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Mandelman sounds the Alert “Calling All Lawyers to 5,000,000 Crime Scenes”

23 Jan

 

It’s time for me to have an adult conversation with the experienced practicing attorneys in this country.  Other grown-ups are welcome to sit in as well, but it’s time for children to be in bed or occupied elsewhere, okay?

If there’s no money to be made solving something… no profit incentive… then for the most part, we don’t quite have a handle on to solving it.  For example, we’re not very good at cleaning up our oceans in general, and if there weren’t money to be made cleaning up oceans after oil spills, my guess would be that we wouldn’t be very good at doing that either.
To-date, however, BP has reportedly spent $21 billion cleaning up the Gulf of Mexico since its last mega-disaster, and guess what?  The Gulf of Mexico is pretty clean again… just two years later!  I remember hearing environmentalists predict that it could take 100 years to clean up the Gulf after the Deepwater Horizon catastrophe.  I guess they were underestimating just how much solution $21 billion can often buy.

Well, today we have a mammoth size foreclosure problem in this country, and it’s being talked about like it’s damn near an unsolvable problem… as if solving it would require determining the chemical origins of life, or figuring out whether black holes really do exist in space.

The foreclosure crisis, thank goodness, is not a black hole-type problem as many would have us believe.  It is a problem that, political constraints notwithstanding, exists at the juncture of economics and the rule of law.  In other words… it’s an oil spill… perhaps the worst oil spill of which the world has ever conceived… the Exxon Valdez meets Deepwater Horizon x 100, if you will… but it’s still just an oil spill.

It’s also important to note that as an economics problem alone, the foreclosure crisis is not a particularly challenging one to solve.  Some would rush to remind me that any proposed solution would be rife with “moral hazard,” and while that may be true, it doesn’t make the problem insoluble, by any means.

The elephant in the room is that what we’re facing in this country today is not just a foreclosure crisis, what we’re dealing with with is much better described as a FRAUDclosure crisis.

A couple of years ago, many would have said that my use of the word “fraud” before “closure,” is just hyperbole.  Today, however, anyone voicing that sort of opinion is selling something.  Even a cursory review of last year’s scathing “consent orders,” that federal regulators issued after months spent investigating mortgage servicers… or a quick perusal of the complaints filed against the servicers by attorneys general in Massachusetts, Nevada, Maryland, or Arizona… or by reading any number of published court decisions favoring homeowners… and one can only conclude that use of the word “fraud” is, if anything, understatement.

Additionally, this past year has been a turning point for the general public as far as FRAUDclosures are concerned.  Television’s most venerable news magazine, “60 Minutes,” along with newspaper-of-record, “The New York Times,” joined a long list of others documenting the many ways that banks and mortgage servicers are routinely breaking numerous laws in order to take advantage of homeowners in foreclosure.  It’s now widely understood to be something that’s occurring all over the country, and even though the banking industry continues to try to dismiss publicized instances as insignificant dalliances or “isolated incidents,” their sheer number has made such attempts laughable.  And the levels of wholesale anger and dissatisfaction with government felt among the populace are both palpable and rising fast.

Today, even forecasts from the likes of Goldman Sachs and Amherst Securities peg the number of foreclosures between 10.4 and 14 million by year-end 2014, and those numbers could easily go higher should home prices continue to fall… which they invariably will.  Add those numbers to the millions of foreclosures already water under the bridge, and were talking about a crisis that results in ONE IN FOUR Americans with mortgages losing their homes to foreclosure in the next handful of years.

What I’m describing will unquestionably devastate any hope for recovery in our broader economy for any number of reasons.  For one thing, as banks are forced to recognize their losses incurred on the mortgage-backed securities and CDOs that capitalize their balance sheets, they will become insolvent… and this time many will be forced to fail.  For another, home prices will continue falling pushing more and more homeowners underwater and consumer spending will continue to decline and that will lead to rising unemployment, which will in turn fuel further foreclosures.  And those hopelessly underwater will begin walking away en masse, which will further exacerbate the decline in prices and become impossible to combat.

All of these factors and more will combine to reduce future demand for residential real estate dramatically… perhaps by half, but in addition, with no secondary mortgage market… no ability to securitize debt… even those wanting to buy homes going forward will find credit to be tight and tighter, destroying any potential for recovery in the housing market.

And I’m no longer in a small group of people writing about this deteriorating situation as was the case three plus years ago.  Every day others are waking up to the fact that what we’ve been told about foreclosures to-date by our government and the financial services and related industries, has proven itself to be at best mistaken… at worst misdirection… or, not to put too fine a point on it, outright folderol.

As conservative columnist, Peggy Noonan, has pointed out recently, it’s simply impossible to imagine this sort of future without also seeing social unrest on a scale not seen in this country since at least the 1930s.  Writing recently about the Occupy Wall Street (“OWS”) movement, Noonan echoes my sentiments on the situation to a tee…

“OWS is an expression of American discontent, and others will follow.  Protests and social unrest are particularly likely if people feel they are unfairly losing their homes to support irresponsible, law-breaking institutions that have successfully disregarded the fundamental rules of capitalism and good citizenship.”

The harsh truth is that whatever is done in the future at state or federal levels to mitigate the damage caused by foreclosures, it’s simply too late to prevent our FRAUDclosure crisis from pretty much wiping out our nation’s middle class economy for more than a generation.  As a practical matter, the only real question we face today is how many are wounded and how many are killed… none of us is getting out unscathed.

There should be no question in anyone’s mind… there are only two paths ahead from which to choose.  Both involve fighting a war… but on one path the battle is fought by lawyers in our courts… on the other, by citizens in our streets.

Make no mistake about it… if we are to mitigate any of the  damage being caused, uphold the rule of law, and protect the rights of millions of homeowners… it should be obvious to anyone that WE NEED TENS OF THOUSANDS OF LAWYERS trained in foreclosure defense, loss mitigation and bankruptcy.  And yet, more than four years into the FRAUDclosure crisis, we don’t have anywhere near the number of trained, ethical attorneys required to meet the demand.

We’re all adults here, so let’s not kid ourselves about why that’s the case.  

We all know why we don’t have the lawyers we need to marshall a more effective defense of homeowners engulfed by the FRAUDclosure crisis… it’s because THERE’S NO MONEY IN IT.  Or, at least that’s what lawyers have been told they are supposed to believe.  Not only that, but the message has been that there  shouldn’t be any money in representing homeowners at risk of FRAUDclosure. It’s as if attorneys profiting from representing homeowners at risk of FRAUDclosure is somehow a bad thing.

AND THAT’S JUST 100% BANKER-INSPIRED B.S.

Don’t you see what’s happened here?  We’ve allowed the banks, and the government that’s been bailing them out, to essentially criminalize the profit potential in representing homeowners at risk of foreclosure… and wonder of wonders, miracles of miracles… here we sit with what appears to be an unsolvable problem.

Consider this… bankers say that they’ve been overwhelmed by the millions of homeowners unexpectedly seeking loan modifications and that’s why applying for a loan modification has been such a nightmare.  But, what about the number of foreclosures occurring in the same time frame?  Haven’t there been an unprecedented and unexpected number of foreclosures too?  So,why is it that the banks have no problems accommodating the millions of unexpected foreclosures, but the millions of unexpected loan modifications represent an unsolvable problem?

It’s simple… because on the foreclosure side of the equation, banks allow lawyers to be profitably compensated for handling foreclosures, and sure enough those law firms have figured out how to handle any number of foreclosures that come down the pike… in fact, the more the merrier, as they say.  On the loan modification side of the house, however, profits are a dirty word… and wouldn’t you know it, the problem is unsolvable.  Why am I not surprised?

Over the TWO YEARS following the Deepwater Horizon disaster, BP spent $21 billion to clean up the Gulf of Mexico.  In the FOUR YEARS since the tsunami of foreclosures began, we’ve spent roughly ten percent of what BP spent cleaning up the Gulf… $2.4 billion… and the vast majority of that amount paid to mortgage servicers… and we’re wondering why the problem can’t be solved?

 A MESSAGE TO OUR NATION’S LAWYERS…

It’s the biggest financial opportunity for the legal profession

SINCE THE REAR END COLLISION. 

The fact is… there is a HUGE OPPORTUNITY today to build a very profitable legal practice based on the ethical and effective representation of homeowners caught in the FRAUDclosure crisis.

From the very beginning of the mortgage meltdown, banks have tried to make sure that homeowners were not represented by attorneys when trying to save their homes from FRAUDclosure.   The reason is now apparent: Banks knew it was a FRAUDclosure crisis before the rest of us did because they’re the ones who put the FRAUD into FRAUDclosure.  From the earliest days of the crisis, the banks and the Obama Administration have been reinforcing TWO LIES:

  1. Homeowners at risk of foreclosure don’t need lawyers… they can just call their bank directly.  That’s like the police telling someone under arrest that he or she doesn’t need a lawyer because any questions can be answered by the District Attorney.  It’s a damn lie… homeowners DO NEED LAWYERS to help them save their homes because it’s not just a foreclosure crisis, it’s a FRAUDclosure crisis.
  2. A lawyer who charges a homeowner at risk of foreclosure up front… is a “SCAMMER.”  That is not only a LIE, but it’s a lie to achieve two key bank objectives.  One – It stopped many homeowners from seeking legal representation, thus allowing the banks to do whatever they wanted as related to foreclosing on their homes.  Two – It stopped countless attorneys from building a profitable practice based on representing homeowners at risk of foreclosure.

The California Example…

In California, the efforts to stop lawyers from representing homeowners have been more extreme than in any other state.  Here the campaign to malign the legal profession has been driven by legislative committees and supported by the California State Bar Association.  In October 2009, California’s SB 94 created a law that has effectively prevented lawyers from offering to represent homeowners who are seeking to avoid foreclosure through modification of their loans.  Under the guise of “charging up front makes you a scammer,” SB 94 has made it illegal for a lawyer to charge a homeowner an upfront retainer for legal fees.

Quite predictably, the law has made it difficult or even impossible for California homeowners to find quality legal representation related to seeking loan modifications, forcing those at risk of foreclosure who want to be represented by an attorney into either litigation or bankruptcy.  Writing for The New York Times in December 2010, David Streitfeld’s article titled, “Homes at Risk, and No Help from Lawyers,” described the situation in California related to SB 94.

In California, where foreclosures are more abundant than in any other state, homeowners trying to win a loan modification have always had a tough time. 

Now they face yet another obstacle: hiring a lawyer.

Sharon Bell, a retiree who lives in Laguna Niguel, southeast of Los Angeles, needs a modification to keep her home. She says she is scared of her bank and its plentiful resources, so much so that she cannot even open its certified letters inquiring where her mortgage payments may be. Yet the half-dozen lawyers she has called have refused to represent her.

“They said they couldn’t help,” said Ms. Bell, 63. “But I’ve got to find help, because I’m dying every day.”

Lawyers throughout California say they have no choice but to reject clients like Ms. Bell because of a new state law that sharply restricts how they can be paid. Under the measure, passed overwhelmingly by the State Legislature and backed by the state bar association, lawyers who work on loan modifications cannot receive any money until the work is complete. The bar association says that under the law, clients cannot put retainers in trust accounts.

To make matters worse, SB 94 has recently become controversial.  In late September 2011, Suzan Anderson, who is the supervising trial council of the state bar’s special team on loan modifications, made an unscheduled appearance at the bar’s annual conference, presenting what she purported to be the bar’s new interpretation of SB 94.  Literally hundreds of attorneys and legal scholars disagree, however, and litigation has recently been filed against the bar seeking declaratory relief, so we’ll soon see the courts decide the issue.

The core issue is about when a lawyer who represents a homeowner trying to get their loan modified can be compensated.  The bar claims the law requires an attorney to wait until the very end of the case, however, the actual language contained in SB 94 doesn’t say that… it says lawyers cannot be paid until completing “any and all services (the lawyer) has contracted to perform…” Up until Ms. Anderson’s presentation at the annual meeting, lawyers were dividing services into separate contractual arrangements and accepting payments from homeowners as discreet sets of services were completed.

Regardless of which side of the debate you’re on, the issue highlights how far the banking lobby will push a state legislature and state bar association in an attempt to prevent homeowners from being represented by legal council when trying to to avoid foreclosure, and it should come as absolutely no surprise that SB 94 was born in the state’s Senate Banking Committee, sponsored by Sen. Ron Calderon, who chairs that committee.

Advocates of SB 94 claim that it was needed to stop “scammers” who were preying on homeowners in distress from accepting up-front fees.  As quoted from Streitfeld’s article in The New York Times…

A spokesman for the Mortgage Bankers Association said it simply wanted to protect homeowners from fraud. “Be very careful about anyone who wants you to pay them to help you get a loan modification,” said the spokesman, John Mechem.

The evidence of any sort of army of lawyers-turned-scammers ripping off homeowners has always been thin, and by “thin” I mean nonexistant.  In the two years since the bill became law, the bar has taken some type of disciplinary action related to the representation of homeowners in foreclosure against two dozen lawyers, give or take a few.  In a state with more than 200,000 lawyers and 2 million homeowners in foreclosure, two dozen lawyers disciplined would hardly seem justification for a law that effectively prevents lawyers from helping homeowners get their loans modified.

Last December, Suzan Anderson, who heads up the bar’s task force on loan modifications, told The New York Times…

“I wish the law had worked,” Ms. Anderson said.

It’s also telling that no other state in the country has a law anything like SB 94, in fact, the rest of the states follow the FTC’s Mortgage Assistance Relief Services rule, MARS, which was adopted on January 30, 2011, and it does allow attorneys representing homeowners seeking loan modifications to accept funds in advance into their trust accounts.

The New York Times article also offered the perspective of several California homeowners seeking legal assistance in a post SB 94 world…

Mark Stone, a 56-year-old general contractor in Sierra Madre, feels differently. A few years ago, he got sick with hepatitis C. Unable to work full time, he began to miss mortgage payments. The drugs he was taking left him “a little confused,” he said.

Mr. Stone knew that his condition put him at a disadvantage in negotiations with his bank. So he hired Gregory Royston, a real estate lawyer in Redondo Beach. It took Mr. Royston nearly a year, but he restructured the loan.

 Without the lawyer, Mr. Stone said, “I’d be living under a bridge.
The legal bill, paid in advance, was $3,500. “Worth every penny,” said Mr. Stone, who is now back at work.
“This law,” Mr. Royston said, “took the wrong people out of the game.”

A Bleak Picture in California…

California’s approach to discouraging lawyers from representing homeowners at risk of foreclosure has not served the state or its residents well at all.  California is the “hardest hit” of all 50 states, accounting for one of every five foreclosures in the U.S.  Almost half of California’s homeowners are either underwater or effectively underwater today.  Since 2008, there have been 1.2 million foreclosures statewide, and that number is expected to exceed 2 million by the end of 2012.  And, according to the report published by the California Reinvestment Coalition…

The 2 million foreclosures expected by the end of this year are forecasted to cost the state and its residents $650 billion statewide.

Today, in California alone there are roughly TWO MILLION homeowners in foreclosure.  I don’t know exactly how many we have nationwide, estimates vary, but are in the 5 million range.  I do know that if two million people needed just 10 hours of legal assistance, it would take 20 million man hours.  Assuming a six hour work day and a 260 day work year… that’s just under 13,000 years assuming only one lawyer were involved.  To help two million people, assuming 10 hours each, at best would require more than 10,000 lawyers trained and working efficiently.

How many attorneys do we have  trained and ready to help loans get modified, represent homeowners in foreclosure defense matters and/or in bankruptcy.  Nowhere near 13,000 that’s for sure… in fact, we might not find 1300 either… and many would say the number could be closer to 130, and with the proliferating fraudulent documents… the abuses by servicers… the number of people who are foreclosed on illegally… its become easy to see the disease, and trained ethical lawyers would seem the only cure.

Mandelman out.

~~~

We need a literal army of experienced litigators, and Max Gardner’s Bankruptcy Boot Camp has trained close to 900 attorneys to protect the rights of homeowners in foreclosure.  I’ve attended Max’s Boot Camp… I could never recommend it strongly enough… and often do.  But, there’s more than legal training that’s required here… and if we’re going to attract the number of lawyers we need to fight this war…

The Answer is Money…

What Was Your Question?

Ohio’s former Attorney General Marc Dann is a highly experienced foreclosure defense attorney and a graduate of Max Gardner’s Boot Camp. He’s proven in his own successful practice that lawyers have the opportunity to DO GOOD… and DO WELL at the same time by learning the ins and outs of this, unfortunately, very fast growing and specialized field.  And he’s developed a comprehensive training and ongoing support program that allows experienced foreclosure defense attorneys to immediately access new clients and the right clients, improve operations within their firms, and yes… increase their profitability dramatically.

Marc understands our need for an experienced army of foreclosure defense lawyers, but he also understands the reality that lawyers have to make money in order to operate effectively.  In a phrase, a lawyer that can provide effective representation for homeowners at risk of foreclosure today, should not be worried about losing his or her own home to foreclosure because that benefits no one.

So, Marc has developed and employed best practices in building his own successful foreclosure defense practice, and now he’s teaching other attorneys how to make money in foreclosure defense so that ultimately he will have provided countless thousands of homeowners all over the country with access to highly capable, ethical and experienced attorneys.

Marc Dann’s LAW PROFITS program will take experienced and effective attorneys committed to foreclosure defense and protecting the rights of homeowners, and help transform them into vibrant, profitable firms or individual legal practices.  Some of the innovative solutions Marc will be delivering include:

  • How to cut through the noise created by scammers, reaching out to homeowners in a very honest and compelling way.
  • When and how to sue the bad modification company or bad lawyer.
  • Suing the foreclosure mills for fun and profits.
  • Using Fair Debt Collection Practices and State Consumer Protection.
  • Learn about the new practices available under Dodd Frank.
  • Harnessing TILA and RESPA inside and outside bankruptcy court.
  • Unconventional approaches stay one step ahead of servicer practices.
  • Billing structures, methodologies, and practice accounting.
  • Designing compensation programs that balance the needs of homeowners with the needs of your firm.  
  • Never lose clients – Ongoing communications program that’s turn-key and educates clients so they become fans.
  • Fee agreements – for contingency and hourly clients.
  • Become part of a highly visible network of top foreclosure defense attorneys, and strategic partners.
  • Communications strategies and tactics proven effective and unavailable anywhere else.

Making little or no money in foreclosure defense isn’t doing your clients any favors because you cannot be your best without it.  Marc Dann’s LAW PROFITS is not a pot of gold, or a winning lottery ticket, but it is a proven process and suite of best practices that makes a law practice profitable… essentially immediately.  It’s work, no question about it, but it’s important and gratifying work.

I wholeheartedly support Mar’c Dann’s LAW PROFITS initiative.  And I strongly urge all of the lawyers reading this to take action now by clicking the link below, so you can find out more about what his LAW PROFITS program for foreclosure defense and bankruptcy lawyers can do for you and your firm.  The FRAUDclosure crisis and its ancillary topics, I’m sorry to say, are going to be with us for a long time… a decade plus, if we’re lucky.  Longer if we’re not.  It’s time to settle in and start capitalizing on being one of the best at solving on of the worst case scenarios.

Click below to find out more about…

Marc Dann’s

LAW PROFITS

What is predatory Lending ( Making a loan to get the Real estate not a loan you can afford)

20 Jan
English: Then Secretary of Housing and Urban D...

Image via Wikipedia

DEFINING PREDATORY LENDING

Predatory lending encompasses a variety of practices. The most prevalent of these practices, however, is predatory lending in connection with home mortgage loans. These loans are targeted at homeowners who may be living on fixed or lower incomes, and those who have checkered credit histories.

Unlike most prime loans, subprime mortgage loans are generally based on the equity in a borrower’s house instead of his or her ability to make the scheduled payments. Therefore, problems meeting scheduled payments frequently arise due to the borrower’s lack of liquidity, a problem obviously foreseeable, yet ignored, by the lender. When this occurs, the predatory lender encourages the borrower to refinance the loan into another unaffordable loan, thus increasing the loan amount owed, primarily due to new finance fees. This “refinancing” severely decreases the borrower’s equity in his or her home and is a common practice referred to as “loan flipping.”

Another practice utilized by predatory lenders is “packing.” This is the practice of surreptitiously placing lender-protective credit insurance or other goods and services into consumer loans. For example, a predatory lender will state a fixed monthly payment to the borrower. Upon closure, however, the loan papers will include numerous single premium payment insurance policies which need to be added to the quoted monthly payment. These insurance policies are not mentioned during the loan negotiations as an additional cost. The lender ultimately hopes the borrower will not notice the added charges at all; if, however, the borrower is lucky enough to recognize the hidden costs, predatory lenders are equipped with numerous tactics to force the loan through despite the borrower’s misgivings. The most prevalent tactic is to threaten the closing of the loan by stating that deletion of the challenged costs will either cause delay, or effect the borrower’s loan eligibility. Given the financial situations of most of these borrowers, the threat of not receiving the loan, or even just a delay in the closing of the loan, can be enough to make the borrower forget about the added charges

Although many borrowers become aware of these hidden charges when they receive their first statement, other hidden terms and penalties are included that become apparent only when the borrower decides to get out of the loan.

One of the most potent tools used by predatory lenders to keep borrowers defenseless is the prepayment penalty. According to Standard & Poor’s, subprime loans contain prepayment penalties 80% of the time, while prime loans only 2% of the time. Since it is lower income individuals who are targeted by predatory lenders, the threat of thousands of dollars in prepayment penalties obviates the lenders fear of the borrower prepaying the balance through a more affordable prime loan. The prepayment penalties trap the individual in a long-term unaffordable loan that can only be refinanced by the lender who misrepresented the loan terms in the first place.

Predatory loans can be financially devastating. A borrower owing up to three times as much as he or she has borrowed is not an uncommon occurrence with a sub-prime predatory home mortgage loan.

Predatory lending revisited FINANCIAL CODE § 4970

20 Jan
Loans

Image by jferzoco via Flickr

A. INTRODUCTION

Predatory lending has become an insidious financial problem in recent years for thousands of Californians. In any real estate loan, the loan terms and consequences must be adequately disclosed and, more importantly, financially feasible for the borrower. Through “flipping” and “packing,” predatory lenders avoid these two requirements, reaping massive benefits while causing financial ruination for the consumer.

Fortunately for consumers, the California Legislature has recognized the growing problem of predatory lending by adding Division 1.6 to the Financial Code, effective July 1, 2002. This law specifies what constitutes predatory lending and expressly prohibits certain acts. In discussing predatory lending practices in California, this article will demonstrate the potential impact of the new law, and what remedies are now available to those affected by these practices. .

B. DEFINING PREDATORY LENDING

Predatory lending encompasses a variety of practices. The most prevalent of these practices, however, is predatory lending in connection with home mortgage loans. These loans are targeted at homeowners who may be living on fixed or lower incomes, and those who have checkered credit histories.

Unlike most prime loans, subprime mortgage loans are generally based on the equity in a borrower’s house instead of his or her ability to make the scheduled payments. Therefore, problems meeting scheduled payments frequently arise due to the borrower’s lack of liquidity, a problem obviously foreseeable, yet ignored, by the lender. When this occurs, the predatory lender encourages the borrower to refinance the loan into another unaffordable loan, thus increasing the loan amount owed, primarily due to new finance fees. This “refinancing” severely decreases the borrower’s equity in his or her home and is a common practice referred to as “loan flipping.”

Another practice utilized by predatory lenders is “packing.” This is the practice of surreptitiously placing lender-protective credit insurance or other goods and services into consumer loans. For example, a predatory lender will state a fixed monthly payment to the borrower. Upon closure, however, the loan papers will include numerous single premium payment insurance policies which need to be added to the quoted monthly payment. These insurance policies are not mentioned during the loan negotiations as an additional cost. The lender ultimately hopes the borrower will not notice the added charges at all; if, however, the borrower is lucky enough to recognize the hidden costs, predatory lenders are equipped with numerous tactics to force the loan through despite the borrower’s misgivings. The most prevalent tactic is to threaten the closing of the loan by stating that deletion of the challenged costs will either cause delay, or effect the borrower’s loan eligibility. Given the financial situations of most of these borrowers, the threat of not receiving the loan, or even just a delay in the closing of the loan, can be enough to make the borrower forget about the added charges

Although many borrowers become aware of these hidden charges when they receive their first statement, other hidden terms and penalties are included that become apparent only when the borrower decides to get out of the loan.

One of the most potent tools used by predatory lenders to keep borrowers defenseless is the prepayment penalty. According to Standard & Poor’s, subprime loans contain prepayment penalties 80% of the time, while prime loans only 2% of the time. Since it is lower income individuals who are targeted by predatory lenders, the threat of thousands of dollars in prepayment penalties obviates the lenders fear of the borrower prepaying the balance through a more affordable prime loan. The prepayment penalties trap the individual in a long-term unaffordable loan that can only be refinanced by the lender who misrepresented the loan terms in the first place.

Predatory loans can be financially devastating. A borrower owing up to three times as much as he or she has borrowed is not an uncommon occurrence with a sub-prime predatory home mortgage loan.

C. PREDATORY LENDING IN CALIFORNIA

The California Reinvestment Committee (CRC) is currently conducting a study weighing the effect predatory lending has had on Californians. The preliminary findings suggest predatory lending is a very common practice in California:

  • 73% of all borrowers saw key loan terms (e.g. interest rate, fixed versus adjustable mortgage, prepayment penalty) change for the worse at the closing of the loan as compared to what was represented to them;
  • 61% of all borrowers had loans containing prepayment penalty provisions which lock borrowers into bad loans by assessing a fee of several thousand dollars if borrowers pay off their subprime loans early;
  • 64% of borrowers reported refinancing their home loans from two to six times, suggesting widespread “loan flipping” and “equity stripping” by lenders;
  • 39% of borrowers reported that the idea to take out a loan secured by their home came from the marketing of subprime lenders. Aggressive marketing through telephone calls, mailers and broker solicitations, was experienced by most study participants.

Although the study is still in its infancy, the preliminary numbers leave no room for doubt that predatory lending has become a tremendous problem in California and is robbing Californians of millions of dollars. The discrepancies in prime loan interest rates and those offered by the subprime lenders has steadily increased.

Subprime lenders state that they serve a very important function, mainly providing credit to borrowers with imperfect credit histories. However, it is this exact premise, the supposed benevolence of subprime lending, on which predatory lenders rely to justify their practices, thereby blending financially feasible subprime lending into predatory lending. Financial Code § 4970 is California’s remedy to this problem.

D. BASIC PROVISIONS OF FINANCIAL CODE § 4970

California Financial Code § 4970 et seq. became effective on July 1, 2002. This law recognizes the need for more stringent regulations on consumer loans secured by specified real property, defined as “covered loans.” The effect of the bill was best summed up by the Legislative Counsel’s digest, which states:

The law prohibits various acts in making covered loans, including the following:

  • Failing to consider the financial ability of a borrower to repay the loan
  • Financing specified types of credit insurance into a consumer loan transaction
  • Recommending or encouraging a consumer to default on an existing consumer loan in order to solicit or make a covered loan that refinances the consumer loan
  • Making a covered loan without providing the consumer specified disclosure

Moreover, this law expressly defines the relationship between the broker and the borrower as a fiduciary relationship, thereby placing a legal duty on the broker to act in the borrower’s best interest.Furthermore, the newly enacted provisions clearly lay out strong incentives for attorneys to vigorously prosecute predatory lending. Under California Financial Code § 4978, these incentives include mandatory attorney fees, the award of punitive damages, and the greater of either actual damages or statutorily prescribed damages when the violation is “willful and knowing.”

(a) A person who fails to comply with the provisions of this division is civilly liable to the consumer in an amount equal to actual damages suffered by the consumer, plus attorney’s fees and costs. For a willful and knowing violation of this division, the person shall be liable to the consumer in the amount of $15,000.00 or the consumer’s actual damages, whichever is greater, plus attorneys’ fees and costs…..

(b)(2). A court may, in addition to any other remedy, award punitive damages to the consumer upon a finding that such damages are warranted pursuant to Section 3294 of the Civil Code.

Accordingly, if either an express violation of this section or abuse of the fiduciary relationship between broker and borrower is established, private attorneys and their clients are now equipped with statutory power to obtain redress.

Although California Financial Code § 4970 paints with a broad stroke, with its specificity, predatory lenders will undoubtedly find loopholes in the regulations. Fortunately for California consumers, actions for predatory lending can also be brought under the very expansive state consumer protection statutes, such as Business and Professions Code §17200.

E. WAYS TO AVOID PREDATORY LENDING

In addition to discussing remedial measures for predatory lending, it is important to also discuss ways in which individuals can avoid receiving a predatory loan.

The first way to avoid predatory lending is to comparison shop different lenders to find the best deal. As predatory lenders would have them believe, borrowers with credit problems think that only by paying exorbitant interest rates can they qualify for a loan. However, the truth is that up to 50% of those people who receive predatory loans would actually qualify for a prime loan. The most practical way to remedy this problem is for a borrower to obtain a credit history report and have it analyzed by a disinterested third party. By doing this, the borrower will know when a predatory lender is being untruthful about the type of loan for which he or she will qualify due to credit problems.

Second, when applying for a loan, keep an eye out for common misrepresentations that are indicative of predatory loans. For example, the lender states that the loan has the flexibility of an open line of credit, or the lender requires credit insurance, claiming it is the only way the borrower will qualify for the loan. Next, the consumer should ask to see the lender’s published rates on fees and points.

Finally, the consumer should look for terms and conditions that will trap him or her into the loan. As discussed above, prepayment clauses are indicative of a predatory loan. The reasoning behind prepayment clauses is to keep borrowers from refinancing into a prime loan once they learn the financial reality of their current loan. Furthermore, when a borrower is offered a loan that is “asset based”(10), he or she should demand to be told what affect such a loan could have on the asset’s equity.

CONCLUSION

It is important for attorneys to utilize all available tools at their discretion to curb harm resulting from predatory lending. California Finance Code § 4970 is a powerful new tool for litigators. Equipped with this new tool and California Business & Professions Code 17200, California attorneys should be eager to assist the victims of predatory lending.

In addition, it is important for the consumer to learn ways to spot predatory lending terms and conditions. By seeking the advice of counsel when applying for a loan, one may be able to avoid financial pitfalls down the road.

Chase Accused of Brazen Bankruptcy Fraud

17 Jan
English: Category:JPMorgan Chase

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LOS ANGELES (CN) – JPMorgan Chase routinely fabricated documents to deceive bankruptcy judges, going so far as to Photoshop documents to “create the illusion” of standing “in tens of thousands of bankruptcy cases,” according to a federal class action.

Lead plaintiff Ernest Michael Bakenie claims that Chase’s “pattern and practice of playing ‘hide-and-seek’ with debtors, judges and other bankruptcy players” bore rich fruit: that Chase secured motions for relief of stay and proofs of claim in 95 percent of its cases.

“Through the use of fabricated assignments, endorsements and affidavits that purport to transfer deeds of trust, notes and the rights to all monies due under the terms of tens of thousands of non-negotiable promissory notes (the ‘MLNs’); Chase has demonstrated a pattern and practice of playing ‘hide-and-seek’ with debtors, judges and other bankruptcy players,” the complaint states.

“Chase intentionally conceals the identity of the true parties in interest entitled to enforce the tens of tens of thousands of residential non-negotiable promissory notes (the ‘MLNs’) for its own financial benefit, at the expense of the class and to the detriment of the integrity of the bankruptcy system.”

Bakenie says Chase used a network of attorneys to file more than 7,000 motions for relief from automatic stay in bankruptcy cases in the Central District of California, “wherein they falsely claim to be the party entitled to monies due under the terms of MLNs.”

Chase rewards attorneys based on how quickly they can secure the stays, and uses fabricated documents to establish chain of title on loans, according to the complaint.

“Rather than incur the cost of ‘proving up’ its own standing or the standing of its principal Mortgage Backed Security Trust, Chase systemically misrepresents Chase or a designated MBST to be a creditor in tens of thousands of bankruptcy cases by utilizing manufactured documents,” the complaint states.

Bakenie claims: “That said practice is utilized for all mortgage loans originated by Chase, and other loan originators, including insolvent Washington Mutual Bank, whose assets were purchased by Chase.

“That said manufactured documents are fabrications intended to create the illusion of a valid transfers MLNs and support the assertion of standing in tens of thousands of bankruptcy cases. …

“That the aforementioned fabricated evidence is ‘photo-shopped’ and is highly persuasive and authentic in appearance so as to ensure legal victory in the bankruptcy courts.

“That said manufactured evidence is systemically utilized to deceive bankruptcy players and increase the profits of Chase, its agents and its principals through massive cost savings and the imposition of attorney fees upon class borrowers.

“As a direct result of this practice, over 95 percent of Chase’s motions for relief of stay and proofs of claim are granted without objection.

“That the use of the fabricated evidence has a chilling effect on class debtors and their attorneys. Said business practices discourages bankruptcy players from offering objections or from questioning the validity of Chase’s false claims based on standing.”

Bakenie adds: “That said practice allows Chase to dump defaulted loans that were never properly securitized by WAMU and other originators acquired by Chase into private mortgage backed security trusts by creating the illusion of a valid transfer.

“Said practice shifts the liability of defaulted loans not properly securitized by WAMU, from Chase to private mortgage backed security trusts. The practice allows Chase to effectively mitigate the millions of dollars in liability of the WAMU acquisition, where WAMU failed to transfer MLNs of its portfolio before its demise. Said practice shifts losses from WAMU toMBST bond investors.

“That after a non-judicial foreclosure sale, class members remain indebted to the true beneficiary for the unsecured note but without credit for the loss of the collateral to Chase’s designated assignee.

“Most egregiously, the network attorneys utilize the inducing documents to obtain attorney fees awards from by the bankruptcy judges ranging from $600-$1,000 for each successful motion for relief of stay.”

Bakenie concludes that “degradation of the integrity of our bankruptcy court system cannot be justified in the name of Chase’s cost savings and unjust enrichment.”

Bakenie seeks class certification, disgorgement, compensatory, statutory and punitive damages for unfair and deceptive trade, and “an order vacating all bankruptcy orders, claims and awards granted based on Chase’s misrepresentation and deceptive business practices”.

He is represented by Joseph Arthur Roberts of Newport Beach.

The Trustee sale can be set aside

20 Dec

Bank of America, N.A. v. La Jolla Group II, 129 Cal. App. 4th 706, 15 710,717 (5th Dist. 2005) (void foreclosure sale required rescission of trustee’s deed returning title to the status quo prior to the foreclosure sale); Dimock v. Emerald Properties, 81 Cal. App. 4th 868, 874 (4th Dist. 2000) (sale under deed of trust by former trustee void, and tender of the amount due is unnecessary).

THE COURT MUST STRICTLY ENFORCE

THE TECHNICAL REQUIREMENTS FOR A FORECLOSURE.

The harshness of non-judicial foreclosure has been recognized. “The exercise of the power of sale is a harsh method of foreclosing the rights of the grantor.” Anderson v. Heart Federal Savings (1989) 208 Cal.App.3d 202, 6 215, citing to System Inv. Corporation v. Union Bank (1971) 21 Cal.App.3d 137, 153.  The statutory requirements are intended to protect the trustor from a wrongful or unfair loss of his property Moeller v. Lien (1994) 25 Cal.App.4th 822, 830; accord, Hicks v. E.T. Legg & Associates (2001) 89 Cal.App.4th 496, 503; Lo Nguyen v. Calhoun (6th District 2003) 105 Cal.App.4th 428, 440, and a valid foreclosure by the private power of sale requires strict compliance with the requirements of the statute. Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.179; Anderson v. Heart Federal Sav. & Loan Assn., 208 Cal. App. 3d 202, 211 (3d Dist. 1989), reh’g denied and opinion modified, (Mar. 28, 1989); Miller v. Cote (4th Dist. 1982) 127 Cal. App. 3d 888, 894; System Inv. Corp. v. Union Bank (2d Dist. 1971) 21 Cal. App. 3d 137, 152-153; Bisno v. Sax (2d Dist. 1959) 175 Cal. App. 2d 714, 720.

It has been a cornerstone of foreclosure law that the statutory requirements, intending to protect the Trustor and or Grantor from a wrongful or unfair loss of the property, must be complied with strictly. Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.182.   “Close” compliance does not count. As a result, any trustee’s sale based on a statutorily deficient Notice of Default is invalid (emphasis added). Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.182; Anderson v. Heart Federal Sav. & Loan Assn. (3dDist. 1989) 208 Cal. App. 3d 202, 211, reh’g denied and opinion modified, (Mar. 28, 1989); Miller v. Cote (4th Dist. 1982) 127 Cal. App. 3d 888, 894; System Inv. Corp. v. Union Bank (2d Dist. 1971) 21 Cal. App. 3d 137, 152-153; Saterstrom v. Glick Bros. Sash, Door & Mill Co.(3d Dist. 1931) 118 Cal. App. 379.

Additionally, any Trustee’s Sale based on a statutorily deficient Notice of Trustee Sale is invalid.  Anderson v. Heart Federal Sav. & Loan Assn. (3d Dist. 1989) 11 208 Cal.App. 3d 202, 211, reh’g denied and opinion modified, (Mar. 28, 1989). The California Sixth District Court of Appeal observed, “Pursuing that policy [of judicial interpretation], the courts have fashioned rules to protect the debtor, one of them being that the notice of default will be strictly construed and must correctly set forth the amounts required to cure the default.” Sweatt v. The Foreclosure Co., Inc. (1985 – 6th District) 166 Cal.App.3d 273 at 278, citing to Miller v. Cote (1982) 127 Cal.App.3d 888, 894 and SystemInv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153.

The same reasoning applies even to a Notice of Trustee’s Sale.  Courts will set aside a foreclosure sale when there has been fraud, when the sale has been improperly, unfairly, or unlawfully conducted, or when there has been such a mistake that it would be inequitable to let it stand. Bank of America Nat. Trust & Savings Ass’n v. Reidy (1940) 15 Cal. 2d 243, 248; Whitman v. Transtate Title Co.(4th Dist. 1985) 165 Cal. App. 3d 312, 322-323; In re Worcester (9th Cir. 1987) 811 F.2d 1224, 1228.  See also Smith v. Williams (1961) 55 Cal. 2d 617, 621; Stirton v. Pastor (4th Dist. 1960) 177 Cal. App. 2d 232, 234; Brown v. Busch (3d Dist. 1957) 152 Cal.App. 2d 200, 203-204.

English: Foreclosure auction 2007

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Fannie Mae Foreclosure Lawyers Acted Improperly

10 Oct

Thumbnail image for Foreclosure.jpgHomeowners in Northern California have questioned the practices of Fannie Mae and Freddie Mac in foreclosure proceedings. If you are facing a foreclosure, you may be able to keep the property by filing for bankruptcy. You should consult with an attorney regarding your legal options.

After news reports in mid-2010 began to describe the dubious practices, like the routine filing of false pleadings in bankruptcy courts, Fannie Mae’s overseer started to scrutinize the conduct of its attorneys. The inspector general of the Federal Housing Finance Agency severely criticized the FHFA’s oversight of Fannie Mae and the practices of its foreclosure attorneys in a report issued Tuesday. “American homeowners have been struggling with the effects of the housing finance crisis for several years, and they shouldn’t have to worry whether they will be victims of foreclosure abuse,” Inspector General Steve Linick told the New York Times. “Increased oversight by F.H.F.A. could help to prevent these abuses.”

According to the New York Times, the report is the second in two weeks in which the inspector general has outlined lapses at both the Federal Housing Finance Agency and the companies it oversees Federal National Mortgage Assn (Fannie Mae) and Federal Home Loan Mortgage Corp (Freddie Mac). The agency has acted as conservator for the companies since they were taken over by the government in 2008. Its duty is to ensure that their operations do not pose additional risk to the taxpayers who now own them. The companies have tapped the taxpayers to cover mortgage losses totaling about $160 billion. The new report from the inspector general tracks Fannie Mae’s dealings with the law firms handling its foreclosures from 1997, when the company created its so-called retained attorney network. At the time, Fannie Mae was a highly profitable and powerful institution, and it devised the legal network to ensure that borrower defaults would be resolved with efficiency and speed.

The law firms in the network agreed to a flat-rate fee structure and pricing model based on the volume of foreclosures they completed. The companies that serviced the loans for Fannie Mae, were supposed to monitor the law firms’ performance and practices, the report noted

After receiving information from a shareholder in 2003 about foreclosure abuses by its law firms, Fannie Mae assigned its outside counsel to investigate, according to the report. That law firm concluded in a 2006 analysis that “foreclosure attorneys in Florida are routinely filing false pleadings and affidavits,” and that the practice could be occurring elsewhere. “It is axiomatic that the practice is improper and should be stopped,” the law firm said.

The inspector general’s report said that it could not be determined whether Fannie Mae had alerted its regulator, then the Office of Federal Housing Enterprise Oversight, to the legal improprieties identified by its internal investigation.

The inspector general said that both Fannie Mae and its regulator appear to have ignored other signs of problems in their foreclosure operations. For example, the Federal Housing Finance Agency did not respond to borrower complaints about improper actions taken by law firms in foreclosures received as early as August 2009, even though foreclosure abuse poses operational and financial risks to Fannie Mae.

The report cited a media report from early 2008 detailing foreclosure abuses by law firms doing work for Fannie Mae. Nevertheless, a few months later and just before its takeover by the government, Fannie Mae began requiring the banks that serviced its loans to use only those law firms that were in its network. By then, 140 law firms in 31 jurisdictions were in the group. Fannie Mae, the mortgage finance giant, learned as early as 2003 of extensive foreclosure abuses among the law firms it had hired to remove troubled borrowers from their homes. But the company did little to correct the firms’ practices,.

Finally last fall, after an outcry over apparently forged foreclosure documents and other improprieties, the Federal Housing Finance Agency began investigating the company’s process. In a report issued early this year, it determined that Fannie Mae’s management of its network of lawyers did not meet safety and soundness standards. Among the reasons: the company’s controls to prevent or detect foreclosure abuses were inadequate, as was the company’s monitoring of the law firms. “If a law firm self-reported no issues as it processed cases,” the inspector general said, “then Fannie Mae presumed the firm was doing a good job.” The agency is still deciding how to handle the lawyer network, the inspector general said.

Officials at the housing agency have agreed with the recommendations in the inspector general’s report. Corinne Russell, a spokeswoman for F.H.F.A. said the agency was concluding its supervisory work in this area and would direct Fannie Mae to take necessary action when the work was completed.

In a response, the agency said that by Sept. 29, 2012, it would review its existing supervisory practices and act to resolve “deficiencies in the management of risks associated with default-related legal services vendors.”

If you are having problems with a loan or foreclosure, we provide free legal consultations for bankruptcy in San Francisco County, Sacramento County, Alameda County, Contra Costa County, San Mateo County, Santa Clara County, Stanislaus County, San Joaquin County, Marin County, Solano County and throughout Northern California. Contact us for a free legal consultation today.925-957-9797

Forget Mass Joinder just use Consumer Legal Remedies Act Civil Code 1750

16 Sep

CALIFORNIA CIVIL CODE
SECTION 1750 et seq
Consumers Legal Remedies Act

1750. This title may be cited as the Consumers Legal Remedies Act.

1751. Any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void.

1752. The provisions of this title are not exclusive. The remedies provided herein for violation of any section of this title or for conduct proscribed by any section of this title shall be in addition to any other procedures or remedies for any violation or conduct provided for in any other law.
Nothing in this title shall limit any other statutory or any common law rights of the Attorney General or any other person to bring class actions. Class actions by consumers brought under the specific provisions of Chapter 3 (commencing with Section 1770) of this title shall be governed exclusively by the provisions of Chapter 4 (commencing with Section 1780); however, this shall not be construed so as to deprive a consumer of any statutory or common law right to bring a class action without resort to this title. If any act or practice proscribed under this title also constitutes a cause of action in common law or a violation of another statute, the consumer may assert such common law or statutory cause of action under the procedures and with the remedies provided for in such law.

1753. If any provision of this title or the application thereof to any person or circumstance is held to be unconstitutional, the remainder of the title and the application of such provision to other persons or circumstances shall not be affected thereby.

1754. The provisions of this title shall not apply to any transaction which provides for the construction, sale, or construction and sale of an entire residence or all or part of a structure designed for commercial or industrial occupancy, with or without a parcel of real property or an interest therein, or for the sale of a lot or parcel of real property, including any site preparation incidental to such sale.

1755. Nothing in this title shall apply to the owners or employees of any advertising medium, including, but not limited to, newspapers, magazines, broadcast stations, billboards and transit ads, by whom any advertisement in violation of this title is published or disseminated, unless it is established that such owners or employees had knowledge of the deceptive methods, acts or practices declared to be unlawful by Section 1770.

1756. The substantive and procedural provisions of this title shall only apply to actions filed on or after January 1, 1971.

1760. This title shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection.

1761. As used in this title:

  • (a) “Goods” means tangible chattels bought or leased for use primarily for personal, family, or household purposes, including certificates or coupons exchangeable for these goods, and including goods which, at the time of the sale or subsequently, are to be so affixed to real property as to become a part of real property, whether or not severable therefrom.
  • (b) “Services” means work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods.
  • (c) “Person” means an individual, partnership, corporation, limited liability company, association, or other group, however organized.
  • (d) “Consumer” means an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes.
  • (e) “Transaction” means an agreement between a consumer and any other person, whether or not the agreement is a contract enforceable by action, and includes the making of, and the performance pursuant to, that agreement.
  • (f) “Senior citizen” means a person who is 65 years of age or older.
  • (g) “Disabled person” means any person who has a physical or mental impairment which substantially limits one or more major life activities.
    • (1) As used in this subdivision, “physical or mental impairment” means any of the following:
      • A. Any physiological disorder or condition, cosmetic disfigurement, or anatomical loss substantially affecting one or more of the following body systems: neurological; muscoloskeletal; special sense organs; respiratory, including speech organs; cardiovascular; reproductive; digestive; genitourinary; hemic and lymphatic; skin; or endocrine.
      • B. Any mental or psychological disorder, such as mental retardation, organic brain syndrome, emotional or mental illness, and specific learning disabilities. The term “physical or mental impairment” includes, but is not limited to, such diseases and conditions as orthopedic, visual, speech and hearing impairment, cerebral palsy, epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, diabetes, mental retardation, and emotional illness.
    • (2) “Major life activities” means functions such as caring for one’ s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working.
  • (h) “Home solicitation” means any transaction made at the consumer’ s primary residence, except those transactions initiated by the consumer. A consumer response to an advertisement is not a home solicitation.

1770.

  • (a) The following unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer are unlawful:
    • (1) Passing off goods or services as those of another.
    • (2) Misrepresenting the source, sponsorship, approval, or certification of goods or services.
    • (3) Misrepresenting the affiliation, connection, or association with, or certification by, another. (MERS)and Securitization
    • (4) Using deceptive representations or designations of geographic origin in connection with goods or services.
    • (5) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he or she does not have.
    • (6) Representing that goods are original or new if they have deteriorated unreasonably or are altered, reconditioned, reclaimed, used, or secondhand.
    • (7) Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.
    • (8) Disparaging the goods, services, or business of another by false or misleading representation of fact.
    • (9) Advertising goods or services with intent not to sell them as advertised.
    • (10) Advertising goods or services with intent not to supply reasonably expectable demand, unless the advertisement discloses a limitation of quantity.
    • (11) Advertising furniture without clearly indicating that it is unassembled if that is the case.
    • (12) Advertising the price of unassembled furniture without clearly indicating the assembled price of that furniture if the same furniture is available assembled from the seller.
    • (13) Making false or misleading statements of fact concerning reasons for, existence of, or amounts of price reductions.
    • (14) Representing that a transaction confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law.
    • (15) Representing that a part, replacement, or repair service is needed when it is not.
    • (16) Representing that the subject of a transaction has been supplied in accordance with a previous representation when it has not. Sign this transaction now and when the option ARM adjusts we will refinance at no cost to you
    • (17) Representing that the consumer will receive a rebate, discount, or other economic benefit, if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction.
    • (18) Misrepresenting the authority of a salesperson, representative, or agent to negotiate the final terms of a transaction with a consumer.
    • (19) Inserting an unconscionable provision in the contract.
    • (20) Advertising that a product is being offered at a specific price plus a specific percentage of that price unless (1) the total price is set forth in the advertisement, which may include, but is not limited to, shelf tags, displays, and media advertising, in a size larger than any other price in that advertisement, and (2) the specific price plus a specific percentage of that price represents a markup from the seller’s costs or from the wholesale price of the product. This subdivision shall not apply to in-store advertising by businesses which are open only to members or cooperative organizations organized pursuant to Division 3 (commencing with Section 12000) of Title 1 of the Corporations Code where more than 50 percent of purchases are made at the specific price set forth in the advertisement.
    • (21) Selling or leasing goods in violation of Chapter 4 (commencing with Section 1797.8) of Title 1.7.
    • (22)
      • (A) Disseminating an unsolicited prerecorded message by telephone without an unrecorded, natural voice first informing the person answering the telephone of the name of the caller or the organization being represented, and either the address or the telephone number of the caller, and without obtaining the consent of that person to listen to the prerecorded message.
      • (B) This subdivision does not apply to a message disseminated to a business associate, customer, or other person having an established relationship with the person or organization making the call, to a call for the purpose of collecting an existing obligation, or to any call generated at the request of the recipient.
    • (23) The home solicitation, as defined in subdivision (h) of Section 1761, of a consumer who is a senior citizen where a loan is made encumbering the primary residence of that consumer for the purposes of paying for home improvements and where the transaction is part of a pattern or practice in violation of either subsection (h) or (i) of Section 1639 of Title 15 of the United States Code or subsection (e) of Section 226.32 of Title 12 of the Code of Federal Regulations.
      A third party shall not be liable under this subdivision unless (1) there was an agency relationship between the party who engaged in home solicitation and the third party or (2) the third party had actual knowledge of, or participated in, the unfair or deceptive transaction. A third party who is a holder in due course under a home solicitation transaction shall not be liable under this subdivision.

(b)

    • (1) It is an unfair or deceptive act or practice for a mortgage broker or lender, directly or indirectly, to use a home improvement contractor to negotiate the terms of any loan that is secured, whether in whole or in part, by the residence of the borrower and which is used to finance a home improvement contract or any portion thereof. For purposes of this subdivision, “mortgage broker or lender” includes a finance lender licensed pursuant to the California Finance Lenders Law (Division 9 (commencing with Section 22000) of the Financial Code), a residential mortgage lender licensed pursuant to the California Residential Mortgage Lending Act (Division 20 (commencing with Section 50000) of the Financial Code), or a real estate broker licensed under the Real Estate Law (Division 4 (commencing with Section 10000) of the Business and Professions Code).
    • (2) This section shall not be construed to either authorize or prohibit a home improvement contractor from referring a consumer to a mortgage broker or lender by this subdivision. However, a home improvement contractor may refer a consumer to a mortgage lender or broker if that referral does not violate Section 7157 of the Business and Professions Code or any other provision of law. A mortgage lender or broker may purchase an executed home improvement contract if that purchase does not violate Section 7157 of the Business and Professions Code or any other provision of law. Nothing in this paragraph shall have any effect on the application of Chapter 1 (commencing with Section 1801) of Title 2 to a home improvement transaction or the financing thereof.

1780.

  • (a) Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against such person to recover or obtain any of the following:
    • (1) Actual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000).
    • (2) An order enjoining such methods, acts, or practices.
    • (3) Restitution of property.
    • (4) Punitive damages.
    • (5) Any other relief which the court deems proper.
  • (b) Any consumer who is a senior citizen or a disabled person, as defined in subdivisions (f) and (g) of Section 1761, as part of an action under subdivision (a), may seek and be awarded, in addition to the remedies specified therein, up to five thousand dollars ($5,000) where the trier of fact (1) finds that the consumer has suffered substantial physical, emotional, or economic damage resulting from the defendant’s conduct, (2) makes an affirmative finding in regard to one or more of the factors set forth in subdivision (b) of Section 3345, and (3) finds that an additional award is appropriate. Judgment in a class action by senior citizens or disabled persons under Section 1781 may award each class member such an additional award where the trier of fact has made the foregoing findings.
  • (c) An action under subdivision (a) or (b) may be commenced in the county in which the person against whom it is brought resides, has his or her principal place of business, or is doing business, or in the county where the transaction or any substantial portion thereof occurred.
    If within any such county there is a municipal or justice court, having jurisdiction of the subject matter, established in the city and county or judicial district in which the person against whom the action is brought resides, has his or her principal place of business, or is doing business, or in which the transaction or any substantial portion thereof occurred, then such court is the proper court for the trial of such action. Otherwise, any municipal or justice court in such county having jurisdiction of the subject matter is the proper court for the trial thereof.
    In any action subject to the provisions of this section, concurrently with the filing of the complaint, the plaintiff shall file an affidavit stating facts showing that the action has been commenced in a county or judicial district described in this section as a proper place for the trial of the action. If a plaintiff fails to file the affidavit required by this section, the court shall, upon its own motion or upon motion of any party, dismiss any such action without prejudice.
  • (d) The court shall award court costs and attorney’s fees to a prevailing plaintiff in litigation filed pursuant to this section. Reasonable attorney’s fees may be awarded to a prevailing defendant upon a finding by the court that the plaintiff’s prosecution of the action was not in good faith.

1781.

  • (a) Any consumer entitled to bring an action under Section 1780 may, if the unlawful method, act, or practice has caused damage to other consumers similarly situated, bring an action on behalf of himself and such other consumers to recover damages or obtain other relief as provided for in Section 1780.
  • (b) The court shall permit the suit to be maintained on behalf of all members of the represented class if all of the following conditions exist:
    • (1) It is impracticable to bring all members of the class before the court.
    • (2) The questions of law or fact common to the class are substantially similar and predominate over the questions affecting the individual members.
    • (3) The claims or defenses of the representative plaintiffs are typical of the claims or defenses of the class.
    • (4) The representative plaintiffs will fairly and adequately protect the interests of the class.
  • (c) If notice of the time and place of the hearing is served upon the other parties at least 10 days prior thereto, the court shall hold a hearing, upon motion of any party to the action which is supported by affidavit of any person or persons having knowledge of the facts, to determine if any of the following apply to the action:
    • (1) A class action pursuant to subdivision (b) is proper.
    • (2) Published notice pursuant to subdivision (d) is necessary to adjudicate the claims of the class.
    • (3) The action is without merit or there is no defense to the action.
      A motion based upon Section 437c of the Code of Civil Procedure shall not be granted in any action commenced as a class action pursuant to subdivision (a).
    • (d) If the action is permitted as a class action, the court may direct either party to notify each member of the class of the action.
      The party required to serve notice may, with the consent of the court, if personal notification is unreasonably expensive or it appears that all members of the class cannot be notified personally, give notice as prescribed herein by publication in accordance with Section 6064 of the Government Code in a newspaper of general circulation in the county in which the transaction occurred.
    • (e) The notice required by subdivision (d) shall include the following:
      • (1) The court will exclude the member notified from the class if he so requests by a specified date.
      • (2) The judgment, whether favorable or not, will include all members who do not request exclusion.
      • (3) Any member who does not request exclusion, may, if he desires, enter an appearance through counsel.
    • (f) A class action shall not be dismissed, settled, or compromised without the approval of the court, and notice of the proposed dismissal, settlement, or compromise shall be given in such manner as the court directs to each member who was given notice pursuant to subdivision (d) and did not request exclusion.
    • (g) The judgment in a class action shall describe those to whom the notice was directed and who have not requested exclusion and those the court finds to be members of the class. The best possible notice of the judgment shall be given in such manner as the court directs to each member who was personally served with notice pursuant to subdivision (d) and did not request exclusion.

1782.

  • (a) Thirty days or more prior to the commencement of an action for damages pursuant to the provisions of this title, the consumer shall do the following:
    • (1) Notify the person alleged to have employed or committed methods, acts or practices declared unlawful by Section 1770 of the particular alleged violations of Section 1770.
    • (2) Demand that such person correct, repair, replace or otherwise rectify the goods or services alleged to be in violation of Section 1770.
      Such notice shall be in writing and shall be sent by certified or registered mail, return receipt requested, to the place where the transaction occurred, such person’s principal place of business within California, or, if neither will effect actual notice, the office of the Secretary of State of California.
  • (b) Except as provided in subdivision (c), no action for damages may be maintained under the provisions of Section 1780 if an appropriate correction, repair, replacement or other remedy is given, or agreed to be given within a reasonable time, to the consumer within 30 days after receipt of such notice.
  • (c) No action for damages may be maintained under the provisions of Section 1781 upon a showing by a person alleged to have employed or committed methods, acts or practices declared unlawful by Section 1770 that all of the following exist:
    • (1) All consumers similarly situated have been identified, or a reasonable effort to identify such other consumers has been made.
    • (2) All consumers so identified have been notified that upon their request such person shall make the appropriate correction, repair, replacement or other remedy of the goods and services.
    • (3) The correction, repair, replacement or other remedy requested by such consumers has been, or, in a reasonable time, shall be, given.
    • (4) Such person has ceased from engaging, or if immediate cessation is impossible or unreasonably expensive under the circumstances, such person will, within a reasonable time, cease to engage, in such methods, act, or practices.
  • (d) An action for injunctive relief brought under the specific provisions of Section 1770 may be commenced without compliance with the provisions of subdivision (a). Not less than 30 days after the commencement of an action for injunctive relief, and after compliance with the provisions of subdivision (a), the consumer may amend his complaint without leave of court to include a request for damages. The appropriate provisions of subdivision (b) or (c) shall be applicable if the complaint for injunctive relief is amended to request damages.
  • (e) Attempts to comply with the provisions of this section by a person receiving a demand shall be construed to be an offer to compromise and shall be inadmissible as evidence pursuant to Section 1152 of the Evidence Code; furthermore, such attempts to comply with a demand shall not be considered an admission of engaging in an act or practice declared unlawful by Section 1770. Evidence of compliance or attempts to comply with the provisions of this section may be introduced by a defendant for the purpose of establishing good faith or to show compliance with the provisions of this section.

1783. Any action brought under the specific provisions of Section 1770 shall be commenced not more than three years from the date of the commission of such method, act, or practice.

1784. No award of damages may be given in any action based on a method, act, or practice declared to be unlawful by Section 1770 if the person alleged to have employed or committed such method, act, or practice

  • (a) proves that such violation was not intentional and resulted from a bona fide error notwithstanding the use of reasonable procedures adopted to avoid any such error and
  • (b) makes an appropriate correction, repair or replacement or other remedy of the goods and services according to the provisions of subdivisions (b) and (c) of Section 1782.

 


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