The surprising decision by regulators to scrap a massive and expensive foreclosure review program in favor of a $10 billion settlement with 14 banks — reported by The New York Times Sunday night — came after a year of mounting concerns about the independence and effectiveness of the controversial program.
The program, known as the Independent Foreclosure Review, was supposed to give homeowners who believe that their bank made a mistake in handling their foreclosure an opportunity for a neutral third party to review the claim. It’s not clear what factors led banking regulators to abandon the program in favor of a settlement, but the final straw may have been a pending report by the Government Accountability Office, a nonpartisan investigative arm of Congress, which was investigating the review program.
Rep. Brad Miller, a North Carolina Democrat, told The Huffington Post that the report, which has not been released, was “critical” and that the Office of the Comptroller of the Currency, which administers the review, was aware of its findings. Miller said that that one problem the GAO was likely to highlight was an “unacceptably high” error rate of 11 percent in a sampling of bank loan files.
The sample files were chosen at random by the banks from their broader pool of foreclosed homeowners, who had not necessarily applied for relief. The data suggests that of the 4 million families who lost their homes to foreclosure since the housing crash, more than 400,000 had some bank-caused problem in their loan file. It also suggests that many thousands of those who could have applied for relief didn’t — because they weren’t aware of the review, or weren’t aware that their bank had made a mistake. Some of these mistakes pushed homeowners into foreclosure who otherwise could have afforded to keep their homes.
Miller said the news that a settlement to replace the review was in the works caught him by surprise, and stressed that he had no way of knowing whether the impending GAO report had triggered the decision.
It’s not clear what will happen to the 250,000 homeowners who have already applied to the Independent Foreclosure Review for relief. The Times, citing people familiar with the negotiations, said that a deal between the banks and banking regulators, led by the Office of the Comptroller of the Currency, could be reached by the end of the week. It wasn’t clear how that money would be distributed or how many current and former homeowners who lost their homes to foreclosure — or who were hit with an unnecessary fee — might qualify.
Bryan Hubbard, a spokesman for the OCC, which administers the program, declined to comment on the Times’ story. Hubbard told HuffPost, “The Office of the Comptroller of the Currency is committed to ensuring the Independent Foreclosure Review proceeds efficiently and to ensuring harmed borrowers are compensated as quickly as possible.”
Since the housing market crashed in 2007, thousands of foreclosed homeowners have complained that their mortgage company made a mistake in the management of their home loan, such as foreclosing on someone making payments on a loan modification plan. The Independent Foreclosure Review emerged from a legal agreement in April 2011 between 14 mortgage companies and bank regulators over these abusive “servicing” practices. It was supposed to give homeowners an opportunity to have an unbiased third party review their foreclosure and determine whether they might qualify for a cash payout of up to $125,000.
The initial response was tepid, at best. Homeowners and advocates complained that the application forms were confusing and that information about what type of compensation they might get was missing. Some told HuffPost that they were so disillusioned by the federal government’s anemic response to widely reported bank errors that they weren’t going to bother to apply.
In one instance, Daniel Casper, an Illinois wedding videographer, applied to the program in January after years of combat with Bank of America over his home loan. As The Huffington Post reported in October, he was initially rejected, because, according to the bank, his mortgage was not in the foreclosure process during the eligible review period. Promontory Financial Group, which Bank of America hired to review his loan, apparently did not double check Bank of America’s analysis against the extensive documentation that Chase submitted. That documentation clearly showed that his loan was eligible for review.
In recent months ProPublica, an investigative nonprofit, has issued a series of damning articles about the Independent Foreclosure Review. The most recent found that supposedly independent third-party reviewers looking over Bank of America loan files were given the “correct” answers in advance by the bank. These reviewers could override the answers, but they weren’t starting from a blank slate.
Banks, if they did not find a “compensable error,” did not have to pay anything, giving them a strong incentive to find no flaws with their own work.
“It was flawed from the start,” Miller said of the review program. “There was an inherent conflict of interest by just about everyone involved.”
Also on HuffPost:
Columbine Shooting Survivor Fighting Foreclosure With Occupy LA’s Help
Facing foreclosure, Perry Laspina of Jacksonville, Florida ended up with a home practically for free after his mortgage lender was shut down by parent company Wells Fargo, <a href=”http://realestate.aol.com/blog/2011/04/14/foreclosure-foul-up-wins-man-a-free-home/” target=”_hplink”>AOL Real Estate reports</a>. Laspina got the home “because of the significant decreased value of the property,” a bank spokesman said.
BofA Forecloses On Building With Own Branch Office
A senior couple in Pasco County, Florida faced foreclosure not for missing payments, <a href=”http://www.huffingtonpost.com/2011/08/22/senior-florida-couple-faces-foreclosure-mortgage-early_n_933147.html” target=”_hplink”>but for making one too early</a>. According to a Bank of America representative, they made themselves ineligible for a mortgage modification under the Home Affordable Modification Program when they did not make their payment in the “month in which it [was] due.”
Foreclosure In ‘World’s Richest Apartment Building’
Mother, Disabled Daughter Forced Out Of Home Even After BofA Modification
Dirma Rodriguez and her disabled daughter<a href=”https://editorial.huffingtonpost.com/entry/?blog_id=2&entry_id=1423883″ target=”_hplink”> were forced to flee their home in minutes</a> after Bank of America sold it to a flipper at a foreclosure auction, even though the bank had already modified her loan. But not all hope is lost; Rodriguez may get her home back after the Occupy Fights Foreclosure movement intervened.
ProPublica: The Independent Foreclosure Review is the government’s main effort to compensate homeowners for harm they suffered at the hands of banks — and, as…
MODESTO — Nearly 50,000 Northern San Joaquin Valley homeowners potentially may be owed compensation for financial losses they incurred because of errors made during foreclosure…
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:
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.
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.
Lona v. Citibank Docket
Cal.App. 6th Dist (H036140) 12/21/11TRUSTEE‘S SALES: The court reversed a summary judgment in favor of defendants in an action seeking to set aside a trustee’s sale on the basis that the loan was unconscionable. The court held that summary judgment was improper for two reasons:
1. The homeowner presented sufficient evidence of triable issues of material fact regarding unconscionability. Plaintiff asserted that the loan broker ignored his inability to repay the loan (monthly loan payments were four times his monthly income) and, as a person with limited English fluency, little education, and modest income, he did not understand many of the details of the transaction which was conducted entirely in English.
2. Plaintiff did not tender payment of the debt, which is normally a condition precedent to an action by the borrower to set aside the trustee’s sale, but defendants’ motion for summary judgment did not address the exceptions to this rule that defendant relied upon.
The case contains a good discussion of four exceptions to the tender requirement: 1. If the borrower’s action attacks the validity of the underlying debt, a tender is not required since it would constitute an affirmation of the debt. 2. A tender will not be required when the person who seeks to set aside the trustee’s sale has a counter-claim or set-off against the beneficiary. 3. A tender may not be required where it would be inequitable to impose such a condition on the party challenging the sale. 4. No tender will be required when the trustor is not required to rely on equity to attack the deed because the trustee’s deed is void on its face.Pioneer Construction v. Global Investment Corp. Docket
Cal.App. 2nd Dist. (B225685) 12/21/11MECHANICS LIENS: The court held that:
1. A mechanics lien claimant who provided labor and materials prepetition to a debtor in bankruptcy can record a mechanics lien after the property owner files for bankruptcy without violating the automatic stay. (11 U.S.C. §362(b)(3).)
2. A mechanics lienor must, and defendant did, file a notice of lien in the debtor’s bankruptcy proceedings to inform the debtor and creditors of its intention to enforce the lien. (11 U.S.C. §546(b)(2).)
3. The 90-day period to file an action after recording a mechanics lien is tolled during the pendency of the property owner’s bankruptcy. Accordingly, an action to enforce the lien was timely when filed 79 days after a trustee’s sale by a lender who obtained relief from the automatic stay. (The property ceased to be property of the estate upon completion of the trustee’s sale.)Harbour Vista v. HSBC Mortgage Services Docket
Cal.App. 4th Dist., Div. 3 (G044357) 12/19/11QUIET TITLE: Code of Civil Procedure Section 764.010 states that “[t]he court shall not enter judgment by default. . .” The court held that, while default may be entered, Section 764.010 requires that before issuing a default judgment the trial court must hold an evidentiary hearing in open court, and that a defendant is entitled to participate in the hearing even when it has not yet answered the complaint and is in default. Normally, a defendant has no right to participate in the case after its default has been entered.Park v. First American Title Insurance Company Docket
Cal.App. 4th Dist., Div. 3 (G044118) 11/23/11 (Pub. Order 12/16/11)TRUSTEE’S SALES: A trustee’s sale was delayed due to defendant’s error in preparing the deed of trust. However, the court held that plaintiff could not establish damages because she could not prove that a potential buyer was ready, willing and able to purchase the property when the trustee’s sale was originally scheduled. Such proof would require showing that a prospective buyer made an offer, entered into a contract of sale, obtained a cashier’s check, or took any equivalent step that would have demonstrated she was ready, willing, and able to purchase plaintiff’s property. Also, plaintiff would need to show that the prospective buyer was financially able to purchase the property, such as by showing that the prospective buyer had obtained financing for the sale, preapproval for a loan or had sufficient funds to purchase the property with cash.Bardasian v. Superior Court Docket
Cal.App. 3rd Dist. (C068488) 12/15/11TRUSTEE’S SALES: Civil Code Section 2923.5 requires that before a notice of default can be filed, a lender must attempt to contact the borrower and explore options to prevent foreclosure. Where the trial court ruled on the merits that a lender failed to comply with Section 2923.5, it was proper to enjoin the sale pending compliance with that section, but it was not proper to require plaintiff to post a bond and make rent payments. Also, discussions in connection with a loan modification three years previously did not constitute compliance with the code section.Lang v. Roche Docket
Cal.App. 2nd Dist. (B222885) 11/29/11SHERIFF’S SALES: Plaintiff sought to set aside a Sheriff’s sale arising from the execution on a judgment rendered in another action. Defendant had obtained that judgment by default after service by publication even though plaintiff was defendant’s next door neighbor and could easily be found. The court set the sale aside, holding that even though C.C.P. 701.780 provides that an execution sale is absolute and cannot be set aside, that statute does not eliminate plaintiff’s right of equitable redemption where the judgment is void due to lack of personal jurisdiction.Promenade at Playa Vista HOA v. Western Pacific Housing Docket
Cal.App. 2nd Dist. (B225086) 11/8/11CC&R’S: In a construction defect action brought by a condominium homeowners association, the court held that a developer cannot compel binding arbitration of the litigation pursuant to an arbitration provision in the Declaration of Covenants, Conditions, and Restrictions. CC&R’s are not a contract between the developer and the homeowners association. Instead, the provisions in the CC&R’s are equitable servitudes and can be enforced only by the homeowners association or the owner of a condominium, not by a developer who has sold all the units.Alpha and Omega Development v. Whillock Contracting Docket
Cal.App. 4th Dist., Div. 1 (D058445) 11/2/11LIS PENDENS: This is a slander of title and malicious prosecution action brought after defendant’s unsuccessful action to foreclose a mechanics lien. Plaintiff’s slander of title allegation is based on defendant’s recordation of a lis pendens in the prior mechanics lien action. The appellate court upheld the trial court’s granting of defendant’s anti-SLAPP motion and striking the slander of title cause of action, because recording a lis pendens is privileged under Civil Code Section 47(b)(4).Biancalana v. T.D. Service Company Docket Sup.Ct. Docket
Cal.App. 6th Dist. (H035400) 10/31/11 Petition for review by Cal Supreme Ct. filed 12/9/11TRUSTEE’S SALES: Inadequacy of the sale price is not a sufficient ground for setting aside a trustee’s sale of real property in the absence of any procedural errors. The unpaid balance of the loan secured by the subject deed of trust was $219,105. The trustee erroneously told the auctioneer to credit bid the delinquency amount ($21,894.17). Plaintiff was the successful bidder with a bid of $21,896. The court refused to set aside the sale because there were no procedural errors and the mistake was within the discretion and control of the trustee, who was acting as agent for the lender. The court distinguished Millennium Rock Mortgage, Inc. v. T.D. Service Co. because here the mistake was made by defendant in the course and scope of its duty as the beneficiary’s agent, not by the auctioneer as in Millennium Rock.
The case also contains a discussion of the rule that once the trustee’s deed has been delivered, a rebuttable presumption arises that the foreclosure sale has been conducted regularly and properly. But where the deed has not been transferred, the sale may be challenged on the grounds of procedural irregularity.First Bank v. East West Bank Docket
Cal.App. 2nd Dist. (B226061) 10/17/11 Case complete 12/19/11RECORDING: Where two deeds of trust secured by the same real property were simultaneously time-stamped for recording by the County Recorder’s Office but were indexed at different times, the lenders have equal priority. The recording laws protect subsequent purchasers and neither bank was a subsequent purchaser. The court acknowledged that a subsequent purchaser (or lender) who records his interest before the prior interest is indexed has priority, but this rule does not apply when both deeds of trust were recorded simultaneously.Dollinger DeAnza Assoc. v. Chicago Title Insurance CompanyDocket Sup.Ct. Docket
Cal.App. 6th Dist. (H035576) 9/9/11 (Pub. Order 10/6/11 Request for depublication filed 11/4/11TITLE INSURANCE: Plaintiff’s title insurance policy, which was issued in 2004, insured property that originally consisted of seven parcels, but which had been merged into a single parcel pursuant to a Notice of Merger recorded by the City of Cupertino in 1984. The policy did not except the Notice of Merger from coverage. Plaintiff filed this action after Chicago Title denied its claim for damages alleged to result from the inability to sell one of the parcels separately. The court ruled in favor of Chicago, holding:
1. While the notice of merger may impact Plaintiff’s ability to market the separate parcel, it has no affect on Plaintiff’s title to that parcel, so it does not constitute a defect in title. It does not represent a third person’s claim to an interest in the property.
2. Chicago is not barred by principals of waiver or estoppel from denying plaintiff’s claim, after initially accepting the claim, because 1) waiver only applies to insurers that do not reserve rights when accepting a tender of defense and 2) plaintiff failed to show detrimental reliance, which is one of the elements of estoppel.
3. Plaintiff’s claim for breach of the implied covenant of good faith and fair dealing cannot be maintained where benefits are not due under plaintiff’s insurance policy.
4. Since the court held that the Notice of Merger was not a defect in title, it did not need to consider Chicago’s contention that the Notice of Merger was void because the County Recorder indexed it under the name of the City, rather than the name of the property owner. [Ed. note: This case must have dealt with an ALTA 1992 policy. The ALTA 2006 policy made changes to the Covered Risks.]Sukut Construction v. Rimrock CA Docket Sup.Ct. Docket
Cal.App. 4th Dist., Div. 1 (D057774) 9/30/11 Petition for review by Cal Supreme Ct. DENIED 12/14/11MECHANICS LIENS: Plaintiff could not establish a mining lien under Civil Code Section 3060 for removing rocks from a quarry because a quarry is not a mine and the rocks were not minerals. The court did not address whether plaintiff could establish a regular mechanics lien because it held that plaintiff was judicially estopped from asserting that position after leading defendant to believe that it was asserting only a mining claim.UNPUBLISHED: First American Title Insurance Company v. Ordin Docket
Cal.App. 2nd Dist. (B226671) 9/14/11 Case complete 11/17/11TITLE INSURANCE: An arbitrator found that defendants did not lose coverage under their title policy when they conveyed title to their wholly owned corporation, then to themselves as trustees of their family trust and finally to a wholly owned limited liability company. This conflicts with the holding in Kwok v. Transnation Title Insurance Company and this could have been an interesting case, except that whether the ruling was right or wrong was not before the court. The court held only that the arbitrator’s award could not be overturned, even if the the law was applied incorrectly, because there was no misconduct by the arbitrator.Calvo v. HSBC Bank Docket Sup.Ct. Docket
199 Cal.App.4th 118 – 2nd Dist. (B226494) 9/13/11 Petition for review by Cal Supreme Ct. filed 10/25/11TRUSTEE’S SALES: Notice of the assignment of a deed of trust appeared only in the substitution of trustee, which was recorded on the same date as the notice of trustee’s sale, and which stated that MERS, as nominee for the assignee lender, was the present beneficiary. Plaintiff sought to set aside the trustee’s sale for an alleged violation of Civil Code section 2932.5, which requires the assignee of a mortgagee to record an assignment before exercising a power to sell real property. The court held that the lender did not violate section 2932.5 because that statute does not apply when the power of sale is conferred in a deed of trust rather than a mortgage.Robinson v. Countrywide Home Loans Docket
199 Cal.App.4th 42 – 4th Dist., Div. 2 (E052011) 9/12/11 Case complete 11/15/11TRUSTEE’S SALES: The trial court properly sustained defendant lender’s demurrer without leave to amend because 1) the statutory scheme does not provide for a preemptive suit challenging MERS authority to initiate a foreclosure and 2) even if such a statutory claim were cognizable, the complaint did not allege facts sufficient to challenge the trustee’s authority to initiate a foreclosure.Hacienda Ranch Homes v. Superior Court (Elissagaray) Docket
198 Cal.App.4th 1122 – 3rd Dist. (C065978) 8/30/11 Case complete 11/1/11ADVERSE POSSESSION: Plaintiffs (real parties in interest) acquired a 24.5% interest in the subject property at a tax sale. The court rejected plaintiffs’ claim of adverse possession under both 1) “color of title” because the tax deed by which they acquired their interest clearly conveyed only a 24.5% interest instead of a 100% interest, and 2) “claim of right” because plaintiffs’ claims of posting for-sale signs and clearing weeds 2 or 3 times a year did not satisfy the requirement of protecting the property with a substantial enclosure or cultivating or improving the property, as required by Code of Civil Procedure Section 325. The court also pointed out that obtaining adverse possession against cotenants requires evidence much stronger than that which would be required against a stranger, and plaintiffs failed to establish such evidence in this case.Gramercy Investment Trust v. Lakemont Homes Nevada, Inc. Docket
198 Cal.App.4th 903 – 4th Dist., Div. 2 (E051384) 8/24/11 Case complete 10/27/11ANTIDEFICIENCY: After a judicial foreclosure, the lender obtained a deficiency judgment against a guarantor. The court held that the choice of law provision designating the law of New York was unenforceable because there were insufficient contacts with New York. California is where the contract was executed, the debt was created and guaranteed, the default occurred and the real property is located. Also, Nevada law does not apply, even though the guarantor was a Nevada corporation, because Nevada had no connection with the transaction. The court also held that the guarantor was not entitled to the protection of California’s antideficiency statutes because the guaranty specifically waived rights under those statutes in accordance with Civil Code Section 2856.Hill v. San Jose Family Housing PartnersDocket
198 Cal.App.4th 764 – 6th Dist. (H034931) 8/23/11 Case complete 10/25/11EASEMENTS: Plaintiff, who had entered into an easement agreement with defendant’s predecessor to maintain a billboard on a portion of defendant’s property, filed an action to prevent defendant from constructing a multi-unit building that would allegedly block the view of the billboard. Defendant asserted that the easement was unenforceable because it violated city and county building codes. The court held:
1. The easement was enforceable because the property’s use for advertising purposes is not illegal in and of itself. Although the instrumentality of that use, i.e., the billboard, may be illegal, that is not a bar to the enforcement of the agreement.
2. The easement agreement did not specifically state that it included the right to view the billboard from the street, but the parties necessarily intended the easement to include that right since viewing the billboard by passing traffic is the purpose of the easement.
3. Nevertheless, the trial court improperly denied a motion for a retrial to re-determine damages based on new evidence that the city had instituted administrative proceedings to have the billboard removed. The award of damages was based on plaintiff’s expected revenue from the billboard until 2037, and such damages will be overstated if the city forces plaintiff to remove the billboard.Fontenot v. Wells Fargo Bank Docket Sup.Ct. Docket
198 Cal.App.4th 256 – 1st Dist. (A130478) 8/11/11 Depublication request DENIED 11/30/11FORECLOSURE / MERS: Plaintiff alleged a foreclosure was unlawful because MERS made an invalid assignment of an interest in the promissory note and because the lender had breached an agreement to forbear from foreclosure. The appellate court held that the trial court properly sustained a demurrer to the fourth amended complaint without leave to amend. The court held that MERS had a right to assign the note even though it was not the beneficiary of the deed of trust because in assigning the note it was acting on behalf of the beneficiary and not on its own behalf. Additionally, Plaintiff failed to allege that the note was not otherwise assigned by an unrecorded document. The court also held that plaintiff failed to properly allege that the lender breached a forbearance agreement because plaintiff did not attach to the complaint a copy of a letter (which the court held was part of the forbearance agreement) that purportedly modified the agreement. Normally, a copy of an agreement does not have to be attached to a complaint, but here the trial court granted a previous demurrer with leave to amend specifically on condition plaintiff attach a copy of the entire forbearance agreement to the amended pleading.Boschma v. Home Loan Center Docket
198 Cal.App.4th 230 – 4th Dist., Div. 3 (G043716) 8/10/11 Case complete 10/11/11LOAN DISCLOSURE: Borrowers stated a cause of action that survived a demurrer where they alleged fraud and a violation of California’s Unfair Competition Law (B&PC 17200, et seq.) based on disclosures indicating that borrowers’ Option ARM loan may result in negative amortization when, in fact, making the scheduled payments would definitely result in negative amortization. However, the court also pointed out that at trial in order to prove damages plaintiffs will have to present evidence that, because of the structure of the loans, they suffered actual damages beyond their loss of equity. For every dollar by which the loan balances increased, plaintiffs kept a dollar to save or spend as they pleased, so they will not be able to prove damages if their “only injury is the psychological revelation . . . that they were not receiving a free lunch from defendant”.Thorstrom v. Thorstrom Docket
196 Cal.App.4th 1406 – 1st Dist. (A127888) 6/29/11 Case complete 8/30/11EASEMENTS: Plaintiffs were not able to preclude defendants’ use of a well on plaintiffs’ property. The historic use of the well by the common owner (the mother of the current owners) indicated an intent for the well to serve both properties, and an implied easement was created in favor of defendants when the mother died and left one parcel to each of her two sons. However, the evidence did not establish that defendants were entitled to exclusive use of the well, so both properties are entitled to reasonable use of the well consistent with the volume of water available at any given time.Herrera v. Deutsche Bank Docket
196 Cal.App.4th 1366 – 3rd Dist. (C065630) 5/31/11 (Cert. for pub. 6/28/11) Case complete 8/30/11TRUSTEE’S SALES: Plaintiffs sought to set aside a trustee’s sale, claiming that the Bank had not established that it was the assignee of the note, and that the trustee (“CRC”) had not established that it was properly substituted as trustee. To establish that the Bank was the beneficiary and CRC was the trustee, defendants requested that the trial court take judicial notice of the recorded Assignment of Deed of Trust and Substitution of Trustee, and filed a declaration by an employee of CRC referring to the recordation of the assignment and substitution, and stating that they “indicated” that the Bank was the assignee and CRC was the trustee. The trial court granted defendants’ motion for summary judgment and the appellate court reversed. The Court acknowledged that California law does not require the original promissory note in order to foreclose. But while a court may take judicial notice of a recorded document, that does not mean it may take judicial notice of factual matters stated therein, so the recorded documents do not prove the truth of their contents. Accordingly, the Bank did not present direct evidence that it held the note.
Ed. notes: 1. It seems that the Bank could have avoided this result if it had its own employee make a declaration directly stating that the Bank is the holder of the note and deed of trust, 2. In the unpublished portion of the opinion, the Court held that if the Bank is successful in asserting its claim to the Property, there is no recognizable legal theory that would require the Bank to pay plaintiffs monies they expended on the property for back taxes, insurance and deferred maintenance.Tashakori v. Lakis Docket Sup.Ct. Docket
196 Cal.App.4th 1003 – 2nd Dist. (B220875) 6/21/11 Petition for review by Cal Supreme Ct. DENIED 9/21/11EASEMENTS: The court granted plaintiffs an “equitable easement” for driveway purposes. Apparently, plaintiffs did not have grounds to establish a prescriptive easement. But a court can award an equitable easement where the court applies the “relative hardship” test and determines, as the court did here, that 1) the use is innocent, which means it was not willful or negligent, 2) the user will suffer irreparable harm if relief is not granted and 3) there is little harm to the underlying property owner.Conservatorship of Buchenau (Tornel v. Office of the Public Guardian) Docket
196 Cal.App.4th 1031 – 2nd Dist. (B222941) 5/31/11 (Pub. order 6/21/11) Case complete 8/24/11CONTRACTS: A purchaser of real property was held liable for damages for refusing to complete the purchase contract, even though the seller deposited the deed into escrow 19 days after the date set for close of escrow. The escrow instructions did not include a “time is of the essence” clause, so a reasonable time is allowed for performance. The purchaser presented no evidence that seller’s delay of 19 days was unreasonable following a two-month escrow. Diamond Heights Village Assn. v. Financial Freedom Senior Funding Corp. Docket Sup.Ct. Docket
196 Cal.App.4th 290 – 1st Dist. (A126145) 6/7/11 Petition for review by Cal Supreme Ct. DENIED 9/21/11HOMEOWNERS ASSOCIATION LIENS:
1. A homeowner’s association recorded a notice of assessment lien, judicially foreclosed and obtained a judgment against the homeowners. However, it did not record an abstract of judgment, which would have created a judgment lien, nor did it record a writ of execution, which would have created an execution lien. The court held that a subsequently recorded deed of trust had priority because when an assessment lien is enforced through judicial action, the debt secured by the lien is merged into the judgment. The association’s previous rights were merged into the judgment, substituting in their place only such rights as attach to the judgment.
2. After defendant lender prevailed on summary judgment as to the single cause of action naming the lender, trial proceeded as to the owners of the property, including a cause of action for fraudulent conveyance of a 1/2 interest in the property pertaining to a transfer from the original owner to himself and his mother. The trial court ruled in favor of the Association on the fraudulent conveyance cause of action AND held that defendant lender’s deed of trust was set aside as to that 1/2 interest. The appellate court held that trial of those remaining claims was proper, including trial of the Association’s cause of action against the homeowners for fraudulent conveyance of their condominium unit. It was not proper, however, to void the lender’s security interest in the property (in whole or part) when the lender had not been joined as a party to the fraudulent conveyance cause of action, and final judgment had already been entered in its favor.Hamilton v. Greenwich Investors XXVIModification Docket
195 Cal.App.4th 1602 – 2nd Dist. (B224896) 6/1/11 Case complete 8/17/11TRUSTEE’S SALES:
1. Plaintiff/borrower’s failure to disclose, in earlier bankruptcy proceedings, the existence of his breach of contract and fraud claims against the lender bars the borrower from litigating those claims now. The court distinguished several cases that permitted a debtor in bankruptcy from subsequently pursuing a cause of action that was not disclosed in the bankruptcy pleadings on the basis that in those cases the defendant was not a creditor in the bankruptcy and because the schedules specifically asked the debtor to disclose any offsets against the debts that were listed. This action against the lender amounts to an offset against the loan, so by listing the loan and failing to list this claim, the borrower’s bankruptcy schedules were inaccurate.
2. The borrower’s causes of action for breach of contract and fraud fail in any event because the borrower did not allege the essential fact of payment of sums due from the borrower (i.e. performance by the borrower) or set forth an excuse for performance.
3. The borrower cannot state a cause of action for violations of Civil Code Section 2923.5, which requires lenders to contact borrowers to explore options to avoid foreclosure, because the only remedy for such violations is postponement of the foreclosure sale, and borrower’s house has been sold.***DECERTIFIED*** Ferguson v. Avelo MortgageModification Docket Sup.Ct. Docket
Cal.App. 2nd Dist. (B223447) 6/1/11 Petition for review by Cal Supreme Ct. DENIED & DECERTIFIED 9/14/11FORECLOSURE / MERS:
1. A Notice of Default was defective because it was signed by a trustee before recordation of the substitution of trustee substituting it in place of the original trustee. But the Notice of Sale was properly given because it recorded at the same time as the substitution and included the statutorily required affidavit attesting to the mailing of a copy of the substitution to all persons to whom an NOD must be mailed. Since the NOS was valid, the court held that the sale was merely voidable and not void. Therefore, unlike a void sale (such as where a substitution of trustee is not recorded until after the trustee’s sale is completed), where the sale is merely voidable the plaintiff must tender full payment of the debt in order to bring an action setting aside the sale. The plaintiff did not make such a tender, so the trial court properly refused to set aside the sale.
2. Mortgage Electronic Registration Systems (MERS), as nominee of the original lender had the authority to assign the note and deed of trust to defendant, even if MERS does not possess the original note.Creative Ventures, LLC v. Jim Ward & Associates Docket Sup.Ct. Docket
195 Cal.App.4th 1430 – 6th Dist. (H034883) 5/31/11 Petition for review by Cal Supreme Ct. DENIED 8/10/11USURY:
1. The real estate broker arranged loan exception to the Usury Law does not apply were a corporation was not licensed as a broker, even though the officer who negotiated the loan was licensed, where the officer was acting on behalf of the corporation and not on his own behalf.
2. The payee of the note assigned the note to multiple investors. In order to take free of the borrower’s defenses against the original payee, the assignees would have had to be holders in due course. They were not holders in due course because a) the original payee did not endorse the note and transfer possession of the note to the assignees, both of which are requirements for holder in due course status, and b) each investor was assigned a partial interest and partial assignees cannot be holders in due course.
3. The individual investors did not receive usurious interest because the interest rate itself was not usurious. But since the overall interest was usurious when the payee’s brokerage fee was included, the investors must refund the illegal interest each received.
4. The fact that the investors did not intend to violate the Usury Law is irrelevant because the only intent required is the intent to receive payment of interest.
5. An award of treble damages is within the discretion of the trial court, and the trial court properly exercised its discretion not to award treble damages because the conduct of defendants was not intentional.Ribeiro v. County of El Dorado Docket Sup.Ct. Docket
195 Cal.App.4th 354 – 3rd Dist. (C065505) 5/10/111 Petition for review by Cal Supreme Ct. DENIED 8/24/11TAX SALES: “Caveat emptor” applies to tax sales. Accordingly, plaintiff/tax sale purchaser could not rescind the tax sale and obtain his deposit back where he was unaware of the amount of 1915 Act bond arrearages and where the County did not mislead him.The Main Street Plaza v. Cartwright & Main, LLC Docket
194 Cal.App.4th 1044 – 4th Dist., Div. 3 (G043569) 4/27/11 Case complete 6/27/11EASEMENTS: Plaintiff sought to establish a prescriptive easement for parking and access. The trial court granted a motion for summary judgment against plaintiff because it had not paid taxes on the easement. The appellate court reversed because, while payment of property taxes is an element of a cause of action for adverse possession, payment of taxes is not necessary for an easement by prescription, unless the easement has been separately assessed. A railway easement over the same area was separately assessed, but that is irrelevant because the railway easement and the prescriptive easement were not coextensive in use.Liberty National Enterprises v. Chicago Title Insurance Company Docket
194 Cal.App.4th 839 – 2nd Dist. (B222455) 4/6/11 (pub. order 4/26/11) Case complete 6/28/11NOTE: This case is not summarized because it deals with disqualification of a party’s attorney, and not with issues related to title insurance. It is included here only to point out that fact.Barry v. OC Residential Properties Docket Sup.Ct. Docket
194 Cal.App.4th 861 – 4th Dist., Div. 3 (G043073) 4/26/11 Petition for review by Cal Supreme Ct. DENIED 7/13/11TRUSTEE’S SALES: Under C.C.P. 729.035 a trustee’s sale to enforce a homeowners association lien is subject to a right of redemption for 90 days after the sale, and under C.C.P. 729.060 the redemption price includes reasonable amounts paid for maintenance, upkeep and repair. Defendant purchased plaintiff’s interest in a common interest development at a foreclosure sale of a homeowners association lien. Plaintiff sought to redeem the property and defendant included certain repair costs in the redemption amount. Plaintiff asserted that the costs were not for reasonable maintenance, upkeep and repair. The court held that the costs were properly included because the person seeking to redeem has the burden of proof, and plaintiff failed to carry that burden in this case. Plaintiff also asserted that she should not have to pay the repair costs because the work was performed by an unlicensed contractor. The court held that the cost of the repair work was properly included because plaintiff would receive a windfall if she did not have to reimburse those costs and because this is not an action in which a contractor is seeking compensation.McMackin v. Ehrheart Docket
194 Cal.App.4th 128 – 2nd Dist. (B224723) 4/8/11 Case complete 6/9/11CONTRACTS / PROBATE: This case involves a “Marvin” agreement, which is an express or implied contract between nonmarital partners. Plaintiff sought to enforce an alleged oral agreement with a decedent to leave plaintiff a life estate in real property. The court held that since the agreement was for distribution from an estate, it is governed by C.C.P. Section 366.3, which requires the action to be commenced within one year after the date of death. But the court further concluded that, depending on the circumstances of each case, the doctrine of equitable estoppel may be applied to preclude a party from asserting the statute of limitations set forth in section 366.3 as a defense to an untimely action where the party’s wrongdoing has induced another to forbear filing suit.Ferwerda v. Bordon Docket
193 Cal. App. 4th 1178 – 3rd Dist. (C062389) 3/25/11 Petition for review by Cal Supreme Ct. DENIED 6/8/11CC&R’s
In the published portion of the opinion, the court held:
1. The following language in the CC&R’s gave the Homeowners Association the authority to adopt new design standards pertaining to development of lots in the subdivision: “in the event of a conflict between the standards required by [the Planning] Committee and those contained herein, the standards of said Committee shall govern”; and
2. The Planning Committee could not adopt a rule that allowed for attorney’s fees to be awarded to the prevailing party in a lawsuit because such a provision was not contained in the CC&R’s. Adopting the rule was an attempt by the committee to insert a new provision that binds homeowners without their approval.
In the unpublished portion of the opinion, the court held that the Planning Committee acted properly in denying the plaintiff’s building plans. (The details are not summarized here because that part of the opinion is not certified for publication.)Capon v. Monopoly Game LLC Docket
193 Cal. App. 4th 344 – 1st Dist. (A124964) 3/4/11 Case complete 5/5/11HOME EQUITY SALES CONTRACT ACT: In the published portion of the opinion, the court held that plaintiff was entitled to damages under the Home Equity Sales Contract Act because the purchaser was subject to the Act and the purchase contract did not comply with it. There is an exception in the Act for a purchaser who intends to live in the property. The principal member of the LLC purchase asserted that he intended to live in the property, but the court held the exception does not apply because the purchaser was the LLC rather than the member, so his intent was irrelevant.Gomes v. Countrywide Home Loans Docket Cal. Sup.Ct. Docket U.S. Supreme Ct. Docket
192 Cal. App. 4th 1149 – 4th Dist., Div. 1 (D057005) 2/18/11 Petition for review by Cal Supreme Ct. DENIED 5/18/11, Petition for a writ of certiorari DENIED 10/11/11FORECLOSURE / MERS: A borrower brought an action to restrain a foreclosure of a deed of trust held by MERS as nominee for the original lender. A Notice of Default had been recorded by the trustee, which identified itself as an agent for MERS. The court held that 1) There is no legal basis to bring an action in order to determine whether the person electing to sell the property is duly authorized to do so by the lender, unless the plaintiff can specify a specific factual basis for alleging that the foreclosure was not initiated by the correct party; and 2) MERS has a right to foreclose because the deed of trust specifically provided that MERS as nominee has the right to foreclose.Schuman v. Ignatin Docket
191 Cal. App. 4th 255 – 2nd Dist. (B215059) 12/23/10 Case complete 2/23/11CC&R’s: The applicable CC&R’s would have expired, but an amendment was recorded extending them. Plaintiff filed this action alleging that defendant’s proposed house violated the CC&R’s. The trial court held that the amendment was invalid because it was not signed by all of the lot owners in the subdivision. Since the CC&R’s had expired, it did not determine whether the proposed construction would have violated them. The appellate court reversed and remanded, holding that the defect in the amendment rendered it voidable, not void, and it could no longer be challenged because the four-year statute of limitations contained in C.C.P. 343 had run.Schelb v. Stein Docket
190 Cal. App. 4th 1440 – 2nd Dist. (B213929) 12/17/10 Case complete 2/16/11MARKETABLE RECORD TITLE ACT: In a previous divorce action, in order to equalize a division of community property, the husband was ordered to give the wife a note secured by a deed of trust on property awarded to the husband. In this case (many years later), the court held that under the Marketable Record Title Act, the deed of trust had expired. (Civil Code Section 882.020.) However, under Family Code Section 291, the underlying family law judgment does not expire until paid, so it is enforceable as an unsecured judgment.Vuki v. Superior Court Docket
189 Cal. App. 4th 791 – 4th Dist., Div. 3 (G043544) 10/29/10 Case complete 1/3/11TRUSTEE’S SALES: Unlike section 2923.5 as construed by this court in Mabry v. Superior Court (2010) 185 Cal.App.4th 208, neither Section 2923.52 or Section 2923.53 provides any private right of action, even a very limited one as this court found in Mabry. Civil Code section 2923.52 imposes a 90-day delay in the normal foreclosure process. But Civil Code section 2923.53 allows for an exemption to that delay if lenders have loan modification programs that meet certain criteria. The only enforcement mechanism is that a violation is deemed to be a violation of lenders license laws. Section 2923.54 provides that a violation of Sections 2923.52 or 2923.53 does not invalidate a trustee’s sale, and plaintiff also argued that a lender is not entitled to a bona fide purchaser protection. The court rejected that argument because any noncompliance is entirely a regulatory matter, and cannot be remedied in a private action.Abers v. RounsavellMod Opinion Docket
189 Cal. App. 4th 348 – 4th Dist., Div. 3 (G040486) 10/18/10 Case complete 12/20/10LEASES: Leases of residential condominium units required a re-calculation of rent after 30 years based on a percentage of the appraised value of the “leased land”. The term “leased land” was defined to consist of the condominium unit and an undivided interest in the common area of Parcel 1, and did not include the recreational area (Parcel 2), which was leased to the Homeowners Association. The Court held that the language of the leases was clear. The appraisals were to be based only on the value of the lessees’ interest in Parcel 1 and not on the value of the recreational parcel.UNPUBLISHED: Residential Mortgage Capital v. Chicago Title Ins. Company Docket
Cal.App. 1st Dist. (A125695) 9/20/10 Case complete 11/23/10ESCROW: An escrow holder released loan documents to a mortgage broker at the broker’s request in order to have the borrowers sign the documents at home. They were improperly backdated and the broker failed to provide duplicate copies of the notice of right to rescind. Due these discrepancies, the lender complied with the borrower’s demand for a rescission of the loan, and filed this action against the escrow holder for amounts reimbursed to the borrower for finance charges and attorney’s fees. The Court held that the escrow holder did not breach a duty to the lender because it properly followed the escrow instructions, and it is common for escrow to release documents to persons associated with the transaction in order for them to be signed elsewhere.Starr v. Starr Docket
189 Cal. App. 4th 277 – 2nd Dist. (B219539) 9/30/10 Case complete 12/16/10COMMUNITY PROPERTY: In a divorce action the Court ordered the husband to convey title to himself and his former wife. Title had been taken in the husband’s name and the wife executed a quitclaim deed. But Family Code Section 721 creates a presumption that a transaction that benefits one spouse was the result of undue influence. The husband failed to overcome this presumption where the evidence showed that the wife executed the deed in reliance on the husband’s representation that he would subsequently add her to title. The husband was, nevertheless, entitled to reimbursement for his separate property contribution in purchasing the property.Malkoskie v. Option One Mortgage Corp. Docket
188 Cal. App. 4th 968 – 2nd Dist. (B221470) 9/23/10 Case complete 11/23/10TRUSTEE’S SALES: After plaintiff stipulated to a judgment in an unlawful detainer action, she could not challenge the validity of the trustee’s sale in a subsequent action because the subsequent action is barred by collateral estoppel. Because the action was barred, the court did not reach the question of the validity of the trustee’s sale based on the substitution of trustee being recorded after trustee’s sale proceedings had commenced and based on assignments of the deed of trust into the foreclosing beneficiary being recorded after the trustee’s deed.Lee v. Fidelity National Title Ins. Co. Docket Sup.Ct. Docket
188 Cal. App. 4th 583 – 1st Dist. (A124730) 9/16/10 Petition for review and depublication by Cal Supreme Ct. DENIED 12/1/10TITLE INSURANCE:
1. The insureds could have reasonably expected that they were buying a title insurance policy on APN 22, and not just APN 9, where both the preliminary report and policy included a reference to APN 22, listed exclusions from coverage that were specific to APN 22, and attached an assessor’s parcel map with an arrow pointing to both APN 9 and 22.
2. A preliminary report is merely an offer to issue a title policy, but an insured has the right to expect that the policy will be consistent with the terms of the offer.
3. There was a triable issue of fact as to whether a neighbor’s construction of improvements on APN 22 was sufficient to commence the running of the statute of limitations, where the insureds testified that they did not know the precise location of APN 22 and assumed that the neighbors constructed the improvements on their own property.
4. There was a triable issue of fact as to whether Fidelity National Title Insurance Company acted as escrow holder or whether the escrow was conducted by its affiliate, Fidelity National Title Company (only the insurance company was named as a defendant).Chicago Title Insurance Company v. AMZ Insurance Services Docket Sup.Ct. Docket
188 Cal. App. 4th 401 – 4th Dist., Div. 3 (G041188) 9/9/10 Petition for review and depublication by Cal Supreme Ct. DENIED 12/15/10ESCROW: A document entitled “Evidence of Property Insurance” (“EOI”) constitutes a binder under Insurance Code Section 382.5(a). In this case an EOI was effective to obligate the insurer to issue a homeowner’s policy even though the escrow failed to send the premium check. In order to cancel the EOI the insured has to be given notice pursuant to Insurance Code Section 481.1, which the insurer did not do. The escrow holder paid the insured’s loss and obtained an assignment of rights. The court held that the escrow holder did not act as a volunteer in paying the amount of the loss, and is entitled to be reimbursed by the insurance company under the doctrine of equitable subrogation.Vanderkous v. Conley Docket
188 Cal. App. 4th 111 – 1st Dist (A125352) 9/2/10 Case complete 11/3/10QUIET TITLE: 1) In a quiet title action the court has equitable powers to award compensation as necessary to do complete justice, even though neither party’s pleadings specifically requested compensation. 2) Realizing that the court was going to require plaintiff to compensate defendant in exchange for quieting title in plaintiff’s favor, plaintiff dismissed the lawsuit. However, the dismissal was invalid because it was filed following trial after the case had been submitted to the court.Purdum v. Holmes Docket
187 Cal. App. 4th 916 – 2nd Dist. (B216493) 7/29/10 Case complete 10/22/10NOTARIES: A notary was sued for notarizing a forged deed. He admitted that he knew the grantor had not signed the deed, but the lawsuit was filed more than six years after the deed was signed and notarized. The court held that the action was barred by the six-year limitation period in C.C.P. 338(f)(3) even though plaintiff did not discover the wrongful conduct until well within the six year period.Perlas v. GMAC Mortgage Docket
187 Cal. App. 4th 429 – 1st Dist. (A125212) 8/11/10 Case complete 10/10/10DEEDS OF TRUST: Borrowers filed an action against a lender to set aside a deed of trust, setting forth numerous causes of action. Borrowers’ loan application (apparently prepared by a loan broker) falsely inflated the borrowers’ income. In the published portion of the opinion. The court held in favor of the lender, explaining that a lender is not in a fiduciary relationship with borrowers and owes them no duty of care in approving their loan. A lender’s determination that the borrowers qualified for the loan is not a representation that they could afford the loan. One interesting issue in the unpublished portion of the opinion was the court’s rejection of the borrowers’ argument that naming MERS as nominee invalidated the deed of trust because, as borrower argued, the deed of trust was a contract with MERS and the note was a separate contract with the lender.Soifer v. Chicago Title CompanyModification Docket Sup.Ct. Docket
187 Cal. App. 4th 365 – 2nd Dist. (B217956) 8/10/10 Petition for review by Cal Supreme Ct. DENIED 10/27/10TITLE INSURANCE: A person cannot recover for errors in a title company’s informal communications regarding the condition of title to property in the absence of a policy of title insurance or the purchase of an abstract of title. There are two ways in which an interested party can obtain title information upon which reliance may be placed: an abstract of title or a policy of title insurance. Having purchased neither, plaintiff cannot recover for title company’s incorrect statement that a deed of trust in foreclosure was a first lien.In re: Hastie (Weinkauf v. Florez) Docket Sup.Ct. Docket
186 Cal. App. 4th 1285 – 1st Dist. (A127069) 7/22/10 Petition for review by Cal Supreme Ct. filed late and DENIED 9/21/10DEEDS: An administrator of decedent’s estate sought to set aside two deeds on the basis that the grantees were the grandson and granddaughter of decedent’s caregiver. Defendant did not dispute that the transfers violated Probate Code Section 21350, which prohibits conveyances to a fiduciary, including a caregiver, or the fiduciary’s relatives, unless specified conditions are met. Instead, defendant asserted only that the 3-year statute of limitations had expired. The court held that the action was timely because there was no evidence indicating that the heirs had or should have had knowledge of the transfer, which would have commenced the running of the statute of limitations.Bank of America v. Stonehaven Manor, LLC Docket Sup.Ct. Docket
186 Cal. App. 4th 719 – 3rd Dist. (C060089) 7/12/10 Petition for review by Cal Supreme Ct. DENIED 10/20/10ATTACHMENT: The property of a guarantor of a debt–a debt which is secured by the real property of the principal debtor and also that of a joint and several co-guarantor–is subject to attachment where the guarantor has contractually waived the benefit of that security (i.e. waived the benefit of Civil Code Section 2849).Jackson v. County of Amador Docket
186 Cal. App. 4th 514 – 3rd Dist. (C060845) 7/7/10 Depublication request DENIED 9/15/10RECORDING LAW: An owner of two rental houses sued the county recorder for recording a durable power of attorney and two quitclaim deeds that were fraudulently executed by the owner’s brother. The superior court sustained the recorder’s demurrer without leave to amend. The court of appeal affirmed, holding that the legal insufficiency of the power of attorney did not provide a basis for the recorder to refuse to record the power of attorney under Government Code Section 27201(a) and the recorder did not owe the owner a duty to determine whether the instruments were fraudulently executed because the instruments were notarized.Luna v. Brownell Docket
185 Cal. App. 4th 668 – 2nd Dist. (B212757) 6/11/10 Case complete 8/17/10DEEDS: A deed transferring property to the trustee of a trust is not void as between the grantor and grantee merely because the trust had not been created at the time the deed was executed, if (1) the deed was executed in anticipation of the creation of the trust and (2) the trust is in fact created thereafter. The deed was deemed legally delivered when the Trust was established.Mabry v. Superior Court Docket Sup.Ct. Docket
185 Cal. App. 4th 208 – 4th Dist., Div. 3 (G042911) 6/2/10 Petition for review by Cal Supreme Ct. DENIED 8/18/10TRUSTEE’S SALES: The court answered, and provided thorough explanations for, a laundry list of questions regarding Civil Code Section 2923.5, which requires a lender to explore options for modifying a loan with a borrower prior to commencing foreclosure proceedings.
1. May section 2923.5 be enforced by a private right of action? Yes.
2. Must a borrower tender the full amount of the mortgage indebtedness due as a prerequisite to bringing an action under section 2923.5? No.
3. Is section 2923.5 preempted by federal law? No.
4. What is the extent of a private right of action under section 2923.5? It is limited to obtaining a postponement of a foreclosure to permit the lender to comply with section 2923.5.
5. Must the declaration required of the lender by section 2923.5, subdivision (b) be under penalty of perjury? No.
6. Does a declaration in a notice of default that tracks the language of section 2923.5(b) comply with the statute, even though such language does not on its face delineate precisely which one of three categories applies to the particular case at hand? Yes.
7. If a lender forecloses without complying with section 2923.5, does that noncompliance affect the title acquired by a third party purchaser at the foreclosure sale? No.
8. Did the lender comply with section 2923.5? Remanded to the trial court to determine which of the two sides is telling the truth.
9. Can section 2923.5 be enforced in a class action in this case? Not under these facts, which are highly fact-specific.
10. Does section 2923.5 require a lender to rewrite or modify the loan? No.612 South LLC v. Laconic Limited Partnership Docket
184 Cal. App. 4th 1270 – Cal.App. 4th Dist., Div. 1 (D056646) 5/25/10 Case complete 7/26/10ASSESSMENT BOND FORECLOSURE:
1. Recordation of a Notice of Assessment under the Improvement Act of 1911 imparted constructive notice even though the notice did not name the owner of the subject property and was not indexed under the owner’s name. There is no statutory requirement that the notice of assessment be indexed under the name of the property owner.
2. A Preliminary Report also gave constructive notice where it stated: “The lien of special tax for the following municipal improvement bond, which tax is collected with the county taxes. . .”
3. A property owner is not liable for a deficiency judgment after a bond foreclosure because a property owner does not have personal liability for either delinquent amounts due on the bond or for attorney fees incurred in prosecuting the action.Tarlesson v. Broadway Foreclosure InvestmentsDocket
184 Cal. App. 4th 931 – 1st Dist. (A125445) 5/17/10 Case complete 7/20/10HOMESTEADS: A judgment debtor is entitled to a homestead exemption where she continuously resided in property, even though at one point she conveyed title to her cousin in order to obtain financing and the cousin subsequently conveyed title back to the debtor. The amount of the exemption was $150,000 (later statutorily changed to $175,000) based on debtor’s declaration that she was over 55 years old and earned less than $15,000 per year, because there was no conflicting evidence in the record.UNPUBLISHED: MBK Celamonte v. Lawyers Title Insurance Corporation Docket Sup.Ct. Docket
Cal.App. 4th Dist., Div. 3 (G041605) 4/28/10 Petition for review by Cal Supreme Ct. DENIED 7/21/10TITLE INSURANCE / ENCUMBRANCES: A recorded authorization for a Mello Roos Assessment constitutes an “encumbrance” covered by a title policy, even where actual assessments are conditioned on the future development of the property.Plaza Home Mortgage v. North American Title Company Docket Sup.Ct. Docket
184 Cal. App. 4th 130 – 4th Dist., Div. 1 (D054685) 4/27/10 Depublication request DENIED 8/11/10ESCROW / LOAN FRAUD: The buyer obtained 100% financing and managed to walk away with cash ($54,000) at close of escrow. (Actually, the buyer’s attorney-in-fact received the money.) The lender sued the title company that acted as escrow holder, asserting that it should have notified the lender when it received the instruction to send the payment to the buyer’s attorney-in-fact after escrow had closed. The court reversed a grant of a motion for summary judgment in favor of the escrow, pointing out that its decision is narrow, and holding only that the trial court erred when it determined the escrow did not breach the closing instructions contract merely because escrow had closed. The case was remanded in order to determine whether the escrow breached the closing instructions contract and if so, whether that breach proximately caused the lender’s damages.Garcia v. World Savings Docket Sup.Ct. Docket
183 Cal. App. 4th 1031 – 2nd (B214822) 4/9/10 Petition for review and depublication by Cal Supreme Ct. DENIED 6/23/10TRUSTEE’S SALES: A lender told plaintiffs/owners that it would postpone a trustee’s sale by a week to give plaintiffs time to obtain another loan secured by other property in order to bring the subject loan current. Plaintiffs obtained a loan the following week, but the lender had conducted the trustee’s sale on the scheduled date and the property was sold to a third party bidder. Plaintiffs dismissed causes of action pertaining to setting aside the sale and pursued causes of action for breach of contract, wrongful foreclosure and promissory estoppel. The court held that there was no consideration that would support the breach of contract claim because plaintiffs promised nothing more than was due under the original agreement. Plaintiffs also could not prove a cause of action for wrongful foreclosure because that cause of action requires that the borrower tender funds to pay off the loan prior to the trustee’s sale. However, plaintiffs could recover based on promissory estoppel because procuring a high cost, high interest loan by using other property as security is sufficient to constitute detrimental reliance.LEG Investments v. Boxler Docket
183 Cal. App. 4th 484 – 3rd Dist. (C058743) 4/1/10 Certified for Partial Publication Case complete 6/2/10PARTITION: A right of first refusal in a tenancy in common agreement does not absolutely waive the right of partition. Instead, the right of first refusal merely modifies the right of partition to require the selling cotenant to first offer to sell to the nonselling cotenant before seeking partition. [Ed. note: I expect that the result would have been different if the right of partition had been specifically waived in the tenancy in common agreement.]Steiner v. Thexton Docket
48 Cal. 4th 411 – Cal. Supreme Court (S164928) 3/18/10OPTIONS: A contract to sell real property where the buyer’s performance was entirely conditioned on the buyer obtaining regulatory approval to subdivide the property is an option. Although plaintiffs’ promise was initially illusory because no consideration was given at the outset, plaintiffs’ part performance of their bargained-for promise to seek a parcel split cured the initially illusory nature of the promise and thereby constituted sufficient consideration to render the option irrevocable.Grotenhuis v. County of Santa Barbara Docket
182 Cal. App. 4th 1158 – 2nd Dist. (B212264) 3/15/10 Case complete 5/18/10PROPERTY TAXES: Subject to certain conditions, a homeowner over the age of 55 may sell a principle residence, purchase a replacement dwelling of equal or lesser value in the same county, and transfer the property tax basis of the principal residence to the replacement dwelling. The court held that this favorable tax treatment is not available where title to both properties was held by an individual’s wholly owned corporation. The court rejected plaintiffs’ argument that the corporation was their alter ego because that concept is used to pierce the corporate veil of an opponent, and not to enable a person “to weave in and out of corporate status when it suits the business objective of the day.”Clear Lake Riviera Community Assn. v. Cramer Docket
182 Cal.App. 4th 459 – 1st Dist. (A122205) 2/26/10 Case complete 4/29/10HOMEOWNER’S ASSOCIATIONS: Defendant homeowners were ordered to bring their newly built house into compliance with the homeowners association’s guidelines where the house exceed the guidelines’ height restriction by nine feet. Even though the cost to the defendants will be great, they built the house with knowledge of the restriction and their hardship will not be grossly disproportionate to the loss the neighbors would suffer if the violation were not abated, caused by loss in property values and loss of enjoyment of their properties caused by blocked views. The height restriction was contained in the associations guidelines and not in the CC&R’s, and the association did not have records proving the official adoption of the guidelines. Nevertheless, the court held that proper adoption was inferred from the circumstantial evidence of long enforcement of the guidelines by the association.Forsgren Associates v. Pacific Golf Community Development Docket Sup. Ct. Docket
182 Cal.App. 4th 135 – 4th Dist., Div. 2 (E045940) 2/23/10 Petition for review by Cal Supreme Ct. DENIED 6/17/10MECHANIC’S LIENS: 1. Owners of land are subject to mechanic’s liens where they were aware of the work being done by the lien claimant and where they failed to record a notice of non-responsibility.
2. Civil Code Section 3128 provides that a mechanic’s lien attaches to land on which the improvement is situated “together with a convenient space about the same or so much as may be required for the convenient use and occupation thereof”. Accordingly, defendant’s land adjacent to a golf course on which the lien claimant performed work is subject to a mechanic’s lien, but only as to the limited portions where a tee box was located and where an irrigation system was installed.
3. The fact that adjacent property incidentally benefits from being adjacent to a golf course does not support extending a mechanic’s lien to that property.
4. The owners of the adjacent property were liable for interest, but only as to their proportionate share of the amount of the entire mechanic’s lien.Steinhart v. County of Los Angeles Docket
47 Cal.4th 1298 – Cal. Supreme Court (S158007) 2/4/10PROPERTY TAXES: A “change in ownership”, requiring a property tax reassessment, occurs upon the death of a trust settlor who transferred property to a revocable trust, and which became irrevocable upon the settlor’s death. The fact that one trust beneficiary was entitled to live in the property for her life, and the remaining beneficiaries received the property upon her death, did not alter the fact that a change in ownership of the entire title had occurred.Kuish v. Smith Docket
181 Cal.App.4th 1419 – 4th Dist., Div. 3 (G040743) 2/3/10 Case complete 4/12/10CONTRACTS: 1. Defendants’ retention of a $600,000 deposit designated as “non-refundable” constituted an invalid forfeiture because a) the contract did not contain a valid liquidated damages clause, and b) plaintiff re-sold the property for a higher price, so there were no out-of-pocket damages. 2. The deposit did not constitute additional consideration for extending the escrow because it was labeled “non-refundable” in the original contract.Kendall v. Walker (Modification attached)Docket
181 Cal.App.4th 584 – 1st Dist. (A105981) 12/30/09 Case complete 3/29/10WATER RIGHTS: An owner of land adjoining a navigable waterway has rights in the foreshore adjacent to his property separate from that of the general public. The court held that the boundary in the waterway between adjacent parcels of land is not fixed by extending the boundary lines into the water in the direction of the last course ending at the shore line. Instead, it is fixed by a line drawn into the water perpendicular to the shore line. Accordingly, the court enjoined defendants from allowing their houseboat from being moored in a manner that crossed onto plaintiffs’ side of that perpendicular boundary line.Junkin v. Golden West Foreclosure Service Docket
180 Cal.App.4th 1150 – 1st Dist. (A124374) 1/5/10 Case complete 3/12/10USURY: The joint venture exception to the Usury Law, which has been developed by case law, provides that where the relationship between the parties is a bona fide joint venture or partnership, an advance by a joint venturer is an investment and not a loan, making the Usury Law inapplicable. The court applied the exception to a loan by one partner to the other because instead of looking at the loan in isolation, it looked at the entire transaction which it determined to be a joint venture. The case contains a good discussion of the various factors that should be weighed in determining whether the transaction is a bona fide joint venture. The presence or absence of any one factor is not, alone, determinative. The factors include whether or not: 1) there is an absolute obligation of repayment, 2) the investor may suffer a loss, 3) the investor has a right to participate in management, 4) the subject property was purchased from a third party and 5) the parties considered themselves to be partners.Banc of America Leasing & Capital v. 3 Arch Trustee Services Docket
180 Cal.App.4th 1090 – 4th Dist., Div. 3 (G041480) 12/11/09 Case complete 3/8/10TRUSTEE’S SALES: A judgment lien creditor is not entitled to receive a notice of default, notice of trustee’s sale or notice of surplus sale proceeds unless the creditor records a statutory request for notice. The trustee is required to disburse surplus proceeds only to persons who have provided the trustee with a proof of claim. The burden rests with the judgment creditor to keep a careful watch over the debtor, make requests for notice of default and sales, and to submit claims in the event of surplus sale proceeds.Park 100 Investment Group v. Ryan Docket
180 Cal.App.4th 795 – 2nd Dist. (B208189) 12/23/09 Case complete 2/26/10LIS PENDENS: 1. A lis pendens may be filed against a dominant tenement when the litigation involves an easement dispute. Although title to the dominant tenement would not be directly affected if an easement right was shown to exist, the owner’s right to possession clearly is affected
2.A recorded lis pendens is a privileged publication only if it identifies an action previously filed with a court of competent jurisdiction which affects the title or right of possession of real property. If the complaint does not allege a real property claim, or the alleged claim lacks evidentiary merit, the lis pendens, in addition to being subject to expungement, is not privileged.Millennium Rock Mortgage v. T.D. Service CompanyModification Docket
179 Cal.App.4th 804 – 3rd Dist. (C059875) 11/24/09 Case complete 1/26/10TRUSTEE’S SALES: A trustee’s sale auctioneer erroneously read from a script for a different foreclosure, although the correct street address was used. The auctioneer opened the bidding with the credit bid from the other foreclosure that was substantially less than the correct credit bid. The errors were discovered after the close of bidding but prior to the issuance of a trustee’s deed. The court held that the errors constituted an “irregularity” sufficient to give the trustee the right to rescind the sale.
The court distinguished 6 Angels v. Stuart-Wright Mortgage, in which the court held that a beneficiary’s negligent miscalculation of the amount of its credit bid was not sufficient to rescind the sale. In 6 Angelsthe error was totally extrinsic to the proper conduct of the sale itself. Here there was inherent inconsistency in the auctioneer’s description of the property being offered for sale, creating a fatal ambiguity in determining which property was being auctioned.Fidelity National Title Insurance Company v. Schroeder Docket
179 Cal.App.4th 834 – 5th Dist. (F056339) 11/24/09 Case complete 1/25/10JUDGMENTS: A judgment debtor transferred his 1/2 interest in real property to the other cotenant prior to the judgment creditor recording an abstract of judgment. The court held that if the trial court on remand finds that the transfer was intended to shield the debtor’s property from creditors, then the transferee holds the debtor’s 1/2 interest as a resulting trust for the benefit of the debtor, and the creditor’s judgment lien will attach to that interest. The court also held that the transfer cannot be set aside under the Uniform Fraudulent Transfer Act because no recoverable value remained in the real property after deducting existing encumbrances and Gordon’s homestead exemption.
The case contains a good explanation of the difference between a resulting (“intention enforcing”) and constructive (“fraud-rectifying”) trust. A resulting trust carries out the inferred intent of the parties; a constructive trust defeats or prevents the wrongful act of one of them.Zhang v. Superior Court Docket Sup.Ct. Docket
Cal.App. 4th Dist., Div. 2 (E047207) 10/29/09 Petition for review by Cal Supreme Ct. GRANTED 2/10/10INSURANCE / BAD FAITH: Fraudulent conduct by an insurer does not give rise to a private right of action under the Unfair Insurance Practices Act (Insurance Code section 790.03 et seq.), but it can give rise to a private cause of action under the Unfair Competition Law (Business and Professions Code section 17200 et seq.).Presta v. Tepper Docket
179 Cal.App.4th 909 – 4th Dist., Div. 3 (G040427) 10/28/09 Case complete 1/25/10TRUSTS: An ordinary express trust is not an entity separate from its trustee, like a corporation is. Instead, a trust is merely a relationship by which one person or entity holds property for the benefit of some other person or entity. Consequently, where two men entered into partnership agreements as trustees of their trusts, the provision of the partnership agreement, which required that upon the death of a partner the partnership shall purchase his interest in the partnership, was triggered by the death of one of the two men.Wells Fargo Bank v. NeilsenModificationDocket Sup.Ct. Docket
178 Cal.App.4th 602 – 1st Dist. (A122626) 10/22/09 (Mod. filed 11/10/09) Petition for review by Cal Supreme Ct. DENIED 2/10/10CIRCUITY OF PRIORITY: The Court follows the rule in Bratcher v. Buckner, even though Bratcher involved a judgment lien and two deeds of trust and this case involves three deeds of trust. The situation is that A, B & C have liens on the subject property, and A then subordinates his lien to C’s lien. The problem with this is that C appears to be senior to A, which is senior to B, which is senior to C, so that each lien is senior and junior to one of the other liens.
The Court held that the lien holders have the following priority: (1) C is paid up to the amount of A’s lien, (2) if the amount of A’s lien exceeds C’s lien, A is paid the amount of his lien, less the amount paid so far to C, (3) B is then paid in full, (4) C is then paid any balance still owing to C, (5) A is then paid any balance still owing to A.
This is entirely fair because A loses priority as to the amount of C’s lien, which conforms to the intent of the subordination agreement. B remains in the same position he would be in without the subordination agreement since his lien remains junior only to the amount of A’s lien. C steps into A’s shoes only up to the amount of A’s lien.
NOTE: The odd thing about circuity of priority cases is that they result in surplus proceeds after a foreclosure sale being paid to senior lienholders. Normally, only junior lienholders and the foreclosed out owner are entitled to share in surplus proceeds, and the purchaser takes title subject to the senior liens.Schmidli v. Pearce Docket
178 Cal.App.4th 305 – 3rd Dist. (C058270) 10/13/09 Case complete 12/15/09MARKETABLE RECORD TITLE ACT: This case was decided under the pre-2007 version of Civil Code Section 882.020, which provided that a deed of trust expires after 10 years if the maturity date is “ascertainable from the record”. The court held that this provision was not triggered by a Notice of Default, which set forth the maturity date and which was recorded prior to expiration of the 10-year period. NOTE: In 2007, C.C. Section 882.020 was amended to make it clear that the 10-year period applies only where the maturity date is shown in the deed of trust itself.Nielsen v. Gibson Docket
178 Cal.App.4th 318 – 3rd Dist. (C059291) 10/13/09 Case complete 12/15/09ADVERSE POSSESSION: 1. The “open and notorious” element of adverse possession was satisfied where plaintiff possessed the subject property by actual possession under such circumstances as to constitute reasonable notice to the owner. Defendant was charged with constructive knowledge of plaintiff’s possession, even though defendant was out of the country the entire time and did not have actual knowledge.
2. The 5-year adverse possession period is tolled under C.C.P. Section 328 for up to 20 years if the defendant is “under the age of majority or insane”. In the unpublishedportion of the opinion the court held that although the defendant had been ruled incompetent by a court in Ireland, there was insufficient evidence that defendant’s condition met the legal definition of “insane”.Ricketts v. McCormackDocket Sup.Ct. Docket
177 Cal.App.4th 1324 – 2nd Dist. (B210123) 9/27/09 Petition for review by Cal Supreme Ct. DENIED 12/17/09RECORDING LAW: Civil Code Section 2941(c) provides in part, “Within two business days from the day of receipt, if received in recordable form together with all required fees, the county recorder shall stamp and record the full reconveyance or certificate of discharge.” In this class action lawsuit against the County recorder, the court held that indexing is a distinct function, separate from recording a document, and is not part of section 2941(c)’s stamp-and-record requirement.
The court distinguished indexing, stamping and recording: Stamping: The “stamping” requirement of Section 2941(c) is satisfied when the Recorder endorses on a reconveyance the order of receipt, the day and time of receipt and the amount of fees paid. Recording: The reconveyance is “recorded” once the Recorder has confirmed the document meets all recording requirements, created an entry for the document in the “Enterprise Recording Archive” system, calculated the required fees and confirmed payment of the correct amount and, finally, generated a lead sheet containing, among other things, a bar code, a permanent recording number and the words “Recorded/Filed in Official Records.” Indexing: Government Code Section 27324 requires all instruments “presented for recordation” to “have a title or titles indicating the kind or kinds of documents contained therein,” and the recorder is “required to index only that title or titles captioned on the first page of a document.Starlight Ridge South Homeowner’s Assn. v. Hunter-BloorDocket
177 Cal.App.4th 440 – 4th Dist., Div. 2 (E046457) 8/14/09 (Pub. Order 9/3/09) Case complete 10/19/09CC&R’s: Under Code Civ. Proc. Section 1859, where two provisions appear to cover the same matter, and are inconsistent, the more specific provision controls over the general provision. Here the provision of CC&R’s requiring each homeowner to maintain a drainage ditch where it crossed the homeowners’ properties was a specific provision that controlled over a general provision requiring the homeowner’s association to maintain landscape maintenance areas.First American Title Insurance Co. v. XWarehouse Lending Corp.Docket
177 Cal.App.4th 106 – 1st Dist. (A119931) 8/28/09 Case complete 10/30/09TITLE INSURANCE: A loan policy provides that “the owner of the indebtedness secured by the insured mortgage” becomes an insured under the loan policy. Normally, this means that an assignee becomes an insured. However, where the insured lender failed to disburse loan proceeds for the benefit of the named borrower, an indebtedness never existed, and the warehouse lender/assignee who disbursed money to the lender did not become an insured. The court pointed out that the policy insures against defects in the mortgage itself, but not against problems related to the underlying debt.
NOTE: In Footnote 8 the court distinguishes cases upholding the right of a named insured or its assignee to recover from a title insurer for a loss due to a forged note or forged mortgage because in those cases, and unlike this case, moneys had been actually disbursed or credited to the named borrower by either the lender or its assignee.Wells Fargo v. D & M CabinetsDocket
177 Cal.App.4th 59 – 3rd Dist. (C058486) 8/28/09 Case complete 10/28/09JUDGMENTS: A judgment creditor, seeking to sell an occupied dwelling to collect on a money judgment, may not bypass the stringent requirements of C.C.P. Section 704.740 et seq. when the sale is conducted by a receiver appointed under C.C.P Section 708.620. The judgment creditor must comply with Section 704.740, regardless of whether the property is to be sold by a sheriff or a receiver.Sequoia Park Associates v. County of SonomaDocketSup.Ct. Docket
176 Cal.App.4th 1270 – 1st Dist. (A120049) 8/21/09 Petition for review by Cal Supreme Ct. DENIED 12/2/09PREEMPTION: A County ordinance professing to implement the state mobilehome conversion statutes was preempted for the following reasons: (1) Gov. Code Section 66427.5 expressly preempts the power of local authorities to inject other factors when considering an application to convert an existing mobilehome park from a rental to a resident-owner basis, (2) the ordinance is impliedly preempted because the Legislature has established a dominant role for the state in regulating mobilehomes, and has indicated its intent to forestall local intrusion into the particular terrain of mobilehome conversions and (3) the County’s ordinance duplicates several features of state law, a redundancy that is an established litmus test for preemption.Citizens for Planning Responsibly v. County of San Luis ObispoDocketSup.Ct. Docket
176 Cal.App.4th 357 – 2nd Dist (B206957) 8/4/09 Petition for review by Cal Supreme Ct. DENIED 10/14/09PREEMPTION: The court held that the State Aeronautics Act, which regulates the development and expansion of airports, did not preempt an initiative measure adopted by the voters because none of the following three factors necessary to establish preemption was present: (1) The Legislature may so completely occupy the field in a matter of statewide concern that all, or conflicting, local legislation is precluded, (2) the Legislature may delegate exclusive authority to a city council or board of supervisors to exercise a particular power over matters of statewide concern, or (3) the exercise of the initiative power would impermissibly interfere with an essential governmental function.Delgado v. Interinsurance Exchange of the Auto Club of So. Cal.Docket
47 Cal.4th 302 – Cal. Supreme Court (S155129) 8/3/09INSURANCE / BAD FAITH: The case is not as relevant to title insurance as the lower court case, which held that an insurance company acted in bad faith as a matter of law where a potential for coverage was apparent from the face of the complaint. The Supreme Court reversed, basing its decision on the meaning of “accident” in a homeowner’s policy, and holding that an insured’s unreasonable belief in the need for self-defense does not turn the resulting intentional act of assault and battery into “an accident” within the policy’s coverage clause. Therefore, the insurance company had no duty to defend its insured in the lawsuit brought against him by the injured party.1538 Cahuenga Partners v. Turmeko PropertiesDocket
176 Cal.App.4th 139 – 2nd Dist. (B209548) 7/31/09 Case complete 10/7/09RECONVEYANCE: [This is actually a civil procedure case that it not of much interest to title insurance business, but it is included here because the underlying action sought to cancel a reconveyance.] The court ordered that a reconveyance of a deed of trust be cancelled pursuant to a settlement agreement. The main holding was that a trial court may enforce a settlement agreement against a party to the settlement that has interest in the subject matter of the action even if the party is not named in the action, where the non-party appears in court and consents to the settlement.Lee v. LeeDocket
175 Cal.App.4th 1553 – 5th Dist. (F056107) 7/29/09 Case complete 9/28/09DEEDS / STATUTE OF FRAUDS:
1. The Statute of Frauds does not apply to an executed contract, and a deed that is executed by the grantor and delivered to the grantee is an executed contract. The court rejected defendants’ argument that the deed did not reflect the terms of sale under a verbal agreement.
2. While the alteration of an undelivered deed renders the conveyance void, the alteration of a deed after it has been delivered to the grantee does not invalidate the instrument as to the grantee. The deed is void only as to the individuals who were added as grantees after delivery.White v. CridlebaughDocket
178 Cal.App.4th 506 – 5th Dist. (F053843) 7/29/09 (Mod. 10/20/09) Case complete 12/21/09MECHANIC’S LIENS: Under Business and Professions Code Section 7031, a property owner may recover all compensation paid to an unlicensed contractor, in addition to not being liable for unpaid amounts. Furthermore, this recovery may not be offset or reduced by the unlicensed contractor’s claim for materials or other services.Linthicum v. ButterfieldDocketSup.Ct. Docket
175 Cal.App.4th 259 – 2nd Dist. (B199645) 6/24/09 Petition for review by Cal Supreme Ct. DENIED 9/9/09NOTE: This is a new opinion following a rehearing. The only significant changes from the original opinion filed 4/2/09 (modified 4/8/09) involve the issue of a C.C.P. 998 offer, which is not a significant title insurance or escrow issue.
EASEMENTS: The court quieted title to an easement for access based on the doctrine of “balancing conveniences ” or “relative hardship”. Prohibiting the continued use of the roadway would cause catastrophic loss to the defendants and insignificant loss to the plaintiffs. However, the court remanded the case for the trial court to determine the width of the easement, which should be the minimal width necessary. The court reversed the judgment insofar as it awarded a utility easement to the defendants because they did not seek to quiet title to an easement for utilities, even though they denied the material allegations of that cause of action.United Rentals Northwest v. United Lumber ProductsDocket
174 Cal.App.4th 1479 – 5th Dist. (F055855) 6/18/09 Case complete 8/18/09MECHANIC’S LIENS: Under Civil Code Section 3106, a “work of improvement” includes the demolition and/or removal of buildings. The court held that lumber drying kilns are “buildings” so the contractor who dismantled and removed them was entitled to a mechanic’s lien.People v. ShettyDocketSup.Ct. Docket
174 Cal.App.4th 1488 – 2nd Dist. (B205061) 6/18/09 Petition for review by Cal Supreme Ct. DENIED 9/30/09HOME EQUITY SALES CONTRACT ACT: This case is not significant from a title insurance standpoint, but it is interesting because it is an example of a successful prosecution under the Home Equity Sales Contract Act (Civil Code Section 1695 et seq.).Strauss v. HortonModification Docket
46 Cal.4th 364 – Cal. Supreme Court (S168047) 5/26/09SAME SEX MARRIAGE: The California Supreme Court upheld Proposition 8, which amended the California State Constitution to provide that: “Only marriage between a man and a woman is valid or recognized in California.” Proposition 8 thereby overrode portions of the ruling of In re Marriage Cases, which allowed same-sex marriages. But the Court upheld the marriages that were performed in the brief time same-sex marriage was legal between June 17, 2008 (In re Marriage Cases) through November 5, 2008 (Proposition 8).In re Marriage of LundDocket
174 Cal.App.4th 40 – 4th Dist., Div. 3 (G040863) 5/21/09 Case complete 7/27/09COMMUNITY PROPERTY: An agreement accomplished a transmutation of separate property to community property even though it stated that the transfer was “for estate planning purposes”. A transmutation either occurs for all purposes or it doesn’t occur at all.St. Marie v. Riverside County Regional Park, etc.Docket
46 Cal.4th 282 – Cal. Supreme Court (S159319) 5/14/09OPEN SPACE DEDICATION: Property granted to a Regional Park District is not “actually dedicated” under Public Resources Code Section 5540 for open space purposes until the district’s Board of Directors adopts a resolution dedicating the property for park or open space purposes. Therefore, until the Board of Directors adopts such a resolution, the property may be sold by the District without voter or legislative approval.Manhattan Loft v. Mercury LiquorsDocketSup.Ct. Docket
173 Cal.App.4th 1040 – 2nd Dist. (B211070) 5/6/09 Petition for review by Cal Supreme Ct. DENIED 8/12/09LIS PENDENS: An arbitration proceeding is not an “action” that supports the recordation of a notice of pendency of action. The proper procedure is for a party to an arbitration agreement to file an action in court to support the recording of a lis pendens, and simultaneously file an application to stay the litigation pending arbitration.Murphy v. BurchDocket
46 Cal.4th 157 – Cal. Supreme Court (S159489) 4/27/09EASEMENT BY NECESSITY: This case contains a good discussion of the law of easements by necessity, which the court held did not apply in this case to provide access to plaintiff’s property. This means plaintiff’s property is completely landlocked because the parties had already stipulated that a prescriptive easement could not be established.
An easement by necessity arises by operation of law when 1) there is a strict necessity as when a property is landlocked and 2) the dominant and servient tenements were under the same ownership at the time of the conveyance giving rise to the necessity. The second requirement, while not categorically barred when the federal government is the common grantor, requires a high burden of proof to show 1) the intent of Congress to establish the easement under federal statutes authorizing the patent and 2) the government’s lack of power to condemn the easement. Normally, a reservation of an easement in favor of the government would not be necessary because the government can obtain the easement by condemnation.
The court pointed out that there is a distinction between an implied grant and implied reservation, and favorably quotes a treatise that observes: “an easement of necessity may be created against the government, but the government agency cannot establish an easement by necessity over land it has conveyed because its power of eminent domain removes the strict necessity required for the creation of an easement by necessity.”Abernathy Valley, Inc. v. County of SolanoDocket
173 Cal.App.4th 42 – 1st Dist. (A121817) 4/17/09 Case complete 6/22/09SUBDIVISION MAP ACT: This case contains a very good history of California’s Subdivision Map Act statutes. The court held that parcels shown on a 1909 map recorded pursuant to the 1907 subdivision map law are not entitled to recognition under the Subdivision Map Act’s grandfather clause (Government Code Section 66499.30) because the 1907 act did not regulate the “design and improvement of subdivisions”. The court also held that a local agency may deny an application for a certificate of compliance that seeks a determination that a particular subdivision lot complies with the Act, where the effect of issuing a certificate would be to effectively subdivide the property without complying with the Act.Linthicum v. ButterfieldModificationDocketSup.Ct. Docket
172 Cal.App.4th 1112 – 2nd Dist. (B199645) 4/2/09 SEE NEW OPINION FILED 6/24/09
EASEMENTS: The court quieted title to an easement for access based on the doctrine of “balancing conveniences ” or “relative hardship”. Prohibiting the continued use of the roadway would cause catastrophic loss to the defendants and insignificant loss to the plaintiffs. However, the court remanded the case for the trial court to determine the width of the easement, which should be the minimal width necessary. The court reversed the judgment insofar as it awarded a utility easement to the defendants because they did not seek to quiet title to an easement for utilities, even though they denied the material allegations of that cause of action.McAvoy v. HilbertDocket
172 Cal.App.4th 707 – 4th Dist., Div 1 (D052802) 3/24/09 Case complete 5/27/09ARBITRATION: C.C.P. Section 1298 requires that an arbitration provision in a real estate contract be accompanied by a statutory notice and that the parties indicate their assent by placing their initials on an adjacent space or line. The court held that a listing agreement that is part of a larger transaction for the sale of both a business and real estate is still subject to Section 1298, and refused to enforce an arbitration clause that did not comply with that statute.Peak-Las Positas Partners v. BollagModificationDocket
172 Cal.App.4th 101 – 2nd Dist. (B205091) 3/16/09 Case complete 5/27/09ESCROW: Amended escrow instructions provided for extending the escrow upon mutual consent which “shall not be unreasonably withheld or delayed”. The court held that substantial evidence supported the trial court’s determination that the seller’s refusal to extend escrow was unreasonable. The court pointed out the rule that equity abhors a forfeiture and that plaintiff had paid a non-refundable deposit of $465,000 and spent $5 million in project costs to obtain a lot line adjustment that was necessary in order for the property to be sold.Alfaro v. Community Housing Improvement System & Planning AssnModificationDocketSup.Ct. Docket
171 Cal.App.4th 1356 6th Dist. (H031127) 2/19/09 Petition for review by Cal Supreme Ct. DENIED 5/13/09CC&R’s: The court upheld the validity of recorded CC&R’s containing an affordable housing restriction that required property to remain affordable to buyers with low to moderate income. The court reached several conclusions:
1. Constructive notice of recorded CC&R’s is imparted even if they are not referenced in a subsequent deed,
2. CC&R’s may describe an entire tract, and do not need to describe individual lots in the tract,
3. An affordable housing restriction is a reasonable restraint on alienation even if it is of indefinite duration,
4. Defendants had a duty as sellers to disclose the existence of the CC&R’s. Such disclosure was made if plaintiffs were given, prior to close of escrow, preliminary reports that disclosed the CC&R’s.
5. The fact that a victim had constructive notice of a matter from public records is no defense to fraud. The existence of such public records may be relevant to whether the victim’s reliance was justifiable, but it is not, by itself, conclusive.
6. In the absence of a claim that defendants somehow prevented plaintiffs from reading the preliminary reports or deeds, or misled them about their contents, plaintiffs cannot blame defendants for their own neglect in reading the reports or deeds. Therefore, the date of discovery of alleged fraud for failing to disclose the affordable housing restriction would be the date plaintiffs received their preliminary reports or if they did not receive a preliminary report, the date they received their deeds.Kwok v. Transnation Title Insurance Company DocketSup.Ct. Docket
170 Cal.App.4th 1562 – 2nd Dist. (B207421) 2/10/09 Petition for review by Cal Supreme Ct. DENIED 4/29/09TITLE INSURANCE: Plaintiffs did not succeed as insureds “by operation of law” under the terms of the title insurance policy after transfer of the property from a wholly owned limited liability company, of which appellants were the only members, to appellants as trustees of a revocable family trust. This case highlights the importance of obtaining a 107.9 endorsement, which adds the grantee as an additional insured under the policy.Pro Value Properties v. Quality Loan Service Corp.Docket
170 Cal.App.4th 579 – 2nd Dist. (B204853) 1/23/09 Case complete 3/27/09TRUSTEE’S SALES: A Trustee’s Deed was void because the trustee failed to record a substitution of trustee. The purchaser at the sale was entitled to a return of the money paid plus interest. The interest rate is the prejudgment interest rate of seven percent set forth in Cal. Const., Art. XV, Section 1. A trustee’s obligations to a purchaser are based on statute and not on a contract. Therefore, Civil Code Section 3289 does not apply, since it only applies to a breach of a contract that does not stipulate an interest rate.Sixells v. Cannery Business ParkDocketSup.Ct. Docket
170 Cal.App.4th 648 – 3rd Dist. (C056267) 12/29/08 Petition for review by Cal Supreme Ct. DENIED 3/25/09CONTRACTS: The Subdivision Map Act (Gov. Code, Section 66410 et seq.) prohibits the sale of a parcel of real property until a final subdivision map or parcel map has been filed unless the contract to sell the property is “expressly conditioned” upon the approval and filing of a final map (66499.30(e)). Here, the contract satisfied neither requirement because it allowed the purchaser to complete the purchase if, at its election, the subject property was made into a legal parcel by recording a final map or if the purchaser “waived” the recording of a final map. Therefore the contract was void.Patel v. LiebermenschDocket 45 Cal.4th 344 – Cal. Supreme Court (S156797) 12/22/08SPECIFIC PERFORMANCE: The material factors required for a written contract are the seller, the buyer, the price to be paid, the time and manner of payment, and the property to be transferred, describing it so it may be identified. Here, specific performance of an option was granted even though it was not precise as to the time and manner of payment because where a contract for the sale of real property specifies no time of payment, a reasonable time is allowed. The manner of payment is also a term that may be supplied by implication.In re Marriage of Brooks and RobinsonDocketSup.Ct. Docket
169 Cal.App.4th 176 – 4th Dist., Div. 2 (E043770) 12/16/08 Request for review and depublication by Cal Supreme Ct. DENIED 3/25/09COMMUNITY PROPERTY: The act of taking title to property in the name of one spouse during marriage with the consent of the other spouse effectively removes that property from the general presumption that the property is community property. Instead, there is a presumption that the parties intended title to be held as stated in the deed. This presumption can only be overcome by clear and convincing evidence of a contrary agreement, and not solely by tracing the funds used to purchase the property or by testimony of an intention not disclosed at the time of the execution of the conveyance. Because the court found that there was no agreement to hold title other than as the separate property of the spouse who acquired title in her own name, it did not reach the issue of whether a purchaser from that spouse was a BFP or would be charged with knowledge of that the seller’s spouse had a community property interest in the property.The Formula, Inc. v. Superior CourtDocket
168 Cal.App.4th 1455 – 3rd Dist. (C058894) 12/10/09 Case complete 2/10/09LIS PENDENS: A notice of litigation filed in another state is not authorized for recording under California’s lis pendens statutes. An improperly filed notice of an action in another state is subject to expungement by a California court, but not under the authority of C.C.P. Section 405.30, and an order of expungement is given effect by being recorded in the chain of title to overcome the effect of the earlier filing.Ekstrom v. Marquesa at Monarch Beach HOADocketSup.Ct. Docket
168 Cal.App.4th 1111 – 4th Dist., Div. 3 (G038537) 12/1/08 Depublication request DENIED 3/11/09CC&R’s: A provision in CC&R’s requiring all trees on a lot to be trimmed so as to not exceed the roof of the house on the lot, unless the tree does not obstruct views from other lots, applies to palm trees even though topping a palm tree will kill it. All trees means “all trees”, so palm trees are not exempt from the requirement that offending trees be trimmed, topped, or removed.Spencer v. MarshallDocket
168 Cal.App.4th 783 – 1st Dist. (A119437) 11/24/08 Case complete 1/26/09HOME EQUITY SALES: The Home Equity Sales Contract Act applies even where the seller is in bankruptcy and even where the seller’s Chapter 13 Bankruptcy Plan allows the seller to sell or refinance the subject property without further order of the court.Kachlon v. MarkowitzDocket
168 Cal.App.4th 316 – 2nd Dist. (B182816) 11/17/08 Case complete 1/27/09TRUSTEE’S SALES:
1. The statutorily required mailing, publication, and delivery of notices in nonjudicial foreclosure, and the performance of statutory nonjudicial foreclosure procedures, are privileged communications under the qualified, common-interest privilege, which means that the privilege applies as long as there is no malice. The absolute privilege for communications made in a judicial proceeding (the “litigation privilege”) does not apply.
2. Actions seeking to enjoin nonjudicial foreclosure and clear title based on the provisions of a deed of trust are actions on a contract, so an award of attorney fees under Civil Code Section 1717 and provisions in the deed of trust is proper.
3. An owner is entitled to attorney fees against the trustee who conducted trustee’s sale proceedings where the trustee did not merely act as a neutral stakeholder but rather aligned itself with the lender by denying that the trustor was entitled to relief.Hines v. LukesDocket
167 Cal.App.4th 1174 – 2nd Dist. (B199971) 10/27/08 Case complete 12/31/08EASEMENTS: [Not significant from a title insurance standpoint]. The underlying dispute concerns an easement but the case involves only civil procedure issues pertaining to the enforcement of a settlement agreement.Satchmed Plaza Owners Association v. UWMC Hospital Corp.Docket
167 Cal.App.4th 1034 – 4th Dist., Div. 3 (G038119) 10/23/08 Case complete 12/23/08RIGHT OF FIRST REFUSAL: [Not significant from a title insurance standpoint]. The underlying dispute concerns a right of first refusal but the case involves only civil procedure issues pertaining to a party’s waiver of its right to appeal where it has accepted the benefits of the favorable portion of judgment.Gray v. McCormickDocketSup.Ct. Docket
167 Cal.App.4th 1019 – 4th Dist., Div. 3 (G039738) 10/23/08 Petition for review by Cal Supreme Ct. DENIED 1/14/09EASEMENTS: Exclusive easements are permitted under California law, but the use by the owner of the dominant tenement is limited to the purposes specified in the grant of easement, not all conceivable uses of the property.In re Estate of FelderDocket
167 Cal.App.4th 518 – 2nd Dist. (B205027) 10/9/08 Case complete 12/11/08CONTRACTS: [Not significant from a title insurance standpoint]. The case held that an estate had the right to retain the entire deposit upon a purchaser’s breach of a sales contract even though the estate had only a 1/2 interest in the subject property.Secrest v. Security National Mortgage Loan TrustOrder Modifying Opinion DocketSup.Ct. Docket
167 Cal.App.4th 544 – 4th Dist., Div. 3 (G039065) 10/9/08, Modified 11/3/08 Petition for review by Cal Supreme Ct. DENIED 12/17/08LOAN MODIFICATION: Because a note and deed of trust come within the statute of frauds, a Forbearance Agreement also comes within the statute of frauds pursuant to Civil Code section 1698. Making the downpayment required by the Forbearance Agreement was not sufficient part performance to estop Defendants from asserting the statute of frauds because payment of money alone is not enough as a matter of law to take an agreement out of the statute, and the Plaintiffs have legal means to recover the downpayment if they are entitled to its return. In addition to part performance, the party seeking to enforce the contract must have changed position in reliance on the oral contract to such an extent that application of the statute of frauds would result in an unjust or unconscionable loss, amounting in effect to a fraud.FDIC v. DintinoDocket
167 Cal.App.4th 333 – 4th Dist., Div. 1 (D051447) 9/9/08 (Pub. Order 10/2/08) Case complete 12/2/08TRUST DEEDS: A lender who mistakenly reconveyed a deed of trust could not sue under the note because it would violate the one action rule. However, the lender prevailed on its unjust enrichment cause of action. The applicable statute of limitations was the 3-year statute for actions based on fraud or mistake, and not the 4-year statute for actions based on contract. Nevertheless, the action was timely because the statute did not begin to run until the lender reasonably discovered its mistake, and not from the date of recordation of the reconveyance. Finally, the court awarded defendant attorney’s fees attributable to defending the contract cause of action because defendant prevailed on that particular cause of action even though he lost the lawsuit.California Coastal Commission v. AllenDocketSup.Ct. Docket
167 Cal.App.4th 322 – 2nd Dist. (B197974) 10/1/08 Petition for review by Cal Supreme Ct. DENIED 1/14/09HOMESTEADS:
1. The assignees of a judgment properly established their rights as assignees by filing with the clerk of the court an acknowledgement of assignment of judgment.
2. The subject property was not subject to a homestead exemption because the debtor transferred the property to a corporation of which he was the sole shareholder. The homestead exemption only applies to the interest of a natural person in a dwelling.
3. The debtor could not claim that he was only temporarily absent from a dwelling in order to establish it as his homestead where he leased it for two years. This is true even though the debtor retained the right to occupy a single car section of the garage and the attic.In re Marriage of HoltemannDocketSup.Ct. Docket
162 Cal.App.4th 1175 – 2nd Dist. (B203089) 9/15/08 Petition for review by Cal Supreme Ct. DENIED 12/10/08COMMUNITY PROPERTY: Transmutation of separate property to community property requires language which expressly states that the characterization or ownership of the property is being changed. Here, an effective transmutation occurred because the transmutation agreement clearly specified that a transmutation was occurring and was not negated by arguably confusing language in a trust regarding the parties’ rights to terminate the trust. The court also stated that it was not aware of any authority for the proposition that a transmutation can be conditional or temporary. However, while questioning whether a transmutation can be conditional or temporary, the court did not specifically make that holding because the language used by the parties was not conditional.Mission Shores Association v. PheilDocket
166 Cal.App.4th 789 – 4th Dist., Div. 2 (E043932) 9/5/08 Case complete 11/7/08CC&R’s: Civil Code Section 1356 allows a court to reduce a super-majority voting requirement to amend CC&R’s where the court finds that the amendment is reasonable. Here the court reduced the 2/3 majority requirement to a simple majority for an amendment to limit rentals of homes to 30 days or more.Zanelli v. McGrath Docket
166 Cal.App.4th 615 – 1st Dist. (A117111) 9/2/08 Case complete 11/4/08EASEMENTS:
1. The doctrine of merger codified in Civil Code Sections 805 and 811 applies when “the right to the servitude,” and “the right to the servient tenement” are not vested in a single individual, but in the same persons;
2. The doctrine of merger applies regardless of whether the owners held title as joint tenants or tenants in common. Also, the fact that one owner held his interest in one of the properties as trustee for his inter vivos revocable trust does not preclude merger because California law recognizes that when property is held in this type of trust the settlor has the equivalent of full ownership of the property. (If he had held title only in a representative capacity as a trustee for other beneficiaries under the terms of an irrevocable trust, then his ownership might not result in extinguishment by merger because he would only hold the legal title for the benefit of others.) The court cites Galdjie v. Darwish (2003) 113 Cal.App.4th 1331, stating that a revocable inter vivos trust is recognized as simply a probate avoidance device, but does not prevent creditors of the settlers from reaching trust property.
(3) After being extinguished by merger, an easement is not revived upon severance of the formerly dominant and servient parcels unless it is validly created once again.Ritter & Ritter v. The Churchill Condominium Assn. Docket
166 Cal.App.4th 103 – 2nd Dist. (B187840) 7/22/08 (pub. order 8/21/08) Case complete 10/21/08HOMEOWNERS’ ASSOCIATIONS: A member of a condominium homeowners’ association can recover damages from the association which result from a dangerous condition negligently maintained by the association in the common area. However, the court found in favor of the individual directors because a greater degree of fault is necessary to hold unpaid individual board members liable, and such greater degree of fault was not present here.Kempton v. City of Los AngelesDocketSup.Ct. Docket
165 Cal.App.4th 1344 – 2nd Dist. (B201128) 8/13/08 Request for Depublication by Cal Supreme Ct. DENIED 11/12/08NUISANCE: A private individual may bring an action against a municipality to abate a public nuisance when the individual suffers harm that is specially injurious to himself, or where the nuisance is a public nuisance per se, such as blocking a public sidewalk or road. The court held that plaintiff’s assertions that neighbors’ fences were erected upon city property, prevent access to plaintiff’s sidewalk area, and block the sightlines upon entering and exiting their garage were sufficient to support both a public nuisance per se and specific injury.Claudino v. PereiraDocketSup.Ct. Docket
165 Cal.App.4th 1282 – 3rd Dist. (C054808) 8/12/08 Petition for review by Cal Supreme Ct. DENIED 11/12//08SURVEYS: Determining the location of a boundary line shown on a plat recorded pursuant to the 1867 Townsite Acts requires an examination of both the plat and the surveyor’s field notes. Here, the plat showed the boundary as a straight line, but the court held that the boundary followed the center line of a gulch because the field notes stated that the boundary was “down said gulch”.Zack’s, Inc. v. City of SausalitoDocket
165 Cal.App.4th 1163 – 1st Dist. (A118244) 8/11/08 Case complete 10/14/08TIDELANDS / PUBLIC STREETS: A statute authorizing the City’s lease of tidelands does not supersede other state laws establishing procedures for the abandonment of public streets. Because the City failed to follow the normal procedure for abandonment of the portion of the street upon which it granted a lease, the leasehold was not authorized and can therefore be deemed a nuisance.Gehr v. Baker Hughes Oil Field OperationsDocketSup.Ct. Docket
165 Cal.App.4th 660 – 2nd Dist. (B201195) 7/30/08 Petition for review by Cal Supreme Ct. DENIED 10/16/08NUISANCE: Plaintiff purchased from Defendant real property that was contaminated, and Defendant had begun the remediation process. The 3-year statute of limitations for suing under a permanent nuisance theory had expired. So Plaintiff sued for nuisance damages under a continuing nuisance theory, seeking interest rate differential damages based on the difference in the interest rate between an existing loan and a loan that plaintiff could have obtained if not for the contamination.
The court held that plaintiff’s claim for interest rate differential damages is actually a claim for diminution in value, which may not be recovered under a continuing nuisance theory. Damages for diminution in value may only be recovered for permanent, not continuing, nuisances. When suing for a continuing nuisance, future or prospective damages are not allowed, such as damages for diminution in the value of the subject property. A nuisance can only be considered “continuing” if it can be abated, and therefore a plaintiff suing under this theory may only recover the costs of abating the nuisance.
If the nuisance has inflicted a permanent injury on the land, the plaintiff generally must bring a single lawsuit for all past, present, and future damages within three years of the creation of the nuisance. But if the nuisance is one which may be discontinued at any time, it is considered continuing in character and persons harmed by it may bring successive actions for damages until the nuisance is abated. Recovery is limited, however, to actual injury suffered prior to commencement of each action.Witt Home Ranch v. County of SonomaDocketSup.Ct. Docket
165 Cal.App.4th 543 – 1st Dist. (A118911) 7/29/08 Petition for review by Cal Supreme Ct. DENIED 5/28/08SUBDIVISION MAP ACT: This case contains a good history of California’s Subdivision Map Act statutes. The court held that the laws governing subdivision maps in 1915 did not regulate the “design and improvement of subdivisions,” as required by the grandfather clause of Government Code Section 66499.30. The subdivision map in this case was recorded in 1915 and no lots were subsequently conveyed, so the map does not create a valid subdivision.T.O. IX v. Superior CourtDocketSup.Ct. Docket
165 Cal.App.4th 140 – 2nd Dist. (B203794) 7/24/08 Petition for review by Cal Supreme Ct. DENIED 9/10/08MECHANIC’S LIENS: A mechanic’s lien claimant recorded a mechanic’s lien against each of the nine parcels in a project, each lien for the full amount due under the contract. The court held that defendant could record a single release bond under Civil Code Section 3143 to release all of the liens.Kassir v. Zahabi Docket
164 Cal.App.4th 1352 – 4th Dist., Div. 3 (G038449) 3/5/08 (Pub. Order 4/3/08, Received 7/16/08) Case complete 5/9/08SPECIFIC PERFORMANCE: The trial court ordered Defendant to specifically perform his contract to sell real property to Plaintiff, and further issued a judgment ordering Defendant to pay Plaintiff for rents accruing during the time Defendant was able to perform the agreement but refused to do so. The court held that because the property was overencumbered, Defendant would have received nothing under the agreement and no offset was required.
The court explained that because execution of the judgment in a specific performance action will occur later than the date of performance provided by the contract, financial adjustments must be made to relate their performance back to the contract date, namely: 1) when a buyer is deprived of possession of the property pending resolution of the dispute and the seller receives rents and profits, the buyer is entitled to a credit against the purchase price for the rents and profits from the time the property should have been conveyed to him, 2) a seller also must be treated as if he had performed in a timely fashion and is entitled to receive the value of his lost use of the purchase money during the period performance was delayed, 3) if any part of the purchase price has been set aside by the buyer with notice to the seller, the seller may not receive credit for his lost use of those funds and 4) any award to the seller representing the value of his lost use of the purchase money cannot exceed the rents and profits awarded to the buyer, for otherwise the breaching seller would profit from his wrong.Grant v. RatliffDocketSup.Ct. Docket
164 Cal.App.4th 1304 – 2nd Dist. (B194368) 7/16/08 Request for depublication by Cal Supreme Ct. DENIED 10/1/08PRESCRIPTIVE EASEMENTS: The plaintiff/owner of Parcel A sought to establish a prescriptive easement to a road over Parcel B. In order to establish the requisite 5-year period of open and notorious possession, the plaintiff needed to include the time that the son of the owner of Parcel B spent living in a mobile home on Parcel A. The court held that the son’s use of Parcel A was not adverse but was instead a matter of “family accommodation” and, therefore, a prescriptive easement was not established. The court also discussed: 1) a party seeking to establish a prescriptive easement has the burden of proof by clear and convincing evidence and 2) once the owner of the dominant tenement shows that use of an easement has been continuous over a long period of time, the burden shifts to the owner of the servient tenement to show that the use was permissive, but the servient tenement owner’s burden is a burden of producing evidence, and not a burden of proof.SBAM Partners v. WangDocket
164 Cal.App.4th 903 – 2nd Dist. (B204191) 7/9/08 Case complete 9/10/08HOMESTEADS: Under C.C.P. Section 704.710, a homestead exemption is not allowed on property acquired by the debtor after the judgment has been recorded unless it was purchased with exempt proceeds from the sale, damage or destruction of a homestead within the six-month safe harbor period.Christian v. FloraDocket
164 Cal.App.4th 539 – 3rd Dist. (C054523) 6/30/08 Case complete 9/2/08EASEMENTS: Where parcels in a subdivision are resubdivided by a subsequent parcel map, the new parcel map amends the provisions of any previously recorded parcel map made in compliance with the Map Act. Here, although the deeds to plaintiffs referred to the original parcel map, since the intent of the parties was that the easement shown on the amended parcel map would be conveyed, the grantees acquired title to the easement shown on the amended map.Lange v. SchillingDocket
163 Cal.App.4th 1412 – 3rd Dist. (C055471) 5/28/08; pub. order 6/16/08 Case Complete 8/18/08REAL ESTATE AGENTS: The clear language of the standard California real estate purchase agreement precludes an award of attorney’s fees if a party does not attempt mediation before commencing litigation. Because plaintiff filed his lawsuit before offering mediation, there was no basis to award attorney’s fees.Talbott v. HustwitDocketSup.Ct. Docket
164 Cal.App.4th 148 – 4th Dist., Div. 3 (G037424) 6/20/08 Petition for review and depublication DENIED by Cal Supreme Ct. 9/24/08GUARANTEES:
1. C.C.P. 580a, which requires an appraisal of the real property security before the court may issue a deficiency judgment, does not apply to an action against a guarantor.
2. A lender cannot recover under a guaranty where there the debtor and guarantor already have identical liability, such as with general partners or trustees of a revocable trust in which the debtor is the settlor, trustee and primary beneficiary. Here, however, a guarantee signed by the trustees of the debtors’ trust is enforceable as a “true guarantee” because, although the debtors were the settlors, they were a) secondary, not primary, beneficiaries and b) were not the trustees.Mayer v. L & B Real EstateSup.Ct. Docket
43 Cal.4th 1231 – Cal. Supreme Court (S142211) 6/16/08TAX SALES: The one-year statute of limitations for attacking a tax sale does not begin to run against a property owner who is in “undisturbed possession” of the subject property until that owner has actual notice of the tax sale. Ordinarily, a property owner who has failed to pay property taxes has sufficient knowledge to put him on notice that a tax sale might result. However, in this case the property owners did not have notice because they purchased a single piece of commercial property and received a single yearly tax bill. They had no reason to suspect that due to errors committed by the tax assessor, a small portion of their property was being assessed separately and the tax bills were being sent to a previous owner.
NOTE: This creates a hazard for title companies insuring after a tax sale in reliance on the one-year statute of limitations in Revenue and Taxation Code Section 3725.California Golf v. CooperDocketSup.Ct. Docket
163 Cal.App.4th 1053 – 2nd Dist. (B195211) 6/9/08 Petition for review by Cal Supreme Ct. DENIED 9/17/08TRUSTEE’S SALES:
1. A bidder at a trustee’s sale may not challenge the sale on the basis that the lender previously obtained a decree of judicial foreclosure because the doctrine of election of remedies benefits only the trustor or debtor.
2. A lender’s remedies against a bidder who causes a bank to stop payment on cashier’s checks based on a false affidavit asserting that the checks were lost is not limited to the remedies set forth in CC Section 2924h, and may pursue a cause of action for fraud against the bidder.
(The case contains a good discussion (at pp. 25 – 26) of the procedure for stopping payment on a cashier’s check by submitting an affidavit to the issuing bank.)Biagini v. BeckhamDocket
163 Cal.App.4th 1000 – 3rd Dist. (C054915) 6/9/08 Case complete 8/11/08DEDICATION:
1. Acceptance of a dedication may be actual or implied. It is actual when formal acceptance is made by the proper authorities, and implied when a use has been made of the property by the public 1) of an intensity that is reasonable for the nature of the road and 2) for such a length of time as will evidence an intention to accept the dedication. BUT the use in this case was not sufficient because the use was by neighbors whose use did not exceed what was permitted pursuant to a private easement over the same area.
2. A statutory offer of dedication can be revoked as to the public at large by use of the area that is inconsistent with the dedication, but the offer remains open for formal acceptance by the public entity to which the offer was made. Steiner v. ThextonDocketSup.Ct. Docket
Cal.App. 3rd Dist. (C054605) 5/28/08 REVERSED by Cal. Supreme Ct.OPTIONS: A contract to sell real property where the buyer’s performance was entirely conditioned on the buyer obtaining regulatory approval to subdivide the property is an option. An option must be supported by consideration, but was not here, where the buyer could back out at any time. Buyer’s promise to deliver to seller copies “of all information, reports, tests, studies and other documentation” was not sufficient consideration to support the option.In re Marriage CasesDocket
43 Cal.4th 757 – Cal. Supreme Court (S147999) 5/15/08MARRIAGE: The language of Family Code Section 300 limiting the designation of marriage to a union “between a man and a woman” is unconstitutional and must be stricken from the statute, and the remaining statutory language must be understood as making the designation of marriage available both to opposite-sex and same-sex couples.Harvey v. The Landing Homeowners AssociationDocket
162 Cal.App.4th 809 – 4th Dist., Div. 1 (D050263) 4/4/08 (Cert. for Pub. 4/30/08) Case complete 6/30/08HOMEOWNERS ASSOCIATIONS: The Board of Directors of an HOA has the authority to allow owners to exclusively use common area accessible only to those owners where the following provision of the CC&R’s applied: “The Board shall have the right to allow an Owner to exclusively use portions of the otherwise nonexclusive Common Area, provided that such portions . . . are nominal in area and adjacent to the Owner’s Exclusive Use Area(s) or Living Unit, and, provided further, that such use does not unreasonably interfere with any other Owner’s use . . .” Also, this is allowed under Civil Code Section 1363.07(a)(3)(E).Salma v. CaponDocket
161 Cal.App.4th 1275 – 1st Dist. (A115057) 4/9/08 Case complete 6/11/08HOME EQUITY SALES: A seller claimed he sold his house for far less than it was worth “due to the duress of an impending trustee’s sale and the deceit of the purchasers”. The case involves procedural issues that are not relevant to this web site. However, it is included here because it demonstrates the kind of mess that can occur when you are dealing with property that is in foreclosure. Be careful, folks.Aviel v. NgDocket
161 Cal.App.4th 809 – 1st Dist. (A114930) 2/28/08; pub. order 4/1/08 Case complete 5/6/08LEASES / SUBORDINATION: A lease provision subordinating the lease to “mortgages” also applied to deeds of trust because the two instruments are functionally and legally the same. Therefore a foreclosure of a deed of trust wiped out the lease.People v. MartinezDocket
161 Cal.App.4th 754 – 4th Dist., Div. 2 (E042427) 4/1/08 Case complete 6/2/08FORGERY: This criminal case involves a conviction for forgery of a deed of trust. [NOTE: The crime of forgery can occur even if the owner actually signed the deed of trust. The court pointed out that “forgery is committed when a defendant, by fraud or trickery, causes another to execute a document where the signer is unaware, by reason of such trickery, that he is executing a document of that nature.”Pacific Hills Homeowners Association v. PrunDocket
160 Cal.App.4th 1557 – 4th Dist., Div. 3 (G038244) 3/20/08 Case complete 5/27/08CC&R’s: Defendants built a gate and fence within the setback required by the CC&R’s. 1) The court held that the 5-year statute of limitations of C.C.P. 336(b) applies to unrecorded as well as recorded restrictions, so that the shorter 4-year statute of limitations of C.C.P. 337 is inapplicable. 2) The court upheld the trial court’s equitable remedy of requiring the HOA to pay 2/3 of the cost of relocation defendant’s gate based upon the HOA’s sloppiness in not pursuing its case more promptly.Nicoll v. RudnickDocket
160 Cal.App.4th 550 – 5th Dist. (F052948) 2/27/08 Case complete 4/28/08WATER RIGHTS: An appropriative water right established in a 1902 judgment applied to the entire 300 acre parcel so that when part of the parcel was foreclosed and subsequently re-sold, the water rights must be apportioned according to the acreage of each parcel, not according to the prior actual water usage attributable to each parcel. NOTE: This case contains a good explanation of California water rights law.Real Estate Analytics v. VallasDocket
160 Cal.App.4th 463 – 4th Dist., Div. 1 (D049161) 2/26/08 Case complete 5/29/08SPECIFIC PERFORMANCE: Specific performance is appropriate even where the buyer’s sole purpose and entire intent in buying the property was to earn money for its investors and turn a profit as quickly as possible. The fact that plaintiff was motivated solely to make a profit from the purchase of the property does not overcome the strong statutory presumption that all land is unique and therefore damages were inadequate to make plaintiff whole for the defendant’s breach.Fourth La Costa Condominium Owners Assn. v. SeithDocket
159 Cal.App.4th 563 – 4th Dist., Div. 1 (D049276) 1/30/08 Case complete 4/1/08CC&R’s/HOMEOWNER’S ASSOCIATIONS: The court applied CC 1356(c)(2) and Corp. Code 7515, which allow a court to reduce the supermajority vote requirement for amending CC&R’s and bylaw because the amendments were reasonable and the balloting requirements of the statutes were met.02 Development, LLC v. 607 South Park, LLCDocket
159 Cal.App.4th 609 – 2nd Dist. (B200226) 1/30/08 Case complete 4/3/08SPECIFIC PERFORMANCE: 1) An assignment of a purchaser’s rights under a purchase agreement prior to creation of the assignee as an LLC is valid because an organization can enforce pre-organization contracts if the organization adopts or ratifies them. 2) A purchaser does not need to prove that it already had the necessary funds, or already had binding commitments from third parties to provide the funds, when the other party anticipatorily repudiates the contract. All that plaintiff needed to prove was that it would have been able to obtain the necessary funding (or funding commitments) in order to close the transaction on time.Richeson v. HelalDocketSup.Ct. Docket
158 Cal.App.4th 268 – 2nd Dist. (B187273) 11/29/07; Pub. & mod. order 12/21/07 (see end of opinion)Petition for review by Cal Supreme Ct. DENIED 2/20/08CC&R’s / MUNICIPALITIES: An Agreement Imposing Restrictions (“AIR”) and CC&R’s did not properly lend themselves to an interpretation that would prohibit the City from changing the permitted use or zoning and, were they so construed, the AIR and CC&R’s would be invalid as an attempt by the City to surrender its future right to exercise its police power respecting the property. Here, the AIR and CC&R’s did not prohibit the City from issuing a new conditional use permit allowing the continued use of the subject property as a neighborhood market.Bill Signs Trucking v. Signs Family Ltd. PartnershipDocketSup.Ct. Docket
157 Cal.App.4th 1515 – 4th Dist., Div. 1 (D047861) 12/18/07 Petition for review by Cal Supreme Ct. DENIED 4/9/08LEASES / RIGHT OF FIRST REFUSAL: A tenant’s right of first refusal under a commercial lease is not triggered by the conveyance of an interest in the property between co-partners in a family limited partnership that owns the property and is the landlord.Schweitzer v. Westminster InvestmentsDocketSup.Ct. Docket
157 Cal.App.4th 1195 – 4th Dist., Div. 1 (D049589) 12/13/07 Petition for review by Cal Supreme Ct. DENIED 3/26/08EQUITY PURCHASERS:
1) The bonding requirement of the Home Equity Sales Contracts Act (Civil Code Section 1695.17) is void for vagueness under the due process clause and may not be enforced. Section 1695.17 is vague because it provides no guidance on the amount, the obligee, the beneficiaries, the terms or conditions of the bond, the delivery and acceptance requirements, or the enforcement mechanisms of the required bond.
2) Although the bond requirement may not be enforced, the remainder of the statutory scheme remains valid because the bond provisions are severable from the balance of the enactment.
3) The court refused to set aside the deed in favor of the equity purchaser because, first, the notice requirements of Civil Code Section 1695.5 appear to have been met and, second, the seller’s right to rescind applies before the deed is recorded but the statute “does not specify that a violation of section 1695.5 provides grounds for rescinding a transaction after recordation of the deed”.Crestmar Owners Association v. StapakisDocket
157 Cal.App.4th 1223 – 2nd Dist. (B191049) 12/13/07 Case complete 2/15/07CC&R’s: Where a developer failed to convey title to two parking spaces as required by the CC&R’s, the homeowner’s association was able to quiet title even though more than 20 years had passed since the parking spaces should have been conveyed. The statute of limitations does not run against someone, such as the homeowner’s association here, who is in exclusive and undisputed possession of the property.Washington Mutual Bank v. BlechmanDocketSup.Ct. Docket
157 Cal.App.4th 662 – 2nd Dist. (B191125) 12/4/07 Petition for review by Cal Supreme Ct. DENIED 3/19/08TRUSTEE’S SALES: The foreclosing lender and trustee are indispensable parties to a lawsuit which seeks to set aside a trustee’s sale. Therefore, a default judgment against only the purchaser at the trustee’s sale is subject to collateral attack.Garretson v. PostDocketSup.Ct. Docket
156 Cal.App.4th 1508 – 4th Dist., Div.2 (E041858) 11/20/07 Petition for review by Cal Supreme Ct. DENIED 2/27/08TRUSTEE’S SALES: A cause of action for wrongful foreclosure does not fall within the protection of Code of Civil Procedure section 425.16, commonly referred to as the anti-SLAPP statute (strategic lawsuit against public participation).Murphy v. BurchDocketSup.Ct. Docket
Cal.App. 1st Dist. (A117051) 11/19/07 AFFIRMED by Cal Supreme Ct. 4/27/09EASEMENT BY NECESSITY: An easement by necessity arises by operation of law when 1) there is a strict necessity as when a property is landlocked and 2) the dominant and servient tenements were under the same ownership at the time of the conveyance giving rise to the necessity. However, the second requirement is not met when the properties were owned by the federal government because the Government has the power of eminent domain, rendering it unnecessary to resort to the easement by necessity doctrine in order to acquire easements.
The court attempts to distinguish Kellogg v. Garcia, 102 Cal.App.4th 796, by pointing out that in that case the issue of eminent domain did not arise because the dominant tenement was owned by a private party and the servient tenements by the federal government. [Ed. Note: the court does not adequately address the fact that the government does not always have the power of eminent domain. It only has that power if a public purpose is involved. Also, I do not think the court adequately distinguishes Kellogg, which seems to hold that common ownership by the federal government satisfies the requirement of common ownership.]Elias Real Estate v. TsengDocketSup.Ct. Docket
156 Cal.App.4th 425 – 2nd Dist. (B192857) 10/25/07 Petition for review by Cal Supreme Ct. DENIED 2/13/08SPECIFIC PERFORMANCE: Acts of a partner falling within Corp. Code 16301(1) (acts in ordinary course of business) are not subject to the statute of frauds. Acts of a partner falling within Corp. Code 16301(2) (acts not in the ordinary course of business) are subject to the statute of frauds. In this case, a sale of the partnership’s real property was not in the ordinary course of business, so it fell within Corp. Code 16301(2) and plaintiff could not enforce a contract of sale signed by only one partner.Strong v. State Board of EqualizationDocketSup.Ct. Docket
155 Cal.App.4th 1182 – 3rd Dist. (C052818) 10/2/07 Petition for review by Cal Supreme Ct. DENIED 1/3/08CHANGE OF OWNERSHIP: The statute that excludes transfers between domestic partners from property tax reassessment is constitutional.County of Solano v. HandleryDocketSup.Ct. Docket
155 Cal.App.4th 566 – 1st Dist. (A114120) 9/21/07 Petition for review by Cal Supreme Ct. DENIED 12/12/07DEEDS: The County brought an action against grantors’ heirs to invalidate restrictions in a deed limiting the subject property to use as a county fair or similar public purposes. The court refused to apply the Marketable Record Title Act to eliminate the power of termination in favor of the grantors because the restrictions are enforceable under the public trust doctrine.Baccouche v. BlankenshipDocket
154 Cal.App.4th 1551 – 2nd Dist (B192291) 9/11/07 Case complete 11/16/07EASEMENTS: An easement that permits a use that is prohibited by a zoning ordinance is not void. It is a valid easement, but cannot be enforced unless the dominant owner obtains a variance. As is true with virtually all land use, whether a grantee can actually use the property for the purposes stated in the easement is subject to compliance with any applicable laws and ordinances, including zoning restrictions.WRI Opportunity Loans II LLC v. CooperDocket
154 Cal.App.4th 525 – 2nd Dist. (B191590) 8/23/07 Case complete 10/26/07USURY: The trial court improperly granted a motion for summary judgment on the basis that the loan was exempt from the usury law.
1. The common law exception to the usury law known as the “interest contingency rule” provides that interest that exceeds the legal maximum is not usurious when its payment is subject to a contingency so that the lender’s profit is wholly or partially put in hazard. The hazard in question must be something over and above the risk which exists with all loans – that the borrower will be unable to pay.
2. The court held that the interest contingency rule did not apply to additional interest based on a percentage of the sale price of completed condominium units because the lender was guaranteed additional interest regardless of whether the project generated rents or profits.
3. The loan did not qualify as a shared appreciation loan, permitted under Civil Code Sections 1917-1917.006, because the note guaranteed the additional interest regardless of whether the property appreciated in value or whether the project generated profits.
4. The usury defense may not be waived by guarantor of a loan. (No other published case has addressed this issue.)Archdale v. American International Specialty Lines Ins. Co.Docket
154 Cal.App.4th 449 – 2nd Dist. (B188432) 8/22/07 Case complete 10/26/07INSURANCE: The case contains good discussions of 1) an insurer’s liability for a judgment in excess of policy limits where it fails to accept a reasonable settlement offer within policy limits and 2) the applicable statutes of limitation.REVERSED by Cal. Supreme Court 12/22/08
Patel v. LiebermenschDocketSup.Ct. Docket
154 Cal.App.4th 373 – 4th, Div. 1 (D048582) 8/21/07REVERSED: SPECIFIC PERFORMANCE: Specific performance of an option was denied where the parties never reached agreement on the amount of the deposit, the length of time of the escrow or payment of escrow expenses if there were a delay. One judge dissented on the basis that the option contract was sufficiently clear to be specifically enforced and the court should insert reasonable terms in place of the uncertain terms.In Re Marriage of RuelasDocket
154 Cal.App.4th 339 – 2nd Dist. (B191655) 8/20/07 Case complete 10/26/07RESULTING TRUST: A resulting trust was created where a daughter acquired property in her own name and the evidence showed that she was acquiring the property for her parents who had poor credit.Stoneridge Parkway Partners v. MW Housing PartnersDocketSup.Ct. Docket
153 Cal.App.4th 1373 – 3rd Dist. (C052082) 8/3/07 Petition for review by Cal Supreme Ct. DENIED 11/14/07USURY: The exemption to the usury law for loans made or arranged by real estate brokers applies to a loan in which the broker who negotiated the loan was an employee of an affiliate of the lender, but nevertheless acted as a third party intermediary in negotiating the loan. Kinney v. OvertonDocketSup.Ct. Docket
153 Cal.App.4th 482 – 4th Dist., Div. 3 (G037146) 7/18/07 Petition for review by Cal Supreme Ct. DENIED 10/10/07EASEMENTS: Former Civil Code Section 812 provided that
“[t]he vacation . . . of streets and highways shall extinguish all private easements therein claimed by reason of the purchase of any lot by reference to a map or plat upon which such streets or highways are shown, other than a private easement necessary for the purpose of ingress and egress to any such lot from or to a public street or highway, except as to any person claiming such easement who, within two years from the effective date of such vacation or abandonment . . . shall have recorded in the office of the recorder of the county in which such vacated or abandoned streets or highways are located a verified notice of his claim to such easement . . .” [Emphasis added.]
The court held that cross-complainant could not maintain an action against the person occupying the disputed abandoned parcel because it was not necessary for access and he did not record the notice required by C.C. Section 812. The court specifically did not address the state of title to the disputed parcel or what interest, if any, cross-defendant may have in the parcel.Hartzheim v. Valley Land & Cattle CompanyDocketSup.Ct. Docket
153 Cal.App.4th 383 – 6th Dist. (H030053) 7/17/07 Petition for review by Cal Supreme Ct. DENIED 10/10/07LEASES / RIGHT OF FIRST REFUSAL: A right of first refusal in a lease was not triggered by a partnership’s conveyance of property to the children and grandchildren of its partners for tax and estate planning purposes because it did not constitute a bona fide offer from any third party. The court considered three factors: 1) the contract terms must be reviewed closely to determine the conditions necessary to invoke the right, 2) where a right of first refusal is conditioned upon receipt of a bona fide third party offer to purchase the property, the right is not triggered by the mere conveyance of that property to a third party and 3) the formalities of the transaction must be reviewed to determine its true nature.Berryman v. Merit Property Mgmt.DocketSup.Ct. Docket
152 Cal.App.4th 1544 – 4th Dist., Div. 3 (G037156) 5/31/07 Petition for review by Cal Supreme DENIED 10/10/07HOMEOWNER’S ASSOCIATIONS: Fees charged by a homeowner’s association upon a transfer of title by a homeowner are limited by Civil Code Section 1368 to the association’s actual costs. The court held that this limitation does not apply to fees charged by a management company hired by the association.Cal-Western Reconveyance Corp. v. ReedDocket
152 Cal.App.4th 1308 – 2nd Dist. (B193014) 6/29/07 Case complete 8/29/07TRUSTEE’S SALES: After a trustee’s sale, the trustee deposited the surplus proceeds into court under CC 2924j in order to determine who was entitled to the excess proceeds. The court held that:
(1) The distribution of surplus proceeds to satisfy child and spousal support arrearages was proper because the County had properly recorded an abstract of support judgment,
(2) The trial court erred in distributing proceeds to the debtor’s former wife to satisfy her claims for a community property equalization payment and for attorney fees ordered in the dissolution proceeding, because no recorded lien or encumbrance secured those claims, which in any event were discharged in the debtor’s bankruptcy proceeding (because child and spousal support obligations are not dischargeable, but property settlement payments are dischargeable), and
(3) The trial court erred in distributing proceeds to the debtor’s former lawyer, who was retained to assist the debtor in the collection of proceeds from the trustee’s sale, because an attorney’s lien on the prospective recovery of a client must be enforced in a separate action.
(4) The debtor failed to produce sufficient evidence to support his claim that he was entitled to the $150,000 homestead exemption applicable when a debtor is physically disabled and unable to engage in substantial gainful employment (so he was entitled to only the standard $50,000 homestead exemption).Poseidon Development v. Woodland Lane EstatesOrder Modifying OpinionDocket
152 Cal.App.4th 1106 – 3rd Dist. (C052573) 6/28/07 Case complete 8/31/07PROMISSORY NOTES: A penalty that applied to late payments of installments did not apply to a late payment of the final balloon payment of principal. The penalty was 10% of the amount due, which made sense for regular installments, but bore no reasonable relationship to actual damages if applied to the balloon payment.Carr v. KaminsDocket
151 Cal.App.4th 929 – 2nd Dist. (B191247) 5/31/07 Case complete 8/1/07QUIET TITLE: A quiet title judgment was set aside by defendant’s heir four years after being entered because the heir was not named and served. The plaintiff believed the defendant to be deceased, but made no effort to locate and serve the defendant’s heirs. [Even though this case contains some unique facts, the fact that a default judgment can be set aside four years after being entered demonstrates the danger of relying on default judgments and the need to closely examine the court file and surrounding circumstances before doing so.]Estate of YoolDocket
151 Cal.App.4th 867 – 1st Dist. (A114787) 5/31/07 Case complete 7/31/07RESULTING TRUST: A decedent held title with her daughter for the purpose of facilitating financing and did not intend to acquire beneficial title. A probate court properly ordered the Special Administrator to convey title to the daughter based on the Resulting Trust Doctrine. It held that the four-year statute of limitations under C.C.P. 343 applied and not C.C.P. 366.2, which limits actions to collect on debts of the decedent to one year after the date of death.Kalway v. City of BerkeleyDocket
151 Cal.App.4th 827 – 1st Dist. (A112569) 5/31/07 Case complete 8/1/07SUBDIVISION MAP ACT: Plaintiff husband transferred title of a parcel to his wife in order to avoid merger under the Subdivision Map Act of a substandard parcel into their adjoining lot. The court held that plaintiffs could not evade the Map Act in this manner. It also held that the City had no authority to obtain an order canceling the deed, but that the wife also had no right to further transfer title to the substandard lot except back to her husband.Delgado v. Interinsurance Exchange of the Auto Club of So. Cal.DocketSup.Ct. Docket
Cal.App. 2nd Dist. (B191272) 6/25/07 REVERSED BY CALIFORNIA SUPREME COURTBAD FAITH: An insurance company acted in bad faith as a matter of law where a potential for coverage was apparent from the face of the complaint. The insured allegedly assaulted plaintiff and there was a potential for coverage because the insured may have acted in self defense. The case contains a thorough analysis of the duties of defense and indemnity.Blackmore v. PowellDocketSup.Ct. Docket
150 Cal.App.4th 1593 – 2nd Dist. (B185326) 5/22/07 Request for depublication DENIED 8/29/07EASEMENTS: An easement “for parking and garage purposes” includes the exclusive right to build and use a garage. Granting an exclusive easement may constitute a violation under the Subdivision Map act, but here there is no violation because the exclusive use of the garage covers only a small portion of the easement and is restricted to the uses described in the easement deed. Amalgamated Bank v. Superior CourtDocketSup.Ct. Docket
149 Cal.App.4th 1003 – 3rd Dist. (C052156, C052395) 4/16/07 Petition for review by Cal Supreme Ct. DENIED 8/8/07LIS PENDENS:
1. In deciding a writ petition from an order granting or denying a motion to expunge a lis pendens after judgment and pending appeal, an appellate court must assess whether the underlying real property claim has “probable validity”. This is the same test that is used before judgment. “Probable validity” post-judgment means that it is more likely than not the real property claim will prevail at the end of the appellate process.
2. A judicial foreclosure sale to a third party is absolute, subject only to the right of redemption, and may not be set aside, except that under C.C.P. Section 701.680(c)(1) the judgment debtor may commence an action to set aside the sale within 90 days only if the purchaser at the sale was the judgment creditor. Here, a potential bidder who was stuck in traffic and arrived too late to the sale could not set it aside because only the judgment debtor can do that and because a third party purchased at the sale. L&B Real Estate v. Housing Authority of Los AngelesDocket
149 Cal.App.4th 950 – 2nd Dist. (B189740) 4/13/07 Case complete 6/13/07TAX DEEDS: Because public property is exempt from taxation, tax deeds purporting to convey such property for nonpayment of taxes are void. Two parcels were inadvertently not included in a deed to the State (subsequently conveyed to the Housing Authority of Los Angeles). Accordingly, the tax collector thought that those parcels were still owned by the seller and sold them at a tax sale after real estate taxes were not paid on them. The court also points out that plaintiff was not a good faith purchaser because it had constructive and actual knowledge of the fact that the Housing Authority’s low income housing was partially located on the two parcels sold at the tax sale.Ulloa v. McMillin Real EstateDocket
149 Cal.App.4th 333 – 4th Dist., Div. 1 (D048066) 3/7/07 (Cert. for pub. 4/4/07) Case complete 6/4/07STATUTE OF FRAUDS: The Statute of Frauds requires the authority of an agent who signs a sales agreement to be in writing if the agent signs on behalf of the party to be charged. However, a plaintiff purchaser whose agent signed her name with only verbal authorization is not precluded by the Statute of Frauds from bringing the action because the defendant is the party to be charged.Jordan v. Allstate Insurance CompanyDocketSup.Ct. Docket
148 Cal.App.4th 1062 – 2nd Dist. (B187706) 3/22/07 Petition for review and depublication DENIED 6/27/07BAD FAITH: Where there is a genuine issue as to the insurer’s liability under the policy, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute. However, there can be bad faith liability where an insurer denies coverage but a reasonable investigation would have disclosed facts showing the claim was covered under other provisions of the policy. The court clarified that an insurer’s failure to investigate can result in bad faith liability only if there is coverage. If there is no coverage, then any failure to properly investigate cannot cause the insured any damage.Shah v. McMcMahonDocket
148 Cal.App.4th 526 – 2nd Dist. (B188972) 3/12/07 Case complete 5/16/07LIS PENDENS: Plaintiffs could not appeal an order for attorney’s fees awarded in a hearing of a motion to expunge a lis pendens. The only remedy is to challenge the award by way of a petition for writ of mandate.Sterling v. TaylorDocket
40 Cal.4th 757 – Cal. Supreme Court (S121676) 3/1/07STATUTE OF FRAUDS: If a memorandum signed by the seller includes the essential terms of the parties’ agreement (i.e. the buyer, seller, price, property and the time and manner of payment), but the meaning of those terms is unclear, the memorandum is sufficient under the statute of frauds if extrinsic evidence clarifies the terms with reasonable certainty. Because the memorandum itself must include the essential contractual terms, extrinsic evidence cannot supply those required terms, however, it can be used to explain essential terms that were understood by the parties but would otherwise be unintelligible to others. In this case, the memorandum did not set forth the price with sufficient clarity because it was uncertain whether it was to be determined by a multiplier applied to the actual rent role or whether the price specified was the agreed price even though it was based on the parties’ incorrect estimate of the rent role.Jet Source Charter v. DohertyDocket
148 Cal.App.4th 1 – 4th Dist., Div. 1 (D044779) 1/30/07 (Pub. order and modification filed 2/28/07 – see end of opinion) Case complete 5/1/07PUNITIVE DAMAGES: Parts I, II, III and IV NOT certified for publication: Where the defendant’s conduct only involves economic damage to a single plaintiff who is not particularly vulnerable, an award which exceeds the compensatory damages awarded is not consistent with due process.Dyer v. MartinezDocketSup.Ct. Docket
147 Cal.App.4th 1240 – 4th Dist., Div. 3 (G037423) 2/23/07 Petition for review by Cal Supreme Ct. DENIED 6/13/07RECORDING: A lis pendens that was recorded but not indexed does not impart constructive notice, so a bona fide purchaser for value takes free of the lis pendens. The party seeking recordation must ensure that all the statutory requirements are met and the recorder is deemed to be an agent of the recording party for this purpose.Behniwal v. MixDocket
147 Cal.App.4th 621 – 4th Dist., Div. 3 (G037200) 2/7/07 Case complete 4/13/07SPECIFIC PERFORMANCE: In a specific performance action, a judgment for plaintiff’s attorneys’ fees cannot be offset against the purchase price that the successful plaintiff must pay defendant for the property. A judgment for attorneys’ fees is not an incidental cost that can be included as part of the specific performance judgment, and it is not a lien that relates back to the filing of the lis pendens. Instead, it is an ordinary money judgment that does not relate back to the lis pendens. So, while plaintiff’s title will be superior to defendant’s liens that recorded subsequent to the lis pendens, those liens are nevertheless entitled to be paid to the extent of available proceeds from the full purchase price.Castillo v. Express EscrowDocket
146 Cal.App.4th 1301 – 2nd Dist. (B186306) 1/18/07 Case complete 3/20/07MOBILEHOME ESCROWS:
1) Health and Safety Code Section 18035(f) requires the escrow agent for a mobile home sale to hold funds in escrow upon receiving written notice of a dispute between the parties, even though the statute specifically states “unless otherwise specified in the escrow instructions” and even though the escrow instructions provided that escrow was to close unless “a written demand shall have been made upon you not to complete it”.
2) Section 18035(f) does not require the written notice of dispute to cite the code section, or to be in any particular form, or that the notice be addressed directly to the escrow holder, or that the notice contain an express request not to close escrow. The subdivision requires nothing more than that the escrow agent receive notice in writing of a dispute between the parties. So receiving a copy of the buyer’s attorney’s letter to the seller was sufficient to notify the escrow agent that a dispute existed.Rappaport-Scott v. Interinsurance ExchangeDocket
146 Cal.App.4th 831 – 2nd Dist (B184917) 1/11/07 Case complete 3/14/07INSURANCE: An insurer’s duty to accept reasonable settlement offers within policy limits applies only to third party actions and not to settlement offers from an insured. An insurer has a duty not to unreasonable withhold payments due under a policy. But withholding benefits under a policy is not unreasonable if there is a genuine dispute between the insurer and the insured as to coverage or the amount of payment due, which is what occurred in this case.In re: Rabin
BAP 9th Circuit 12/8/06BANKRUPTCY/HOMESTEADS: Under California law, the homestead exemption rights of registered domestic partners are identical to those of people who are married. Therefore, domestic partners are limited to a single combined exemption, in the same manner as people who are married. In the absence of a domestic partnership or marriage, each cotenant is entitled to the full homestead exemption.Wachovia Bank v. Lifetime IndustriesDocket
145 Cal.App.4th 1039 – 4th Dist., Div. 2 (E037560) 12/15/06 Case complete 2/16/07OPTIONS:
1. When the holder of an option to purchase real property exercises the option and thereby obtains title to the property, the optionee’s title relates back to the date the option was given, as long as the optionee has the right to compel specific performance of the option. But where the optionee acquires title in a transaction unconnected with the option, such as where there has been a breach of the option agreement so that the optionee did not have the right to specific performance, the optionee takes subject to intervening interests just like any other purchaser.
2. Civil Code Section 2906 provides a safe harbor for a lender to avoid the rule against “clogging” the equity of redemption as long as the option is not dependent on the borrower’s default. But even if the lender falls outside the safe harbor because the exercise of the option is dependent upon borrower’s default, it does not automatically follow that the option is void. Instead, the court will analyze the circumstances surrounding the transaction and the intent of the parties to determine whether the option is either void or a disguised mortgage. Also, even if the transaction is a disguised mortgage the optionee (now mortgagee) has a right to judicially foreclose, which will wipe out intervening interests.Wright v. City of Morro BayDocketSup.Ct. Docket
144 Cal.App.4th 767, 145 Cal.App.4th 309a – 2nd Dist (B176929) 11/7/06 Modification of Opinion 12/6/06Petition for review by Cal Supreme Ct. DENIED 2/21/07DEDICATION/ABANDONMENT: C.C.P. 771.010, which provides for termination of an offer of dedication if not accepted within 25 years, did not apply because 1) the statute cannot be applied retroactively to the City’s acceptance occurring more than 25 years after the offer of dedication and 2) the area covered by the dedicated road has never been used by anyone, so the requirement that the property be “used as if free of the dedication” was not met.State Farm General Insurance Co. v. Wells Fargo BankDocket
143 Cal.App.4th 1098 – 1st Dist. (A111643) 10/10/06 Case complete 12/11/06The “superior equities rule” prevents an insurer, who is subrogated to the rights of the insured after paying a claim, from recovering against a party whose equities are equal or superior to those of the insurer. Thus, an insurer may not recover from an alleged tortfeasor where the tortfeasor’s alleged negligence did not directly cause the insured’s loss. The court questioned the continued vitality of the superior equities rule in California, but felt compelled to follow a 1938 Supreme Court case that applied the rule. The court suggests that the Supreme Court should re-address the issue in light of modern day fault principles.Corona Fruits & Veggies v. Frozsun FoodsDocketSup.Ct. Docket
143 Cal.App.4th 319 – 2nd Dist. (B184507) 9/25/06 Petition for review by Cal Supreme Ct. DENIED 12/20/06UCC: A UCC-1 financing statement filed in the name of Armando Munoz is not effective where the debtor’s true name was Armando Munoz Juarez.Warren v. MerrillDocket
143 Cal.App.4th 96 – 2nd Dist. (B186698) 9/21/06 Case complete 11/21/06QUIET TITLE: The Court quieted title in plaintiff where title was taken in the real estate agent’s daughter’s name as part of a fraudulent scheme perpetrated by the agent. This is not a significant title insurance case, but I posted it for reference since it involves quiet title.McKell v. Washington MutualDocketSup.Ct. Docket
142 Cal.App.4th 1457 – 2nd Dist. (B176377) 9/18/06 Request for depublication DENIED 1/17/07RESPA: Washington Mutual (i) charged hundreds of dollars in “underwriting fees” when the underwriting fee charged by Fannie Mae and Freddie Mac to WAMU was only $20 and (ii) marked up the charges for real estate tax verifications and wire transfer fees. The court followed Kruse v. Wells Fargo Home Mortgage (2d Cir. 2004) 383 F.3d 49, holding that marking up costs, for which no additional services are performed, is a violation of RESPA. Such a violation of federal law constitutes an unlawful business practice under California’s Unfair Competition Law (“UCL”) and a breach of contract. Plaintiffs also stated a cause of action for an unfair business practice under the UCL based on the allegation that WAMU led them to believe they were being charged the actual cost of third-party services.Reilly v. City and County of San FranciscoDocketSup.Ct. Docket
142 Cal.App.4th 480 – 1st Dist. (A109062) 8/29/06 Request for depublication DENIED 12/13/06PROPERTY TAX: A change in ownership of real property held by a testamentary trust occurs when an income beneficiary of the trust dies and is succeeded by another income beneficiary. Also, for purposes of determining change in ownership, a life estate either in income from the property or in the property itself is an interest equivalent in value to the fee interest.Markowitz v. FidelityDocketSup.Ct. Docket
142 Cal.App.4th 508 – 2nd Dist. (B179923) 5/31/06 Publication ordered by Cal. Supreme Court 8/30/06ESCROW: Civil Code Section 2941, which permits a title insurance company to record a release of a deed of trust if the lender fails to do so, does not impose an obligation on an escrow holder/title company to record the reconveyance on behalf of the trustee. Citing other authority, the Court states that an escrow holder has no general duty to police the affairs of its depositors; rather, an escrow holder’s obligations are limited to faithful compliance with the parties’ instructions, and absent clear evidence of fraud, an escrow holder’s obligations are limited to compliance with the parties’ instructions. The fact that the borrower had an interest in the loan escrow does not mean that he was a party to the escrow, or to the escrow instructions.Cebular v. Cooper Arms Homeowners AssociationDocketSup.Ct. Docket
142 Cal.App.4th 106 – 2nd Dist. (B182555) 8/21/06 Request for review by Cal Supreme Ct. DENIED 11/15/06; Request to publish Part III, Sec. B filed 10/24/06COVENANTS, CONDITIONS AND RESTRICTIONS: It is not unreasonable for CC&R’s to allocate dues obligations differently for each unit, along with the same allocation of voting rights, even though each unit uses the common areas equally. Although the allocation does not make much sense, courts are disinclined to question the wisdom of agreed-to restrictions.Bernard v. FoleyDocket
39 Cal.4th 794 – Cal. Supreme Court (S136070) (8/21/06)TESTAMENTARY TRANSFERS: Under Probate Code Section 21350, “care custodians” are presumptively disqualified from receiving testamentary transfers from dependent adults to whom they provide personal care, including health services. The Court held that the term “care custodian” includes unrelated persons, even where the service relationship arises out of a preexisting personal friendship rather than a professional or occupational connection. Accordingly, the Court set aside amendments to decedent’s will that were made shortly before decedent’s death, which would have given most of the estate to the care providers.Regency Outdoor Advertising v. City of Los AngelesDocket
39 Cal.4th 507 – Cal. Supreme Court (S132619) 8/7/06 Modification of Opinion 10/11/06ABUTTER’S RIGHTS: There is no right to be seen from a public way, so the city is not liable for damages resulting from the view of plaintiff’s billboard caused by planting trees along a city street. The court pointed out that a private party who blocks the view of someone’s property by obstructing a public way would be liable to someone in plaintiff’s position.Kleveland v. Chicago Title Insurance CompanyDocketSup.Ct. Docket
141 Cal.App.4th 761 – 2nd Dist. (B187427) 7/24/06 Case complete 10/5/06 Request for depublication DENIED 10/25/06TITLE INSURANCE: An arbitration clause in a title policy is not enforceable where the preliminary report did not contain an arbitration clause and did not incorporate by reference the arbitration clause in the CLTA policy actually issued. (The preliminary report incorporated by reference the provisions of a Homeowner’s Policy of Title Insurance with a somewhat different arbitration clause, but a CLTA policy was actually issued.)Essex Insurance Company v. Five Star Dye HouseDocket
38 Cal.4th 1252 – Cal. Supreme Court (S131992) 7/6/06INSURANCE: When an insured assigns a claim for bad faith against the insurer, the assignee may recover Brandt (attorney) fees. Although purely personal causes of action are not assignable, such as claims for emotional distress or punitive damages, Brandt fees constitute an economic loss and are not personal in nature.Peak Investments v. South Peak Homeowners AssociationDocket
140 Cal.App.4th 1363 – 4th Dist., Div. 3 (G035851) 6/28/06 Case complete 8/31/06HOMEOWNER’S ASSOCIATIONS: Where CC&R’s require approval by more than 50 percent of owners in order to amend the Declaration, Civil Code Section 1356(a) allows a court, if certain conditions are met, to reduce the percentage of votes required, if it was approved by “owners having more than 50 percent of the votes in the association”. The Court held that the quoted phrase means a majority of the total votes in the HOA, not merely a majority of those votes that are cast.CTC Real Estate Services v. LepeDocket
140 Cal.App.4th 856 – 2nd Dist. (B185320) 6/21/06 Case complete 8/23/06TRUSTEE’S SALES: The victim of an identity theft, whose name was used to obtain a loan secured by a purchase money deed of trust to acquire real property, may, as the only claimant, recover undistributed surplus proceeds that remained after a trustee sale of the property and the satisfaction of creditors. The Court pointed out that a victim of theft is entitled to recover the assets stolen or anything acquired with the stolen assets, even if the value of those assets exceeds the value of that which was stolen.Slintak v. Buckeye Retirement Co.DocketSup.Ct. Docket
139 Cal.App.4th 575 – 2nd Dist. (B182875) 5/16/06 Request for review by Cal Supreme Ct. DENIED 9/13/06MARKETABLE RECORD TITLE ACT
1) Under Civil Code Section 882.020(a)(1), a deed of trust expires after 10 years where “the final maturity date or the last date fixed for payment of the debt or performance of the obligation is ascertainable from the record”. Here, the October 1992 Notice of Default was recorded and contained the due date of the subject note; thus, the due date is “ascertainable from the record” and the 10-year limitations period of section 882.020(a)(1) applies.
2) Under C.C. Section 880.260, if an action is commenced and a lis pendens filed by the owner to quiet or clear title, the running of the 10-year limitations period is reset and a new 10-year limitations period commences on the date of the recording of the lis pendens. After the expiration of the recommenced 10-year period, the power of sale in the trust deed expires. Preciado v. WildeDocketSup.Ct. Docket
139 Cal.App.4th 321 – 2nd Dist. (B182257) 5/9/06 Request for review by Cal Supreme Ct. DENIED 8/16/06ADVERSE POSSESSION: Plaintiffs failed to establish adverse possession against defendant, with whom they held title as tenants in common. Before title may be acquired by adverse possession as between cotenants, the occupying tenant must impart notice to the tenant out of possession, by acts of ownership of the most open, notorious and unequivocal character, that he intends to oust the latter of his interest in the common property. Such evidence must be stronger than that which would be required to establish title by adverse possession in a stranger.UNPUBLISHEDHarbor Pipe v. Stevens
Cal.App. 4th Dist., Div. 3 (G035530) 4/4/06 Case complete 6/6/06JUDGMENTS: A judgment lien against the settlor of a revocable trust attached to trust property where the identity of the settlor is reflected in the chain of title, so a purchaser takes subject to the judgment lien. NOTE: In other words, title companies need to check the names of the settlors in the General Index when title is held in trust.Aaron v. DunhamDocketSup.Ct. Docket
137 Cal.App.4th 1244 – 1st Dist. (A109488) 3/15/06 Request for review by Cal Supreme Ct. DENIED 6/21/06PRESCRIPTIVE EASEMENTS: 1) Permission granted to an owner does not constitute permission to a successor. 2) Under Civil Code Section 1008, signs preventing prescriptive rights must be posted by an owner or his agent, so signs posted by a lessee without the knowledge of the owner, do not qualify.***DECERTIFIED*** Newmyer v. Parklands RanchDocketSup.Ct. Docket
Cal.App. 2nd Dist. (B180461) 3/23/06 Request for review by Cal Supreme Ct. DENIED; CA opinion DECERTIFIED 6/14/06EASEMENTS: The owner of the dominant tenement possessing over the servient tenement an access easement that includes the right to grant other easements for “like purposes” may convey to an owner of property adjoining the dominant tenement an enforceable easement for access over the servient tenement.Marion Drive LLC v. SaladinoDocketSup.Ct. Docket
136 Cal.App.4th 1432 – 2nd Dist. (B182727) 2/27/06 Request for review by Cal Supreme Ct. DENIED 5/24/06ASSESSMENT LIEN: After a tax sale, the holder of a bond secured by a 1911 Act assessment lien has priority as to surplus tax sale proceeds over a subsequently recorded deed of trust. This is true even though the bond holder purchased the property from the tax sale purchaser. The Court rejected defendant’s argument that fee title had merged with the assessment lien.Barnes v. HussaDocket
136 Cal.App.4th 1358 – 3rd Dist. (C049163) 2/24/06 Case complete 4/26/06LICENSES / WATER RIGHTS: The Plaintiff did not overburden a license to run water in a pipeline across defendant’s property where he extended the pipeline to other property he owned because there was no increase in the burden on the servient tenement and no harm to defendants. A couple of interesting things pointed out by the Court are: 1) A person entitled to use water may use it elsewhere as long as others are not injured by the change, and 2) “An irrevocable license . . . is for all intents and purposes the equivalent of an easement.”***REVERSED***
Mayer v. L & B Real EstateDocketSup.Ct. Docket
Cal.App. 2nd Dist. (B180540) 2/14/06 REVERSED by Cal Supreme Ct. 6/16/08TAX SALES: The one-year statute of limitations for attacking a tax sale applies to preclude an action by a property owner who had actual notice of the tax sale, even where the tax collector’s conduct was egregious. The Court did not reach the question of whether the tax collector satisfied its due process obligations, but refers to a Supreme Court case which held that the limitations period is enforceable even if the defect is constitutional in nature. That case recognized a limited exception where an owner is in “undisturbed possession” such that the owner lacked any reasonable means of alerting himself to the tax sale proceedings.Wright Construction Co. v. BBIC InvestorsDocketSup.Ct. Docket
136 Cal.App.4th 228 – 1st Dist. (A109876) 1/31/06 Request for review by Cal Supreme Ct. DENIED 4/26/06MECHANICS’ LIENS: A mechanic’s lien is premature and invalid under Civil Code Section 3115 if it is recorded before the contractor “completes his contract”. A contract is complete for purposes of commencing the recordation period under section 3115 when all work under the contract has been performed, excused, or otherwise discharged. Here, because of the tenant’s anticipatory breach of the contract, plaintiff had “complete[d] [its] contract” within the meaning of section 3115 the day before the claim of lien was recorded, so the claim of lien was not premature. In a previous writ proceeding, the Court held that the landlord’s notice of nonresponsibility was invalid under the “participating owner doctrine” because the landlord caused the work of improvement to be performed by requiring the lessee to make improvements.Torres v. TorresDocketSup.Ct. Docket
135 Cal.App.4th 870 – 2nd Dist. (B179146) 1/17/06 Request for review by Cal Supreme Ct. DENIED 4/12/06POWER OF ATTORNEY: 1) A statutory form power of attorney is not properly completed where the principal marks the lines specifying the powers with an “X” instead of initials, as required by the form. However, the form is not the exclusive means of creating a power of attorney, so even though it is not valid as a statutory form, it is valid as regular power of attorney. 2) Under Probate Code Section 4264, an attorney in fact may not make a gift of the principal’s property unless specifically authorized to do so in the power of attorney. Here, the principal quitclaimed the property to himself, the other attorney in fact and the principal as joint tenants. However, the court refused to invalidate the conveyance because the plaintiff failed to produce any evidence that the conveyance was not supported by consideration.Ung v. KoehlerOrder Modifying OpinionDocketSup.Ct. Docket
135 Cal.App.4th 186 – 1st Dist. (A109532) 12/28/05 Request for review by Cal Supreme Ct. DENIED 4/12/06TRUSTEE’S SALES:
1. Expiration of the underlying obligation does not preclude enforcement of the power of sale under a deed of trust.
2. A power of sale expires after 60 years or, if the last date fixed for payment of the debt is ascertainable from the record, 10 years after that date.
3. In order to avoid a statutory absurdity, a notice of default that is recorded more than 10 years after “the last date fixed for payment of the debt” does not constitute a part of the “record” for purposes of Civil Code Section 882.020(a).Trust One Mortgage v. Invest America MortgageDocket
134 Cal.App.4th 1302 – 4th Dist., Div. 3 (G035111) 12/15/05 Case complete 2/21/06TRUSTEE’S SALES/ANTI-DEFICIENCY: An indemnification agreement is enforceable after a non-judicial foreclosure where the indemnitor is not the same person as the obligor. If the indemnitor and obligor were the same, the indemnity would be void as an attempt to circumvent antideficiency protections.UNPUBLISHED OPINION Citifinancial Mortgage Company v. Missionary FoundationDocket
Cal.App. 2nd (B178664) 12/14/05 Case complete 2/16/06MARKETABLE RECORD TITLE ACT: (UNPUBLISHED OPINION) Under Civil Code Section 882.020(a)(1), a deed of trust becomes unenforceable 10 years after the final maturity date, or the last date fixed for payment of the debt or performance of the obligation, if that date is ascertainable from the record. Here, the record showed via an Order Confirming Sale of Real Property that the obligation was due five years after close of escrow. The Court held that since “close of escrow” is an event, and not a date certain, Section 882.020(a)(1) did not apply in spite of the fact that escrow must have closed in order for the deed of trust to have been recorded.McElroy v. Chase Manhattan Mortgage Corp.Docket
134 Cal.App. 4th 388 – 4th Dist., Div. 3 (G034588) 11/1/05 Case complete 2/1/06TRUSTEE’S SALES: The Court refused to set aside a trustee’s sale where the lender foreclosed after the trustors tendered payment in the form of a “Bonded Bill of Exchange Order”. The Court determined that “the Bill is a worthless piece of paper, consisting of nothing more than a string of words that sound as though they belong in a legal document, but which, in reality, are incomprehensible, signifying nothing.”***DECERTIFIED*** The Santa Anita Companies v. Westfield CorporationDocketSup.Ct. Docket
134 Cal.App.4th 77 – 2nd Dist. (B175820) 11/17/05 Request for review by Cal Supreme Ct. DENIED and DECERTIFIED 01/25/06DEEDS: The 3-year statute of limitations under C.C.P. 338(d) to seek relief on the ground of mistake does not begin to run until discovery of the mistake or receiving facts that would put a reasonable person on notice of the mistake. The fact that carefully reading the deed would have revealed the mistake is not sufficient to charge the plaintiff with notice, so the statute of limitations did not begin to run until plaintiff actually became aware of the error, and this action was therefore timely.Big Valley Band of Pomo Indians v. Superior CourtDocket
133 Cal.App.4th 1185 – 1st Dist. (A108615) 11/1/05 Case complete 1/4/06INDIANS: An employment agreement with an Indian tribe contained the following clause: “Any claim or controversy arising out of or relating to any provisions of this Agreement, or breach thereof, shall . . . be resolved by arbitration under the rules of the American Arbitration Association in San Francisco, California, and judgment on any award by the arbitrators may be entered in any court having such jurisdiction”. The court held that the effect of the arbitration clause as limited to a consent to arbitrate and enforce any award in state court. But this clause was insufficient to waive the tribe’s immunity from a breach of contract action brought in state court. So plaintiffs are apparently free to bring the same breach of contract claims in an arbitration proceeding.Behniwal v. MixDocket
133 Cal.App.4th 1027 – 4th Dist., Div. 3 (G034074) 9/30/05 Case complete 1/3/06STATUTE OF FRAUDS: A sales contract signed on the sellers’ behalf by their real estate agent did not satisfy the Statute of Frauds because the agent did not have written authority to sign for the sellers. However, a contract which must be in writing can be ratified if the ratification is also in writing. Here the sellers ratified the contract by a sufficient written ratification where they subsequently signed disclosure documents that specifically referred to the contract signed by the real estate agent.Behniwal v. Superior Court Docket
133 Cal.App.4th 1048 – 4th Dist., Div. 3 (G035299) 9/30/05 Case complete 1/3/06LIS PENDENS: (Related to Mix v. Superior Court, several cases below.) Having determined that the plaintiffs have at least a “probably valid” real property claim, the Court issued a peremptory writ of mandate directing the Superior Court to vacate its order expunging the lis pendens. The lis pendens will therefore protect plaintiff’s claim until the time for appeal to the Supreme Court expires or unless the Supreme Court issues its own writ directing that the lis pendens be expunged.Zipperer v. County of Santa ClaraDocket
133 Cal.App.4th 1013 – 6th Dist. (H028455) 9/30/05 (Mod. 10/28/05) Case complete 12/28/05EASEMENTS:
PUBLISHED PORTION: The Solar Shade Control Act provides that “. . . no person owning, or in control of a property shall allow a tree or shrub to be placed, or, if placed, to grow on such property, subsequent to the installation of a solar collector on the property of another so as to cast a shadow greater than 10 percent of the collector absorption area”. The County is exempt from the Act because it adopted an ordinance pursuant to a statute allowing cities and counties to exempt themselves from the Act. The Court did not address the issue of whether the act applies where a tree is not “placed” by a property owner.
UNPUBLISHED PORTION: A common law easement for light and air generally may be created only by express written instrument. A statutory “solar easement” under Civil Code Section 801.5 may be created only by an instrument containing specified terms. The Court held that the County did not have an obligation to trim trees to avoid shading plaintiff’s solar panels, rejecting several theories asserted by plaintiff.Fishback v. County of VenturaDocket
133 Cal.App.4th 896 – 2nd Dist. (B177462) 10/26/05 Case complete 1/9/06SUBDIVISION MAP ACT: Under the 1937 and 1943 Subdivision Map Acts, “subdivision” was defined as “any land or portion thereof shown on the last preceding tax roll as a unit or as contiguous units which is divided for the purpose of sale . . . into five or more parcels within any one year period.” The Court makes numerous points interpreting those statutes, some of the most significant being: 1) Once the fifth parcel is created within a one-year period, all the parcels created within that year constitute a subdivision; 2) Even though a unit of land is defined as a unit as shown on the last tax roll preceding the division, that does not mean the unit shown on the last preceding tax roll is a legal parcel, and legal parcels cannot be created by dividing that illegal parcel; and 3) If land is divided for the purpose of sale, it is irrelevant that the retained parcel is not held for the purpose of sale. Thus, for example, if the owner of a unit of land divides it in half, the unit is divided for the purpose of sale even if the owner intends to sell only one half and keep the other.Attorney General Opinion No. 04-1105
10/3/05ASSESSOR’S RECORDS: County Assessors maintain parcel boundary map data, which is detailed geographic information used to describe and define the precise geographic boundaries of assessor’s parcels. When maintained in electronic format, Assessors must make copies in electronic format available to the public. The fee charged for producing the copy is limited to the direct cost of producing the copy in electronic format, and may not include expenses associated with the county’s initial gathering of the information, with initial conversion of the information into electronic format, or with maintaining the information.Villacreses v. MolinariDocketSup.Ct. Docket
132 Cal.App.4th 1223 – 4th Dist., Div. 3 (G034719) 9/26/05 Request for review by Cal Supreme Ct. DENIED 12/14/05ARBITRATION: Section 1298 requires that an arbitration provision in a real estate contract be accompanied by a statutory notice and that the parties indicate their assent by placing their initials on an adjacent space or line. The arbitration notice, standing alone, does not constitute an arbitration provision. So the Defendants could not compel arbitration where the contract contained only the notice, but did not contain a separate arbitration provision.
The Court has a good sense of humor. The opinion contains the following memorable quotes:
1. “If the first rule of medicine is ‘Do no harm,’ the first rule of contracting should be ‘Read the documents’.”
2. “. . . to paraphrase the immortal words of a former President of the United States, the applicability of this purported arbitration agreement to the instant dispute ‘depends upon what the meaning of the word “it” is.'”Campbell v. Superior Court (La Barrie)DocketSup.Ct. Docket
132 Cal.App.4th 904 – 4th Dist., Div. 1 (D046064) 9/14/05 Request for review by Cal Supreme Ct. DENIED 12/14/05LIS PENDENS: A cause of action for a constructive trust or an equitable lien does not support a lis pendens where it is merely for the purpose of securing a judgment for money damages. [Ed. Note: The Court in this and similar cases make the absolute statement that “an equitable lien does not support a lis pendens”, and explain that the lien is sought merely to secure a money judgment. But it is unclear whether the Court would reach the same conclusion in a pure equitable lien case. For example, where a loan is paid off with the proceeds of a new loan, but the new mortgage accidentally fails to be recorded, an action to impose an equitable lien seeks more than a mere money judgment. It seeks to allow the new lender to step into the shoes of the old lender and, in my opinion, a lis pendens should be allowed.]Fripp v. Walters DocketDocketSup.Ct. Docket
132 Cal.App.4th 656 – 3rd Dist. (C046733) 9/7/05 (ONLY PART I CERTIFIED FOR PUBLICATION)Request for review by Cal Supreme Ct. DENIED 11/16/05BOUNDARIES / SURVEYS: A conveyance referring to a parcel map cannot convey more property than the creator of the parcel map owned. The Court rejected Defendant’s claim that the recorded parcel map was a “government sanctioned survey” which precludes a showing that the boundaries established by the parcel map are erroneous. The court explained that the rule cited by Defendants applies only to official survey maps that create boundaries. Boundary lines cannot be questioned after the conveyance of public land to a private party, even if they are inaccurate.Title Trust Deed Service Co. v. PearsonDocket
132 Cal.App.4th 168 – 2nd Dist (B175067) 8/25/05 Case complete 10/28/05HOMESTEADS: A declared homestead exemption applies to surplus proceeds from a trustee’s sale. [Comment: Applying the declared homestead exemption to trustee’s sales is fine. But the Court also seems to want to pay surplus proceeds to the debtor up to the amount of the exemption before paying the holder of a junior trust deed. This should be wrong since the homestead exemption does not apply to voluntary liens. I think the Court does not adequately address what appears to me to be a circuity of priority problem: The homestead exemption is senior to the judgment lien, which in this case happens to be senior to a junior TD, which is senior to the homestead exemption.]In re Marriage of BensonDocket
36 Cal.4th 1096 – Cal. Supreme Court (S122254) 8/11/05COMMUNITY PROPERTY: The doctrine of partial performance, which is an exception to the Statute of Frauds, is not an exception to the requirement of Family Code Section 852 that an agreement to transmute property be in writing. The concurring opinion points out that the Court does not decide what statutory or equitable remedy would be available to make whole a spouse who has been disadvantaged by an illusory oral promise to transmute property, or what sanction may be employed against a spouse who has used section 852(a) as a means of breaching his or her fiduciary duty and gaining unjust enrichment.First Federal Bank v. FegenDocket
131 Cal.App.4th 798 – 2nd Dist. (B174252) 7/29/05 Case complete 9/29/05JUDGMENTS: The Court dismissed an appeal as being moot where the debtor did not post a bond after a sheriff’s sale of real property. C.C.P. Section 917.4 provides that an appeal of an order directing the sale of real property does not stay enforcement of the order. A sheriff’s sale is final, except that the debtor can commence an action within 90 days to set aside the sale if the judgment creditor is the successful bidder. Here, the debtor failed to file an action within 90 days so the sale is final.Bear Creek Master Association v. EdwardsDocketSup.Ct. Docket
130 Cal.App.4th 1470 – 4th Dist. Div. 2 (E034859) 7/13/05 Request for review by Cal Supreme Ct. DENIED 10/19/05CONDOMINIUMS: The definition of “condominium” in Civil Code Section 1351(f) does not require that an actual structure has been built; rather it only requires that it be described in a recorded condominium plan. (Note, however, that under CC 1352 the condominium does not come into existence until a condominium unit has been conveyed.) The case also contains an extensive discussion of the procedural requirements for foreclosing on an assessment lien recorded by the homeowner’s association.Woodridge Escondido Property Owners Assn. v. NielsenDocketSup.Ct. Docket
130 Cal.App.4th 559 – 4th Dist. Div. 1 (D044294) 5/25/05 (pub. order 6/16/05) Request for review by Cal Supreme Ct. DENIED 8/31/05CC&R’s: A provision in CC&R’s that prohibited construction of a permanent structure in an easement area applied to a deck because it was attached to the house and had supporting posts that were buried in the ground, such that it was designed to continue indefinitely without change and was constructed to last or endure.Beyer v. Tahoe Sands ResortDocket
129 Cal.App.4th 1458 – 3rd Dist. (C045691) 6/8/05 Case complete 8/8/05EASEMENTS: California Civil Code Section 805 provides that a servitude cannot be held by the owner of the servient tenement. The Court held that the term “owner” under Section 805 means the owner of the full fee title, both legal and equitable, such that a property owner who owns less than full title may validly create easements in his own favor on his land. Here, the Court held that the grantor could reserve an easement over property conveyed to a time-share trustee where the grantor held all beneficial interest in the trust and the grantee held just bare legal title.Bank of America v. La Jolla GroupDocketSup.Ct. Docket
129 Cal.App.4th 706 – 5th Dist. (F045318) 5/19/05 Request for review by Cal Supreme Ct. DENIED 9/7/05TRUSTEE’S SALES: A trustee’s sale, which was accidentally held after the owner and lender agreed to reinstate the loan, is invalid. The conclusive presumptions in Civil Code Section 2924 pertain only to notice requirements, not to every defect or inadequacy. The Court points out that the advantages of being a bona fide purchaser are not limited to the presumptions set forth in Section 2924, but does not discuss it further because the defendant did not argue that its bona fide purchaser status supports its position in any way other than the statutory presumptions.Zabrucky v. McAdamsDocket
129 Cal.App.4th 618 – 2nd Dist. (B167590) 5/18/05 Case complete 7/20/05COVENANTS, CONDITIONS & RESTRICTIONS: The Court interpreted a provision in CC&R’s to prohibit an addition to a house which would unreasonably obstruct a neighbor’s view. The Court painstakingly nit-picked through the provisions of the CC&R’s and compared the provisions and the facts to other cases where courts have done the same. The main conclusion I draw is that these cases are each unique and it is very difficult to determine in advance what a court will do. In fact, one judge dissented in this case. This means it can be very dangerous to issue endorsements such as CLTA Endorsement No. 100.6 or 100.28, insuring against this kind of provision in CC&R’s.Anolik v. EMC Mortgage Corp.DocketSup.Ct. Docket
Cal.App. 3rd Dist. (C044201) 4/29/05 (Mod. 5/26/05) Request for review by Cal Supreme Ct. DENIED and DECERTIFIED 8/10/05***DECERTIFIED*** TRUSTEE’S SALES:
1. To be valid, a notice of default must contain at least one correct statement of a breach, and it must be substantial enough to authorize use of the drastic remedy of nonjudicial foreclosure.
2. An assertion in a notice of default of one or more breaches qualified with the words “if any” does not satisfy the requirements of section 2924 because it indicates that the lender has no clue as to the truth or falsity of the assertion.
3. It is not proper to declare a payment in default when the time for imposing a late fee on that payment has not expired because the default is not sufficiently substantial at that point.
4. Under Civil Code Section 2954, a lender cannot force impound payments for property taxes until the borrower has failed to pay two consecutive tax installments.Kangarlou v. Progressive Title CompanyDocket
128 Cal.App.4th 1174 – 2nd Dist. (B177400) 4/28/05 Case complete 6/29/05ESCROW: 1. Under Civil Code Section 1717, plaintiff can recover attorney’s fees after prevailing in an action against the escrow holder, even though the escrow instructions limited attorney’s fees to actions to collect escrow fees.
2. Under Business and Professions Code Section 10138, an escrow holder has a duty to obtain evidence that a real estate broker was regularly licensed before delivering compensation.Paul v. SchoellkopfDocketSup.Ct. Docket
128 Cal.App.4th 147 – 2nd Dist. (B170379) 4/5/05 Request for review by Cal Supreme Ct. DENIED 6/15/05ESCROW: A provision for attorneys’ fees in escrow instructions limited to fees incurred by the escrow company in collecting for escrow services does not apply to other disputes between the buyer and seller.Knight v. Superior CourtDocketSup.Ct. Docket
128 Cal.App.4th 14 – 3rd Dist. (C048378) 4/4/05 Request for review by Cal Supreme Ct. DENIED 6/29/05DOMESTIC PARTNERSHIPS: Family Code Section 308.5, enacted by Proposition 22, 3/7/00, states: “Only marriage between a man and a woman is valid or recognized in California.” This statute did not prohibit the legislature from enacting California’s Domestic Partnership Law, Family Code Section 297, et seq., because Section 308.5 pertains only to marriages, not to other relationships.Estate of SeifertDocketSup.Ct. Docket
128 Cal.App.4th 64 – 3rd Dist. (C046456) 4/4/05 Request for review by Cal Supreme Ct. DENIED 6/22/05ADVERSE POSSESSION: A fiduciary, including an executor, may not acquire title by adverse possession against the heirs. Once the executor was appointed, the statutory period for his adverse possession of the subject property ceased to run.Melendrez v. D & I InvestmentDocketSup.Ct. Docket
127 Cal.App.4th 1238 – 6th Dist. (H027098) 3/29/05 Request for review by Cal Supreme Ct. DENIED 6/22/05 TRUSTEE’S SALES: A trustee’s sale cannot be set aside where the purchaser at the sale is a bona fide purchaser (“BFP”). The elements of being a BFP are that the buyer 1) purchase the property in good faith for value, and 2) have no knowledge or notice of the asserted rights of another. The value paid may be substantially below fair market value. Also, the buyer’s sophistication and experience in purchasing at trustee’s sales does not disqualify him from being a BFP, although in evaluating whether the buyer is a BFP, the buyer’s foreclosure sale experience may be considered in making the factual determination of whether he had knowledge or notice of the conflicting claim.Radian Guaranty v. GaramendiDocketSup.Ct. Docket
127 Cal.App.4th 1280 – 1st Dist. (A105789) 3/29/05 Request for review by Cal Supreme Ct. DENIED 7/20/05TITLE INSURANCE: Radian’s Lien Protection Policy constitutes title insurance pursuant to Insurance Code Section 12340.1. Because Radian does not possess a certificate of authority to transact title insurance, it is not authorized to sell the policy in California or anywhere else in the United States, pursuant to California’s monoline statutes: Ins. Code Section 12360 (title insurance) and Ins. Code Section 12640.10 (mortgage guaranty insurance).Gardenhire v. Superior CourtDocketSup.Ct. Docket
128 Cal.App.4th 426a – 6th Dist. (H026601) 3/22/05 Request for review by Cal Supreme Ct. DENIED 6/8/05TRUSTS: A trust can be revoked by a will where the trust provided for revocation by “any writing” and the will expressed a present intent to revoke the trust. The Court pointed out that a will, which is inoperative during the testator’s life, can nevertheless have a present and immediate effect upon delivery, such as notice of intent to revoke.Jones v. Union Bank of CaliforniaDocketSup.Ct. Docket
127 Cal.App.4th 542 – 2nd Dist. (B173302) 3/11/05 Request for review by Cal Supreme Ct. DENIED 6/8/05When a lender successfully defends an action to set aside or enjoin a foreclosure sale, the antideficiency provisions of C.C.P. Section 580d do not prohibit an award of attorney fees. In addition, Civil Code sections 2924c and 2924d do not limit the amount of fees the court may award.O’Toole Company v. Kingsbury Court HOADocket
126 Cal.App.4th 549 – 2nd Dist. (B172607) 2/3/05 Case complete 4/8/05HOMEOWNER’S ASSOCIATIONS: In a suit to enforce a judgment, the trial court properly appointed a receiver and levied a special emergency assessment when defendant-homeowners association failed to pay. The Court pointed out that regular assessments are exempt from execution, but not special assessments.State of California ex rel. Bowen v. Bank of AmericaDocketSup.Ct. Docket
126 Cal.App.4th 225 – 2nd Dist. (B172190) 1/31/05 Request for review by Cal Supreme Ct. DENIED 5/18/05ESCHEAT: This is a qui tam action filed on behalf of the State Controller. The court held that unused reconveyance fees do not need to be escheated because the obligation to return a specific sum of money is neither certain nor liquidated under Civil Code Section 2941 or under the provisions of the deeds of trust. This case was against lenders and I believe it would not apply in the context of escrow and title insurance.Van Klompenburg v. BergholdDocketSup.Ct. Docket
126 Cal.App.4th 345 – 3rd Dist. (C045417) 1/31/05 Request for review by Cal Supreme Ct. DENIED 5/11/05EASEMENTS: Where the grant of easement states that the right of way shall be “kept open” and “wholly unobstructed”, the normal rule does not apply, which would otherwise allow the owner of the servient estate to erect a locked gate as long as the owner of the dominant estate is given a key and the gate does not unreasonably interfere with the use of the easement.State of California v. Old Republic Title CompanyDocketSup.Ct. Docket
125 Cal.App.4th 1219 – 1st Dist. (A095918) 1/20/05 NOTE: request for order directing republication of court of appeal opinion DENIED 8/16/06.
Overruled in part on issue not significant to title insurance – SEE BELOW.TITLE INSURANCE: Old Republic was found liable for 1) failing to escheat unclaimed funds in escrow accounts, 2) failing to return fees collected for reconveyances which were not used and 3) failing to pay interest collected on escrow funds to the depositing party.
Of particular interest, the Court stated:
“Insurance Code Section 12413.5 provides that interest on escrow funds must be paid to the depositing party ‘unless the escrow is otherwise instructed by the depositing party . . . .’ Any title company is free to draft escrow instructions that, with full disclosure to and agreement from the depositing party, direct that the arbitrage interest differential be paid to the company. It is a matter of disclosing the pertinent costs and benefits to the customer.”
FALSE CLAIMS ACT: A political subdivision may not bring an action under Government Code section 12652, subdivision (c), to recover funds on behalf of the state or another political subdivision.Frei v. DaveyDocket
124 Cal.App.4th 1506 – 4th Dist., Div. 3 (G033682) 12/17/04 Case complete 2/22/05CONTRACTS: Under the most recent version of the CAR purchase contract, the prevailing party is barred from recovering attorney fees if he refused a request to mediate.Mix v. Superior Court DocketSup.Ct. Docket
124 Cal.App.4th 987 – 4th Dist., Div. 3 12/7/04 (G033875) Request for review by Cal Supreme Ct. DENIED 2/16/05LIS PENDENS: (Related to Behniwal v. Superior Court, several cases above.) After the claimant loses at trial, the trial court must expunge a lis pendens pending appeal unless claimant can establish by a preponderance of the evidence the probable validity of the real property claim. Claimants will rarely be able to do this because it requires a trial court to determine that its own decision will probably be reversed on appeal. The court points out that this strict result is tempered by claimant’s ability to petition the appellate court for a writ of mandate, so that the appellate court can make its own determination of the probability of the trial court’s decision being reversed on appeal.D’Orsay International Partners v. Superior CourtDocketSup.Ct. Docket
123 Cal.App.4th 836 – 2nd Dist. 10/29/04 (B174411) Request for review by Cal Supreme Ct. DENIED 1/26/05MECHANIC’S LIENS: The court ordered the release of a mechanic’s lien because there was no actual visible work on the land or the delivery of construction materials. The criteria applicable to a design professional’s lien do not apply where the claimant filed a mechanic’s lien. The court specifically did not address the question of whether a contractor performing design services or employing design professionals may assert a design professionals’ lien.Gibbo v. BergerDocketSup.Ct. Docket
123 Cal.App.4th 396 – 4th Dist., Div. 2 10/22/04 (E035201) Case complete 12/27/04 Req. for Depublication by Cal. Supreme Ct. DENIED 2/16/05USURY: The usury exemption for loans arranged by real estate brokers does not apply where the broker functioned as an escrow whose involvement was limited to preparing loan documents on the terms provided by the parties, ordering title insurance, and dispersing funds, all in accordance with the parties’ instructions. In order to “arrange a loan” the broker must act as a third party intermediary who causes a loan to be obtained or procured. Such conduct includes structuring the loan as the agent for the lender, setting the interest rate and points to be paid, drafting the terms of the loan, reviewing the loan documents, or conducting a title search.Knapp v. DohertyDocket
123 Cal.App.4th 76 – 6th Dist. 9/20/04 (H026670) Case complete 12/21/04TRUSTEE’S SALES:
1. Civil Code Section 2924 requires the trustee to give notice of sale only “after the lapse of the three months” following recordation of the notice of default. The Notice of Sale technically violated this requirement because it was served by mail on the property owner several days prior to the end of three months. However, this did not invalidate the sale because the owner did not suffer prejudice from the early notice.
2. Incorrectly stating the date of the default in the Notice of Default did not invalidate the sale because the discrepancy was not material.Royal Thrift and Loan v. County EscrowDocket
123 Cal.App.4th 24 – 2nd Dist. 10/15/04 (B165006) Case complete 12/16/04TRUSTEE’S SALES:
1. Postponements of a trustee’s sale during an appeal were reasonable, so they do not count toward the 3-postponement limit of Civil Code Section 2924g(c)(1). The postponements fall under the “stayed by operation of law” exception. However, the Court recognized that the better course would have been to re-notice the trustee’s sale after the appeal.
2. The court indicated that an appeal from an action to quiet title against a deed of trust should stay the trustee’s sale proceedings under Code of Civil Procedure Section 916 pending the appeal. However, the court did not formally make that holding because the owner did not appeal and the issues involving the appellants (escrow holder and bonding company) did not require a holding on that issue.Tesco Controls v. Monterey Mechanical Co.Docket
124 Cal.App.4th 780 – 3rd Dist. 12/6/04 (C042184) (Opinion on rehearing) Case complete 2/7/05MECHANIC’S LIENS: A mechanic’s lien release that waives lien rights up to the date stated in the release is effective to waive lien rights up to that date, even if the progress payments did not fully compensate the lien claimant.Gale v. Superior CourtDocket
122 Cal.App.4th 1388 – 4th Dist., Div. 3 10/6/04 (G033968) (Mod. 10/22/04) Rehearing Denied 10/22/04; Case Complete 12/10/04LIS PENDENS / DIVORCE
1. The automatic stay contained in a divorce summons does not apply to the sale by the husband, as managing member of a family-owned management company, of real property vested in the management company.
2. A petition for dissolution of marriage which does not allege a community interest in specific real property does not support the filing of a lis pendens.Nwosu v. UbaDocket
122 Cal.App.4th 1229 – 6th Dist. 10/1/04 (H026182) Case complete 12/01/04The court held that a transaction was a bona fide sale and not an equitable mortgage. The complicated facts provide little of interest to the title insurance business, other than to note the fact that a deed can be held to be a mortgage if the deed was given to secure a debt. The case contains a good discussion of the distinction between legal claims, for which there is a right to a jury trial, and equitable claims, for which there is no right to a jury trial.Moores v. County of MendocinoDocket
122 Cal.App.4th 883 – 1st Dist. 9/24/04 (A105446) Case complete 11/24/04SUBDIVISION MAP ACT: The enactment of an ordinance requiring the County to record notices of merger did not result in the unmerger of parcels that had previously merged under the County’s previous automatic merger ordinance. The County properly sent a subsequent notice under Gov. Code Section 66451.302 notifying property owners of the possibility of a merger. Accordingly, plaintiff’s parcels remain merged.Larsson v. GrabachDocketSup.Ct. Docket
121 Cal.App.4th 1147 – 5th Dist. 8/25/04 (F042675) Request for review by Cal Supreme Ct. DENIED 12/15/04EASEMENTS: An easement by implication can be created when an owner of real property dies intestate and the property is then divided and distributed to the intestate’s heirs by court decree.Felgenhauer v. SoniDocket
121 Cal.App.4th 445 – 2nd Dist. 8/5/04 (B157490) Case complete 10/8/04PRESCRIPTIVE EASEMENTS: To establish a claim of right, which is one of the elements necessary to establish a prescriptive easement, the claimant does not need to believe he is entitled to use of the easement. The phrase “claim of right” has caused confusion because it suggests the need for an intent or state of mind. But it does not require a belief that the use is legally justified; it simply means that the property was used without permission of the owner of the land.Jonathan Neil & Assoc. v. JonesDocket
33 Cal.4th 917 – Cal. Supreme Court (S107855) 8/5/04 (Mod. 10/20/04)INSURANCE: A tort action for breach of the duty of good faith and fair dealing exists only in regard to the issues of bad faith payment of claims and unreasonable failure to settle. It does not pertain to the general administration of an insurance policy or to other contract settings. In this case, a tort cause of action does not lie for the insurer’s bad faith conduct in setting an unfairly high insurance premium.Bello v. ABA Energy CorporationDocket
121 Cal.App.4th 301 – 1st Dist. 8/2/04 (A102287) Case complete 10/6/04RIGHTS OF WAY: A grant of a public right of way includes uses made possible by future development or technology, which are not in existence at the time of the grant. Here, the Court held that a right of way included the right to install a pipeline to transport natural gas.California National Bank v. HavisDocket
120 Cal.App.4th 1122 – 2nd Dist. 7/23/04 (B167152) Case complete 9/22/04DEEDS OF TRUST: A bank holding a deed of trust holder was paid outside of escrow with a check. The bank sent a letter to escrow stating that it had “received payoff funds . . . it is our policy to issue the Full Reconveyance 10 days after receipt of the payoff check. Therefore, a Full Reconveyance will be sent to the County Recorder on or about August 5, 2002”. The escrow relied on the letter and closed escrow without paying off the lender. The check bounced and the lender began foreclosure.
The Court reversed a summary judgment in favor of defendants, holding that the letter did not constitute a payoff demand statement binding on the bank under CC 2943. The Court determined that there was a triable issue of fact as to whether the parties could reasonably have relied on the letter. [Ed. note: The Court exhibited a scary lack of understanding of real estate transactions, and could not come to grips with the fact that reconveyances from institutional lenders never record at close of escrow.]Kirkeby v. Sup. Ct. (Fascenelli)Docket
33 Cal.4th 642 – Cal. Supreme Court 7/22/04 (S117640)LIS PENDENS: An action to set aside a fraudulent conveyance supports the recording of a lis pendens. The court stated that “[b]y definition, the voiding of a transfer of real property will affect title to or possession of real property”. (Ed. note: Several appellate court decisions have held that actions to impose equitable liens and constructive trusts do not support a lis pendens. The Supreme Court did not deal with those issues but it seems that, using the court’s language, it could similarly be said that “by definition imposing an equitable lien or constructive trust will affect title to or possession of real property.”)Tom v. City and County of San FranciscoDocketSup.Ct. Docket
120 Cal.App.4th 674 – 1st Dist. 6/22/04 (A101950) Request for review by Cal Supreme Ct. DENIED 10/13/04TENANCY IN COMMON AGREEMENTS: In order to evade burdensome regulations for converting apartments to condominiums, it has become a common practice in San Francisco for a group of people to acquire a multi-unit residential building and enter into a tenancy in common agreement establishing an exclusive right of occupancy for each dwelling unit. Seeking to end this practice, the People’s Republic of San Francisco enacted an ordinance prohibiting exclusive right of occupancy agreements. The Court held that the ordinance is unconstitutional because it violates the right of privacy set forth in Article I, section I of the California Constitution.California Attorney General Opinion No. 03-1108
6/9/04RECORDING: A memorandum of lease is a recordable instrument.Yeung v. SoosDocket
119 Cal.App.4th 576 – 2nd Dist. 6/16/04 (B165939) (Mod. 7/2/04) Case complete 9/10/04QUIET TITLE: A default judgment after service by publication is permissible in a quiet title action. However, the judgment may not be entered by the normal default prove-up methods; the court must require evidence of the plaintiff’s title, including live witnesses and complete authentication of the underlying real property records. Nevertheless, the judgment is not rendered void because the default prove-up method was used rather than an evidentiary hearing.Villa de Las Palmas HOA v. TerifajDocket
33 Cal.4th 73 – Cal. Supreme Court 6/14/04 (S109123)RESTRICTIONS: Use restrictions in amended declarations are binding on owners who purchased prior to recordation of the amendment. They are also subject to the same presumption of validity as the original declaration.In re Marriage of GioiaDocket
119 Cal.App.4th 272 – 2nd Dist. 6/9/04 (B166803) Case complete 8/11/04BANKRUPTCY: A bankruptcy trustee’s notice of abandonment of property was effective even though it was ambiguous because it did not specifically state that the trustee will be deemed to have abandoned the property 15 days from the date of mailing of the notice. The court also states that an abandonment is irrevocable even if the property later becomes more valuable.Dieckmeyer v. Redevelopment Agency of Huntington BeachDocketSup.Ct. Docket
127 Cal.App.4th 248 – 4th Dist., Div. 3 2/28/05 (G031869) (2nd Opinion) Case complete 5/5/05DEEDS OF TRUST: Where a deed of trust secures both payment of a promissory note and performance of contractual obligations (CC&R’s in this case), the trustor is not entitled to reconveyance of the deed of trust after the note is paid off, but before the contractual obligations are satisfied.Textron Financial v. National Union Fire Insurance Co.DocketSup.Ct. Docket
118 Cal.App.4th 1061 – 4th Dist., Div. 3 5/20/04 (G020323) (Mod. 6/18/04) Req. for rev. and depub. by Cal Supreme Ct. DENIED 9/15/04INSURANCE / PUNITIVE DAMAGES:
1. The amount of attorney’s fees incurred by an insured in obtaining policy benefits and recoverable under Brandt v. Sup. Ct. are limited to the fees under the contingency fee agreement between the insured and its counsel, and not a higher figure based on the reasonable value of the attorney’s services.
2. Punitive damages must be based on compensatory damages awarded for tortious conduct, including breach of the implied covenant of good faith and fair dealing, excluding the sum recovered on the breach of contract claim.
3. When compensatory damages are neither exceptionally high nor low, and the defendant’s conduct is neither exceptionally extreme nor trivial, the outer constitutional limit on the amount of punitive damages is approximately four times the amount of compensatory damages.
4. The wealth of a defendant cannot justify an otherwise unconstitutional punitive damages award.Blackburn v. CharnleyDocketSup.Ct. Docket
117 Cal.App.4th 758 – 2nd Dist. 4/8/04 (B166080) Request for review by Cal Supreme Ct. DENIED 7/21/04SPECIFIC PERFORMANCE: Specific performance is available even though the contract referred to lots which had not yet been subdivided. This violation of the Subdivision Map Act made the contract voidable at the option of the buyer, who chose to enforce the contract instead. The requirement in the standard CAR contract to mediate in order to collect attorney’s fees does not apply where an action is filed in order to record a lis pendens and where mediation was conducted pursuant to the court’s own practices.Hedges v. CarriganDocket
117 Cal.App.4th 578 – 2nd Dist. 4/6/04 (B166248) Case complete 6/11/04ARBITRATION: The Federal Arbitration Act preempts C.C.P. Section 1298, which requires that an arbitration clause in a real estate contract contain a specified notice and be in a specified type size. Preemption requires that the transaction affect interstate commerce, which the court found existed because the anticipated financing involved an FHA loan, and the purchase agreement was on a copyrighted form that stated it could only be used by members of the National Association of Realtors. [Ed. note: the form does not say that!] However, in the unpublished portion of the opinion, the court held that the arbitration clause could not be enforced because it required that the parties initial it in order to acknowledge their agreement to arbitration, and they did not all do so. [Ed. note: the concurring opinion makes much more sense than the majority opinion!]Kapner v. Meadowlark Ranch Assn.Docket
116 Cal.App.4th 1182 – 2nd Dist. 3/17/04 (B163525) Case complete 5/25/04ADVERSE POSSESSION / PRESCRIPTIVE EASEMENTS: A prescriptive easement cannot be established where the encroacher’s use is exclusive. The Court affirmed the trial court’s order requiring the property owner to sign an encroachment agreement or remove the encroachment.Harrison v. WelchDocketSup.Ct. Docket
116 Cal.App.4th 1084 – 3rd Dist. 3/12/04 (C044320) Request for depublication DENIED 6/23/04ADVERSE POSSESSION / PRESCRIPTIVE EASEMENTS:
1) In the uncertified Part I of the opinion, the court rejected Defendant’s claim of adverse possession because real property taxes were not paid on any area outside of Defendant’s lot. The court rejected defendant’s creative argument that real property taxes were paid on all land within the setback area where defendant’s house was 3-1/2 feet from the property line, and a zoning ordinance required a 5-foot setback.
2) A prescriptive easement cannot be established where the encroacher’s use is exclusive. The opinion contains an excellent discussion of the case law on this issue.
3) The 5-year statute of limitations in C.C.P. Sections 318 and 321, within which a plaintiff must bring an action to recover real property, does not commence until the encroacher’s use of the property has ripened into adverse possession.Brizuela v. CalFarm Insurance CompanyDocketSup.Ct. Docket
116 Cal.App.4th 578 – 2nd Dist. 3/3/04 (B160875) Review by Cal Supreme Ct. DENIED 6/9/04INSURANCE: Where an insurance policy requires an insured who has filed a claim to submit to an examination under oath, that obligation is a condition precedent to obtaining benefits under the policy. The insurer is entitled to deny the claim without showing it was prejudiced by the insured’s refusal.Hanshaw v. Long Valley Road Assn.DocketSup.Ct. Docket
116 Cal.App.4th 471 – 3rd Dist. 3/2/04 (C041796) Review by Cal Supreme Ct. DENIED 5/19/04PUBLIC STREETS: An offer of dedication of a public street that is not formally accepted may, nevertheless, be accepted by subsequent public use. This is known as common law dedication. However, counties have a duty to maintain only those roads that are “county roads”, and a public road does not become a county road unless specifically accepted as such by the appropriate resolution of the Board of Supervisors.Miner v. Tustin Avenue InvestorsDocket
116 Cal.App.4th 264 – 4th Dist., Div.3 2/27/04 (G031703) Case complete 5/4/04LEASES / ESTOPPEL CERTIFICATES: A lease contained an option to renew for 5 years, but the tenant signed an estoppel certificate stating that the lease was in full force and effect, and that the tenant had no options except the following: (blank lines that followed were left blank). The Court held that the tenant was not bound by the estoppel certificate because it was ambiguous as to whether it referred only to options outside of the lease or whether the tenant had somehow given up his option rights.Tremper v. QuinonesDocket
115 Cal.App.4th 944 – 2nd Dist. 2/17/04 (B165218) Case complete 5/3/04GOOD FAITH IMPROVER: Attorney’s fees and costs may be included in the calculation of damages awarded against a person bringing an action as a good faith improver under C.C.P. Section 871.3, regardless of whether the costs and fees were incurred in prosecuting a complaint or defending against a cross complaint, and even where the good faith improver issues are part of a quiet title action which would not ordinarily support an award of attorney’s fees and costs.Kertesz v. OstrovskyDocket
115 Cal.App.4th 369 – 4th Dist., Div.3 1/28/04 (G030640) Case complete 4/2/04JUDGMENTS / BANKRUPTCY: The time for renewing a judgment was 10 years from entry of the judgment, plus the amount of time between the debtor’s filing of a bankruptcy petition and the date of the Bankruptcy Court’s order of nondischargeability, plus an additional 30 days under Bankruptcy Code Section 108(c). The court reached this conclusion even though the judgment was entered before the bankruptcy petition was filed, and the 10-year period for renewing the judgment expired long after the bankruptcy was closed.
NOTE: I believe the judge misunderstood the automatic stay and Bankruptcy Code Section 108(c). I do not believe the automatic stay applies when a period of time for taking an action commences prior to bankruptcy, and expires after the bankruptcy case is closed.Rancho Santa Fe Association v. Dolan-KingDocketSup.Ct. Docket
115 Cal.App.4th 28 – 4th Dist., Div.1 1/7/04 (D040637/D041486) Pet. for Review by Cal Supreme Ct. DENIED 4/28/04HOMEOWNER’S ASSOCIATIONS: Regulations adopted and interpreted by a Homeowner’s Association must be reasonable from the perspective of the entire development, not by determining on a case-by-case basis the effect on individual homeowners.Gray Cary Ware & Freidenrich v. Vigilant Insurance Co.Docket
114 Cal.App.4th 1185 – 4th Dist., Div.1 1/12/04 (D041811) Case complete 3/15/04INSURANCE: Civil Code Section 2860(c) provides for the arbitration of disputes over the amount of legal fees or the hourly billing rate of Cumis counsel, but does not apply to other defense expenses.
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.
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My name is Timothy McCandless, and I’m here to tell you what most banks and mortgage loan servicers don’t want you to know: More than 65 million homes in the US may not be subject to foreclosure after all, and your home is very likely one of the “safe” homes. The reason these homes are not technically subject to foreclosure is because the lenders, mortgage companies, mortgage servicers, and title companies broke the law throughout the process of managing your loan, both at the inception of your loan and throughout the life of the loan. Because of their fraudulent actions, they are unable to produce a title for, or show ownership of, your property. This causes what we call a “defect of title”, and legally prohibits your lender or servicer from foreclosing, regardless of whether or not your loan is current.
This situation is all over the news, and now, starting today, you can learn how to protect yourself from unlawful foreclosure.
WE CAN TRAIN YOU HOW TO CHALLENGE YOUR LENDER
Most Mortgage Assignments are Illegal
In a major ruling in the Massachusetts Supreme Court today, US Bank National Association and Wells Fargo lost the “Ibanez case”, meaning that they don’t have standing to foreclose due to improper mortgage assignment. The ruling is likely to send shock waves through the entire judicial system, and seriously raise the stakes on foreclosure fraud. Bank stocks plummeted after this ruling. These assignments are what people need to challenge in their own mortgages.
I am prepared to show you the most amazing information on how you can actually Challenge Your Lender. Once you opt in for our free ebook (just enter your email address above and to the right), you’ll get immediate access to our first, very informative webinar, as well as to our free ebook. You’ll learn more about the Challenge Your Lender program, and more importantly, how the US mortgage system is rigged to take advantage of you and how to can fight back. My program will show you exactly how to get a copy of your loan documents that your lender or loan servicer currently has in their possession, and then how to begin examining these documents to learn more about how your lender, as well as other parties involved, has used your name and credit to make millions of dollars. Analyzing your loan documents is a crucial first step in beginning the Challenge Your Lender process.
Save your home from foreclosure
The information that you will be receiving in my free material and webinar will further your knowledge on what most lenders are doing to homeowners, and how you can save yourself from foreclosure. You will have the opportunity to acquire a free copy of my Challenge Your Lender workbook and learn how to begin building the paper trail that you will need to defend yourself and to prove the wrongdoings of your lender and loan servicer. Once you go through the workbook and listen in on the free webinar, you will be on top of your Challenge and ready to begin the program.
The Challenge Your Lender program will help put you in a position of power and control over your loan, and will allow you to decide what you would like to do with your property. This leverage will be advantageous when you begin negotiating your foreclosure. Most importantly, your lender or loan servicer should not be able to foreclose on you once you notify them that you have identified fraudulent activity. My program is your first step in saving your property from foreclosure.
Don’t wait – opt in today. Every day counts in the battle against your lender.
Homeowners 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
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.
SEE 42-in RE Cruz vs Aurora AURORA LOAN SERVICES LLC, SCME MORTGAGE BANKERS INC, ING BANK FSB, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS ALL BITE THE DUST, SUBJECT TO LIABILITY AND NO ABILITY TO FORECLOSE WITHOUT COMPLYING WITH LAW. Salient points of Judge Mann’s Decision: TRUTH IN LENDING was dismissed because they were time-barred. LESSON: Don’t ignore […]
Posted on August 7, 2011 by Neil Garfield EDITOR’S NOTE: We know the foreclosures were gross misrepresentations of fact to the Courts, to the Borrowers and to the Investors. This article shows the crossover between the MegaBanks — sharing and diluting the responsibility for these fabrications as they went along. If you are talking about […]
I looked into the records for that entity in the SEC EDGAR online database and discovered that the last annual report was filed in 2007, contemporaneously with a FORM 15 filing.That Form 15 filing claimed a standing under 15d-6 of the 1934 SEC regulations which exempts the entity of filing an annual report, whereby the […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE Submitted on 2011/08/24 at 9:08 pm Norwest and Alt-A Land Title & Fidelity National Insurance morpted into Microsoft open platform on CLOUD and portals now through which new GMAC Mortgage & State of Maryland in the pass-thru-agency state portal funded to access FIS, […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S NOTE: It is comforting to know that at least some people are paying attention. From one of the largest servicers in the country comes an admission that securitization of mortgage loans was an illusion. The facts alleged by AHMSI in its lawsuit […]
Finality versus good and evil. In the battlefield it isn’t about good and evil. It is about winner and losers. In military battles around the world many battles have been one by the worst tyrants imaginable. Just because you are right, just because the banks did bad things, just because they have no right to […]
“If you’re allowed to foreclose and kick someone out of his or her home without being the party that either owns the loan or represents the person who owns the loan… if you can ignore those laws, why can’t you ignore other laws too? Which laws apply, when one of the parties didn’t make his […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE see VIDEO $1.2 Trillion in EXTRA BAILOUT MONEY FROM FED SECRETLY GIVEN TO DOMESTIC AND FOREIGN BANKS Of course the figure is much higher, but the secrecy surrounding the money given by the Fed to the banks is something to enrage any tea […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S NOTE: Here is a good place to start — the devil is in the details. You will find that the more you probe the more people and bad documents emerge. Persistence pays. Here is a letter that one homeowner just sent to […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE The boys are playing rough now, but US Bank, failing to take its queues from Deutsch is plunging ahead with CalWestern by its side, using forged, fabircated, faked documents that wouldn’t be valid even if they were properly executed. The securitizers tricked and […]
SAN FRANCISCO — Attorney General Kamala D. Harris today announced that the California Department of Justice, in conjunction with the State Bar of California, has sued multiple entities accused of fraudulently taking millions of dollars from thousands of homeowners who were led to believe they would receive relief on their mortgages. Attorney General Harris sued […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE IF THE BANKS DON’T OWN THE PROPERTY OR THE MORTGAGE, WHO DOES? EDITOR’S NOTE: My figures tracking thousands of foreclosures indicate the same thing that the New York Post found. There are a scattered few foreclosures that are good old-fashioned foreclosures of valid […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S COMMENT: I was talking with an expert in landlord tenant law and I received an interesting suggestion. The case involved someone who has just been served with a writ of restitution where the owner had to peaceably leave her home — or […]
Wednesday, August 17th, 2011, 2:49 pm A controversial case challenging the ability of Mortgage Electronic Registration Systems to foreclose on a California man was filed with the Supreme Court Monday, making it the first major MERS case to reach the nation’s highest court. If the Supreme Court agrees to hear Gomes v. Countrywide, Gomes’ attorney, […]
by KERRI PANCHUK Proposed Illinois Legislation Would Freeze Evictions for Four Months California AG Wants Pay Option ARM Answers Does the Senate’s housing bill encourage foreclosures? California Law Freezes Foreclosures, Burns Servicers Short Sales Cost Lenders $310m More Than Necessary, CoreLogic Study Finds Thursday, August 4th, 2011, 7:31 am A California man is on a […]
So you have denied the claims of the pretenders and put that in issue. You have even alleged fraud, forgery and fabrication and the catch-word “robosigning”. But the Judge, alleging that he did not want to “make new law” (which wasn’t true) or allegedly because he didn’t want to start an avalanche of litigation interfering […]
Contact Us: MortgageReductionLaw.com Dear Homeowner, It’s been widely reported around the country, via internet, blogs and newspapers, how the lenders used the foreclosure mills and other legal ways, to fabricate fraudulent documents to record in the county recorder offices and pretend they have legal standing to initiate the foreclosure procedure. Neil Garfield in his blog […]
TIMOTHY L. MCCANDLESS, ESQ. SBN 147715 LAW OFFICES OF TIMOTHY L. MCCANDLESS 820 Main Street, Ste. 1 Martinez, CA (925) 957-9797 Telephone (909) 382-9956 Facsimile Attorney for Defendant Zenkarla S. Salazar SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SANTA CLARA GMAC MORTGAGE, LLC FKA GMAC MORTGAGE CORPORATION, Plaintiff, vs. […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S NOTE: We know the foreclosures were gross misrepresentations of fact to the Courts, to the Borrowers and to the Investors. This article shows the crossover between the MegaBanks — sharing and diluting the responsibility for these fabrications as they went along. If […]
posted by Katie Porter As challenges to whether a “bank” (usually actually a securitized trust) has the right to foreclose because it owns the note and mortgage become more common, rumors swirl about the ability to use such tactics to get a “free house.” There are a few instances of consumer getting a free house, […]
From LivingLies: I think that everyone is missing the #1 problem MERS has in CA. MERS is a Non-Authorized Agent and cannot legally assign the Promissory Note, making any foreclosure by other than the original lender wrongful, for the following reasons. 1) Under established and binding Ca law, a Nominee can’t assign the Note. Born […]
Posted on August 1, 2011 by Neil Garfield I WRITE THIS BECAUSE WITH SO MANY PRO SE LITIGANTS AND UNINFORMED LAWYERS WEIGHING IN IT IS SOMETIMES NECESSARY TO CLARIFY THE ISSUES. Quiet Title is not a defense. If used defensively you will most likely lose your case and also unintentionally waive rights that you might […]
Pro Per Debtor Stops Attorneys for US Bank – in RE Deamicis Posted: 31 Jul 2011 10:21 PM PDT Pro Per Debtor Stops Attorneys for US Bank – in RE Deamicis By Daniel Edstrom DTC Systems, Inc. She has been fighting tooth and nail. Nobody was listening. The current bankruptcy judge was skeptical when she […]
Recent Consent Orders Consent Order, Sovereign Bank, Wyomissing, Pennsylvania, 04410, NE-11-17, April… Order shall be directed to the Comptroller of the Currency, or to the individual, … or office designated by the Comptroller of the Currency. Sovereign Bank Consent Order Page http://www.mortgagedaily.com/forms/OccConsentOrderSovereign041311.pdf Consent Order, OneWest Bank, FSB, Pasadena, California, 18129, WN-11-011,
A Bakersfield homeowner is taking on a bank, in a battle that could have sweeping implications for people facing foreclosure. Mark Demucha wants Wells Fargo to prove it owns his home loan. And, if his lawsuit is successful, it could set a legal precedent that slows or even stops foreclosures across the state. “Filled out the […]
A. Standing The party seeking to invoke federal jurisdiction has the burden of establishing standing.28 Constitutional standing analysis includes three elements: (1) the plaintiff must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical; (2) there must […]
(1) Notaries Public § 1–Disciplinary Proceedings–Time for Instituting. Disciplinary action taken by the Secretary of State against a notary public was not barred by the fact that the proceeding was instituted more than three years after the notary’s alleged improper act and more than one year after its discovery. Statutes of limitation barring civil actions […]
SEPARATION OF DEED OF TRUST FROM NOTE: Bellistri Opinion Posted on April 28, 2010 by Neil Garfield There is a lot of conflicting opinions about this. My opinion is that the confusion arises not from the law, not from application of the law and not from what is written on the note or deed of Trust. […]
Brand New, Hot Off The Presses MERS Policy Bulletin July 24th, 2011 | Author: Matthew D. Weidner, Esq. After years of claiming that assignments don’t matter and the date of assignment certainly doesn’t matter, the MERS Monster has finally changed its tune, effective July 21, 2011: The Certifying Officer must execute the assignment of the […]
Stay of Execution and Appeal The defendant may request a stay of execution of the judgment whether or not an appeal is taken. [CCP §918(a), (c).] You may stay execution of the judgment for up to 40 days without the landlord’s consent in a limited civil case (or up to 70 days in an unlimited […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE factual issues for Unlawful Detainer case NFG 7-15-11 Various states have two levels of jurisdiction that make it difficult to raise the proper issues in eviction even if there has been no preceding judicial action or if the preceding judicial action has been […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE The Free House Myth posted by Katie Porter As challenges to whether a “bank” (usually actually a securitized trust) has the right to foreclose because it owns the note and mortgage become more common, rumors swirl about the ability to use such tactics […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S NOTE: The battle is heating up. BOA, for example, is stepping up efforts to cause as much trouble as possible for those foreclosure defense lawyers who are getting traction in the courts. This started some time ago as some people were actually […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE No Punishment = Continued Misconduct Posted on July 19, 2011 by Mark Stopa Esq. http://www.stayinmyhome.com/blog/?p=1565 In Maine, a group of drug dealers was caught distributing drugs to local middle schoolers. They confessed, yet the District Attorney declined to press charges, so the drug […]
Recently Discovered Flaw in Recording System Clouds Titles on Previously Foreclosed Properties The modern system of mortgage refinancing and assignments created during the housing boom has left behind a wave of title defects on properties that have ever had a foreclosure in their history, due to a loophole in the property records recording system. […]
The brief below as circulated by the California Bar’s: Insolvency Law Committee: Herrera vs. Deutsche Bank National Trust Co., 2011 Westlaw 2547979 (Cal.App.) Facts: A married couple (“the homeowners”) purchased a home at a foreclosure sale. Supposedly, unbeknownst to them, their interest in the home was subject to a prior (and perhaps unrecorded) deed […]
If the court follows the rules of evidence (and they do) if proper objections are filed. No eviction of a secuitized loan should ever prevail on an eviction; they cannot produce the foundation to authenticate the Trustees Deed it is based upon preliminary facts that they are unable and unwilling to bring to court. The […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S NOTE: Anyone who has entered into mortgage modification process with BOA or any other bank acting as servicer or otherwise knows the story. The Bank does everything it can to delay the process until the borrower gets into serious trouble and then […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE JUDGES ARE STARTING TO EXAMINE DOCUMENTS AND THEY DON’T LIKE WHAT THEY ARE SEEING “Thus, while A.R.S. §33-807(E) may operate to dismiss a trustee in certain instances, if one of the allegations of a complaint is that the entity purporting to act as […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE The Allonge- Billions of Dollars in Commerce Hangs on A Single Scrap of Paper EDITOR’S NOTE: If you wrote a check to your next door neighbor, you would expect that he would either cash it or deposit it. But what if your neighbor […]
All banks love to use judicial notice to establish their position but with all the robo signing the evidence is being excluded. ROBERT HERRERA et al., Plaintiffs and Appellants, v. DEUTSCHE 1 BANK NATIONAL TRUST COMPANY et al., Defendants and Respondents. No. C065630. Court of Appeals of California, Third District, El Dorado.Filed May 31, 2011. […]
False Statements 06/28/2011 California Bankruptcy Judge Laura Stuart Taylor has joined the ranks of judges who will not tolerate fraudulent documents produced by banks to foreclose. Judge Taylor entered an Order To Show Cause why OneWest Bank, FSB, should not incur “a significant coercive sanction intended to deter any future tender of misleading evidence to […]
From ChaseChase.org: Federal District Court Javaheri v. JPMorgan Chase, Case No. CV10-8185 ODW Otis D. Wright II, Judge, U.S. District Court, Central District of California, Los Angeles Douglas Gillies, attorney for Daryoush Javaheri Plaintiff sued to halt a foreclosure initiated by JPMorgan Chase and California Reconveyance Co. Chase responded with a Motion to Dismiss. Two […]
By Niel Garfield EDITOR’S NOTE AND COMMENT: LAWYERS BEWARE! Starting up an anti-foreclosure venture and making comments criticizing the system has reportedly caused some investigations to begin and may result in bar discipline for technical infractions. From what I can see, the Bar is focused on UPL — unauthorized practice of law. The use of […]
Each day I get calls from desperate people hoping against hope the there is a magic document that can be filed or recorded the will magically give them their home free and clear without recourse. I tell them if it sounds to good to be true it probably is. That’s not to say that I […]
Ohio Judge Steven Terry Found Guilty of Rigging Foreclosure and Mail Fraud Corruption Case AKRON, Ohio – The Cuyahoga County judge charged in the county corruption investigation for allegedly fixing a foreclosure case has been found guilty on three of the five charges he was facing. The federal jury returned the verdict
Abigail C. Field- The $8.5 billion settlement that Bank of New York and Bank of America hope will resolve all (or almost all) mortgage backed securities claims between them has faced a lot of opposition. The attorneys general of New York and Delaware oppose the deal, as do various investors not involved […]
Lets not get to excited just yet as this comes as a complete surprise. What does this mean for the AG’s who are pursuing their own investigations and how will this help homeowners? Or is this another bailout waiting to happen? NYT- The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set […]
In case you missed it.. I put together Special Events that Happened in 1999 …Welcome to the 99 Club. It’s incomplete but it was a start to the mess we have today. AP- By PALLAVI GOGOI, AP Business Writer Counties across the United States are discovering that illegal or questionable mortgage paperwork is far more […]
They can start here: Deposition Transcript of Litton Loan Servicing Litigation Manager Christopher Spradling CNN- NEW YORK (CNNMoney) — The Federal Reserve issued an enforcement action Thursday against Goldman Sachs, saying the investment bank must investigate questionable lending and foreclosure practices in its mortgage unit. The action orders Goldman to hire an independent consultant to investigate […]
American Banker did an outstanding, superb job with this article. Please read. American Banker- Some of the largest mortgage servicers are still fabricating documents that should have been signed years ago and submitting them as evidence to foreclose on homeowners. The practice continues nearly a year after the companies were caught cutting corners in […]
Commonwealth of Massachusetts Southern Essex District Registry of Deeds Shetland Park 45 Congress Street Suite 4100 Salem, Massachusetts 01970 NEWS FOR IMMEDIATE RELEASE Salem, MA August 30, 2011 Contact: John O’Brien, Register of Deeds 978-542-1722 jl.obrien@sec.state.ma.us . John O’Brien, Southern Essex District Register of Deeds in Salem, […]
WSJ– The mortgage industry will take a step toward cleaning up some of its most controversial practices under a deal between a New York regulator and three financial firms, including Goldman Sachs Group Inc. Under the agreement with the state’s financial-services superintendent, Benjamin M. Lawsky, the three firms—Goldman, its Litton Loan Servicing […]
WSJ- From: Home Loan News Sent: Wednesday, August 31, 2011 4:19am Subject: Important Message From Barbara DeSoer To All IMS Associates I wanted to provide this team with information about a strategic announcement our Home Loans business will make today that is consistent with our ongoing efforts to align the business to […]
Aug 31 (Reuters) – Bank of New York Mellon Corp said Robert Kelly, who has held the company’s top job since 2008, has stepped down as chairman and chief executive officer, following differences in approach to managing the company. The company, one of the world’s largest custody banks, said it named board member Gerald Hassell as chairman […]
Bloomberg- New York Attorney General Eric Schneiderman’s office has taken testimony from 53 witnesses in its investigation into Bank of America Corp. (BAC)’s 2008 acquisition of Merrill Lynch & Co., a federal judge said. U.S. District Judge Kevin Castel in Manhattan said in an order today that “there have been 53 examinations under oath by the […]
UPDATE: It was announced that he’s left to spend more time with his family. According to the Yahoo Message boards: Greg Whitworth FIRED If you do a google search under cached it brings you to his info, but when clicked on the message board link it brings you or redirects one to a 404 NOT FOUND. Mysteriously his info […]
False Statements Limited Purpose Corporate Officers Action Date: August 31, 2011 Location: TALLAHASSEE, FL A STATEMENT ON MORTGAGE FRAUD THAT EVERY ATTORNEY GENERAL COULD ISSUE TODAY There has been widespread, well-documented abuse of corporate officer titles by banks, mortgage companies and mortgage servicing companies on mortgage-related documents. Individuals who are not corporate officers have been directed to […]
Hagens Berman Sobol Shapiro LLP today announced that it is investigating concerns by hedge funds and institutional investors who believe Bank of America Corp. (NYSE: BAC) may have failed to disclose to investors the risk associated with a $10 billion lawsuit threat from American International Group (“AIG”) (NYSE: AIG). According to […]
It’s going to tank! WSJ- Bank of America Corp. intends to sell its correspondent mortgage business, as the troubled lender looks to narrow its focus and bolster its financial strength, said people familiar with the situation. Employees could be notified as soon as Wednesday that the lender has decided to exit the […]
H/T David Dayen SURE DID! . For immediate release — Monday, October 6, 2008. Contact Bob Brammer – 515-281-6699 . Miller: AGs Reach Agreement with Countrywide Financial that Will Help Almost 400,000 Borrowers Facing Foreclosure The Iowa Attorney General says the settlement will offer mortgage loan modifications to more than 1,100 Iowans that will help many avoid […]
NEVADA vs. BANK OF AMERICA CORP. | Second Amended Complaint “The Breach, Trusts Never Became Holders of These Mortgages”” NY TIMES- The attorney general of Nevada is accusing Bank of America of repeatedly violating a broad loan modification agreement it struck with state officials in October 2008 and is seeking to rip up the deal so […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE SEE Corrective+Assignment[2] CHUTZPAH: Look it up if you are not familiar with the term. Here is a document that states on its face that Linda Green had no authority to to sign anything on behalf of MERS. So there goes thousands of documents […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE WHY DID THE LOAN SERVICER CLEAR THE LOAN OBLIGATION DOWN TO ZERO? Monday, August 29, 2011 Who owns the loan? The Ohio Supreme Court is taking up the question of what a bank needs to prove to force someone from his home. Story […]
MOST POPULAR ARTICLES CLICK HERE TO RESERVE SEATING AT HAWAII WORKSHOP GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE SEE US BANK OCC ORDER AND COMMENTARY It will be up on the store soon and on the American Homeowners Cooperative at http://www.Americanhomeownerscoop.com. Based upon an in depth analysis of our title and securitization combo […]
MOST POPULAR ARTICLES CLICK HERE TO RESERVE SEATING AT HAWAII WORKSHOP GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE Homeowner Associations Wake Up to Collections and Profit!! FORECLOSING ON THE BANK!! EDITOR’S COMMENT: Becker and Poliakoff in South Florida is probably the largest law firm representing homeowner associations in the U.S. Once upon a […]
MOST POPULAR ARTICLES CLICK HERE AND RESERVE SEATING NOW AT HAWAII WORKSHOP OCTOBER 14 GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE THEY WANT YOUR HOUSE!!! “The banks don’t care whether you made your payments or not. They want your house. They don’t care if someone else made your payments. They want your house. […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S NOTE: IT ALL COMES DOWN TO THIS: DO YOU WANT TO SAVE THE BANKS OR DO YOU WANT TO SAVE THE COUNTRY? Submitted on 2011/08/27 at 9:20 am by Nancy Drewe National Mortgage News sign up for your own subscription first 2 […]
MOST POPULAR ARTICLES CLICK HERE TO RESERVE SEATING AT HAWAII WORKSHOP GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE KISS: KEEP IT SIMPLE STUPID Finality versus good and evil. In the battlefield it isn’t about good and evil. It is about winner and losers. In military battles around the world many battles have been […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE “bank is suddenly open to unlimited downside capital risk” BofA’s $8.5 Billion Settlement Could Fall Apart After Request Made To Move Mortgage Case From State To Federal Court As most know by now, the ridiculously low $8.5 billion putback settlement, which was supposed […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S NOTE: It is comforting to know that at least some people are paying attention. From one of the largest servicers in the country comes an admission that securitization of mortgage loans was an illusion. The facts alleged by AHMSI in its lawsuit […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE “If you’re allowed to foreclose and kick someone out of his or her home without being the party that either owns the loan or represents the person who owns the loan… if you can ignore those laws, why can’t you ignore other laws […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE REFUNDABLE RESERVATION NOW TO RESERVE SEATING CLICK HERE FOR ONE DAY PASS JOIN LIVINGLIES MEMBERSHIP NOW AND GET THE AUDIO-FILE ON LAST NIGHT’S 90 MINUTE BROADCAST WITH MANDELMAN MATTERS AND LIVINGLIES WRITERS. BLOG MEMBERSHIP SUBSCRIPTION We have twice monthly teleconferences, questions and answers […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE Bank Of America’s No-Good, Very Bad Enablers By Halah Touryalai | Forbes – Mon, Aug 22, 2011 What’s the worse than Bank of America acting as if it deserves immunity from all its bad foreclosure behavior? A presidential administration that agrees. President Obama’s administration is […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE TRANSFER TO POOL AFTER FORECLOSURE INITIATED: VOID “ The fact that Deutsche had possession of the mortgage, however, is irrelevant to its status as mortgagee. While a promissory note endorsed in blank may be enforced by the party in possession of the note, […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE TENNESSEE FEDERAL COURT DENIES BANK OF AMERICA’S MOTION TO DISMISS DECLARATORY JUDGMENT ACTION CHALLENGING ALLEGED OWNERSHIP OF LOAN Today, August 23, 2011, 6 hours ago | Jeff Barnes August 23, 2011 A Tennessee Federal court has issued an Order and Memorandum denying a […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE see VIDEO $1.2 Trillion in EXTRA BAILOUT MONEY FROM FED SECRETLY GIVEN TO DOMESTIC AND FOREIGN BANKS Of course the figure is much higher, but the secrecy surrounding the money given by the Fed to the banks is something to enrage any tea […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE SEE 42-in_RE_Cruz_vs_Aurora AURORA LOAN SERVICES LLC, SCME MORTGAGE BANKERS INC, ING BANK FSB, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS ALL BITE THE DUST, SUBJECT TO LIABILITY AND NO ABILITY TO FORECLOSE WITHOUT COMPLYING WITH LAW. Salient points of Judge Mann’s Decision: TRUTH IN LENDING was […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE ROBO-SIGNING IS NOW CALLED SURROGATE SIGNING AHMSI SUIT CONFIRMS PRACTICE IS WRONG, UNAUTHORIZED AND INVALID EDITOR’S NOTE: I find it interesting that LPS continued to fabricate and forge documents after AHMSI told them to stop. It could only mean that they were really […]
MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S NOTE: THE ONLY THING MISSING IS THE LARGEST QUESTION OF ALL: WERE THE MORTGAGE LIENS EVER PERFECTED? DO THEY EXIST? I also contest the issue of whether the banks were ever intending to do things right. I know from interviews I conducted […]
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It’s been widely reported around the country, via internet, blogs and newspapers, how the lenders used the foreclosure mills and other legal ways, to fabricate fraudulent documents to record in the county recorder offices and pretend they have legal standing to initiate the foreclosure procedure.
A few years ago, when the Mortgage Debacle started, these lenders went after the Mortgage Brokers after they found themselves in trouble for the many defaulted loans. They filed civil and criminal lawsuits convicting these brokers for fabricating documents and forging signatures to fund the loans. The legal system, judges and General Attorneys were prompt to convict “these so called criminals”.Contact Us: MortgageReductionLaw.com
Today the tables have turned 180 degrees and we have discovered how these entities have been widely practicing what they accused others of. Today the lenders are fabricating documents, forging signatures and filing fraudulent documents with the government agencies to weasel their way into owning the homeowners’ properties.Contact Us: MortgageReductionLaw.com
The fact that judges preceding the Unlawful Detainer hearings are not educated enough about the matter and don’t want to take the time to hear the attorneys defending the homeowners, does not help to make this wrong right. Securitization is a very complicated subject that cannot be taught in an Unlawful Detainer hearing or even in a Wrongful Foreclosure hearing. The way judges have been manipulating the information provided by the homeowners in their lawsuits to rule in favor of the lenders is despicable!Contact Us: MortgageReductionLaw.com
That’s why it’s so important to have all your property recorded documents used to foreclose on your home, been researched and analyzed by an expert that can identify all the issues that can be used in a Court of Law to fight for your home.
When you go in front of a Judge with enough evidence to prove that fraud was committed by the lender when the lender fabricated documents used to foreclose, you have a good chance to get the Judge’s attention. Fraud is a subject they know, it’s a crime and they can rule in your favor. It would be very difficult for a Judge to justify this fraudulent behavior on the part of the lender.
Later on, once you have successfully received an injunction, you can bring the securitization argument in your complaint and make the lender prove their innocence.Contact Us: MortgageReductionLaw.com
The documents used to initiate the foreclosure of your home have been fraudulently fabricated by either the Trustee or the Lender.
Some attorneys who have explored this cause of action in their civil lawsuits, have been able to get relief for the homeowners by getting the in Temporary Restraining Order and the Injunction granted.
Below please find proof of a very common practice within these entities when they fabricate documents. They use the name of one person who becomes an officer of many entities and the signature is very different in different documents. This has happened in your case too.
This is a portion of our report after thoroughly performing research and discovery for one of our clients: (testimonial letters can be provided upon request after signing a confidentiality agreement).
SIGNED BY: LINDA GREEN AS VICE PRESIDENT FOR AMERICAN HOME MORTGAGE SERVICING, INC. AS SUCCESOR IN INTEREST TO OPTION ONE MORTGAGE CORPORATION
TOO MANY JOBS
For this report, over 500 mortgage assignments were examined.
Each Assignment was filed by Docx, a mortgage servicing company in Alpharetta, GA; each was notarized in Fulton County, GA.
Many of these Assignments have been used in foreclosure actions to prove that the lender has the legal right to file the foreclosure actions.
The name of Linda Green, frequently appears on Docx documents. The following list summarizes some of the many job titles used by Green.Contact Us: MortgageReductionLaw.com
JOB TITLES HELD BY LINDA GREEN
11-11-2004 & 06-22-2006
Vice President, Loan Documentation, Wells Fargo Bank, N.A., successor by merger to Wells Fargo
Home Mortgage, Inc.
08-11-2008 & 08-14-2008
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc
08-27-2008
Vice President, American Home Mortgage Servicing as successor-in-interest to Option One Mortgage Corporation
09-19-2008
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Brokers Conduit
09-30-2008
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc
09-30-2008
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Brokers Conduit
10-08-2009
Vice President & Asst. Secretary, American Home Mortgage Servicing, Inc., as servicer for Ameriquest Mortgage Corporation
10-16-2008
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc
10-17-2008, 11-20-2008
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Brokers Conduit
11-20-2008
Vice President, Option One Mortgage Corporation
12-08-2008
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Brokers Conduit
12-15-2008
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for HLB Mortgage
12-24-2008
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc
12-26-2008
Vice President, American Home Mortgage Servicing, Inc
01-13-2009
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for Family Lending Services, Inc
01-15-2009
Vice President, Mortgage Electronic Registration Systems, Inc., acting solely as nominee for American Home Mortgage Acceptance, Inc
02-03-2009
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Broker Conduit
02-24-2009
Vice President, American Home Mortgage Servicing, Inc. as successor-in-interest to Option One Mortgage Corporation
02-25-2009
Vice President, Bank of America, N A
02-27-2009
Vice President, American Home Mortgage Servicing, Inc., as successor-in-interest to Option One Mortgage Corporation
03-02-2009
Vice President, Mortgage Electronic Registration Systems, Inc., acting solely as nominee for American Home Mortgage
03-04-2009
Vice President, Argent Mortgage Company, LLC by Citi Residential Lending Inc., attorney-in-fact
03-06-2009 & 03-20-2009
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc
04-15-2009, 04-17-2009, 04-20-2009
Vice President, Bank of America, N.A.
05-11-2009, 07-06-2009
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc
07-14-2009
Vice President, Bank of America, N.A.
07-30-2009
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc
08-12-2009
Vice President, Sand Canyon Corporation f/k/a Option One Mortgage Corporation
08-28-2009
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc.
09-03-2009
Asst. Vice President, Sand Canyon Corporation formerly known as Option One Mortgage Corporation
09-03-2009
Asst. Secretary, Mortgage Electronic Registration Systems, Inc., acting solely as nominee for American Home Mortgage
09-04-2009
Asst. Secretary, Mortgage Electronic Registration Systems, Inc., acting solely as nominee for American Home Mortgage
09-08-2009
Vice President, Bank of America, N.A.
09-21-2009 & 09-22-2009
Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc
ATTACHED TO THIS DOCUMENT OTHER DOCUMENTS SIGNED BY LINDA GREEN THAT SHOW THE VARIATIONS OF HER SIGNATURE
IT APPEARS AS IF THE SIGNATURE OF MS. GREEN COULD BE A FORGERY.Contact Us: MortgageReductionLaw.com
A forgery is a writing which falsely purports to be writing for another and is executed with the intent to defraud. Ordinarily a forged instrument cannot carry title.
THE SIGNATURE BELOW IS THE SIGNATURE IN THIS ASSIGNMENT OF DEED OF TRUST:Contact Us: MortgageReductionLaw.com
THE FOLLOWING SIGNATURES ARE FROM DIFFERENT DOCUMENTS RECORDEDIN DIFFERENT COUNTIES:
THIS WHOLE SYSTEM IS A FARCE. A BROKEN DOWN, FRAUDULENT, SHAKY, DISHONEST AND TERRIFYINGLY CORRUPT SYSTEM.
The press and the general public is starting to pick up on these major systemic issues that judges, attorneys and other insiders have known about for some time…when the whole system collapses we’ve all got a real mess on our hands.
As we all struggle to unravel this monstrous mess, breaking down capacity will be a key focus in the problem. We’re all going to be searching around to determine who to sue and where to sue them, but because the courts failed to enforce the most basic pleading requirement….i.e. specifically identify who the parties to the lawsuit are, this is going to be most difficult.
One of the persistent and most pervasive problems in the whole foreclosure crisis is the inability of any party to get reliable or credible information about what is owed on a mortgage, who that phantom amount is owed to and what negotiated amount a lender, servicer or other party involved in the transaction might accept to modify or short sale the underlying loan.
A very concerning issue is the publication on the MERS website of information that identifies who the servicer on a loan is and who the investor in that loan is. But, neither the servicer or investor matches up to the information in many cases.
When you combine all this information with the depositions of Robo signers that are posted on many website, you’ll understand that in a large number of cases, the only connection between the plaintiff foreclosing and the mortgage being foreclosed is a sloppy and hastily executed Assignment signed by an officer that has no corporate authority and has no personal knowledge of the information contained on those documents.
It’s simply not okay to use the “robosigning” practice in the non judicial foreclosure states because these foreclosure cases don’t have to go to court.
The following are some of the most clear legal reasons why the Robo-Signer Controversy should entitle hundreds of thousands of homeowners wrongfully foreclosed and evicted to sue in non judicial foreclosure states. Robo Signers are illegal because fraud cannot be the basis of clear title, trustee’s deeds following Robo Signed sales should be void as a matter of law, notarization is a recording requirement for many of the documents, which was often botched, and most importantly because robo signed falsifications are meant for use in court, including unlawful detainers and bankruptcy matters.Contact Us: MortgageReductionLaw.com
CALIFORNIA
1. Clear Title May Not Derive from a Fraud (including a bona fide purchaser for value).
In the case of a fraudulent transaction California law is settled. The Court in Trout v. Trout, (1934), 220 Cal. 652 at 656 stated:
“Numerous authorities have established the rule that an instrument wholly void, such as an undelivered deed, a forged instrument, or a deed in blank, cannot be made the foundation of a good title, even under the equitable doctrine of bona fide purchase. Consequently, the fact that defendant Archer acted in good faith in dealing with persons who apparently held legal title, is not in itself sufficient basis for relief.” (Emphasis added, internal citations omitted).
This sentiment was clearly echoed in 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc. (2001) 85 Cal.App.4th 1279 at 1286 where the Court stated:
“It is the general rule that courts have power to vacate a foreclosure sale where there has been fraud in the procurement of the foreclosure decree or where the sale has been improperly, unfairly or unlawfully conducted, or is tainted by fraud, or where there has been such a mistake that to allow it to stand would be inequitable to purchaser and parties.” (Emphasis added).
If forged signatures are used to obtain the foreclosure it makes a difference!
2. Any apparent sale based on Robosigned documents or forged signatures should be void and without any legal effect.
In Bank of America v. LaJolla Group II, the California Court of Appeals held that if a trustee is not contractually empowered under the Deed of Trust to hold a sale, it is totally void. Voidness, as opposed to voidability, means that it is without legal effect. Title does not transfer. No right to evict arises. The property is not sold.
In turn, California Civil Code 2934a requires that the beneficiary execute, notarize and record a substitution for a valid Substitution of Trustee to take effect. Thus, if the Assignment of Deed of Trust, the Substitution of Trustee or the Notice of Default are Robo-Signed, the sale should be void.Contact Us: MortgageReductionLaw.com
3. These documents are not recordable without good notarization.
In California, the reason these documents are notarized in the first place is because otherwise they will not be accepted by the County recorder. Moreover, a notary who helps commit real estate fraud is liable for $25,000 per offense.
Once the document is recorded, however, it is entitled to a “presumption of validity”, which is what spurned the falsification trend in the first place. California Civil Code Section 2924. Therefore, the notarization of a false signature not only constitutes fraud, but is every bit intended as part of a larger conspiracy to commit fraud on the court.
4. The documents are intended for court eviction proceedings.
A necessary purpose for these documents, after the non judicial foreclosure, is the eviction of the rightful owners afterward. Even in California, eviction is a judicial process, albeit summary and often sloppily conducted by judges who don’t really believe they can say no to the pirates taking your house. However, as demonstrated below, once these documents make it into court, the bank officers and lawyers become guilty of felonies:
California Penal Code section 118 provides (a) Every person who, having taken an oath that he or she will testify, declare, depose, or certify truly before any competent tribunal, officer, or person, in any of the cases in which the oath may by law of the State of California be administered, willfully and contrary to the oath, states as true any material matter which he or she knows to be false, and every person who testifies, declares, deposes, or certifies under penalty of perjury in any of the cases in which the testimony, declarations, depositions, or certification is permitted by law of the State of California under penalty of perjury and willfully states as true any material matter which he or she knows to be false, is guilty of perjury.Contact Us: MortgageReductionLaw.com
This subdivision is applicable whether the statement, or the testimony, declaration, deposition, or certification is made or subscribed within or without the State of California.
Penal Code section 132 provides: Every person who upon any trial, proceeding, inquiry, or investigation whatever, authorized or permitted by law, offers in evidence, as genuine or true, any book, paper, document, record, or other instrument in writing, knowing the same to have been forged or fraudulently altered or ante-dated, is guilty of felony.
The Doctrine of Unclean Hands provides: plaintiff’s misconduct in the matter before the court makes his hands “unclean” and he may not hold with them the pristine remedy of injunctive relief. California Satellite Sys. v Nichols (1985) 170 CA3d 56, 216 CR 180. California’s unclean hands rule requires that the Plaintiff don’t cheat, and behave fairly. The plaintiff must come into court with clean hands, and keep them clean, or he or she will be denied relief, regardless of the merits of the claim. Kendall-Jackson Winery Ltd. v Superior Court (1999) 76 CA4th 970, 978, 90 CR2d 743. Whether the doctrine applies is a question of fact. CrossTalk Prods., Inc. v Jacobson (1998) 65 CA4th 631, 639, 76 CR2d 615.
5. Robo Signed Documents Are Intended for Use in California Bankruptcy Court Matters. One majorly overlooked facet of California is our extremely active bankrtupcy court proceedings, where, just as in judicial foreclosure states, the banks must prove “standing” to proceed with a foreclosure. If they are not signed by persons with the requisite knowledge, affidavits submitted in bankruptcy court proceedings such as objections to a plan and Relief from Stays are perjured.
The documents in support are often falsified evidence.
CONCLUSION
Verified eviction complaints, perjured motions for summary judgment, and all other eviction paperwork after robo signed non judicial foreclosures in California and other states are illegal and void. The paperwork itself is void. The sale is void. But the only way to clean up the hundreds of thousands of effected titles is through litigation, because even now the banks will simply not do the right thing. And that’s why robo signers count in non-judicial foreclosure states. Victims of robosigners in California may seek declaratory relief, damages under the Rosenthal Act; an injunction and attorneys fees for Unfair Business practices, as well as claims for slander of title; abuse of process, civil theft, and conversion.Contact Us: MortgageReductionLaw.com
Who knows, maybe his resignation has something to do with this article where he admits that they have bifuricated the note from the mortgage and have been doing so for many years with the servicers,
As investors bought more and more loans in the secondary market, many of them began to contract with servicing
companies to handle loan servicing obligations. A servicer is a company that a mortgage loan investor hires to handle
payment processing, tax and insurance escrows, foreclosure and other matters related to the loan or the property. Often, the servicer is the same lender that originated the loan, sold the beneficial ownership in the secondary market and agreed to continue servicing the loan for the new beneficial owner.
For these servicing companies to perform their duties satisfactorily, the note and mortgage were bifurcated. The
investor or its designee held the note and named the servicing company as mortgagee, a structure that became standard. Some servicing companies have grown quite large, and a very active secondary market in servicing contracts has developed as well. Now more than $ 400 billion in servicing contracts trade annually.
A servicing contract is not an interest in real estate. Unlike a mortgage, it has nothing to do with legal title to the
property and is personal property under UCC § 9-106. Even before MERS, servicers had no reason to appear in the
public land records, except to receive the legal process they need to service loans properly.
The bifurcated structure worked fine for a long time, but the sheer volume of transfers between servicing
companies and the resulting need to record assignments caused a heavy drag on the secondary market. The burden
affected lenders, title companies, consumers and even local recorders. Assignment processing for the sale of a relatively modest loan portfolio can take up to six months to complete. Error rates as high as 33% are common. With the active secondary market in servicing contracts, more than four million loans are affected annually. Loan servicing can trade several times before even the first assignment in a chain is recorded, leaving the public land records clogged with unnecessary assignments. Sometimes these assignments are recorded in the wrong sequence, clouding title to the property.
see full article “There is Life on MERS”
MERS CEO R.K. Arnold Leaving Company
Submitted by Tyler Durden on 01/21/2011 14:23 -0500
Is the biggest fraud in the history of the US housing market about to come unglued? If so, take our prediction of a $100 billion total in future BofA rep and warranty reserves and triple it.
From the WSJ:
The chief executive of the privately-held Mortgage Electronic Registration Systems, or MERS, is planning to leave the company and an announcement could come within days, according to people familiar with the matter.
The company has been under fire by Congress and state officials for its role in the mortgage-document crisis. The firm’s board of directors has met in recent days to address the fate of the company and its chief executive, R.K. Arnold, the people said.
Arnold and other MERS executives didn’t respond to requests for comment. A MERS spokeswoman Friday declined comment. Arnold, a former U.S. Army Ranger, has served as the CEO and president of Merscorp Inc., the parent company of MERS, since 1998 and has been with the company since its inception 15 years ago, according to a corporate biography.
MERS was built by Fannie Mae (FNMA), Freddie Mac (FMCC), and several large U.S. banks in 1996 as an electronic registry of land records. That created a parallel database to facilitate the packaging of loans into securities that could be sold and re-sold without being recorded in local county courthouses, reducing costs for banks. The company’s name is listed as the agent for mortgage lenders on more than 65 million home loans.
But the company’s practices have begun to receive heavy scrutiny from state prosecutors and federal regulators, particularly in light of foreclosure-document problems that surfaced last fall. State and federal lawmakers have begun to consider bills that would make it harder for banks to use or foreclose on properties through MERS.
MERS’s legal standing also has been challenged by legal experts because it doesn’t own the underlying debt. Previously, the mortgage and the promissory note weren’t split between different parties.
Critics of the company have raised concerns over whether notes were properly assigned or tracked within the electronic system. Judges have also begun to question the company’s practices of “deputizing” hundreds of bank executives to handle foreclosures by naming them “vice presidents” of MERS.
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1.If you feel you were taken advantage of or not told the whole truth when you received your loan and want to consider legal action against your lender, call us.
1.Did you know that in some cases the lender is forced to eliminate your debt completely and give you back the title to your home?
2.If you received your loan based on any of the following you may have possible claims against your lender:
1.Stated Income
2.Inflated Appraisal
3.If you were sold on taking cash out of your home
4.If you were sold on using your home’s equity to pay off your credit cards or auto loans
5.If you refinanced more than one time in the course of a 3 year period
6.If you were charged high fees
7.If you were sold on getting a negative amortization loan, or adjustable rate loan
8.If your loan had a prepayment penalty
9.If you feel your interest rate is higher than it should be
10.If your initial closing costs looked different at signing than you were lead to believe
11.If you know more than one person in your same position that closed a loan with the same lender or mortgage broker
12.If you feel you were given an inferior loan because of your race
13.If you feel that your lender is over aggressive in their collections actions
14.If there is more than 3 people in your neighborhood that are facing foreclosure
15.If you only speak Spanish and all your disclosures were given to you in English
Predatory lending is a term used to describe unfair, deceptive, or fraudulent practices of some lenders during the loan origination process. There are no legal definitions in the United States for predatory lending, though there are laws against many of the specific practices commonly identified as predatory, and various federal agencies use the term as a catch-all term for many specific illegal activities in the loan industry. Predatory lending is not to be confused with predatory mortgage servicing (predatory servicing) which is used to describe the unfair, deceptive, or fraudulent practices of lenders and servicing agents during the loan or mortgage servicing process, post origination.
One less contentious definition of the term is the practice of a lender deceptively convincing borrowers to agree to unfair and abusive loan terms, or systematically violating those terms in ways that make it difficult for the borrower to defend against. Other types of lending sometimes also referred to as predatory include payday loans, credit cards or other forms of consumer debt, and overdraft loans, when the interest rates are considered unreasonably high. Although predatory lenders are most likely to target the less educated, racial minorities and the elderly, victims of predatory lending are represented across all demographics.
Predatory lending typically occurs on loans backed by some kind of collateral, such as a car or house, so that if the borrower defaults on the loan, the lender can repossess or foreclose and profit by selling the repossessed or foreclosed property. Lenders may be accused of tricking a borrower into believing that an interest rate is lower than it actually is, or that the borrower’s ability to pay is greater than it actually is. The lender, or others as agents of the lender, may well profit from repossession or foreclosure upon the collateral.
Abusive or unfair lending practices www.thestopforeclosureplan.com
There are many lending practices which have been called abusive and labeled with the term “predatory lending.” There is a great deal of dispute between lenders and consumer groups as to what exactly constitutes “unfair” or “predatory” practices, but the following are sometimes cited.
•Unjustified risk-based pricing. This is the practice of charging more (in the form of higher interest rates and fees) for extending credit to borrowers identified by the lender as posing a greater credit risk. The lending industry argues that risk-based pricing is a legitimate practice; since a greater percentage of loans made to less creditworthy borrowers can be expected to go into default, higher prices are necessary to obtain the same yield on the portfolio as a whole. Some consumer groups argue that higher prices paid by more vulnerable consumers cannot always be justified by increased credit risk.
•Single-premium credit insurance. This is the purchase of insurance which will pay off the loan in case the homebuyer dies. It is more expensive than other forms of insurance because it does not involve any medical checkups, but customers almost always are not shown their choices, because usually the lender is not licensed to sell other forms of insurance. In addition, this insurance is usually financed into the loan which causes the loan to be more expensive, but at the same time encourages people to buy the insurance because they do not have to pay up front.
•Failure to present the loan price as negotiable. Many lenders will negotiate the price structure of the loan with borrowers. In some situations, borrowers can even negotiate an outright reduction in the interest rate or other charges on the loan. Consumer advocates argue that borrowers, especially unsophisticated borrowers, are not aware of their ability to negotiate and might even be under the mistaken impression that the lender is placing the borrower’s interests above its own. Thus, many borrowers do not take advantage of their ability to negotiate.
•Failure to clearly and accurately disclose terms and conditions, particularly in cases where an unsophisticated borrower is involved. Mortgage loans are complex transactions involving multiple parties and dozens of pages of legal documents. In the most egregious of predatory cases, lenders or brokers have been known to not only mislead borrowers, but actually alter documents after they have been signed.
•Short-term loans with disproportionally high fees, such as payday loans, credit card late fees, checking account overdraft fees, and Tax Refund Anticipation Loans, where the fee paid for advancing the money for a short period of time works out to an annual interest rate significantly in excess of the market rate for high-risk loans. The originators of such loans dispute that the fees are interest.
•Servicing agent and securitization abuses. The mortgage servicing agent is the entity that receives the mortgage payment, maintains the payment records, provides borrowers with account statements, imposes late charges when the payment is late, and pursues delinquent borrowers. A securitization is a financial transaction in which assets, especially debt instruments, are pooled and securities representing interests in the pool are issued. Most loans are subject to being bundled and sold, and the rights to act as servicing agent sold, without the consent of the borrower. A federal statute requires notice to the borrower of a change in servicing agent, but does not protect the borrower from being held delinquent on the note for payments made to the servicing agent who fails to forward the payments to the owner of the note, especially if that servicing agent goes bankrupt, and borrowers who have made all payments on time can find themselves being foreclosed on and becoming unsecured creditors of the servicing agent. Foreclosures can sometimes be conducted without proper notice to the borrower. In some states (see Texas Rule of Civil Procedure 746), there is no defense against eviction, forcing the borrower to move and incur the expense of hiring a lawyer and finding another place to live while litigating the claim of the “new owner” to own the house, especially after it is resold one or more times. When the debtor demands that the current claimed note owner produce the original note with his signature on it, the note owner typically is unable or unwilling to do so, and tries to establish his claim with an affidavit that it is the owner, without proving it is the “holder in due course”, the traditional standard for a debt claim, and the courts often allow them to do that. In the meantime, the note continues to be traded, its physical whereabouts difficult to discover.
Consumers believe that they are protected by consumer protection laws, when their lender is really operating wholly outside the laws. Refer to 16 U.S.C. 1601 and 12 C.F.R. 226.
Underlying issues
There are many underlying issues in the predatory lending debate:
•Judicial practices: Some argue that much of the problem arises from a tendency of the courts to favor lenders, and to shift the burden of proof of compliance with the terms of the debt instrument to the debtor. According to this argument, it should not be the duty of the borrower to make sure his payments are getting to the current note-owner, but to make evidence that all payments were made to the last known agent for collection sufficient to block or reverse repossession or foreclosure, and eviction, and to cancel the debt if the current note owner cannot prove he is the “holder in due course” by producing the actual original debt instrument in court. http://www.thestopforeclosureplan.com•Risk-based pricing: The basic idea is that borrowers who are thought of as more likely to default on their loans should pay higher interest rates and finance charges to compensate lenders for the increased risk. In essence, high returns motivate lenders to lend to a group they might not otherwise lend to — “subprime” or risky borrowers. Advocates of this system believe that it would be unfair — or a poor business strategy — to raise interest rates globally to accommodate risky borrowers, thus penalizing low-risk borrowers who are unlikely to default. Opponents argue that the practice tends to disproportionately create capital gains for the affluent while oppressing working-class borrowers with modest financial resources. Some people consider risk-based pricing to be unfair in principle. Lenders contend that interest rates are generally set fairly considering the risk that the lender assumes, and that competition between lenders will ensure availability of appropriately-priced loans to high-risk customers. Still others feel that while the rates themselves may be justifiable with respect to the risks, it is irresponsible for lenders to encourage or allow borrowers with credit problems to take out high-priced loans. For all of its pros and cons, risk-based pricing remains a universal practice in bond markets and the insurance industry, and it is implied in the stock market and in many other open-market venues; it is only controversial in the case of consumer loans.
•Competition: Some believe that risk-based pricing is fair but feel that many loans charge prices far above the risk, using the risk as an excuse to overcharge. These criticisms are not levied on all products, but only on those specifically deemed predatory. Proponents counter that competition among lenders should prevent or reduce overcharging.
•Financial education: Many observers feel that competition in the markets served by what critics describe as “predatory lenders” is not affected by price because the targeted consumers are completely uneducated about the time value of money and the concept of Annual percentage rate, a different measure of price than what many are used to.
•Caveat emptor: There is an underlying debate about whether a lender should be allowed to charge whatever it wants for a service, even if it seems to make no attempts at deceiving the consumer about the price. At issue here is the belief that lending is a commodity and that the lending community has an almost fiduciary duty to advise the borrower that funds can be obtained more cheaply. Also at issue are certain financial products which appear to be profitable only due to adverse selection or a lack of knowledge on the part of the customers relative to the lenders. For example, some people allege that credit insurance would not be profitable to lending companies if only those customers who had the right “fit” for the product actually bought it (i.e., only those customers who were not able to get the generally cheaper term life insurance).
•Discrimination: Some organizations feel that many financial institutions continue to engage in racial discrimination. Most do not allege that the loan underwriters themselves discriminate, but rather that there is systemic discrimination. Situations in which a loan broker or other salesman may negotiate the interest rate are likely more ripe for discrimination. Discrimination may occur if, when dealing with racial minorities, loan brokers tend to claim that a person’s credit score is lower than it is, justifying a higher interest rate charged, on the hope that the customer assumes the lender to be correct. This may be based on an internalized bias that a minority group has a lower economic profile. It is also possible that a broker or loan salesman with some control over the interest rate might attempt to charge a higher rate to persons of race which he personally dislikes. For this reason some call for laws requiring interest rates to be set entirely by objective measures.
OCC Advisory Letter AL 2003-2 describes predatory lending as including the following:
•Loan “flipping” – frequent refinancings that result in little or no economic benefit to the borrower and are undertaken with the primary or sole objective of generating additional loan fees, prepayment penalties, and fees from the financing of credit-related products;
•Refinancings of special subsidized mortgages that result in the loss of beneficial loan terms;
•”Packing” of excessive and sometimes “hidden” fees in the amount financed;
•Using loan terms or structures – such as negative amortization – to make it more difficult or impossible for borrowers to reduce or repay their indebtedness;
•Using balloon payments to conceal the true burden of the financing and to force borrowers into costly refinancing transactions or foreclosures;
•Targeting inappropriate or excessively expensive credit products to older borrowers, to persons who are not financially sophisticated or who may be otherwise vulnerable to abusive practices, and to persons who could qualify for mainstream credit products and terms;
•Inadequate disclosure of the true costs, risks and, where necessary, appropriateness to the borrower of loan transactions;
•The offering of single premium credit life insurance; and
•The use of mandatory arbitration clauses.
It should be noted that mortgage applications are usually completed by mortgage brokers, rather than by borrowers themselves, making it difficult to pin down the source of any misrepresentations.
A stated income loan application is where no proof of income is needed. When the broker files the loan, they have to go by whatever income is stated. This opened the doors for borrowers to be approved for loans that they otherwise would not qualify for, or afford.
Although the target for most scammers, lending institutions were often complicit in what amounted to multiparty mortgage fraud. The Oregonian obtained a JP Morgan Chase memo, titled “Zippy Cheats & Tricks.” Zippy was Chase’s in-house automated loan underwriting system, and the memo was a primer on how to get risky mortgage loans approved.
United States legislation combating predatory lending
Many laws at both the Federal and state government level are aimed at preventing predatory lending. Although not specifically anti-predatory in nature, the Federal Truth in Lending Act requires certain disclosures of APR and loan terms. Also, in 1994 section 32 of the Truth in Lending Act, entitled the Home Ownership and Equity Protection Act of 1994, was created. This law is devoted to identifying certain high-cost, potentially predatory mortgage loans and reining in their terms.www.thestopforeclosureplan.com
Twenty-five states have passed anti-predatory lending laws. Arkansas, Georgia, Illinois, Maine, Massachusetts, North Carolina, New York, New Jersey, New Mexico and South Carolina are among those states considered to have the strongest laws. Other states with predatory lending laws include: California, Colorado, Connecticut, Florida, Kentucky, Maine, Maryland, Nevada, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Utah, Wisconsin, and West Virginia. These laws usually describe one or more classes of “high-cost” or “covered” loans, which are defined by the fees charged to the borrower at origination or the APR. While lenders are not prohibited from making “high-cost” or “covered” loans, a number of additional restrictions are placed on these loans, and the penalties for noncompliance can be substantial. http://www.thestopforeclosureplan.com
If the lawyer is not a competent witness with personal knowledge, then he should shut up and sit down.
So you sent a QWR and you know the loan is securitized. The orignating lender says talk to the servicer and the servicer declines to answer all the questions because they didn’t originate the loan. Or you are in court and the lawyer is trying to finesse his way past basic rules of evidence and due process by making representations to the Judge as an officer of the court.
He’s lying of course and if you let it go unchallenged, you will lose the case. Basically opposing counsel is saying “trust me Judge I wouldn’t say it if it wasn’t so.” And your answer is that the lawyer is not a witness, that you don’t trust the lawyer or what he has to say, that if he is a witness he should be sworn in and subject to cross examaintion and if he is not a witness you are entitled to be confronted with a real witness with real testimony based upon real knowledge.
First Questions: When did you first learn of this case? What personal knowledge do you have concerning the payments received from the homeowner or third parties? What personal knowledge do you have as to who providing the actual cash from which the subject loan was funded?
Only when pressed relentlessly by the homeowner, the servicer comes up with a more and more restrictive answer as to what role they play. But they always start with don’t worry about a thing we control everything. Not true. Then later after you thought you worked out a modification they tell the deal is off because the investor declined. The investor is and always was the lender. That is the bottom line and any representation to the contrary is a lie and a fraud upon the court.
So whoever you sent the QWR to, always disclaims your right to ask, or tells you the name of the investor (i.e., your lender) is confidential, or that they have authority (but they won’t show it to you). That doesn’t seem to be a lender, does it? In fact they disclaim even knowing enough to answer your questions.
So AFTER THEY SERVE YOU with something file a motion to compel an immediate full answer to your QWR since under TILA service on the servicer is the same as service on the lender. You argue that everyone seems to be claiming rights to be paid under the original obligation, everyone seems to be claiming the right to enforce the note and mortgage, but nobody is willing to state unequivocally that they are the lender.
You are stuck in the position of being unable to seek modification under federal and State rules, unable to sell the property because you don’t know who can sign a satisfaction of mortgage or a release and reconveyance, unable to do a short-sale, and unable to refinance — all because they won’t give a simple answer to a simple question: who is the lender and what is the balance claimed by the real lender on the obligation? At this point you don’t even know that any of the real lenders wish to make a claim.
This is probably because they received TARP funds and insurance proceeds on defaults of pools that they had purchased multiple insurance policies (credit default swaps). But whether they are paid by someone who acquired rights of subrogation or they were not paid, you have a right to a FULL accounting and to know who they are and whether they received any third party money. If they were paid in part or otherwise sold their interest, then you have multiple additional unknown parties.
The reason is simple. They are not the lender and they know it. The lender is a group of investors who funded the transaction with Petitioner/Homeowner and others who purchased similar financial products from the same group of participants in the securitization chain relating to the subject loan.
The people currently in court do not include all the real parties in interest for you to make claims against the lender. Cite to the Massachusetts case where Wells Fargo and its lawyer were subject to an $850,000 sanction for misrepresenting its status to the court.
It is not enough for them to bluff their way by saying that they have already answered the interrogatories. When they lost and it came time to allocate damages and attorneys fees, Wells suddenly said they were NOT the lender, beneficiary or current holder and that therefore the damages and attorneys fees should be assessed against the real lender — who was not a party to the pending litigation and whom they refused to disclose along with their misrepresentation that they were the true lender.
It is not enough that the lawyer makes a representation to the court as an officer of the court. That is not how evidence works. If the lawyer wants to represent facts, then he/she should be sworn in and be subject to (1) voir dire to establish that he/she is opposing counsel that it came from some company.
The witness must be a competent witness who takes an oath, has personal knowledge regarding the content of the document, states that personal knowledge and whose testimony conforms to what is on the document.
There is no such thing as foundation without a witness. There is no such thing as foundation without a competent witness. So if the lawyer tries to finesse the subject by making blanket representations to the court(e.g. the property is “underwater” by $xxx,xxx and we need a lift of stay…yet, there is no certified appraisal entered into evidence with a certified appraiser that can be cross examined…just a statement from opposing counsel) point to Wells, or even point to other inconsistencies between what counsel has represented and what now appears to be the truth, and demand an evidentiary hearing. If the lawyer is not a competent witness with personal knowledge, then he should shut up and sit down.
File a motion to extend time to file adversary proceeding(in BK situation), answer, affirmative defenses and counterclaim UNTIL YOU GET A FULL AND COMPLETE ANSWER TO YOUR QWR so you can determine the real parties in interest and serve them with process. Otherwise, we will have a partial result wherein the real owner of the loan can and will claim damages and injunctive relief probably against all the current parties to this action including the Homeowner.
In short, the opposing counsel cannot just make statements of “fact” and have them accepted by the court as “fact” if they don’t pass the sniff test of real evidence corroborated by a competent witness. …and with every pleading ask for an evidentiary hearing and attorneys fees. Follow rule 11 procedure in Federal Court or the state law counterpart so you can get them later.
CA SB 94 on Lawyers & Loan Modifications Passes Assembly… 62-10
The California Assembly has passed Senate Bill 94, a bill that seeks to protect homeowners from loan modification scammers, but could end up having the unintended consequence of eliminating a homeowner’s ability to retain an attorney to help them save their home from foreclosure.
The bill, which has an “urgency clause” attached to it, now must pass the State Senate, and if passed, could be signed by the Governor on October 11th, and go into effect immediately thereafter.
SB 94’s author is California State Senator Ron Calderon, the Chair of the Senate Banking Committee, which shouldn’t come as much of a surprise to anyone familiar with the bigger picture. Sen. Calderon, while acknowledging that fee-for-service providers can provide valuable services to homeowners at risk of foreclosure, authored SB 94 to ensure that providers of these services are not compensated until the contracted services have been performed.
SB 94 prevents companies, individuals… and even attorneys… from receiving fees or any other form of compensation until after the contracted services have been rendered. The bill will now go to the Democratic controlled Senate where it is expected to pass.
Supporters of the bill say that the state is literally teeming with con artists who take advantage of homeowners desperate to save their homes from foreclosure by charging hefty fees up front and then failing to deliver anything of value in return. They say that by making it illegal to charge up front fees, they will be protecting consumers from being scammed.
While there’s no question that there have been some unscrupulous people that have taken advantage of homeowners in distress, the number of these scammers is unclear. Now that we’ve learned that lenders and servicers have only modified an average of 9% of qualified mortgages under the Obama plan, it’s hard to tell which companies were scamming and which were made to look like scams by the servicers and lenders who failed to live up to their agreement with the federal government.
In fact, ever since it’s come to light that mortgage servicers have been sued hundreds of times, that they continue to violate the HAMP provisions, that they foreclose when they’re not supposed to, charge up front fees for modifications, require homeowners to sign waivers, and so much more, who can be sure who the scammers really are. Bank of America, for example, got the worst grade of any bank on the President’s report card listing, modifying only 4% of the eligible mortgages since the plan began. We’ve given B of A something like $200 billion and they still claim that they’re having a hard time answering the phones over there, so who’s scamming who?
To make matters worse, and in the spirit of Y2K, the media has fanned the flames of irrationality with stories of people losing their homes as a result of someone failing to get their loan modified. The stories go something like this:
We gave them 1,000. They told us to stop making our mortgage payment. They promised us a principal reduction. We didn’t hear from them for months. And then we lost our house.
I am so sure. Can that even happen? I own a house or two. Walk me through how that happened again, because I absolutely guarantee you… no way could those things happen to me and I end up losing my house over it. Not a chance in the world. I’m not saying I couldn’t lose a house, but it sure as heck would take a damn sight more than that to make it happen.
Depending on how you read the language in the bill, it may prevent licensed California attorneys from requiring a retainer in advance of services being rendered, and this could essentially eliminate a homeowner’s ability to hire a lawyer to help save their home.
Supporters, on the other hand, respond that homeowners will still be able to hire attorneys, but that the attorneys will now have to wait until after services have been rendered before being paid for their services. They say that attorneys, just like real estate agents and mortgage brokers, will now only be able to receive compensation after services have been rendered.
But, assuming they’re talking about at the end of the transaction, there are key differences. Real estate agents and mortgage brokers are paid OUT OF ESCROW at the end of a transaction. They don’t send clients a bill for their services after the property is sold.
Homeowners at risk of foreclosure are having trouble paying their bills and for the most part, their credit ratings have suffered as a result. If an attorney were to represent a homeowner seeking a loan modification, and then bill for his or her services after the loan was modified, the attorney would be nothing more than an unsecured creditor of a homeowner who’s only marginally credit worthy at best. If the homeowner didn’t pay the bill, the attorney would have no recourse other than to sue the homeowner in Small Claims Court where they would likely receive small payments over time if lucky.
Extending unsecured credit to homeowners that are already struggling to pay their bills, and then having to sue them in order to collect simply isn’t a business model that attorneys, or anyone else for that matter, are likely to embrace. In fact, the more than 50 California attorneys involved in loan modifications that I contacted to ask about this issue all confirmed that they would not represent homeowners on that basis.
One attorney, who asked not to be identified, said: “Getting a lender or servicer to agree to a loan modification takes months, sometimes six or nine months. If I worked on behalf of homeowners for six or nine months and then didn’t get paid by a number of them, it wouldn’t be very long before I’d have to close my doors. No lawyer is going to do that kind of work without any security and anyone who thinks they will, simply isn’t familiar with what’s involved.”
“I don’t think there’s any question that SB 94 will make it almost impossible for a homeowner to obtain legal representation related to loan modifications,” explained another attorney who also asked not to be identified. ”The banks have fought lawyers helping clients through the loan modification process every step of the way, so I’m not surprised they’ve pushed for this legislation to pass.”
Proponents of the legislation recite the all too familiar mantra about there being so many scammers out there that the state has no choice but to move to shut down any one offering to help homeowners secure loan modifications that charges a fee for the services. They point out that consumers can just call their banks directly, or that there are nonprofit organizations throughout the state that can help homeowners with loan modifications.
While the latter is certainly true, it’s only further evidence that there exists a group of people in positions of influence that are unfamiliar , or at the very least not adequately familiar with obtaining a loan modification through a nonprofit organization, and they’ve certainly never tried calling a bank directly.
The fact that there are nonprofit housing counselors available, and the degree to which they may or may not be able to assist a given homeowner, is irrelevant. Homeowners are well aware of the nonprofit options available. They are also aware that they can call their banks directly. From the President of the United States and and U.S. Attorney General to the community newspapers found in every small town in America, homeowners have heard the fairy tales about about these options, and they’ve tried them… over and over again, often times for many months. When they didn’t get the desired results, they hired a firm to help them.
Yet, even the State Bar of California is supporting SB 94, and even AB 764, a California Assembly variation on the theme, and one even more draconian because of its requirement that attorneys only be allowed to bill a client after a successful loan modification has been obtained. That means that an attorney would have to guarantee a homeowner that he or she would obtain a modification agreement from a lender or servicer or not get paid for trying. Absurd on so many levels. Frankly, if AB 764 passes, would the last one out of California please turn off the lights and bring the flag.
As of late July, the California State Bar said it was investigating 391 complaints against 141 attorneys, as opposed to nine investigations related to loan modifications in 2008. The Bar hasn’t read anywhere all of the complaints its received, but you don’t have to be a statistician to figure out that there’s more to the complaints that meets the eye. So far the State Bar has taken action against three attorneys and the Attorney General another four… so, let’s see… carry the 3… that’s 7 lawyers. Two or three more and they could have a softball team.
At the federal level they’re still reporting the same numbers they were last spring. Closed 11… sent 71 letters… blah, blah, blah… we’ve got a country of 300 million and at least 5 million are in trouble on their mortgage. The simple fact is, they’re going to have to come up with some serious numbers before I’m going to be scared of bumping into a scammer on every corner.
Looking Ahead…
California’s ALT-A and Option ARM mortgages are just beginning to re-set, causing payments to rise, and with almost half of the mortgages in California already underwater, these homeowners will be unable to refinance and foreclosures will increase as a result. Prime jumbo foreclosure rates are already up a mind blowing 634% as compared with January 2008 levels, according to LPS Applied Analytics.
Clearly, if SB 94 ends up reducing the number of legitimate firms available for homeowners to turn to, everyone involved in its passage is going to be retiring. While many sub-prime borrowers have suffered silently through this horror show of a housing crisis, the ALT-A and Option ARM borrowers are highly unlikely to slip quietly into the night.
There are a couple of things about the latest version of SB 94 that I found interesting:
1. It says that a lawyer can’t collect a fee or any other compensation before serivces have been delivered, but it doesn’t make clear whether attorneys can ask the client to deposit funds in the law firm’s trust account and then bill against thsoe funds as amounts are earned. Funds deposited in a law firm trust account remain the client’s funds, so they’re not a lawyer’s “fees or other compensation”. Those funds are there so that when the fees have been earned, the lawyer doesn’t have to hope his or her bill gets paid. Of course, it also says that an attorney can’t hold any security interest, but money in a trust account a client’s money, the attorney has no lien against it. All of this is a matter of interpretation, of course, so who knows.
2. While there used to be language in both the real estate and lawyer sections that prohibited breaking up services related to a loan modification, in the latest version all of the language related to breaking up services as applied to attorneys has been eliminated. It still applies to real estate licensed firms, but not to attorneys. This may be a good thing, as at least a lawyer could complete sections of the work involved as opposed to having to wait until the very end, which the way the banks have been handling things, could be nine months away.
3. The bill says nothing about the amounts that may be charged for services in connection with a loan modification. So, in the case of an attorney, that would seem to mean that… well, you can put one, two and three together from there.
4. Lawyers are not included in definition of foreclosure consultant. And there is a requirement that new language be inserted in contracts, along the lines of “You don’t have to pay anyone to get a loan modification… blah, blah, blah.” Like that will be news to any homeowner in America. I’ve spoken with hundreds and never ran across one who didn’t try it themselves before calling a lawyer. I realize the Attorney General doesn’t seem to know that, but look… he’s been busy.
Conclusion…
Will SB 94 actually stop con artists from taking advantage of homeowners in distress? Or will it end up only stopping reputable lawyers from helping homeowners, while foreclosures increase and our economy continues its deflationary free fall? Will the California State Bar ever finishing reading the complaints being received, and if they ever do, will they understand what they’ve read. Or is our destiny that the masses won’t understand what’s happening around them until it sucks them under as well.
I surely hope not. But for now, I’m just hoping people can still a hire an attorney next week to help save their homes, because if they can’t… the Bar is going to get a lot more letters from unhappy homeowners.
News Release
July 15, 2009
For Immediate Release
Contact: (916) 324-5500
Print Version
Attachments
Los Angeles – As part of a massive federal-state crackdown on loan modification scams, Attorney General Edmund G. Brown Jr. at a press conference today announced the filing of legal action against 21 individuals and 14 companies who ripped off thousands of homeowners desperately seeking mortgage relief.
Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.
“The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure,” Brown said. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”
Brown filed five lawsuits as part of “Operation Loan Lies,” a nationwide sweep of sham loan modification consultants, which he conducted with the Federal Trade Commission, the U.S. Attorney’s office and 22 other federal and state agencies. In total, 189 suits and orders to stop doing business were filed across the country.
Following the housing collapse, hundreds of loan modification and foreclosure-prevention companies have cropped up, charging thousands of dollars in upfront fees and claiming that they can reduce mortgage payments. Yet, loan modifications are rarely, if ever, obtained. Less than 1 percent of homeowners nationwide have received principal reductions of any kind.
Brown has been leading the fight against fraudulent loan modification companies. He has sought court orders to shut down several companies including First Gov and Foreclosure Freedom and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.
Brown’s office filed the following lawsuits in Orange County and U.S. District Court for the Central District (Los Angeles):
– U.S. Homeowners Assistance, based in Irvine;
– U.S. Foreclosure Relief Corp and its legal affiliate Adrian Pomery, based in the City of Orange;
– Home Relief Services, LLC, with offices in Irvine, Newport Beach and Anaheim, and its legal affiliate, the Diener Law Firm;
– RMR Group Loss Mitigation, LLC and its legal affiliates Shippey & Associates and Arthur Aldridge. RMR Group has offices in Newport Beach, City of Orange, Huntington Beach, Corona, and Fresno;
– and
– United First, Inc, and its lawyer affiliate Mitchell Roth, based in Los Angeles.
U.S. Homeowners Assistance
Brown on Monday sued U.S. Homeowners Assistance, and its executives — Hakimullah “Sean” Sarpas and Zulmai Nazarzai — for bilking dozens of homeowners out of thousands of dollars each.
U.S. Homeowners Assistance claimed to be a government agency with a 98 percent success rate in aiding homeowners. In reality, the company was not a government agency and was never certified as an approved housing counselor by the U.S. Department of Housing and Urban Development. None of U.S. Homeowners Assistance’s known victims received loan modifications despite paying upfront fees ranging from $1,200 to $3,500.
For example, in January 2008, one victim received a letter from her lender indicating that her monthly mortgage payment would increase from $2,300 to $3,500. Days later, she received an unsolicited phone call from U.S. Homeowners Assistance promising a 40 percent reduction in principal and a $2,000 reduction in her monthly payment. She paid $3500 upfront for U.S. Homeowners Assistance’s services.
At the end of April 2008, her lender informed her that her loan modification request had been denied and sent her the documents that U.S. Homeowners Assistance had filed on her behalf. After reviewing those documents, she discovered that U.S. Homeowners Assistance had forged her signature and falsified her financial information – including fabricating a lease agreement with a fictitious tenant.
When she confronted U.S. Homeowners Assistance, she was immediately disconnected and has not been able to reach the company.
Brown’s suit contends that U.S. Homeowners Assistance violated:
– California Business and Professions Code section 17500 by falsely stating they were a government agency and misleading homeowners by claiming a 98 percent success rate in obtaining loan modifications;
– California Business and Professions Code section 17200 by failing to perform services made in exchange for upfront fees;
– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;
– California Civil Code section 2945.45 for failing to register with the California Attorney General’s Office as foreclosure consultants; and
– California Penal Code section 487 for grand theft.
Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.
US Homeowners Assistance also did business as Statewide Financial Group, Inc., We Beat All Rates, and US Homeowners Preservation Center.
US Foreclosure Relief Corporation
Brown last week sued US Foreclosure Relief Corporation, H.E. Service Company, their executives — George Escalante and Cesar Lopez — as well as their legal affiliate Adrian Pomery for running a scam promising homeowners reductions in their principal and interest rates as low as 4 percent. Brown was joined in this suit by the Federal Trade Commission and the State of Missouri.
Using aggressive telemarketing tactics, the defendants solicited desperate homeowners and charged an upfront fee ranging from $1,800 to $2,800 for loan modification services. During one nine-month period alone, consumers paid defendants in excess of $4.4 million. Yet, in most instances, defendants failed to provide the mortgage-relief services. Once consumers paid the fee, the defendants avoided responding to consumers’ inquiries.
In response to a large number of consumer complaints, several government agencies directed the defendants to stop their illegal practices. Instead, they changed their business name and continued their operations – using six different business aliases in the past eight months alone.
Brown’s lawsuit alleges the companies and individuals violated:
– The National Do Not Call Registry, 16 C.F.R. section 310.4 and California Business and Professions Code section 17200 by telemarketing their services to persons on the registry;
– The National Do Not Call Registry, 16 C.F.R. section 310.8 and California Business and Professions Code section 17200 by telemarketing their services without paying the mandatory annual fee for access to telephone numbers within the area codes included in the registry;
– California Civil Code section 2945 et seq. and California Business and Professions Code section 17200 by demanding and collecting up-front fees prior to performing any services, failing to include statutory notices in their contracts, and failing to comply with other requirements imposed on mortgage foreclosure consultants;
– California Business and Professions Code sections 17200 and 17500 by representing that they would obtain home loan modifications for consumers but failing to do so in most instances; by representing that consumers must make further payments even though they had not performed any of the promised services; by representing that they have a high success rate and that they can obtain loan modification within no more than 60 days when in fact these representations were false; and by directing consumers to avoid contact with their lenders and to stop making loan payments causing some lenders to initiate foreclosure proceedings and causing damage to consumers’ credit records.
Victims of this scam include a father of four battling cancer, a small business owner, an elderly disabled couple, a sheriff whose income dropped due to city budget cuts and an Iraq-war veteran. None of these victims received the loan modification promised.
Brown is seeking unspecified civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.
The defendants also did business under other names including Lighthouse Services and California Foreclosure Specialists.
Home Relief Services, LLC
Brown Monday sued Home Relief Services, LLC., its executives Terence Green Sr. and Stefano Marrero, the Diener Law Firm and its principal attorney Christopher L. Diener for bilking thousands of homeowners out of thousands of dollars each.
Home Relief Services charged homeowners over $4,000 in upfront fees, promised to lower interest rates to 4 percent, convert adjustable-rate mortgages to low fixed-rate loans and reduce principal up to 50 percent within 30 to 60 days. None of the known victims received a modification with the assistance of the defendants.
In some cases, these companies also sought to be the lenders’ agent in the short-sale of their clients’ homes. In doing so, the defendants attempted to use their customers’ personal financial information for their own benefit.
Home Relief Services and the Diener Law Firm directed homeowners to stop contacting their lender because the defendants would act as their sole agent and negotiator.
Brown’s lawsuit contends that the defendants violated:
– California Business and Professions Code section 17500 by claiming a 95 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;
– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;
– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;
– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;
– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and
– California Penal Code section 487 for grand theft.
Brown is seeking $10 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.
Two other companies with the same management were also involved in the effort to deceive homeowners: Payment Relief Services, Inc. and Golden State Funding, Inc.
RMR Group Loss Mitigation Group
Brown Monday sued RMR Group Loss Mitigation and its executives Michael Scott Armendariz of Huntington Beach, Ruben Curiel of Lancaster, and Ricardo Haag of Corona; Living Water Lending, Inc.; and attorney Arthur Steven Aldridge of Westlake Village as well as the law firm of Shippey & Associates and its principal attorney Karla C. Shippey of Yorba Linda – for bilking over 500 victims out of nearly $1 million.
The company solicited homeowners through telephone calls and in-person home visits. Employees claimed a 98 percent success rate and a money-back guarantee. None of the known victims received any refunds or modifications with the assistance of defendants.
For example, in July 2008, a 71-year old victim learned his monthly mortgage payments would increase from $2,470 to $3,295. He paid $2,995, yet received no loan modification and no refund.
Additionally, RMR insisted that homeowners refrain from contacting their lenders because the defendants would act as their agents.
Brown’s suit contends that the defendants violated:
– California Business and Professions Code section 17500 by claiming a 98 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;
– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;
– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;
– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;
– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and
– California Penal Code section 487 for grand theft.
Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.
United First, Inc.
On July 6, 2009, Brown sued a foreclosure consultant and an attorney — Paul Noe Jr. and Mitchell Roth – who conned 2,000 desperate homeowners into paying exorbitant fees for “phony lawsuits” to forestall foreclosure proceedings.
These lawsuits were filed and abandoned, even though homeowners were charged $1,800 in upfront fees, at least $1,200 per month and contingency fees of up to 80 percent of their home’s value.
Noe convinced more than 2,000 homeowners to sign “joint venture” agreements with his company, United First, and hire Roth to file suits claiming that the borrower’s loan was invalid because the mortgages had been sold so many times on Wall Street that the lender could not demonstrate who owned it. Similar suits in other states have never resulted in the elimination of the borrower’s mortgage debt.
After filing the lawsuits, Roth did virtually nothing to advance the cases. He often failed to make required court filings, respond to legal motions, comply with court deadlines, or appear at court hearings. Instead, Roth’s firm simply tried to extend the lawsuits as long as possible in order to collect additional monthly fees.
United First charged homeowners approximately $1,800 in upfront fees, plus at least $1,200 per month. If the case was settled, homeowners were required to pay 50 percent of the cash value of the settlement. For example, if United First won a $100,000 reduction of the mortgage debt, the homeowner would have to pay United First a fee of $50,000. If United First completely eliminated the homeowner’s debt, the homeowner would be required to pay the company 80 percent of the value of the home.
Brown’s lawsuit contends that Noe, Roth and United First:
– Violated California’s credit counseling and foreclosure consultant laws, Civil Code sections 1789 and 2945
– Inserted unconscionable terms in contracts;
– Engaged in improper running and capping, meaning that Roth improperly partnered with United First, Inc. and Noe, who were not lawyers, to generate business for his law firm violating California Business and Professions Code 6150; and
– Violated 17500 of the California Business and Professions Code.
Brown’s office is seeking $2 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.
Tips for Homeowners
Brown’s office issued these tips for homeowners to avoid becoming a victim:
DON’T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.
DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.
DON’T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.
DON’T transfer title or sell your house to a “foreclosure rescuer.” Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called “rescuers” use to evict homeowners and steal all or most of the home’s equity.
DON’T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.
DON’T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the “rescuer.”
DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or http://www.hud.gov.
If you believe you have been the victim of a mortgage-relief scam in California, please contact the Attorney General’s Public Inquiry Unit at http://ag.ca.gov/consumers/general.php.
# # #
— read and weep. Game Over. Over the next 6-12 months the entire foreclosure mess is going to be turned on its head as it becomes apparent to even the most skeptical that the mortgage mess is just that — a mess. From the time the deed was recorded to the time the assignments, powers of attorneys, notarization and other documents were fabricated and executed there is an 18 minute Nixonian gap in the record that cannot be cured. Just because you produce documents, however real they appear, does not mean you can shift the burden of proof onto the borrower. In California our legislator have attempted to slow this train wreck but the pretender lenders just go on with the foreclosure by declaring to the foreclosure trustee the borrower is in default and they have all the documents the trustee then records a false document. A notice of default filed pursuant to Section 2924 shall include a declaration from the mortgagee, beneficiary, or authorized agent that it has contacted the borrower, tried with due diligence to contact the borrower as required by this section, or the borrower has surrendered the property to the mortgagee, trustee, beneficiary, or authorized agent.
Invalid Declaration on Notice of Default and/or Notice of Trustee’s Sale.
The purpose of permitting a declaration under penalty of perjury, in lieu of a sworn statement, is to help ensure that declarations contain a truthful factual representation and are made in good faith. (In re Marriage of Reese & Guy, 73 Cal. App. 4th 1214, 87 Cal. Rptr. 2d 339 (4th Dist. 1999).
In addition to California Civil Code §2923.5, California Code of Civil Procedure §2015.5 states:
Whenever, under any law of this state or under any rule, regulation, order or requirement made pursuant to the law of this state, any matter is required or permitted to be supported, evidenced, established, or proved by the sworn statement, declaration, verification, certificate, oath, or affidavit, in writing of the person making the same, such matter may with like force and effect be supported, evidenced, established or proved by the unsworn statement, declaration, verification, or certificate, in writing of such person which recites that is certified or declared by him or her to be true under penalty of perjury, is subscribed by him or her, and (1), if executed within this state, states the date and place of execution; (2) if executed at any place, within or without this state, states the date of execution and that is so certified or declared under the laws of the State of California. The certification or declaration must be in substantially the following form:
(a) If executed within this state:
“I certify (or declare) under penalty of perjury that the foregoing is true and correct”:
_____________________ _______________________
(Date and Place) (Signature)
For our purposes we need not look any farther than the Notice of Default to find the declaration is not signed under penalty of perjury; as mandated by new Civil Code §2923.5(c). (Blum v. Superior Court (Copley Press Inc.) (2006) 141 Cal App 4th 418, 45 Cal. Reptr. 3d 902 ). The Declaration is merely a form declaration with a check box.
No Personal Knowledge of Declarant
According to Giles v. Friendly Finance Co. of Biloxi, Inc., 199 So. 2nd 265 (Miss. 1967), “an affidavit on behalf of a corporation must show that it was made by an authorized officer or agent, and the officer him or herself must swear to the facts.” Furthermore, in Giles v. County Dep’t of Public Welfare of Marion County (Ind.App. 1 Dist.1991) 579 N.E.2d 653, 654-655 states in pertinent part, “a person who verified a pleading to have personal knowledge or reasonable cause to believe the existence of the facts stated therein.” Here, the Declaration for the Notice of Default by the agent does not state if the agent has personal knowledge and how he obtained this knowledge.
The proper function of an affidavit is to state facts, not conclusions, ¹ and affidavits that merely state conclusions rather than facts are insufficient. ² An affidavit must set forth facts and show affirmatively how the affiant obtained personal knowledge of those facts. ³
Here, The Notice of Default does not have the required agent’s personal knowledge of facts and if the Plaintiff borrower was affirmatively contacted in person or by telephone
to assess the Plaintiff’s financial situation and explore options for the Plaintiff to avoid foreclosure. A simple check box next to the “facts” does not suffice.
Furthermore, “it has been said that personal knowledge of facts asserted in an affidavit is not presumed from the mere positive averment of facts, but rather, a court should be shown how the affiant knew or could have known such facts, and, if there is no evidence from which the inference of personal knowledge can be drawn, then it is
¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬____________________________________________________________________________
¹ Lindley v. Midwest Pulmonary Consultants, P.C., 55 S.W.3d 906 (Mo. Ct. App. W.D. 2001).
² Jaime v. St. Joseph Hosp. Foundation, 853 S.W.2d 604 (Tex. App. Houston 1st Dist. 1993).
³ M.G.M. Grand Hotel, Inc. v. Castro, 8 S.W.3d 403 (Tex. App. Corpus Chrisit 1999).
presumed that from which the inference of personal knowledge can be drawn, then it is presumed that such does not exist.” ¹ The declaration signed by agent does not state anywhere how he knew or could have known if Plaintiff was contacted in person or by telephone to explore different financial options. It is vague and ambiguous if he himself called plaintiff.
This defendant did not adhere to the mandates laid out by congress before a foreclosure can be considered duly perfected. The Notice of Default states,
“That by reason thereof, the present beneficiary under such deed of trust, has executed and delivered to said agent, a written Declaration of Default and Demand for same, and has deposited with said agent such Deed of Trust and all documents evidencing obligations secured thereby, and has declared and does hereby declare all sums secured thereby immediately due and payable and has elected and does hereby elect to cause the trust property to be sold to satisfy the obligations secured thereby.”
However, Defendants do not have and assignment of the deed of trust nor have they complied with 2923.5 or 2923.6 or 2924 the Deed of Trust, nor do they provide any documents evidencing obligations secured thereby. For the aforementioned reasons, the Notice of Default will be void as a matter of law. The pretender lenders a banking on the “tender defense” to save them ie. yes we did not follow the law so sue us and when you do we will claim “tender” Check Mate but that’s not the law.
Recording a False Document
Furthermore, according to California Penal Code § 115 in pertinent part:
(a) Every person who knowingly procures or offers any false or forged instrument to be filed, registered, or recorded in any public office within this state, which instrument, if genuine, might be filed, registered, or recorded under any law of this state or of the United States, is guilty of a felony.
If you say you have a claim, you must prove it. If you say you are the lender, you must prove it. Legislators take notice: Just because bankers give you money doesn’t mean they can change 1000 years of common law, statutory law and constitutional law. It just won’t fly. And if you are a legislator looking to get elected or re-elected, your failure to act on what is now an obvious need to clear title and restore the wealth of your citizens who were cheated and defrauded, will be punished by the votes of your constituents.
Ameriquest’s final argument, that the sanctions are a
criminal penalty, is bereft of authority. Ameriquest cites F.J.
Hanshaw Enterprises, Inc. v. Emerald River Development, Inc., 244
F.3d 1128 (9th Cir. 2001), a case about inherent powers – not
Rule 11 –
This is an excerpt from the decision just this bloggers note the Hanshaw Case was my case. I argued this case at the 9th circuit court of appeals
If you will grasp the implications of this judge-youngs-decision-on-nosekdecision all or most all the evictions and foreclosures are being litigated by the wrong parties that is to say parties who have no real stake in the outcome. they are merely servicers not the real investors. They do not have the right to foreclose or evict. No assignment No note No security interest No standing They do not want to be listed anywhere. They (the lenders) have caused the greatest damage to the American Citizen since the great depression and they do not want to be exposed or named in countless lawsuits. Time and time again I get from the judges in demurer hearings ” I see what you are saying counsel but your claim does not appear to be against this defendant” the unnamed investment pool of the Lehman Brothers shared High yield equity Fund trustee does not exist and so far can’t be sued.
(a) (1) A mortgagee, trustee, beneficiary, or authorized
agent may not file a notice of default pursuant to Section 2924 until
30 days after contact is made as required by paragraph (2) or 30
days after satisfying the due diligence requirements as described in
subdivision (g).
(2) A mortgagee, beneficiary, or authorized agent shall contact
the borrower in person (and this does not mean agent for the foreclosure company) or by telephone in order to assess the
borrower's financial situation and explore options for the borrower
to avoid foreclosure. During the initial contact, the mortgagee,
beneficiary, or authorized agent shall advise the borrower that he or
she has the right to request a subsequent meeting and, if requested,
the mortgagee, beneficiary, or authorized agent shall schedule the
meeting to occur within 14 days. The assessment of the borrower's
financial situation and discussion of options may occur during the
first contact, or at the subsequent meeting scheduled for that
purpose. In either case, the borrower shall be provided the toll-free
telephone number made available by the United States Department of
Housing and Urban Development (HUD) to find a HUD-certified housing
counseling agency. Any meeting may occur telephonically.
(b) A notice of default filed pursuant to Section 2924 shall
include a declaration from the mortgagee, beneficiary, or authorized
agent that it has contacted the borrower, tried with due diligence to
contact the borrower as required by this section, or the borrower
has surrendered the property to the mortgagee, trustee, beneficiary,
or authorized agent.
(c) If a mortgagee, trustee, beneficiary, or authorized agent had
already filed the notice of default prior to the enactment of this
section and did not subsequently file a notice of rescission, then
the mortgagee, trustee, beneficiary, or authorized agent shall, as
part of the notice of sale filed pursuant to Section 2924f, include a
declaration that either:
(1) States that the borrower was contacted to assess the borrower'
s financial situation and to explore options for the borrower to
avoid foreclosure.
(2) Lists the efforts made, if any, to contact the borrower in the
event no contact was made.
(d) A mortgagee's, beneficiary's, or authorized agent's loss
mitigation personnel may participate by telephone during any contact
required by this section.
(e) For purposes of this section, a "borrower" shall include a
mortgagor or trustor.
(f) A borrower may designate a HUD-certified housing counseling
agency, attorney, or other advisor to discuss with the mortgagee,
beneficiary, or authorized agent, on the borrower's behalf, options
for the borrower to avoid foreclosure. That contact made at the
direction of the borrower shall satisfy the contact requirements of
paragraph (2) of subdivision (a). Any loan modification or workout
plan offered at the meeting by the mortgagee, beneficiary, or
authorized agent is subject to approval by the borrower.
(g) A notice of default may be filed pursuant to Section 2924 when
a mortgagee, beneficiary, or authorized agent has not contacted a
borrower as required by paragraph (2) of subdivision (a) provided
that the failure to contact the borrower occurred despite the due
diligence of the mortgagee, beneficiary, or authorized agent. For
purposes of this section, "due diligence" shall require and mean all
of the following:
(1) A mortgagee, beneficiary, or authorized agent shall first
attempt to contact a borrower by sending a first-class letter that
includes the toll-free telephone number made available by HUD to find
a HUD-certified housing counseling agency.
(2) (A) After the letter has been sent, the mortgagee,
beneficiary, or authorized agent shall attempt to contact the
borrower by telephone at least three times at different hours and on
different days. Telephone calls shall be made to the primary
telephone number on file.
(B) A mortgagee, beneficiary, or authorized agent may attempt to
contact a borrower using an automated system to dial borrowers,
provided that, if the telephone call is answered, the call is
connected to a live representative of the mortgagee, beneficiary, or
authorized agent.
(C) A mortgagee, beneficiary, or authorized agent satisfies the
telephone contact requirements of this paragraph if it determines,
after attempting contact pursuant to this paragraph, that the
borrower's primary telephone number and secondary telephone number or
numbers on file, if any, have been disconnected.
(3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
mortgagee, beneficiary, or authorized agent shall then send a
certified letter, with return receipt requested.
(4) The mortgagee, beneficiary, or authorized agent shall provide
a means for the borrower to contact it in a timely manner, including
a toll-free telephone number that will provide access to a live
representative during business hours.
(5) The mortgagee, beneficiary, or authorized agent has posted a
prominent link on the homepage of its Internet Web site, if any, to
the following information:
(A) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options.
(B) A list of financial documents borrowers should collect and be
prepared to present to the mortgagee, beneficiary, or authorized
agent when discussing options for avoiding foreclosure.
(C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgagee, beneficiary,
or authorized agent.
(D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
(h) Subdivisions (a), (c), and (g) shall not apply if any of the
following occurs:
(1) The borrower has surrendered the property as evidenced by
either a letter confirming the surrender or delivery of the keys to
the property to the mortgagee, trustee, beneficiary, or authorized
agent.
(2) The borrower has contracted with an organization, person, or
entity whose primary business is advising people who have decided to
leave their homes on how to extend the foreclosure process and avoid
their contractual obligations to mortgagees or beneficiaries.
(3) The borrower has filed for bankruptcy, and the proceedings
have not been finalized.
(i) This section shall apply only to loans made from January 1,
2003, to December 31, 2007, inclusive, that are secured by
residential real property and are for owner-occupied residences. For
purposes of this subdivision, "owner-occupied" means that the
residence is the principal residence of the borrower.
(j) This section shall remain in effect only until January 1, 2013,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2013, deletes or extends that da
On Saturday March 7,2009 a meeting was held for 200 plus victims of the United First equity save your house scam. At that meeting it was determined that a class action should be filed to recover the funds lost by the victims of the unconscionable contract.
As a first step an involuntary Bankruptcy is being filed today March 9, 2009. To be considered as a creditor of said Bankruptcy please Fax the Joint Venture agreement and retainer agreement to 909-494-4214.
Additionally it is this attorneys opinion that said Bankruptcy will act as a “stay” for all averse actions being taken by lenders as against said victims. This opinion is based upon the fact that United First maintained an interest in the real property as a joint venture to 80% of the properties value(no matter how unconscionable this may be) this is an interest that can be protected by the Bankruptcy Stay 11 USC 362.
California Civil Code 2923.6 enforces and promotes loan modifications to stop foreclosure in the state. California Civil Code 2923.6 (Servicer’s Duty under Pooling Agreements) went into effect on July 8, 2008. It applies to all loans from January 1, 2003, to December 31, 2007 secured by residential real property for owner-occupied residences.
The new law states that servicing agents for loan pools owe a duty to all parties in the pool so that a workout or modification is in the best interests of the parties if the loan is in default or default is reasonably foreseeable, and the recovery on the workout exceeds the anticipated recovery through a California foreclosure based on the current value of the property.
Almost all residential mortgages have Pooling and Servicing Agreements (“PSA”) since they were transferred to various Mortgage Backed Security Trusts after origination. California Civil Code 2823.6 broadens and extends this PSA duty by requiring servicers to accept loan modifications with borrowers.
How does this law apply?
Attorney Michael Doan provides this example of how the new law applies in his article entitled “California Foreclosures: Lenders Must Accept Loan Modifications” on the Mortgage Law Network blog. We removed the borrower’s name from the example for the sake of privacy.
A California borrower’s loan is presently in danger of foreclosure. The house he bought 2 years ago for $800,000 with a $640,000 first and $140,000 second, has now plummeted in value to $375,000. The borrower can no longer afford the $9,000 per month mortgage payment. But, he is willing, able, and ready to execute a modification of his loan on the following terms:
a) New Loan Amount: $330,000.00
b) New Interest Rate: 6% fixed
c) New Loan Length: 30 years
d) New Payment: $1978.52
While this new loan amount of $330,000 is less than the current fair market value, the costs of foreclosure need to be taken into account. Foreclosures typically cost the lender $50,000 per foreclosure. For example, the Joint Economic Committee of Congress estimated in June, 2007, that the average foreclosure results in $77.935.00 in costs to the homeowner, lender, local government, and neighbors. Of the $77,935.00 in foreclosure costs, the Joint Economic Committee of Congress estimates that the lender will suffer $50,000.00 in costs in conducting a non-judicial foreclosure on the property, maintaining, rehabilitating, insuring, and reselling the property to a third party. Freddie Mac places this loss higher at $58,759.00.
Accordingly, the anticipated recovery through foreclosure on a net present value basis is $325,000.00 or less and the recovery under the proposed loan modification at $330,000.00 exceeds the net present recovery through foreclosure of $325,000.00 by over $5,000.00. Thus, California Civil Code 2823.6 would mandate a modification to the new terms.
This new law remains in effect until January 1, 2013. Restructuring your mortgage will stop foreclosure and lower mortgage payments. Depending on your circumstances, you may also be able to lower your interest rate, as well. Visit the “Get Started” page to find out if you can benefit from this new California law and avoid foreclosure.
Recent Loan Modification studies have shown that a large percentage of traditional loan modifications put the borrowers more upside down than when they started.
Unfortunately many loan mods are leaving people with higher monthly payments. In many loan modifcation the money you did not pay gets tacked on to the back of the loan… Increasing your loan balance and making you more upside down. This is why over 50% of all loan mods are in default. They are not fixing the problem they are just postponing it.
Before you go into default on your loans at the advice of some former subprime loan seller, make sure you understand that absent finding some legal leverage over the lender you have a good chance of seeing your payments going up.
Our Loan Modification program includes
1. Upside Down Analysis
2. Qualified Written Request and offer of Loan Modification
3. Letter informing lender of clients election to pursue remedies carved out by recent California Law under 2923.6 and or Federal Programs under the Truth in lending Act and the Fair Debt collection practices Act.
4. Letter Disputing debt (if advisable)
5. Cease and Desist letters (if advisable)
6. Follow up, contact with negotiator, and negotiation by an attorney when needed.
By now many of you have read about all the Federal Governments Loan Modification Programs. Others have been cold called by a former loan brokers offering to help you with your Loan Modification. Its odd that many of the brokers who put people into these miserable loans are now charging people up front to get out of the them.
Before you spend thousands of dollars with someone, do an investigation:
1. Is the person licensed by the California Department of Real Estate? Or, the California State Bar?
2. Are your potential representatives aware that have to be licensed according to the DRE?
3. Are they asking you for money up front? They are violating the California Foreclosure Consultant act if they are neither CA attorneys nor perhaps Real Estate brokers in possesion of a no opinion letter from the California Department of Real Estate? Note… if a Notice of Default has been filed against your residence only attorneys acting as your attorney can take up front fees. Don’t fall for “attorney backed” baloney. Are you retaining the services of the attorney or not? Did you sign a retainer agreement ?
4. If your potential representative is not an attorney make sure he or she is a Real Estate Broker capable of proving their upfront retainer agreement has been given a no opinon letter by the DRE. (As of November 2008 – only 14 non attorney entites have been “approved by the DRE.)
5. If somone says they are attorney backed – ask to speak with the attorney. What does attorney backed mean? From what we have seen it is usually a junk marketing business being run by someone who can not get a proper license to do loan modifications.
6. Find out how your loan modification people intend to gain leverage over the lender.
7. If you are offered a loan audit or a Qualfied Written Request under RESPA letter – will an attorney be doing the negotiating against the lender? Will you have to hire the attorney after you pay for your loan audit? Doesn’t that put cart before the horse?
8. Will it do you any good to have a loan audit done if you later have to go out and retain an attorney. You want to retain their services of an attorney before you pay for the audit. The loan audit is the profit center; negotiation takes time.
9. What kind of results should you expect?
10. Who will be doing your negotiating?
11. Will the Loan Modification request go out on Legal Letterhead?
12. How much will you have to pay? Are you looking for a typical loan mod result or are you looking to leverage the law in the hopes of getting a better than average loan mod result.
13. What if your are not satisfied with the loan modification offered by the lender?
14. Should you go into default on both loans prior to requesting a loan modification? Why? What happens if the loan mod does not work out to your satisfaction? (very important question.)
15. Will an attorney review the terms of your loan modification with you? Will you have to waive your anti-deficiency protections if you sign your loan modification paperwork? Will an attorney help you leverage recent changes in California law in an attempt to get a substantial reduction in the principle?
September 2005, we signed a purchase contract and made a $12,000 deposit for a Centex Town Home in Oviedo, Florida. The builder’s mortgage company, CTX Mortgage, offered $3,000 in incententives so we decided to use them. We were given a Good Faith Estimate and interest rate of 6.25% but were told we could not lock in because it was too far off from the closing.
By late November 2005, we had heard nothing from CTX, so we contacted them to lock in a rate. We were again told that we needed to wait until the closing date was determined. We were given three new Good Faith Estimates with rates between 6.840% – 7.090% and were told they were the best CTX could offer, but we were approved for all three scenarios. We decided to shop around and received a Good Faith Estimate with a rate of 6.625% from Wells Fargo. A few days later, Centex contacted us to schedule the closing. We told them we were going to use Wells Fargo but were told that we could not change lenders after the completion of the framing inspection, which took place on October 21, 2005. We reviewed the contract and found a page this to be true. So we agreed to proceed with CTX but complained about the rate increases on the good faith estimates. Our file was transferred to a new loan officer, Jennifer Powell. According to her, our original loan officer had never ran our credit and we were not approved for any of the good faith estimates she provided to us.
Our closing was scheduled for Dec 28, 2005. Between December 8th and December 27th, we received five different good faith estimates from Jennifer (6.75% on December 8th, 7.75% on December 20th, 7.99% on December 21st, 9.125% on December 22th, and 9.375% on December 28th). Jennifer said my ‘low income’ made me high risk, which caused the rates to jump. We told Jennifer that the significant rate increase made the mortgage payments completely unaffordable for us and pleaded with her to either allow us to seek other financing or cancel the contract. She said either take the rate they gave us or lose our deposit of $12,000. We did not want to close on the property, but were not prepared to walk away empty-handed, so we asked for a loan program that would allow us to refinance without penalty. This is what made the rates jump up to 9.375% and 13.550% (an 80/20 loan).
The closing documents were not made available to us until 6:30 p.m. the night before our closing. We stayed in their office to review everything and noticed that my income on the application that CTX had prepeared was double my true income. We asked Jennifer why this was and she told us that in order to get approval, my income had to be ?stated?, meaning my income would not be verified by the lender. Please note in the above paragraph that we were told the rates were high because of my ‘low income’. After the closing, CTX immediately sold our loans, even before the first payment was due. There is only one reason why they offer mortgages and that is to rip people off!!!!
We have struggled for the past year and now have two liens against our property and our credit is ruined! We believe that what CTX Mortgage did is termed Predatory Lending. They tricked us, showing us good rates until it was too late for us to change lenders. We have two young daughters, a 5 year-old and a 3 month-old, and we are in jeopardy of losing our home. We are going to file a complaint with any and all agencies we can but would really like to hear from anyone else who has had this problem. I don’t know how these people sleep at night!
Constance
Oviedo, Florida
U.S.A.
Click here to read other Rip Off Reports on CENTEX (CAVCO HOMES)
RESPA: Washington Mutual (i) charged hundreds of dollars in “underwriting fees” when the underwriting fee charged by Fannie Mae and Freddie Mac to WAMU was only $20 and (ii) marked up the charges for real estate tax verifications and wire transfer fees. The court followed Kruse v. Wells Fargo Home Mortgage (2d Cir. 2004) 383 F.3d 49, holding that marking up costs, for which no additional services are performed, is a violation of RESPA. Such a violation of federal law constitutes an unlawful business practice under California’s Unfair Competition Law (“UCL”) and a breach of contract. Plaintiffs also stated a cause of action for an unfair business practice under the UCL based on the allegation that WAMU led them to believe they were being charged the actual cost of third-party services.mckell_v_washingtonmutual
There were only 800,000 bankruptcy filings in the United States in 2007, according to the National Bankruptcy Research Center.
And while there is little hard data as to how many of these involve homeowners, some evidence suggests that about half the cases do. In one metro area, Riverside, Calif., 62% of 2007 bankruptcies involved home owners with outstanding balances. And not all of these would qualify for cram downs.
“These bills have means tests,” Harnick said. “If you can afford to pay your mortgage, you don’t qualify. If you can’t afford to pay even after the mortgage balance is reduced, you’re not eligible.”
And Adam Levitin, a law professor at Georgetown University contends that cram-downs would add little to the costs of new mortgages.
He examined historical mortgage rates during periods when judges were allowed to reduce mortgage balances, and concluded that the impact on interest rates would probably come to less than 15 basis points – 0.15 of a percentage point.
“The MBA numbers are just baloney,” said Levitin.
However, even though the direct impact on borrowers would be limited, permitting cram-downs could indirectly give borrowers more leverage in dealing with lenders, according to Bruce Marks, founder and CEO of the Neighborhood Assistance Corporation of America (NACA).
Mortgage borrowers could force lenders to negotiate loan restructurings by threatening to file for bankruptcy and have the judges do it for them.
Some people with credit-card debt already win concessions from credit card lenders by threatening bankruptcy, where the debt may be discharged.
“I consider this one of the most important pieces of legislation before Congress right now,” said Marks.
Will it become law?
As to the previous attempt to pass cramdown legislation the conventional wisdom was “We believe it will be very difficult to stop this legislation and we put the initial odds of enactment at 60%,” said Jaret Seiberg of the Stanford Group, a policy research company, in a press release assessing the new bills.
Now that it is being reintroduced in a “New Congress” and “New President” I believe Cramdowns will become law.
This will allow borrowers the leverage they need to negotiate with their own predator.
The Cramdown legislation was reintroduced in Congress on monday Jan 5,2009
(a) The Legislature finds and declares that any duty
servicers may have to maximize net present value under their pooling
and servicing agreements is owed to all parties in a loan pool, not
to any particular parties, and that a servicer acts in the best
interests of all parties if it agrees to or implements a loan
modification or workout plan for which both of the following apply:
(1) The loan is in payment default, or payment default is
reasonably foreseeable.
(2) Anticipated recovery under the loan modification or workout
plan exceeds the anticipated recovery through foreclosure on a net
present value basis.
(b) It is the intent of the Legislature that the mortgagee,
beneficiary, or authorized agent offer the borrower a loan
modification or workout plan if such a modification or plan is
consistent with its contractual or other authority.
(c) This section shall remain in effect only until January 1, 2013,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2013, deletes or extends that date.
GreenPoint Brokers Targeted by New York
HCI Mortgage, Consumer One Mortgage settle with attorney general
January 5, 2009
Two New York mortgage brokers have settled charges that they charged minorities thousands of dollars more in fees, while a third broker faces a lawsuit by the state and more brokers face investigations. The actions were prompted by an investigation into defunct wholesaler GreenPoint Mortgage Funding Inc.
HCI Mortgage and Consumer One Mortgage have entered an agreement with New York’s attorney general, a press release today said. Between the two companies, there are more than 20 branches throughout the state.
The two brokers will pay $665,000 in restitution to around 455 black and Hispanic borrowers, according to the announcement. The also agreed to establish a standard fee schedule, monitor pricing to minorities and report lending details to the state.
Both brokers are accused of charging minorities higher fees than similarly-situated White borrowers.
The attorney general conducted an investigation with the New York State Department of Banking into discriminatory practices by mortgage brokers. The investigation was triggered by the state’s investigation into GreenPoint Mortgage Funding Inc. after it found that Home Mortgage Disclosure Act data indicated discrimination had occurred on GreenPoint mortgages. GreenPoint, which was shut down by parent Capital One in August 2007, settled the charges in July for $1 million.
Statistical analyses conducted on loans originated by HCI found that black borrowers were charged around 46 percent more than similarly situated whites, which worked out to around $2,260. Hispanic borrowers saw fees that were an average of 55 percent higher, which worked out to $2,280.
“These customers were charged significantly higher fees for no reason other than being a minority — something that is explicitly against the law in New York State,” Attorney General Andrew Cuomo said in the statement.
In addition, the attorney general has filed a lawsuit in federal district court against U.S. Capital Funding LLC. A state investigation also found discriminatory practices at U.S. Capital, but the company refused to provide restitution to more than 100 minority borrowers — prompting the lawsuit by the attorney general.
U.S. Capital reportedly brokered 300 loans between January 2006 and July 2007, including around 100 mortgages for black and Hispanic borrowers. Minorities were allegedly charged 58 percent more than whites, costing them an average of $3,500 each.
“HCI Mortgage, Consumer One, and U.S. Capital Funding all did substantial business with GreenPoint,” the statement said. “The office is continuing its investigation into potential discriminatory pricing by other mortgage brokers.
In a nutshell, this settlement will enable eligible subprime and pay-option mortgage borrowers to avoid foreclosure by obtaining a modified and affordable loan. The loans covered by the settlement are among the riskiest and highest defaulting loans at the center of America’s foreclosure crisis. Assuming every eligible borrower and investor participates, this loan modification program will provide up to $3.5 billion to California borrowers as follows:
• Suspension of foreclosures for eligible borrowers with subprime and pay-option adjustable rate loans pending determination of borrower ability to afford loan modifications;
• Loan modifications valued at up to $3.4 billion worth of reduced interest payments and, for certain borrowers, reduction of their principal balances;
• Waiver of late fees of up to $33.6 million;
• Waiver of prepayment penalties of up to $25.6 million for borrowers who receive modifications, pay off, or refinance their loans;
• $27.9 million in payments to borrowers who are 120 or more days delinquent or whose homes have already been foreclosed; and
• Approximately $25.2 million in additional payments to borrowers who, in the future, cannot afford monthly payments under the loan modification program and lose their homes to foreclosure.
More specifically, the modification program covers subprime and pay-option adjustable-rate mortgage loans in which the borrower’s first payment was due between January 1, 2004 and December 31, 2007. The program will be available for loans in default that are secured by owner-occupied property and serviced by Countrywide Financial or one of its affiliates. In addition, the borrower’s loan balance must be 75% or more of the current value of the home, and the borrower must be able to afford adjusted monthly payments under the terms of the modification.
The terms of the modification will vary based on the type of loan, including:
• “Pay-option ARM loans,” in which loan balances increase each month if a borrower makes only a minimum payment. Borrowers may be eligible to have their principal reduced to 95% of their home’s current value and may also qualify for an interest-rate reduction or conversion to an interest-only payment.
• Subprime adjustable-rate loans, such as 2/28 loans. Borrowers may have their interest rate reduced to the initial rate. If the borrower still cannot afford it, the borrower may be eligible for further interest-rate reductions to as low as 3.5%.
• Subprime fixed loans. Borrowers may be eligible for interest-rate reductions.
• “Hope for Homeowners Program.” If they qualify, some borrowers may be placed in loans made through this federal program.
• Alt-A and prime loans. Borrowers who are in default, but have Alt-A and prime loans, may also be considered for modifications, depending on circumstances.
84. Plaintiff reallege and incorporates by reference the above paragraphs as though set forth fully herein.
85. The misrepresentations by Defendants’ and/or Defendants’ predecessors, failures to disclose, and failure to investigate as described above were made with the intent to induce Plaintiff to obligate himself on the Loan in reliance on the integrity of Defendants and/or Defendants’ predecessors.
86. Plaintiff is an unsophisticated customer whose reliance upon Defendants and/or Defendants’ predecessors was reasonable and consistent with the Congressional intent and purpose of California Civil Code § 1572 enacted in 1872 and designed to assist and protect consumers similarly situated as Plaintiff in this action.
87. As an unsophisticated customer, Plaintiff could not have discovered the true nature of the material facts on their own.
88. The accuracy by Defendants and/or Defendants’ predecessors of representation is important in enabling consumers such as Plaintiff to compare market lenders in order to make informed decisions regarding lending transactions such as a loan.
89. Plaintiff was ignorant of the facts which Defendants and/or Defendants’ predecessors misrepresented and failed to disclose.
90. Plaintiffs reliance on Defendants and/or Defendants’ predecessors was a substantial factor in causing their harm.
91. Had the terms of the Loan been accurately represented and disclosed by Defendants and/or Defendants’ predecessors, Plaintiff would not have accepted the Loan nor been harmed.
92. Had Defendants and/or Defendants’ predecessors investigated Plaintiff’s financial capabilities, they would have been forced to deny Plaintiff on this particular loan.
93. Defendants and/or Defendants’ predecessors conspired and agreed to commit the above mentioned fraud.
94. As a proximate result of Defendants and or Defendants’ predecessors fraud, Plaintiff has suffered damage in an amount to be determined at trial.
95. The conduct of Defendants and/or Defendants’ predecessors as mentioned above was fraudulent within the meaning of California Civil Code § 3294(c)(3), and by virtue thereof Plaintiff is entitled to an award of punitive damages in an amount sufficient to punish and make an example of the Defendants.
Defendants’ Lack of Standing to Enforce A Non-Judicial Foreclosure Pursuant To California Commercial Code § 3301
46. A promissory note is person property and the deed of trust securing a note is a mere incident of the debt it secures, with no separable ascertainable market value. California Civil Code §§ 657, 663. Kirby v. Palos Verdes Escrow Co., 183 Cal. App. 3d 57, 62.
47. Any transfers of the notice and mortgage fundamentally flow back to the note:
“The assignment of a mortgage without a transfer of the Indebtedness confers no right, since debt and security are inseparable and the mortgage alone is not a subject of transfer, ” Hyde v. Mangan (1891) 88 Cal. 319, 26 P 180, 1891 Cal LEXIS 693; Johnson v, Razy (1919)181 Cal 342, 184 P 657; 1919 Cal LEXIS 358; Bowman v. Sears (1923, Cal App) 63 Cal App 235, 218 P 489, 1923 Cal App LEXIS 199; Treat v. Burns (1932) 216 Cal 216, 13 P2d,724, 1932 Cal LEXIS 554.
48. ”A mortgagee’s purported assignment of the mortgage without an assignment of the debt which is secured is a legal nullity.” Kelley V. Upshaw (1952) 39 Cal 2d 179, 246 P2d 23, 1952 Cal. LEXIS 248.
49. ”A trust deed has no assignable quality independent of the debt; it may not be assigned or transferred apart from the debt; and an attempt to assign the trust deed without a transfer of the debt is without effect.” Domarad v. Fisher & Burke, Inc. (1969 Cal. App. 1st Dist) 270 Cal. App. 2d 543, 76 Cal. Rptr. 529, 1969 Cal. App. LEXIS 1556.
50. The Promissory Note is a negotiable instrument.
51. Transferring a Deed of Trust by itself does not allow enforcement of the instrument unless the Promissory Note is properly negotiated.
52. Where an instrument has been transferred, enforceability is determined based upon possession.
53. California Commercial Code § 3301 limits a negotiable instrument’s enforcement to the following:
“Person entitled. to enforce” an Instrument means (a) the holder of the instrument, (b) a nonholder in possession of the instrument who has the rights of a holder, or (c) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to
Section 3309 or subdivision (d) of Section 3418. A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
54. None of the Defendants are present holders of the instrument.
55. None of the Defendants are nonholders in possession of the instrument who has
rights of the holder.
56. None of the Defendants are entitled to enforce the instrument pursuant to section 3309 or subdivision (d) of Section 3418.
57. Defendants have no enforceable rights under California Commercial Code 3301(a) to enforce the negotiable instrument.
58. Since there is no right to enforce the negotiable instrument, the Notice of Default provisions of California Civil Code § 2924 and Notice of Sale provisions of California Civil Code § 2924(f) were likewise never complied with, and there is no subsequent incidental right to enforce any deed of trust and conduct a non-judicial foreclosure.
Plaintiff Suffered Damages As A Result of Defendants’ Conduct:
59. As a direct result of Defendants’ acts, Plaintiff has incurred actual damages consisting of mental and emotional distress, nervousness, grief, embarrassment, loss of sleep, anxiety, worry, mortification, shock, humiliation, indignity, pain and suffering, and other injuries.
60. Plaintiff incurred out of pocket monetary damages.
61. Plaintiff continues to incur monetary damages.
62. Plaintiff will incur the loss of their personal residence if a non-judicial foreclosure is allowed to proceed.
63. Each of Defendants harassing acts were so willful, vexatious, outrageous, oppressive, and maliciously calculated enough, so as to warrant statutory penalties and punitive damages.
Defendants Are Not Holders In Due Course Since Plaintiff Was Duped Into An Improper Loan And There Is No Effective Endorsement:
21. Plaintiff incurred a “debt” as that term is defined by California Civil 17 Code §1788(d) and 15 U.S.C. § 1692a(5), when he obtained a Loan on their Personal Residence.
22. The loan is memorialized via a Deed of Trust and Promissory Note, each of which contain an attorney fees provision for the lender should they prevail in the enforcement of their contractual rights.
23. Plaintiff has no experience beyond basic financial matters.
24. Plaintiff was never explained the full terms of their loan, including but not limited to the rate of interest how the interest rate would be calculated, what the payment schedule should be, the risks and disadvantages of the loan, the prepay penalties, the maximum amount the loan payment could arise to.
25. Certain fees in obtaining the loan, were also not explained to the Plaintiff, including but not limited to “underwriting fees,” “MERS registration fee,” “appraisal fees,” “broker fees”, “loan tie in fees,” etc.
26. A determination of whether Plaintiff would be able to make the payments as specified in the loan was never truly made.
27. Plaintiff’s income was never truly verified.
28. Plaintiff was rushed when signing the documents, the closing process provided no time for review and took minutes to accomplish.
29. Plaintiff could not understand any of the documents and signed them based on representations and the trust and confidence the Plaintiff placed in Defendants’ predecessors.
30. Plaintiff is informed and believe that Defendants and/or Defendants’ predecessors established and implemented the policy of failing to disclose material facts about the Loan, failing to verify Plaintiff’s income, falsifying Plaintiff’s income, agreeing to accept a Yield Spread Premium, and causing Plaintiff’s Loan to include a penalty for early payment.
31. Plaintiff is informed and believes that Defendants and/or Defendants’ predecessors established such policy so as to profit, knowing that Plaintiff would be unable to perform future terms of the Loan.
32. Plaintiff was a victim of Fraud in the Factum since the forgoing misrepresentations caused them to obtain the home loan without accurately realizing, the risks, duties, or obligations incurred.
33. The Promissory Note contains sufficient space on the note itself for endorsement whereby any assignment by allonge is ineffective pursuant to Pribus v. Bush, 118 Cal. App. 3d 1003 (May 12, 1981).
34. Defendants are not holders in due course due to Fraud in Factum and ineffective endorsement.
3. Recently, the California Legislature found and declared the following in enacting California Civil Code 2923.6 on July 8, 2008:
(a) California is facing an unprecedented threat to its state economy because of skyrocketing residential property foreclosure rates in California. Residential property foreclosures increased sevenfold from 2006 to 2007, in 2007, more than 84,375 properties were lost to foreclosure in California, and 254,824 loans went into default, the first step in the foreclosure process.
(b) High foreclosure rates have adversely affected property values in California, and will have even greater adverse consequences as foreclosure rates continue to rise. According to statistics released by the HOPE NOW Alliance the number of completed California foreclosure sales in 20’07 increased almost threefold from 1902 in the first quarter to 5574 in the fourth quarter of that year. Those same statistics report that 10,556 foreclosure sales, almost double the number for the prior quarter, were completed just in the month of January 2008. More foreclosures means less money for schools, public safety, and other key services.
(c) Under specified circumstances, mortgage lenders and servicers are authorized under their pooling and servicing agreements to modify mortgage loans when the modification is in the best interest of investors. Generally, that modification may be deemed to be in the best interest of investors when the net present value of the income stream of the modified loan is greater than the amount that would be recovered through the disposition of the real property security through a foreclosure sale.
(d) It is essential to the economic health of California for the state to ameliorate the deleterious effects on the state economy and local economies and the California housing market that will result from the continued foreclosures of residential properties in unprecedented numbers by modifying the foreclosure process to require mortgagees, beneficiaries, or authorized agents to contact borrowers and explore options that could avoid foreclosure. These Changes in accessing the state’s foreclosure process are essential to ensure that the process does not exacerbate the current crisis by adding more foreclosures to the glut of foreclosed properties already on the market when a foreclosure could have been avoided. Those additional foreclosures will further destabilize the housing market with significant, corresponding deleterious effects on the local and state economy.
(e) According to a survey released by the Federal Home Loan Mortgage Corporation (Freddie Mac) on January 31, 2008, 57 percent of the nation’s late-paying borrowers do not know their lenders may offer alternative to help them avoid foreclosure.
(f) As reflected in recent government and industry-led efforts to help troubled borrowers, the mortgage foreclosure crisis impacts borrowers not only in nontraditional loans, but also many borrowers in conventional loans.
(g) This act is necessary to avoid unnecessary foreclosures of residential properties and thereby provide stability to California’s statewide and regional economies and housing market by requiring early contact and communications between mortgagees, beneficiaries, or authorized agents and specified borrowers to explore options that could avoid foreclosure and by facilitating the modification or restructuring of loans in appropriate circumstances.
4. “Operation Malicious Mortgage’ is a nationwide operation coordinated by the U.S. Department of Justice and the FBI to identify, arrest, and prosecute mortgage fraud violators.” San Diego Union Tribune, June 19, 2008. As shown below, Plaintiffs were victims of such mortgage fraud.
5. “Home ownership is the foundation of the American Dream. Dangerous mortgages have put millions of families in jeopardy of losing their homes.” CNN Money, December 24, 2007. The Loan which is the subject of this action to Plaintiff is of such character.
6. “Finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy. High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy. Therefore, doing what we, can to avoid preventable foreclosures is not just in the interest of the lenders and borrowers. It’s in everybody’s best interest.” Ben Bernanke, Federal Reserve Chairman, May 9, 2008. Plaintiff alleges that Defendants had the duty to prevent such foreclosure, but failed to so act.
7. “Most of these homeowners could avoid foreclosure if present loan holders would modify the existing loans by lowering the interest rate and making it fixed, capitalizing the arrearages, and forgiving a portion of the loan. The result would benefit lenders, homeowners, and their communities.” CNN Money, id.
8. On behalf of President Bush, Secretary Paulson has encouraged lenders to voluntarily freeze interest rates on adjustable-rate mortgages. Mark Zandl, chief economist for Mood’s commented, “There is no stick in the plan. There are a significant number of investors who would rather see homeowners default and go into foreclosure.” San Diego Union Tribune, id.
9. “Fewer than l%• of homeowners have experienced any help “from the Bush-Paulson plan.” San Diego Union Tribune, id. Plaintiffs’ are not of that sliver that have obtained help.
10. The Gravamen of Plaintiff’s complaint is that Defendants violated State and Federal laws which were specifically enacted to protect such abusive, deceptive, and unfair conduct by Defendants, and that Defendants cannot legally enforce a non-judicial foreclosure.
Plaintiffs, insert Plaintiff, by and through their attorney of record, Timothy McCandless,
allege the following, on information and belief:
I.
DEFENDANTS AND VENUE
1. At all relevant times, Defendant Countrywide Financial Corporation (hereinafter “CFC”), a Delaware corporation, has transacted and continues to transact business throughout the State of California, including in insert county.
2. At all relevant times, Defendant Countrywide Home Loans, Inc. (hereinafter “CHL”), a New York corporation, has transacted and continues to transact business throughout the State of California, including in insert county. CHL is a subsidiary of CFC.
3. At all relevant times, until on or about December 15, 2004, Full Spectrum
Lending, Inc. (hereinafter “Full Spectrum”), was a California corporation that transacted business throughout the State of California, including in insert county, and was a subsidiary of CFC. On or about December 15, 2004, Full Spectrum was merged into and became a division of CHL. For all conduct that occurred on or after December 15, 2004, any reference in this complaint to CHL includes reference to its Full Spectrum division.
4. Defendants CFC, CHL, and Full Spectrum are referred to collectively herein as
“Countrywide” or “the Countrywide Defendants.”
5. At all times pertinent hereto, Defendant Angelo Mozilo (hereinafter “Mozilo”) was Chairman and Chief Executive Officer of CFC. Defendant Mozilo directed, authorized, and ratified the conduct of the Countrywide Defendants set forth herein.
6. At all times pertinent hereto, Defendant David Sambol (hereinafter “Sambol”) is and was the President of CHL and, since approximately September, 2006, has served as the President andChief Operating Officer of CFC. Sambol directed, authorized and ratified the conduct of CHL, and after, September, 2006, the Countrywide Defendants, as set forth herein. Defendant Sambol is a resident of Los Angeles County.
7. Plaintiff is not aware of the true names and capacities of the Defendants sued as Does 1 through 100, inclusive, and therefore sues these Defendants by such fictitious names. Each of these fictitiously named Defendants is responsible in some manner for the activities alleged in this Complaint. Plaintiff will amend this Complaint to add the true names of the fictitiously named Defendants once they are discovered.
8. The Defendants identified in paragraphs 1 through 7, above, shall be referred to collectively as “Defendants.”
9. Whenever reference is made in this Complaint to any act of any Defendant(s), that
allegation shall mean that each Defendant acted individually and jointly with the other Defendants.
10. Any allegation about acts of any corporate or other business Defendant means that
the corporation or other business did the acts alleged through its officers, directors, employees, agents and/or representatives while they were acting within the actual or ostensible scope of their
authority.
11. At all relevant times, each Defendant committed the acts, caused or directed others to commit the acts, or permitted others to commit the acts alleged in this Complaint. Additionally, some or all of the Defendants acted as the agent of the other Defendants, and all of
the Defendants acted within the scope of their agency if acting as an agent of another.
12. At all relevant times, each Defendant knew or realized that the other Defendants were engaging in or planned to engage in the violations of law alleged in this Complaint. Knowing or realizing that other Defendants were engaging in or planning to engage in unlawful conduct, each Defendant nevertheless facilitated the commission of those unlawful acts. Each Defendant intended to and did encourage, facilitate, or assist in the commission of the unlawful acts, and thereby aided and abetted the other Defendants in the unlawful conduct.
13. At all relevant times, Defendants have engaged in a conspiracy, common enterprise, and common course of conduct, the purpose of which is and was to engage in the violations of law alleged in this Complaint. This conspiracy, common enterprise, and common course of conduct continues to the present.
14. The violations of law alleged in this Complaint occurred in insert county and elsewhere throughout California and the United States.
II.
DEFENDANTS’ BUSINESS ACTS AND PRACTICES
15. This action is brought against Defendants, who engaged in false advertising and unfair competition in the origination of residential mortgage loans and home equity lines of credit (hereinafter “HELOCs”).
16. Countrywide originated mortgage loans and HELOCs through several channels, including a wholesale origination channel and a retail origination channel. The Countrywide employees who marketed, sold or negotiated the terms of mortgage loans and HELOCs in any of
its origination channels, either directly to consumers or indirectly by working with mortgage brokers, are referred to herein as “loan officers.”
17. In Countrywide’s wholesale channel, loan officers in its Wholesale Lending Division (hereinafter “WLD”) and Specialty Lending Group (hereinafter “SLG”) (now merged into the WLD) worked closely with a nationwide network of mortgage brokers to originate loans. In its wholesale channel, Countrywide often did business as “America’s Wholesale Lender,” a fictitious business named owned by CHL. In Countrywide’s retail channel, loan officers employed by Countrywide in its Consumer Markets Division (“CMD”) sold loans directly to consumers. In addition, loan officers employed by Full Spectrum up until December 14, 2004, and thereafter by Countrywide’s Full Spectrum Lending Division (hereinafter “FSLD”), sold loans directly to consumers as part of Countrywide’s retail channel.
18. Countrywide maintained sophisticated electronic databases by means of which corporate management, including but not limited to Defendants Mozilo and Sambol, could obtain information regarding Countrywide’s loan production status, including the types of loan products, the number and dollar volume of loans, the underwriting analysis for individual loans, and the number of loans which were approved via underwriting exceptions. Defendants used this
information, together with data they received regarding secondary market trends, to develop and
modify the loan products that Countrywide offered and the underwriting standards that Countrywide applied.
19. The mortgage market changed in recent years from one in which lenders originated mortgages for retention in their own portfolios to one in which lenders attempted to generate as many mortgage loans as possible for resale on the secondary mortgage market. The goal for lenders such as Countrywide was not only to originate high mortgage loan volumes but
also to originate loans with above-market interest rates and other terms which would attract premium prices on the secondary market.
20. In 2004, in an effort to maximize Countrywide’s profits, Defendants set out to double Countrywide’s share of the national mortgage market to 30% through a deceptive scheme
to mass produce loans for sale on the secondary market. Defendants viewed borrowers as nothing more than the means for producing more loans, originating loans with little or no regard to borrowers’ long-term ability to afford them and to sustain homeownership. This scheme was created and maintained with the knowledge, approval and ratification of Defendants Mozilo and
Sambol.
21. Defendants implemented this deceptive scheme through misleading marketing practices designed to sell risky and costly loans to homeowners, the terms and dangers of which they did not understand, including by (a) advertising that it was the nation’s largest lender and could be trusted by consumers; (b) encouraging borrowers to refinance or obtain purchase money financing with complicated mortgage instruments like hybrid adjustable rate mortgages or payment option adjustable rate mortgages that were difficult for consumers to understand; (c) marketing these complex loan products to consumers by emphasizing the very low initial “teaser” or “fixed” rates while obfuscating or misrepresenting the later steep monthly payments and interest rate increases or risk of negative amortization; and (d) routinely soliciting borrowers to refinance only a few months after Countywide or the loan brokers with whom it had “business
partnerships” had sold them loans.
22. Defendants also employed various lending policies to further their deceptive scheme and to sell ever-increasing numbers of loans, including (a) the dramatic easing of Countrywide’s underwriting standards; (b) the increased use of low- or no-documentation loans which allowed for no verification of stated income or stated assets or both, or no request for income or asset information at all; (c) urging borrowers to encumber their homes up to 100% (or more) of the assessed value; and (d) placing borrowers in “piggyback” second mortgages in the form of higher interest rate HELOCs while obscuring their total monthly payment obligations.
23. Also to further the deceptive scheme, Defendants created a high-pressure sales environment that propelled its branch managers and loan officers to meet high production goals and close as many loans as they could without regard to borrower ability to repay. Defendants’ high-pressure sales environment also propelled loan officers to sell the riskiest types of loans, such as payment option and hybrid adjustable rate mortgages, because loan officers could easily sell them by deceptively focusing borrowers’ attention on the low initial monthly payments or interest rates. Defendants also made arrangements with a large network of mortgage brokers to procure loans for Countrywide and, through its loan pricing structure, encouraged these brokers to place homeowners in loans with interest rates higher than those for which they qualified, as well as prepayment penalty obligations. This system of compensation aided and abetted brokers in breaching their fiduciary duties to borrowers by inducing borrowers to accept unfavorable loan terms without full disclosure of the borrowers’ options and also compensated brokers beyond the reasonable value of the brokerage services they rendered.
24. Countrywide received numerous complaints from borrowers claiming that they did not understand their loan terms. Despite these complaints, Defendants turned a blind eye to the ongoing deceptive practices engaged in by Countrywide’s loan officers and loan broker “business partners,” as well as to the hardships created for borrowers by its loose underwriting practices. Defendants cared only about selling increasing numbers of loans at any cost, in order to maximize Countrywide’s profits on the secondary market.
III.
THE PRIMARY PURPOSE OF DEFENDANTS’ DECEPTIVE BUSINESS
PRACTICES WAS TO MAXIMIZE PROFITS FROM THE SALE OF LOANS TO
THE SECONDARY MARKET
25. Defendants’ deceptive scheme had one primary goal – to supply the secondary market with as many loans as possible, ideally loans that would earn the highest premiums. Over
a period of several years, Defendants constantly expanded Countrywide’s share of the consumer market for mortgage loans through a wide variety of deceptive practices, undertaken with the direction, authorization, and ratification of Defendants Sambol and Mozilo, in order to maximize its profits from the sale of those loans to the secondary market.
26. While Countrywide retained ownership of some of the loans it originated, it sold the vast majority of its loans on the secondary market, either as mortgage-backed securities or as pools of whole loans.
27. In the typical securitization transaction involving mortgage-backed securities, loans were “pooled” together and transferred to a trust controlled by the securitizer, such as Countrywide. The trust then created and sold securities backed by the loans in the pool. Holders of the securities received the right to a portion of the monthly payment stream from the pooled loans, although they were not typically entitled to the entire payment stream. Rather, the holders received some portion of the monthly payments. The securitizer or the trust it controlled often retained an interest in any remaining payment streams not sold to security holders. These securitizations could involve the pooling of hundreds or thousands of loans, and the sale of many
thousands of shares.
28. Countrywide generated massive revenues through these loan securitizations. Its reported securities trading volume grew from 647 billion dollars in 2000, to 2.9 trillion dollars in 2003, 3.1 trillion dollars in 2004, 3.6 trillion dollars in 2005, and 3.8 trillion dollars in 2006. (These figures relate to the ostensible values given to the securities by Countrywide or investors, and include securities backed by loans made by other lenders and purchased by Countrywide.)
29. For the sale of whole (i.e., unsecuritized) loans, Countrywide pooled loans and sold them in bulk to third-party investors, often (but not exclusively) Wall Street firms. The sale of whole loans generated additional revenues for Countrywide. Countrywide often sold the whole loans at a premium, meaning that the purchaser paid Countrywide a price in excess of 100% of the total principal amount of the loans included in the loan pool.
30. The price paid by purchasers of securities or pools of whole loans varied based on the demand for the particular types of loans included in the securitization or sale of whole loans. The characteristics of the loans, such as whether the loans are prime or subprime, whether the loans have an adjustable or fixed interest rate, or whether the loans include a prepayment penalty, all influenced the price.
31. Various types of loans and loan terms earned greater prices, or “premiums,” in the secondary market. For example, investors in mortgages and mortgage backed securities have been willing to pay higher premiums for loans with prepayment penalties. Because the prepayment penalty deters borrowers from refinancing early in the life of the loan, it essentially ensures that the income stream from the loan will continue while the prepayment penalty is in effect. Lenders, such as Countrywide, typically sought to market loans that earned it higher premiums, including loans with prepayment penalties.
32. In order to maximize the profits earned by the sale of its loans to the secondary market, Countrywide’s business model increasingly focused on finding ways to generate an ever larger volume of the types of loans most demanded by investors. For example, Countrywide developed and modified loan products by discussing with investors the prices they would be willing to pay for loans with particular characteristics (or for securities backed by loans with particular characteristics), and this enabled Countrywide to determine which loans were most likely to be sold on the secondary market for the highest premiums.
33. Further, rather than waiting to sell loans until after they were made, Countrywide would sell loans “forward” before loans were funded. In order to determine what loans it could sell forward, Countrywide would both examine loans in various stages of production and examine its projected volume of production over the next several months.
34. Loans that were sold forward were sold subject to a set of stipulations between Countrywide and the purchaser. For example, in a sale of whole loans, Countrywide might agree on October 1 that on December 1 it would deliver 2000 adjustable rate mortgage loans with anaverage interest rate of 6.0%, half of which would be subject to a prepayment penalty, among other characteristics. (None of these loans would have been made as of October 1.) Based on these stipulations regarding the characteristics of the loans to be included in the pool, an investor might agree to pay a price totaling 102.25% of the total face value of the loans. In other words, the purchaser agreed in advance to pay a premium of 2.25%. Then, if the loans actually delivered on December 1 had a slightly higher or lower average interest rate, the terms of the stipulation would specify how much the final price would be adjusted.
35. The information regarding the premiums that particular loan products and terms could earn on the secondary market was forwarded to Countrywide’s production department, [Redacted description of production department’s responsibilities.]
36. Countrywide originated as many loans as possible not only to maximize its profits on the secondary market, but to earn greater profits from servicing the mortgages it sold. Countrywide often retained the right to service the loans it securitized and sold as pools of whole
loans. The terms of the securitizations and sales agreements for pools of whole loans authorized Countrywide to charge the purchasers a monthly fee for servicing the loans, typically a percentage of the payment stream on the loan.
37. Tantalized by the huge profits earned by selling loans to the secondary market, Defendants constantly sought to increase Countrywide’s market share: the greater the number and percentage of loans it originated, the greater the revenue it could earn on the secondary market. Countrywide executives, including Defendant Mozilo, publicly stated that they sought to
increase Countrywide’s market share to 30% of all mortgage loans made and HELOCs extended
in the country.
38. In its 2006 annual report, Countrywide trumpeted the fact that “[w]hile the overall residential loan production market in the United States has tripled in size since 2000, from $1.0 trillion to $2.9 trillion at the end of 2006, Countrywide has grown nearly three times faster, going from $62 billion in loan originations in 2000 to $463 billion in 2006.”
39. In addition, Countrywide directly and indirectly motivated its branch managers, loan officers and brokers to market the loans that would earn the highest premiums on the secondary market without regard to borrower ability to repay. For example, the value on the secondary market of the loans generated by a Countrywide branch was an important factor in determining the branch’s profitability and, in turn, branch manager compensation. Managers were highly motivated to pressure their loan officers to sell loans that would earn Countrywide the highest premium on the secondary market, which resulted in aggressive marketing of such loans to consumers.
40. The secondary market affected Countrywide’s pricing of products and, in order to
sell more loans on the secondary market, Countrywide relaxed its underwriting standards and liberally granted exceptions to those standards. Countrywide managers and executives, including but not limited to Defendants Mozilo and Sambol, had access to information that provided transparency and a seamless connection between secondary market transactions, the loan production process, and managerial and sales incentives.
IV.
COUNTRYWIDE ENGAGED IN DECEPTIVE PRACTICES IN THE SALE OF
COMPLEX AND RISKY LOANS TO CONSUMERS
41. Countrywide offered a variety of loan products that were both financially risky and difficult for borrowers to understand, including in particular payment option and hybrid adjustable rate mortgages and second loans in the form of home equity lines of credit.
A. The Pay Option ARM
42. Particularly after 2003, Countrywide aggressively marketed its payment option adjustable rate mortgage (“Pay Option ARM”) under the direction, authorization and ratification of Defendants Mozilo and Sambol. The Pay Option ARM, which Countrywide classified as a “prime” product, is a complicated mortgage product which entices consumers by offering a very low “teaser” rate – often as low as 1% – for an introductory period of one or three months. At the end of the introductory period, the interest rate increases dramatically. Despite the short duration of the low initial interest rate, Countrywide’s Pay Option ARMs often include a one, two or three-year prepayment penalty.
43. When the teaser rate on a Pay Option ARM expires, the loan immediately becomes an adjustable rate loan. Unlike most adjustable rate loans, where the rate can only change once every year or every six months, the interest rate on a Pay Option ARM can change every month (if there is a change in the index used to compute the rate).
44. Countrywide’s Pay Option ARMs were typically tied to either the “MTA,” “LIBOR” or “COFI” index. The MTA index is the 12-month average of the annual yields on actively traded United States Treasury Securities adjusted to a constant maturity of one year as published by the Federal Reserve Board. The LIBOR (London Interbank Offered Rate) index is based on rates that contributor banks in London offer each other for inter-bank deposits. Separate LIBOR indices are kept for one month, six-month, and one-year periods, based on the duration of the deposit. For example, the one-year LIBOR index reported for June 2008 is the rate for a twelve-month deposit in U.S. dollars as of the last business day of the previous month. The COFI (11th District Cost of Funds Index) is the monthly weighted average of the interest rates paid on checking and savings accounts offered by financial institutions operating in the states of Arizona, California and Nevada.
45. Although the interest rate increases immediately after the expiration of the short period of time during which the teaser rate is in effect, a borrower with a Pay Option ARM has the option of making monthly payments as though the interest rate had not changed. Borrowers with Pay Option ARMs typically have four different payment options during the first five years of the loan. The first option is a “minimum” payment that is based on the introductory interest rate. The minimum payment, which Countrywide marketed as the “payment rate,” is the lowest of the payment options presented to the borrower. Most of Countrywide’s borrowers choose to make the minimum payment.
46. The minimum payment on a Pay Option ARM usually is less than the interest accruing on the loan. The unpaid interest is added to the principal amount of the loan, resulting in negative amortization. The minimum payment remains the same for one year and then increases by 7.5% each year for the next four years. At the fifth year, the payment will be “recast” to be fully amortizing, causing a substantial jump in the payment amount often called “payment shock.”
47. However, the loan balance on a Pay Option ARM also has a negative amortization cap, typically 115% of the original principal of the loan. If the balance hits the cap, the monthly payment is immediately raised to the fully amortizing level (i.e., all payments after the date the cap is reached must be sufficient to pay off the new balance over the remaining life of the loan). When that happens, the borrower experiences significant payment shock. A borrower with a Countrywide Pay Option ARM with a 1% teaser rate, who is making the minimum payment, is very likely to hit the negative amortization cap and suffer payment shock well before the standard 5-year recast date.
48. Instead of making the minimum payment, the borrower has the option of making an interest-only payment for five years. The borrower then experiences payment shock when the payment recasts to cover both principal and interest for the remaining term of the loan. Alternatively, the borrower can choose to make a fully amortizing principal and interest payment based on either a 15-year or a 30-year term.
49. The ever-increasing monthly payments and payment shock characteristic of Pay Option ARMs are illustrated by the following example of a Countrywide loan. The loan had an initial principal balance of $460,000.00, a teaser rate of 1%, and a margin of 2.9% (such that after the one-month teaser rate expired, the interest would be the 1-month LIBOR index plus 2.9%, rounded to the nearest 1/8th percent). After the teaser rate expired, based on the 1-month LIBOR rate as of the date the borrower obtained the loan, the interest rate would increase to 7.00%. Assuming the 7.00% interest rate remained in place, and the borrower chose to make the minimum payment for as long as possible, the payment schedule would be approximately as follows:
a. $1,479.54 per month for the first year;
b. $1,590.51 per month for the second year;
c. $1,709.80 per month for the third year;
d. $1,838.04 per month for the fourth year;
e. $1,975.89 per month for the first nine months of the fifth year; and
f. approximately $3747.83 per month for the remaining twenty-five years
and three months on the loan.
50. Once the payments reach $3747.83, this Pay Option ARM will have negatively amortized such that the balance of the loan will have increased to approximately $523,792.33. At that point, the borrower will be faced with a payment more than two-and-a-half times greater than the initial payment and likely will be unable to refinance unless his or her home has increased in value at least commensurately with the increased loan balance. In addition, increases in the LIBOR rate could cause the borrower to hit the negative amortization cap earlier, and also could result in even higher payments. If the interest rate reached 8%, just 1% higher, the negative amortization cap would be reached sooner and payments could reach $4,000.00 per month, or higher.
51. During the underwriting process, Countrywide did not consider whether borrowers would be able to afford such payment shock. Further, depending on the state of the his or her finances, even the interim increases in the minimum payment may well have caused dramatic hardship for the borrower.
52. Even if the borrower elects to make interest-only payments, he or she still will experience payment shock. Again assuming the interest rate stays constant at 7.00% over the life of the loan, the borrower’s initial payments would be approximately $2,683.33 for five years. Thereafter, the payment will increase to approximately $3,251.18 per month, an increase of over 20%.
53. Nearly all Countrywide’s Pay Option ARM borrowers will experience payment shock such as that illustrated in paragraphs 49 through 52 above. As of December 31, 2006, almost 88% of the Pay Option ARM portfolio held by Defendants consisted of loans that had experienced some negative amortization. This percentage increased to 91% as of December 31, 2007.
54. Countrywide sold thousands of Pay Option ARMs, either through its branches or through brokers. For example, on a national basis, approximately 19% of the loans originated by Countrywide in 2005 were Pay Option ARMs. Countrywide made many of these loans in California.
55. These loans were highly profitable. Countrywide had a gross profit margin of approximately 4% on Pay Option ARMs, compared to 2% on mortgages guaranteed by the Federal Housing Administration.
56. Countrywide retained ownership of a number of loans for investment purposes, including thousands of Pay Option ARMs. Countrywide reported the negative amortization amounts on these Pay Option ARMs (i.e., the amount by which the balances on those loans increased) as income on its financial statements. The negative amortization “income” earned by Countrywide totaled 1.2 billion dollars by the end of 2007.
57. Moreover, Pay Option ARMs with higher margins could be sold for a higher premium on the secondary market, because the higher margins would produce a greater interest rate and therefore a larger income stream. To insure an abundant stream of such loans, Countrywide pushed its loan officers to sell Pay Option ARMs and paid loan brokers greater compensation for selling a Pay Option ARM with a higher margin, or above-par rate, thus encouraging them to put consumers into higher cost loans. Countrywide also used a variety of deceptive marketing techniques to sell its Pay Option ARMs to consumers.
58. Countrywide deceptively marketed the Pay Option ARM by aggressively promoting the teaser rate. Television commercials emphasized that the payment rate could be as low as 1% and print advertisements lauded the extra cash available to borrowers because of the low minimum payment on the loan. Television advertisements did not effectively distinguish between the “payment rate” and the interest rate on the loans, and any warnings about potential negative amortization in Countrywide’s print advertisements were buried in densely written small type.
59. Borrowers, enticed by the low teaser rate, were easily distracted from the fine print in the loan documents and did not fully understand the terms or the financial implications of Countrywide’s Pay Option ARMs.
60. When a borrower obtained a Pay Option ARM from Countrywide, the only initial monthly payment amount that appeared anywhere in his or her loan documents was the minimum payment amount. In other words, documents provided to the borrower assumed he or she would make only the minimum payment. Thus, a borrower would not know the monthly payment necessary to make a payment that would, for example, cover accruing interest, until he or she received the first statement after the expiration of the teaser rate, well after all loan documents were signed.
61. Countrywide and the brokers it accepted as its “business partners” misrepresented or obfuscated the true terms of the Pay Option ARMs offered by Countrywide, including but not limited to misrepresenting or obfuscating the amount of time that the interest rate would be fixed for the loan, misrepresenting or obfuscating the risk of negative amortization and the fact that the
payment rate was not the interest rate, and misrepresenting or obfuscating that the minimum payment would not apply for the life of the loan.
62. Countrywide and its business partner brokers also misrepresented or obfuscated how difficult it might be for borrowers to refinance a Pay Option ARM loan. In fact, after making only the minimum payment, because of negative amortization the borrower likely would not be able to refinance a Pay Option ARM loan unless the home serving as security for the mortgage had increased in value. This is particularly true in cases for borrowers whose loans have a very high loan-to-value ratio.
63. Countrywide and its business partner brokers often misrepresented or obfuscated the fact that a particular Pay Option ARM included a prepayment penalty and failed to explain the effect that making only the minimum payment would have on the amount of the prepayment penalty. If a borrower seeks to refinance after having made the minimum payment for an extended period, but while a prepayment penalty is still in effect, the negative amortization can cause the amount of the prepayment penalty to increase. Prepayment penalties typically equal six
months worth of accrued interest. As negative amortization causes the loan principal to increase, it also causes an increase in the amount of interest that accrues that each month, thereby increasing the prepayment penalty.
64. Countrywide and its business partner brokers also represented that the prepayment penalty could be waived if the borrower refinanced with Countrywide. However, Countrywide sells most of the loans it originates, and Countrywide has at most limited authority to waive prepayment penalties on loans it does not own, even when it controls the servicing (and is often required to pay the prepayment penalties on loans it does not own in the instances where it is not able to collect the penalty from the borrower).
B. Hybrid ARM Loans
65. In addition to the Pay Option ARMs, Countrywide offered “Hybrid” ARM loans. Hybrid ARMs have a fixed interest rate for a period of 2, 3, 5, 7, or 10 years, and then an adjustable interest rate for the remaining loan term. The products described below were offered with the approval, direction and ratification of Defendants Sambol and Mozilo.
(1) 2/28 and 3/27 ARMs
6. Countrywide typically offered “2/28” Hybrid ARMs through its Full Spectrum Lending Division. These 2/28 ARM loans have low, fixed interest rates for the first two years (the “2” in “2/28”). The loans often only required interest-only payments during the period the initial rate was in effect, or sometimes for the first five years of the loan.
67. After the initial rate expires, the interest rate can adjust once every six months for the next 28 years (the “28” in “2/28”). During this period, the interest rate typically is determined by adding a margin to the one-year LIBOR index, except that the amount the interest rate can increase at one time may be limited to 1.5%. Because the initial rate is set independent of the index, the payment increase can be dramatic, particularly if the loan called for interest-only payments for the first two or five years.
68. Countrywide also offered “3/27” ARMs, which operate similarly to 2/28 ARMs, except that the low initial rate is fixed for three rather than two years, and the interest rate then adjusts for 27 rather than 28 years.
69. Countrywide underwrote 2/28 and 3/27 ARMs based on the payment required while the initial rate was in effect, without regard to whether the borrower could afford the loan thereafter. And, like Pay Option ARMs, Countrywide’s 2/28 and 3/27 ARMs typically contain prepayment penalties.
70. A borrower with a 2/28 ARM, like a borrower with a Pay Option ARM, is subjected to steadily increasing monthly payments as well as payment shock. For example, a Countrywide borrower obtained a 2/28 ARM for $570,000, with an initial rate of 8.95% for the first two years. Thereafter, the interest rate was to be calculated by adding a margin of 7.95% to the six-month LIBOR index. The promissory note for this 2/28 ARM provides that the interest rate can never be lower 8.95% and can go as high as 15.95%. Based on the LIBOR rate that applied at the time the borrower received the loan and the terms of the note governing interest rate (and therefore payment) increases, the anticipated payment schedule was:
a. $4,565.86 per month for two years;
b. $5,141.98 per month for six months;
c. $5,765.48 per month for six months; and
d. payments of $6,403.01 per month or more thereafter.
71. This borrower’s monthly payments on this 2/28 ARM will thus increase by approximately 40% just during the 12 months between the end of the second year and beginning of the fourth year of the loan.
(2) 5/1, 7/1, and 10/1 ARMs
72. Countrywide also offered 5/1, 7/1, and 10/1 “interest-only” loans. Marketed as having “fixed” or “fixed period” interest rates, these loans carried a fixed interest rate for the first
5, 7, or 10 years respectively. These loans were underwritten based on the initial fixed, interest only payment until at least the end of 2005. However, when the fixed rate period expires, the interest rate adjusts once per year and is determined by adding a margin to an index. The monthly payments dramatically increase after the interest-only period, because payments over the remaining 25, 23, or 20 years are fully amortized to cover both principal and interest.
73. For example, if a borrower had a 5/1 loan for $500,000 that remained constant at 7.5% for the life of the loan, the monthly payments during the five year interest-only period would be $3,125.00. The monthly payment would increase to approximately $3,694.96 for the remaining 25 years of the loan. If the interest rate increased to 8% over the remaining 25 years, the payment would jump to $3,859.08 per month.
74. Collectively, 2/28, 3/27, 5/1, 7/1, and 10/1 ARMs will be referred to herein as “Hybrid ARMs.”
(3) Countrywide’s Deceptive Marketing of its Hybrid ARMs
75. Countrywide marketed Hybrid ARMs by emphasizing the low monthly payment and low “fixed” initial interest rate. Countrywide and its business partner brokers misrepresented or obfuscated the true terms of these loans, including but not limited to misrepresenting or obfuscating the amount of time that the fixed rate would be in effect, misrepresenting or obfuscating the fact that the interest rates on the loans are adjustable rather than fixed, and obfuscating or misrepresenting the amount by which payments could increase once the initial fixed rate expired.
76. Countrywide and its business partner brokers also often misrepresented or obfuscated the fact that Hybrid ARMs, particularly 2/28 and 3/27 ARMs, included prepayment penalties, or represented that the prepayment penalties could be waived when the borrowers refinanced with Countrywide. However, most loans originated by Countrywide are sold on the secondary market and, as described in paragraph 64, above, Countrywide generally cannot waive the terms of loans it does not own, even when it controls the servicing.
77. Countrywide and its brokers also misrepresented or obfuscated how difficult it might be for borrowers to refinance Hybrid ARMs. Although borrowers often were assured that they would be able to refinance, those seeking to refinance Hybrid ARMs after the expiration of the initial interest-only period likely would be able to do so unless the home serving as security for the mortgage had maintained or increased its value. This was particularly true for borrowers whose loans have very high loan-to-value ratios, as there would be no new equity in the borrowers’ homes to help them pay fees and costs associated with the refinances (as well as any prepayment penalties that may still apply).
C. Home Equity Lines of Credit
78. Countrywide also aggressively marketed HELOCs, particularly to borrowers who had previously obtained or were in the process of obtaining a first mortgage loan from Countrywide. Defendants referred to such HELOCs as “piggies” or “piggyback loans,” and referred to simultaneously funded first loans and HELOCs as “combo loans.” The first loan typically covered 80% of the appraised value of the home securing the mortgage, while the HELOC covered any of the home’s remaining value up to (and sometimes exceeding) 20%. Thus, the HELOC and the first loan together often encumbered 100% or more of a home’s appraised value.
79. Under the terms of the piggyback HELOCs, borrowers received monthly bills for interest-only payments for the first five years of the loan term (which could be extended to ten years at Countrywide’s option), during which time they could also tap any unused amount of the equity line. This was called the “draw period.”
80. Because Countrywide offered HELOCs as piggybacks to Pay Option and Hybrid ARMs, 100% or more of a property’s appraised value could be encumbered with loans that required interest-only payments or allowed for negative amortization.
81. Countrywide typically urged borrowers to draw down the full line of credit when HELOCs initially funded. This allowed Countrywide to earn as much interest as possible on the HELOCs it kept in its portfolio, and helped generate the promised payment streams for HELOCs sold on the secondary market. For the borrower, however, drawing down the full line of credit at funding meant that there effectively was no “equity line” available during the draw period, as the borrower would be making interest-only payments for five years.
82. Upon the end of the draw period, the HELOC notes generally require borrowers to repay the principal and interest in fully amortizing payments over a fifteen year period. A fully drawn HELOC was therefore functionally a 20- or 25-year closed-end mortgage. However, Countrywide did not provide borrowers with any documents or other materials to help them calculate the principal and interest payments that would be due after the draw, or interest-only, period.
83. Countrywide HELOCs were underwritten not to the fully amortizing payment, but to the interest-only payments due during the draw period. Countrywide typically charged an early termination fee for HELOCs closed before three years, and sometimes would charge a monthly fee for HELOCs where the balance fell below a specified amount.
84. A borrower with an interest-only or a negatively amortizing loan faces even greater payment shock if he or she also has a fully drawn HELOC. For example, a borrower with fully drawn $100,000 HELOC at a 7.00% interest rate will have monthly interest-only payments of approximately $583.33. At the end of the draw period, the payment will increase to $898.83. This payment increase is in addition to whatever payment increase the borrower is experiencing on his or her first mortgage. This potential dual payment shock is typically obfuscated from or not explained to borrowers. Moreover, a borrower with a piggyback HELOC, particularly a borrower whose first mortgage negatively amortized or allowed interest-only payments, is even less likely to be able to refinance at the time of his or her payment shock unless his or her home has increased in value.
V.
COUNTRYWIDE EASED AND DISREGARDED UNDERWRITING
STANDARDS IN ORDER TO INCREASE ITS MARKET SHARE
85. Driven by its push for market share, Countrywide did whatever it took to sell more loans, faster – including by easing its underwriting criteria and disregarding the minimal underwriting criteria it claimed to require. By easing and disregarding its underwriting criteria, Countrywide increased the risk that borrowers would lose their homes. Defendants Mozilo and Sambol actively pushed for easing Countrywide’s underwriting standards and documentation requirements, allowed the liberal granting of exceptions to those already eased standards and requirements, and received reports detailing the actual underwriting characteristics and performance of the loans Countrywide funded.
A. Countrywide’s Low- and No-Documentation Loans
86. Traditionally, lenders required borrowers seeking mortgage loans to document their income, for example by providing W-2s or tax returns, as well as assets. Countrywide, however, disregarded such documentation requirements with respect to its riskiest loan products and introduced a variety of reduced or no documentation loan programs that eased and quickened the loan origination process. The vast majority of the Hybrid ARMs and nearly all of the Pay Option ARMs originated by Countrywide were reduced or no documentation loans.
87. As an example of one of its widespread no documentation programs, Countrywide made Pay Option ARMs, Hybrid ARMs, and piggyback HELOCs, among other loans, pursuant to its “Stated Income Stated Assets,” or “SISA,” program. The borrower’s income and assets were stated but not verified. Employment was verbally confirmed and income was supposed to be roughly consistent with incomes earned in the type of job in which the borrower was employed. Reduced documentation loans, in turn, allowed borrowers to document their income through the provision of W-2 tax forms, bank statements, or verbal verification of employment.
88. These low- and no-documentation programs, such as SISA, enabled Countrywide to process loans more quickly and therefore to make more loans. Stated income loans also encouraged the overstating of income – loan brokers and officers either overstated the borrower’s income without his or her knowledge, or led the borrower into overstating his or her income without explaining the risk of default that the borrower would face with a loan he or she would not actually afford. According to a former Countrywide loan officer, for example, a loan officer might say, “with your credit score of X, for this house, and to make X payment, X is the income you need to make.” Many borrowers responded by agreeing that they made X amount in income.
89. For stated income loans, it became standard practice for loan processors and underwriters to check http://www.salary.com to see if a stated income was within a reasonable range, with more tolerance on the upside for California salaries. Because loan officers knew about this practice, they too would look at salary.com to figure out the parameters ahead of time and know by how much they could overstate (or fabricate) income.
B. Countrywide’s Easing of Underwriting Standards
90. Countrywide also relaxed, and often disregarded, the traditional underwriting standards used to separate acceptable from unacceptable risk in order to produce more loans for the secondary market. Initially, for example, a borrower had to have a credit score of for a stated income loan. As the secondary market’s appetite for loans increased, Countrywide relaxed its guidelines so that a borrower with a credit score of could get a stated income loan with 100% financing.
91. Underwriting standards which Countrywide relaxed included qualifying interest rates (the rate used to determine whether borrowers can afford loans), loan-to-value ratios (the amount of the loan(s) compared to lower of the appraised value or sale price of the property), and debt-to-income ratios (the amount of borrowers’ monthly income compared to their monthly indebtedness).
92. With respect to qualifying rates, while Countrywide offered loans with initial low payments that would increase, loans were underwritten without regard to borrowers’ long-term financial circumstances. Until at least the end of 2005, Countrywide underwrote and approved its Hybrid ARMs based on the fixed interest rate applicable during the initial period of the loan, without taking into account whether the borrowers would be able to afford the dramatically higher payments that would inevitably be required during the remaining term of the loan.
93. In addition, Countrywide’s approach to underwriting and marketing Pay Option ARMs diverged. Countrywide underwrote Pay Option ARMs based on the assumption that borrowers would not make the minimum payment and therefore not experience negative amortization. In contrast, Countrywide marketed Pay Option ARMs by emphasizing the minimum payments. Countrywide continued this underwriting practice even though it knew that many of its Pay Option ARM borrowers would choose to make only the minimum monthly payment and that a high percentage of such borrowers had experienced negative amortization on their homes, as described in paragraph 53, above.
94. Countrywide also underwrote and approved HELOCs based on the borrower’s ability to afford the interest-only payments during the initial period of the loan, not based on the borrower’s ability to afford the subsequent, fully amortized principal and interest payments.
95. Countrywide eased other basic underwriting standards. Starting in 2003, as Defendants pushed to expand market share, underwriting standards and verification requirements became more flexible to enable underwriters to approve loans faster. Countrywide, for example, allowed higher and higher loan-to-value (“LTV”) and combined loan-to-value (“CLTV”) ratios –the higher the ratio, the greater the risk that a borrower will default and will be unable to refinance in order to avoid default. Similarly, Countrywide approved loans with higher and higher debt-to-income (“DTI”) ratios – the higher ratio, the greater the risk the borrower will have cash-flow problems and miss mortgage payments.
C. Countrywide’s “Exception” Underwriting Compromised Standards
96. Countrywide approved loans that it knew to be high risk, and therefore highly likely to end up in default, by ignoring its own minimal underwriting guidelines. Based on the proposed loan terms and the borrower’s financial and credit information, Countrywide’s computerized underwriting system (“CLUES”) issued a loan analysis report that rated the consumer’s credit and ability to repay the loan, and also indicated whether a proposed loan was in compliance with Countrywide’s underwriting guidelines. Based on this analysis, the CLUES report would recommend that the loan be approved, the loan be declined, or that the loan be “referred” to manual underwriting. CLUES, for example, might flag a “rule violation” if the borrower’s LTV, CLTV or credit score fell outside the guidelines for a given loan product. In such instances, CLUES would make a recommendation to “refer” the loan for further analysis by
a Countrywide underwriter.
97. The CLUES result was only a recommendation, not a final decision. The role of the underwriter was basically to verify information and ultimately decide whether to approve a loan based on Countrywide’s underwriting criteria. Underwriters could overcome potential rule violations or other underwriting issues flagged by CLUES by adding on “compensating factors,” such as letters from the borrower that addressed a low FICO score or provided explanations regarding a bankruptcy, judgment lien, or other issues affecting credit status.
98. Underwriters were under intense pressure to process and fund as many loans as possible. They were expected to process 60 to 70 loans per day, making careful consideration of borrowers’ financial circumstances and the suitability of the loan product for them nearly impossible.
99. As the pressure to produce loans increased, underwriters, their superiors, branch managers, and regional vice presidents were given the authority to grant exceptions to Countrywide’s minimal underwriting standards and to change the terms of a loan suggested by CLUES. Even if CLUES had recommended denying a loan, the underwriter could override that denial if he or she obtained approval from his or her supervisor.
100. Because of the intense pressure to produce loans, underwriters increasingly had to justify why they were not approving a loan or granting an exception for unmet underwriting criteria to their supervisors, as well as to dissatisfied loan officers and branch managers who earned commissions based on loan volume. Any number of Countrywide managerial employees could override an underwriter’s decision to decline a loan and request an exception to an underwriting standard. Countrywide employees also could submit a request for an exception to Countrywide’s Structured Loan Desk in Plano, Texas, a department specifically set up by Countrywide, at the direction of Defendants Mozilo and Sambol, to grant underwriting exceptions. According to a former employee, in 2006, 15,000 to 20,000 loans a month were processed through the Structured Loan Desk.
101. Countrywide granted exceptions liberally, further diluting its already minimal underwriting standards for making loans. Countrywide granted exception requests in a variety of circumstances where one or more basic underwriting criteria of the borrower did not meet loan product guidelines, including, for example, LTV or CLTV, loan amount and credit score. Countrywide placed borrowers in risky loans such as Hybrid and Pay Option ARMs, based on stated but not verified income and assets, and then overlooked its few remaining underwriting indicia of risk.
102. To attract more business Countrywide promoted its relaxed underwriting standards and ready grant of exceptions to brokers. For example, Countrywide promoted “Unsurpassed Product Choices and Flexible Guidelines,” including (a) “100% financing for purchase or refinancing” loans; (b) “80/20 combo loans for stated Self-Employed and Non Self- Employed;” (c) “Stated Self-Employed and Non Self-Employed loan programs with as low as a 500 credit score.” Countrywide stated that its “Specialty Lending Group’s experienced and knowledgeable loan experts are empowered to review all loan packages, make sound credit decisions and provide quality lending solutions – yes, even for ‘hard to close’ loans.”
D. Countrywide’s Risk-Layering and Pressure to Sell “Piggyback” Loans
Further Loosened Underwriting Practices
103. Countrywide compromised its underwriting standards even further by risk layering, i.e., combining high risk loans with one or more relaxed underwriting standards. Countrywide was well aware that layered risk created a greater likelihood that borrowers would lose their homes.
104. As early as January 2005, Countrywide identified the following borrower/loan characteristics as having a negative impact on the underwriting evaluation process: [Redacted description of risk factors identified by Countrywide.]
105. Nonetheless, Countrywide combined these very risk factors in the loans it promoted to borrowers. Countrywide introduced, for example, loan programs that allowed for higher LTVs/CLTVs, less documentation and lower credit scores. A high risk loan such as a Pay Option ARM could be sold to borrowers with increasingly lower credit scores. In addition, by accepting higher DTI ratios and combining Pay Option ARMs with second mortgages that allowed borrowers to finance a down payment, Countrywide would qualify borrowers with fewer financial resources, and hence a higher likelihood of default.
106. With a second or “piggyback” mortgage, the borrower could get a first loan for 80% of the purchase price (i.e., an 80% LTV) and a second loan for 20% of the purchase price (a 20% LTV), for a combined loan-to-value ratio of 100%. This allowed the borrower to finance a down payment and also avoid paying mortgage insurance (which typically is required if the LTV
on a first loan exceeds 80%). Such loans obviously were risky as the borrower had contributed no funds whatsoever to the loan and, if the loan required no documentation, had only stated his or her income and assets.
107. The following examples describe risk layering and underwriting exceptions granted to several California borrowers to whom Countrywide sold Hybrid or Pay Option ARMs. These examples represent only a small percentage of the large number of California residents who are likely facing foreclosure due to Countrywide’s widespread practice of risk-layering.
a. Countrywide loan officer convinced a borrower to take a Pay Option ARM with a 1-month teaser rate and a 3-year prepayment penalty, plus a full-draw piggyback HELOC, based on the loan officer’s representation that the value of the borrower’s home would continue to rise and he would have no problem refinancing. The borrower’s DTI was % and FICO was . An exception was granted for . The loan closed in January 2006, and a Notice of Default issued in June 2007. [Redacted example of underwriting exception approved by Countrywide.]
b. The CLUES report issued for a loan applicant in February 2005 stated that [Redacted example of underwriting exception approved by Countrywide.]
c. [Redacted example of underwriting exception approved by Countrywide.]
VI.
COUNTRYWIDE ENGAGED IN DECEPTIVE MARKETING PRACTICES TO
SELL INCREASING NUMBERS OF LOANS
108. Driven by its push for market share, Countrywide did whatever it took to sell more loans, faster – including by engaging in a number of deceptive marketing practices under the direction and with the ratification of Defendants Mozilo and Sambol.
A. Countrywide Deceptively Lulled Borrowers Into Believing That it Was a
“Trusted Advisor” Looking Out for the Borrowers’ Best Interests
109. Countrywide sought to induce borrowers into believing that it was looking out for their best interest through various types of solicitations. Countrywide published television, radio, and print advertisements, for example, touting itself as “the company you can trust” and urging consumers to “join the millions of homeowners who have trusted Countrywide.” Countrywide capitalized on its status as the “number one mortgage lender” and claimed that it was a mortgage loan expert capable of advising customers. For example, Countrywide claimed that it “had years to perfect [its] craft” and offered “industry leading expertise” and that “[w]ith over 35 years of service and one of the widest selections of loan programs, [it] is an expert at finding solutions for all kinds of situations.” As another example, Countrywide offered “consultation[s] with our home loan experts” and claimed it “would go the distance with you to help secure a loan program to fit your financial needs and goals.”
110. Countrywide also engaged in extensive solicitation campaigns aimed at those borrowers it was easiest for it to find — existing Countrywide customers. Countrywide targeted existing customers with tailored letters and e-mail solicitations, creating the impression that it was a mortgage expert that advised its borrowers, at no cost, regarding the financial mortgage options that were in their best interest. For example, Countrywide took advantage of Pay Option ARM customers’ worries regarding potential future “steep payment adjustments,” by sending them a “special invitation” to talk with “specially-trained consultants” regarding “your current financial situation, at no charge, to see if refinancing may help put you in a better financial position.”
111. Countrywide also created an annual “anniversary” campaign, by sending letters and e-mails to existing customers offering a “free Anniversary Loan Review,” which it touted as a “home loan analysis” with an “experienced Loan Consultant.” Countrywide advertised itself in
these solicitations as, for example, an “expert at finding solutions” and “smart financial options” that would best suit borrowers’ financial needs.
112. Countrywide operated an extensive telemarketing operation, aimed both at new potential customers and existing Countrywide customers, in which it touted its expertise and claimed to find the best financial options for its customers. For example, Countrywide instructed its Full Spectrum loan officers to memorize a script that instructed them to “build rapport” and “gain trust” in conversations with potential customers, and to do so with existing customers by “positioning” telephone calls, the true purpose of which was to sell refinance loans, as a Customer Service loan check-up[s].” On these calls, loan officers were instructed to . [Redacted description of marketing training for loan officers.] Countrywide instructed FSLD loan officers to state, for example, “I’m an experienced mortgage lending professional specializing in helping people improve their financial situation.” Countrywide even instructed loan officers to offer to provide advice on other lender’s mortgage loans and to tell potential customers, that “even if you’re working with someone else and just want a second opinion – mortgages can be very complicated. I’m here for that.”
113. In addition, when handling initial calls from prospective customers, for example, Countrywide instructed its FSLD loan officers to . [Redacted description of marketing training for loan officers.] Contrary to the kinds of representations described in this paragraph and paragraphs 109 through 112, above, Countrywide often did not sell borrowers loans that were in their best interest.
B. Countrywide Encouraged Serial Refinancing
114. In order to constantly produce more loans for sale to the secondary market, Countrywide aggressively marketed refinance loans to those homeowners it had no trouble finding — Countrywide customers. Countrywide misled these borrowers regarding the benefits of
refinancing, including by using the deceptive marketing practices described in paragraphs 119 through 128 below. In addition, Countrywide created a perpetual market for its refinance loans by selling Pay Option and Hybrid ARMs that borrowers would have to refinance in order to avoid payment shock. Countrywide knew that borrowers who could not afford the inevitable payment increase on such loans and who were unable to refinance would be at great risk of losing their homes.
115. Countrywide provided lists of existing customers to its loan officers responsible for outbound marketing. Defendants’ loan officers hounded Countrywide customers by phone, mail, and electronic mail with refinance loan offers. For example, [Redacted description of Countrywide’s marketing plans for soliciting existing Countrywide customers to refinance.] FSLD “leads” – telephone numbers for existing, eligible customers – were uploaded into a telemarketing database on a weekly basis.
116. Countrywide even solicited customers who were having trouble making payments or facing foreclosure, without regard to the risk that the customer would default on Pay Option and Hybrid ARM refinance loans. FSLD solicited existing prime customers who had “recurring” missed payments. Countrywide required its customer service representatives to market refinance loans to borrowers who called with questions, including borrowers who were behind on their monthly payments or facing foreclosure.
117. Countrywide also solicited existing customers on other occasions, including on their annual loan “anniversaries” (see paragraph 111, above) and shortly before a rate or payment was to reset on Pay Option or Hybrid ARMs, without regard to whether the loan had a prepayment penalty period that had not yet expired. In doing so, the Countrywide Defendants refinanced borrowers while the prepayment penalty on their prior Countrywide loan was still in effect, often concealing the existence of the prepayment penalty.
118. Countrywide claims that approximately 60% of FSLD’s business has been comprised of refinancing Countrywide loans.
C. Countrywide Misled Borrowers About the True Terms of Pay Option and Hybrid ARM Loans by Focusing the Borrowers’ Attention on Low Beginning Payments and Teaser Rates
119. Because Pay Option ARM and Hybrid ARMs start with lower monthly payments and interest rates than most other types of loan products, and given their complex nature, Countrywide was able to easily sell such loans to borrowers by focusing on the initial low monthly payments and/or rates and by obscuring or misrepresenting the true risks of such loans.
120. With respect to Pay Option ARMs, the crux of Countrywide’s sales approach was to “sell the payment.” When presenting a borrower with various loan options, for example, Countrywide would “sell the payment” by showing the borrower the minimum monthly payments for the Pay Option ARM in comparison to other loan products with larger payments. Then, Countrywide would ask which payment the borrower preferred without discussing other differences between the loan products. Naturally, in this situation, most borrowers chose the option with the lowest payment, the Pay Option ARM, without realizing that the payment would
last for only a short time before it would begin to increase.
121. If, instead, Countrywide presented the Pay Option ARM as the only option, it would “sell the payment” by emphasizing the low minimum payment and how much the borrower would “save” every month by making such a low payment, without discussing the payment shock and negative amortization that inevitably result when borrowers make minimum payments. Given the complexity of Pay Option ARMs, such a presentation easily misled borrowers regarding the long-term affordability of their loans.
122. Countrywide also represented that the initial monthly payment would last for the entire term of the loan, or for some period longer than that provided for by the loan’s terms.
123. Countrywide engaged in similar deceptive representations with respect to Hybrid
ARMs. For example, Countrywide focused its sales presentation on the interest-only payments during the initial fixed-rate period, i.e. the 2-year period on a 2/28 ARM or the 3-year period on a 3/27 ARM, not on how the payment would adjust to include both principal and interest after the initial fixed-rate period. It also represented that the payments would last for the entire term of the loan, or for some period longer than that provided for by the loan’s terms.
124. When selling Pay Option and Hybrid ARMs, Countrywide engaged in another deceptive practice – rather than selling the payment, it would sell the rate. Countrywide either focused exclusively on the initial one-month, two-year, or three-year “fixed” interest rate, for example, without discussing that the rate would reset after the initial period to a potentially much higher rate, or it represented that the initial interest rate would last for a much longer period than it actually did or for the entire term of the loan.
125. Countrywide’s letter and e-mail solicitations, as well as telemarketing calls, also focused borrowers’ attention on short-term low monthly payments. FSLD loan officers, for example, were required to memorize scripts that marketed low monthly payments by focusing (a) on the potential customer’s dissatisfaction with his or her current monthly payments under his or her current mortgage loan and/or (b) on so-called “savings” that result from minimum monthly payments. As just one of many potential examples, to overcome a borrower’s claim that he or she already has a loan with a low interest rate, Countrywide required FSLD loan officers to memorize the following response: “I certainly understand how important that is to you. But let me ask you something . . . . Which would you rather have, a long-term fixed payment, or a short term one that may allow you to realize several hundred dollars a month in savings? I am able to help many of my clients lower their monthly payments and it only takes a few minutes over the phone to get started.” What the FSLD loan officer did not state was that the borrowers would, in
fact, not save money because the payment on the new loan would ultimately exceed the payment on the borrower’s current loan.
126. Borrowers subjected to any of the deceptive marketing practices described above would not understand the true risks and likely unaffordability of their Pay Option or Hybrid ARMs. Many borrowers did not read their loan documents and disclosures before signing. Countrywide often made borrowers sign a large stack of documents without providing the borrower with time to read them. Other borrowers were unable to read English. And, given the
complexity of Pay Option and Hybrid ARMs, many borrowers who managed to read their loan documents did not understand the terms of the loans they were being sold.
127. As a result, many borrowers who obtained Pay Option and Hybrid ARMs did not understand that their initial monthly payment would at some point “explode,” that their initial interest rate would increase and become adjustable, or that the principal amount of their loans could actually increase. Countrywide received numerous complaints regarding these practices from consumers, including over complaints per year handled by the alone between approximately January 2005 and August 2007. Many borrowers complainted that they did not understand the terms of their Pay Option and Hybrid ARMs, including the potential magnitude of changes to their monthly payments, interest rates, or loan balances. Many borrowers also complained that Countrywide’s loan officers either did not tell them about the payment or rate increases on such loans or promised that they would have fixed-rate, fixed payment loans, rather than adjustable rate mortgage loans with increasing payments.
128. Despite these complaints, Defendants did not alter their deceptive marketing practices and did not address the hardship created by their practice of making Pay Option and Hybrid ARMs with little or no regard to affordability. Defendants cared only about doing whatever it took to sell increasing numbers of loans.
D. Countrywide Misled Borrowers About their Ability to Refinance Before The
Rates or Payments on Their Pay Option and Hybrid ARMs Increased
129. If a borrower was able to figure out that he or she had obtained a Pay Option or Hybrid ARM before signing the loan documents, he or she may still have been misled by Countrywide in another way – Countrywide’s loan officers often overcame borrower concerns about exploding monthly payments or increasing interest rates by promising that they would be able to refinance with Countrywide into a loan with more affordable terms before the payments or rate reset.
130. Countrywide often represented that the value of a borrower’s home would increase, thus creating enough equity to obtain a loan with better terms. However, borrowers with interest-only or negatively amortizing loans that encumbered as much as, if not more than, 100% of their home’s appraised value, were highly unlikely to be able to refinance into another loan if their home did not increase in value. Additionally, any consumers who sought to refinance a Countrywide mortgage would likely incur a substantial prepayment penalty, thus limiting their ability to obtain a more favorable loan.
131. Countrywide loan officers often misrepresented or obfuscated the fact that a borrower’s loan had a prepayment penalty or misrepresented that a prepayment penalty could be waived. Countrywide also promised borrowers that they would have no problem refinancing their Pay Option or Hybrid ARMs, when in fact they might have difficulty refinancing due to the existence of prepayment penalties. Prepayment penalties on Pay Option and Hybrid ARMs essentially prevent many borrowers from refinancing such unaffordable loans before their payments explode or rates reset.
132. Countrywide received numerous complaints from borrowers who claimed that they had not been told about the prepayment penalty or that the loan officer promised they would not have one. Again, despite receiving such complaints, Defendants turned a blind eye to deceptive marketing practices regarding prepayment penalties and the resulting adverse financial consequences to borrowers.
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E. Countrywide Misled Borrowers About the Cost of Reduced and No Document Loans
133. Countrywide touted its low documentation requirements, urging borrowers to get “fastrack” loans so that they could get cash more quickly. However, many borrowers who obtained these loans possessed sufficient documentation to qualify for full document mortgages, and some submitted that documentation to their loan officer or to one of Countrywide’s business partner brokers. In emphasizing the ease, speed and availability of reduced or no document loans, Countrywide and its brokers concealed the fact that borrowers could qualify for a lower rate or reduced fees if they elected to apply for a mortgage by fully documenting their income and assets.
F. Countrywide Misled Borrowers Regarding the Terms of HELOCs
134. Countrywide misrepresented the terms of HELOCs, including without limitation by failing to inform the borrower that he or she would not have access to additional credit because he or she was receiving a full draw or that the monthly payment on the HELOC was interest-only and the borrower therefore would not be able to draw additional funds on the HELOC at a later date.
135. Countrywide also misrepresented or obfuscated the payment shock that borrowers would experience after the interest-only payment period on the HELOCs ended. Countrywide’s Call Center received large numbers of calls from borrowers complaining that they did not understand that the payments on their full-draw HELOCs would only cover interest, or that the interest rates on their HELOCs would adjust and increase.
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VII.
IN ORDER TO INCREASE MARKET SHARE, DEFENDANTS CREATED A
HIGH-PRESSURE SALES ENVIRONMENT WHERE EMPLOYEES WERE
REWARDED FOR SELLING AS MANY LOANS AS THEY COULD, WITHOUT
REGARD TO BORROWERS’ ABILITY TO REPAY
136. Despite touting itself as a lender that cared about its borrowers, Countrywide was, in essence, a mass production loan factory set up to produce an ever-increasing stream of loans without regard to borrowers’ ability to repay their loans and sustain homeownership. In order to provide an endless supply of loans for sale to the secondary market, Defendants pressured Countywide employees involved in the sale and processing of loans to produce as many loans as possible, as quickly as possible, and at the highest prices.
137. Defendants created this pressure through a compensation system, which predictably led employees to disregard Countrywide’s minimal underwriting guidelines and to originate loans without regard to their sustainability. Countrywide’s compensation system also motivated its loan officers to engage in the deceptive marketing practices described in the preceding sections.
138. Defendants incentivized managers to place intense pressure on the employees they supervised to sell as many loans as possible, as quickly as possible, at the highest prices possible. Branch managers received commissions or bonuses based on the net profits and loan volume generated by their branches. In most circumstances, however, branch managers were eligible for such commissions or bonuses only if . [Redacted descriptions regarding minimum requirements for commission or bonus eligibility.] Branch managers were also rewarded for meeting production goals set by corporate management, – or penalized for failing to do so. [Redacted description of the criteria Countrywide used to adjust branch managers’ commissions or bonuses.]
139. Countrywide provided branch managers with access to computer applications and databases that allowed them to monitor loan sales on a daily basis and pressure employees to “sell, sell, sell.” A branch manager could input the type of loan (such as a Pay Option ARM), and determine what price a borrower would pay for that loan, as well as the amount of profit the loan would likely generate for the branch. Branch managers could also monitor their branches’ loan sales performance by tracking loans that were in the process of being underwritten and the prices and characteristics of loans sold by the branch and by particular loan officers, during any specified time period.
140. With such tools available, Countrywide’s branch managers were able to constantly pressure loan officers, loan processors, and underwriters to do their part in increasing loan production – by hunting down more borrowers, selling more loans, and processing loans as quickly as possible, thereby boosting loan production, branch profits, and branch manager commissions and bonuses. This high-pressure sales environment invited deceptive sales practices and created incentives for retail branch managers, other managers, loan officers, loan specialists, and underwriters to jam loans through underwriting without regard to borrower ability to repay.
141. Countrywide created additional pressure to engage in deceptive marketing practices and sell loans without regard to their sustainability by paying its loan officers and managers a modest base salary that could be supplemented by commissions or bonuses. In most circumstances, the employees were eligible to receive these commissions or bonuses only if they, or the employees they supervised, sold a minimum number or dollar volume of loans.
142. Not only did this compensation system create incentives for employees to sell as many loans as possible, as quickly as possible, it also created incentives for retail employees to steer borrowers into riskier loans. For example, Countrywide paid greater commissions and bonuses to CMD managers and loan officers for selling . [Redacted description of loan products.] Countrywide also paid greater commissions and bonuses to FSLD managers and loan officers for [Redacted description of loan products.]
143. Countrywide’s compensation system also created incentives for wholesale loan officers to steer brokers and their clients into riskier loans. Countrywide’s wholesale loan officers worked one-on-one with “business partner” brokers approved by Countrywide. The loan officers cultivated relationships with brokers in order to persuade them to bring their business to Countrywide and, in particular, to work with a particular loan officer so that he or she, and his or her managers, could earn greater commissions. [Redacted description of compensation paid by Countrywide for the sale of particular loan products.]
144. Countrywide’s compensation system also rewarded employees for selling . [Redacted description of compensation paid by Countrywide for the sale of particular loan products.]
145. Countrywide’s high-pressure sales environment and compensation system encouraged serial refinancing of Countrywide loans. The retail compensation systems created incentives for loan officers to churn the loans of borrowers to whom they had previously sold loans, without regard to a borrower’s ability to repay, and with the consequence of draining equity from borrowers’ homes. Although Countrywide maintained a policy that discouraged loan officers from refinancing Countrywide loans within a short time period after the original loan funded (Countrywide often changed this time period, which was as low as months for some loan products), loan officers boosted their loan sales by targeting the easiest group of potential borrowers to locate – Countrywide borrowers – as soon as that period expired.
146. Countrywide management at all levels pressured the employees below them to sell and approve more loans, at the highest prices, as quickly as possible, in order to maximize Countrywide’s profits on the secondary market. Defendant Sambol, for example, monitored Countrywide’s loan production numbers and pressured employees involved in selling loans or supervising them to produce an ever-increasing numbers of loans, faster. Regional vice presidents pressured branch managers to increase their branches’ loan numbers. Branch managers pressured loan officers to produce more loans, faster, and often set their own branch level production quotas.
147. Underwriters were also pressured to approve greater numbers of loans quickly and to overlook underwriting guidelines while doing so. Defendant Sambol pressured underwriters to increase their loan production and to increase approval rates by relaxing underwriting criteria. Regional operations vice presidents, branch operations managers, branch managers, and loan officers all pressured underwriters to rush loan approvals. Countrywide required underwriters to meet loan processing quotas and paid bonuses to underwriters who exceeded them.
148. Customer service representatives at Countrywide’s Call Center also were expected to achieve quotas and received bonuses for exceeding them. Countrywide required service representatives to complete calls in three minutes or less, and to complete as many as sixty-five to eighty-five calls per day. Although three minutes is not sufficient time to assist the confused or distressed borrowers who contacted them, Countrywide required service representatives to market refinance loans or piggyback HELOCs to borrowers who called with questions — including borrowers who were behind on their monthly payments or facing foreclosure. Using a script, the service representatives were required to pitch the loan and transfer the caller to the appropriate Countrywide division. Service representatives also received bonuses for loans that were so referred and funded.
149. Countrywide employees from senior management down to branch managers pressured the employees below them to sell certain kinds of products. Regional vice presidents, area managers, and branch managers pushed loan officers to sell Pay Option ARMs, piggyback HELOCs, and loans with prepayment penalties, primarily because such loans boosted branch profits, manager commissions, and Countrywide’s profits on the secondary market.
150. If any of these employees, including branch managers, loan officers, loan processors, underwriters, and customer service representatives, failed to produce the numbers expected, Countrywide terminated their employment.
VIII.
AS PART OF ITS DECEPTIVE SCHEME, COUNTRYWIDE COMPENSATED
ITS BUSINESS PARTNER BROKERS AT A HIGHER RATE FOR MORE
PROFITABLE LOANS, WITHOUT CONSIDERATION OF SERVICES
ACTUALLY PROVIDED BY THE BROKERS
151. In California, a mortgage broker owes his or her client a fiduciary duty. A mortgage broker is customarily retained by a borrower to act as the borrower’s agent in negotiating an acceptable loan. All persons engaged in this business in California are required to obtain real estate licenses and to comply with statutory requirements. Among other things, the mortgage broker has an obligation to make a full and accurate disclosure of the terms of a loan to borrowers, particularly those that might affect the borrower’s decision, and to act always in the utmost good faith toward the borrower and to refrain from obtaining any advantage over the borrower.
152. Countrywide paid brokers compensation in the form of yield spread premiums or rebates to induce brokers to place borrowers in loans that would earn Countrywide the greatest profit on the secondary market, regardless of whether the loans were in the best interest of, or appropriate for, the borrowers. In fact, the mortgages that earned Countrywide the highest profit, and therefore would pay the highest rebates or yield spread premiums to brokers, often were not in the best interest of the borrower.
153. For example, Countrywide paid a yield spread premium to brokers if a loan was made at a higher interest rate than the rate for which the borrower qualified and without regard for the services actually provided by the broker. Countrywide paid a rebate to a broker if he or she originated or negotiated a loan that included a prepayment penalty. A three-year prepayment penalty resulted in a higher rebate to the broker than a one-year prepayment penalty. Countrywide would pay this higher rebate even in instances where the loan did not include a provision, such as a more favorable origination fee or interest rate, to counterbalance the prepayment penalty, and where brokers did not perform any additional services in connection with the loan.
154. Countrywide also would pay rebates in exchange for a broker providing an adjustable rate loan with a high margin (the amount added to the index to determine the interest rate). Countrywide would provide an additional rebate to brokers if they were able to induce a borrower to obtain a line of credit.
155. Countrywide accepted loans from brokers in which the broker earned up to points (i.e., percent of the amount of the loan), whether in origination fees, rebates, or yield spread premiums. This high level of compensation was well in excess of the industry norm and encouraged brokers to sell Countrywide loans without regard to whether the loans were in their clients’ best interest. In addition, the compensation paid by Countrywide to brokers was well in excess of, and not reasonably related to, the value of the brokerage services performed by Countrywide’s business partner brokers.
156. In order to maximize their compensation from Countrywide, brokers misled borrowers about the true terms of Pay Option and Hybrid ARMs, misled borrowers about their ability to refinance before the rates or payments on their loans increased, misled borrowers about the cost of reduced and no document loans, and misled borrowers regarding the terms of HELOCs by engaging in the same kinds of deceptive practices alleged at paragraphs 58 through 64, 75 through 77, 108 through 117, and 119 through 135 above.
157. Borrowers often did not realize that their loans contained terms that were unfavorable to them and provided greater compensation to their brokers specifically as payment for those unfavorable terms. An origination fee or other charges imposed by a broker are either
paid by the borrower or financed as part of the loan. In contrast, rebates and yield spread premiums are not part of the principal of the loan and instead are paid separately by Countrywide to the broker. Documentation provided to the borrower might indicate, at most, that a yield spread premium or rebate was paid outside of closing (often delineated as “p.o.c.” or “ysp poc”), with no indication that the payment constituted compensation from Countrywide to the broker for placing the borrower in a loan with terms that were not in the borrower’s best interest, such as a higher interest rate or lengthier prepayment penalty.
158. Countrywide closely monitored and controlled the brokers with whom it worked. Countrywide required brokers it accepted as “business partners” to cooperate and provide all information, documents and reports it requested so that Countrywide could conduct a review of the broker and its operations. In addition, Countrywide required the broker to warrant and represent that all loans were closed using documents either prepared or expressly approved by Countrywide.
IX.
AS A RESULT OF DEFENDANTS’ DECEPTIVE SCHEME, THOUSANDS OF
CALIFORNIA HOMEOWNERS HAVE EITHER LOST THEIR HOMES OR
FACE FORECLOSURE AS THE RATES ON THEIR ADJUSTABLE RATE
MORTGAGES RESET
159. Due to Countrywide’s lack of meaningful underwriting guidelines and risk layering, Countrywide’s deceptive sales tactics, Countrywide’s high-pressure sales environment, and the complex nature of its Pay Option and Hybrid ARMs, a large number of Countrywide loans have ended in default and foreclosure, or are headed in that direction. Many of its borrowers have lost their homes, or are facing foreclosure, because they cannot afford the payment shock and their properties are too heavily encumbered for them to be able to refinance and pay prepayment penalties.
160. The national pace of foreclosures is skyrocketing. In the month of May 2008, approximately 20,000 Californians lost their homes to foreclosure, and approximately 72,000 California homes (roughly 1 out of 183 homes) were in default. This represented an 81% increase from May 2007, at which point the rate was roughly 1 out of every 308 households, while the May 2007 rate represented a 350% increase from May 2006.
161. Countrywide mortgages account for a large percentage of these delinquencies and foreclosures. Countrywide’s 10-K filed in February, 2008, estimated that as of December 31, 2007, a staggering 27.29% of its non-prime mortgages were delinquent. As of that date, approximately 26% of Countrywide’s loans were secured by properties located in California.
162. These numbers have only worsened. As of April, 2008, % of the mortgages owned by Countrywide Home Loans were in some stage of delinquency or foreclosure, including % of originated non-prime loans, and % of Pay Option ARMs.
163. In January and March, 2008, Countrywide recorded notices of default in Alameda, Fresno, Riverside, and San Diego counties alone. Those notices of default represented an aggregate total of delinquent principal and interest of more than dollars. An October 2007 report prepared by Credit Suisse estimated that Countrywide’s delinquency and foreclosure rates are likely to double over the next two years.
164. This may well understate the extent of the crisis facing California homeowners with Countrywide mortgages, as more and more Pay Option ARMs go into delinquency. Approximately 60% of all Pay Option ARMs (made by any lender) were made in California, and many of these were made by Countrywide. Once the thousands of Pay Option ARMs sold by Countrywide to California borrowers reach their negative amortization cap or otherwise reset to require fully indexed principal and interest payments, which will occur over the next two years for many such loans made between 2003 and 2006, the number of such loans in default is likely to skyrocket even above their current high delinquency rate.
FIRST CAUSE OF ACTION AGAINST ALL DEFENDANTS
VIOLATIONS OF BUSINESS AND PROFESSIONS CODE SECTION 17500
(UNTRUE OR MISLEADING STATEMENTS)
165. The People reallege and incorporate by reference all paragraphs above, as though fully set forth in this cause of action.
166. Defendants have violated and continue to violate Business and Professions Code section 17500 by making or disseminating untrue or misleading statements, or by causing untrue or misleading statements to be made or disseminated, in or from California, with the intent to induce members of the public to enter into mortgage loan or home equity line of credit transactions secured by their primary residences. These untrue and misleading statements include but are not necessarily limited to:
a. Statements that Countrywide was a mortgage loan expert that could be
trusted to help borrowers obtain mortgage loans that were appropriate to their financial circumstances, as described in paragraphs 109 through 113, above;
b. Statements regarding the terms and payment obligations of Pay Option
ARMs offered by Countrywide, including statements that the initial payment rate was the interest rate, statements regarding the duration of the initial payment, statements regarding the duration of the initial interest rate, and statements obfuscating the risks associated with such mortgage loans, as described in paragraphs 58 through 64, 119 through 122, and 124 through 128, above;
c. Statements regarding the terms and payment obligations of Hybrid ARMs
offered by Countrywide, including statements regarding the duration of the initial interest-only payment, statements regarding the duration of the initial interest rate, and statements obfuscating the risks associated with such mortgage loans, as described in paragraphs 75 through 77, 119, and 123 through 128, above;
d. Statements regarding the terms and payment obligations of HELOCs, as described in paragraphs 134 through 135, above; and
e. Statements that borrowers with Pay Option and Hybrid ARMs offered by Countrywide would be able to refinance the mortgage loans before the interest rates reset, when in fact they most likely could not, as described in paragraphs 62, 76, 77, and 129 through 132, above;
f. Statements regarding prepayment penalties on Pay Option and Hybrid ARMs offered by Countrywide, including statements that the mortgage loans did not have prepayment penalties, when in fact they did, and statements that prepayment penalties could be waived, when in fact they could not, as described in paragraphs 63, 64, 76, and 131 through 132, above;
g. Statements regarding the costs of reduced or no documentation mortgage loans, as described in paragraph 133, above;
h. Statements regarding the benefits or advisability of refinancing mortgage loans with Pay Option and Hybrid ARMs offered by Countrywide, as described in paragraphs 110 through 118, above; and
i. Statements regarding the existence of prepayment penalties on mortgage loans being refinanced with Countrywide mortgage loans, as described in paragraph 117, above.
167. Defendants knew, or by the exercise of reasonable care should have known, that these statements were untrue or misleading at the time they were made.
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SECOND CAUSE OF ACTION AGAINST ALL DEFENDANTS
VIOLATIONS OF BUSINESS AND PROFESSIONS CODE SECTION 17200
(UNFAIR COMPETITION)
168. The People reallege and incorporate by reference all paragraphs above, as through fully set forth in this cause of action.
169. Defendants have engaged in, and continue to engage in, acts or practices that constitute unfair competition, as that term is defined in Section 17200 of the Business and Professions Code. Such acts or practices include, but are not limited to, the following:
a. Creating and maintaining a deceptive scheme to mass produce loans for sale on the secondary market, as described in paragraphs 15 through 164, above;
b. Making untrue or misleading representations that Countrywide could be trusted to sell borrowers mortgage loans that were appropriate to their financial circumstances, as described in paragraphs 109 through 113, above;
c. Making untrue or misleading representations regarding the terms and payment obligations of Countrywide’s Pay Option and Hybrid ARMs, including representations regarding the payment rate, the duration of initial interest rates, the duration of initial monthly payments, the inclusion of prepayment penalties, the waivability of prepayment penalties, the payment shock that borrowers were likely to experience, and the risks associated with such mortgage loans, as described in paragraphs 58 through 64, 75 through 77, and 119 through 132, above;
d. Making untrue or misleading representations regarding the terms and payment obligations of Countrywide’s HELOCs, as described in paragraphs 134 through 135, above;
e. Making untrue or misleading representations regarding the costs of reduced or no documentation mortgage loans, as described in paragraph 133, above;
f. Making untrue or misleading representations regarding the true likelihood or circumstances under which borrowers would be able to refinance Pay Option or Hybrid ARMs offered by Countrywide, as described in paragraphs 62, 76, 77, and 129 through 132, above;
g. Soliciting borrowers to refinance mortgage loans by misrepresenting the benefits of doing so or by misrepresnting or obfuscating the fact that in doing so the borrowers will incur a prepayment penalty, as described in paragraphs 110 through 118, above;
h. Making mortgage loans and extending HELOCs without regard to whether
borrowers would be able to afford monthly payments on those loans or HELOCs after the expiration of the initial interest rates on the mortgage loans, or the draw periods on the HELOCs, as described in paragraphs 85 through 107, above;
i. Aiding and abetting the breach of the fiduciary duty owed by mortgage brokers to California borrowers, as described in paragraphs 151 through 158, above;
j. Failing to provide borrowers with documents sufficient to inform them of their payment obligations with respect to fully drawn HELOCs, as described in paragraphs 81 through 84, above;
k. Paying compensation to mortgage brokers that was not reasonably related to the value of the brokerage services they performed, as described in paragraphs 152 through 155, above; and
l. Violating Section 17500 of the Business and Professions Code, as described in the First Cause of Action, above.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for judgment as follows:
1. Pursuant to Business and Professions Code section 17535, that all Defendants, their employees, agents, representatives, successors, assigns, and all persons who act in concert with them be permanently enjoined from making any untrue or misleading statements in violation of Business and Professions Codes section 17500, including the untrue or misleading statements alleged in the First Cause of Action.
2. Pursuant to Business and Professions Code section 17203, that all Defendants, their employees, agents, representatives, successors, assigns, and all persons who act in concert with them be permanently enjoined from committing any acts of unfair competition, including the violations alleged in the Second Cause of Action.
3. Pursuant to Business and Professions Code sections 17535, that the Court make such orders or judgments as may be necessary to prevent the use or employment by any Defendant of any practices which violate section 17500 of the Business and Professions Code, or which may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of any such practice.
4. Pursuant to Business and Professions Code section 17203, that this court make such orders or judgments as may be necessary to prevent the use or employment by any Defendant of any practice which constitutes unfair competition or as may be necessary to restore
to any person in interest any money or property, real or personal, which may have been acquired
by means of such unfair competition.
5. Pursuant to Business and Professions Code section 17536, that Defendants, and each of them, be ordered to pay a civil penalty in the amount of two thousand five hundred dollars ($2,500) for each violation of Business and Professions Code section 17500 by Defendants, in an amount according to proof.
6. Pursuant to Business and Professions Code section 17206, that Defendants, and each of them, be ordered to pay a civil penalty in the amount of two thousand five hundred dollars ($2,500) for each violation of Business and Professions Code section 17200 by Defendants, in an amount according to proof.
7. That Plaintiff recover its costs of suit, including costs of investigation.
8. For such other and further relief that the Court deems just, proper, and equitable.
Dated: December 30, 2008 THE LAW OFFICES OF
TIMOTHY MCCANDLESS
By _____________________________
Timothy McCandless, Attorney for Plaintiffs
1. Documents to be examined:
1. Promotional literature, correspondence and borrowers notes from initial contact with mortgage broker of “lender.”
2. Any document purporting to give the terms of a proposed loan including but not limited to Good Faith Estimate
3. The Good Faith Estimate and documents supporting affordability and benefits
4. The settlement statement
5. The name and contact information and appraisal report including the actual person and license number of the appraiser, the amount of the previous sale, any prior appraisals available to borrower, and the borrower’s estimate of current value decreased by 12% for broker’s fees (6%) and current average discount from asking price (6%).
6. The name and address of the mortgage broker, and the specific person the borrower dealt with, whether the mortgage broker is still in business.
7. Identification of the loan originator
8. Determination if FNMA or Freddie MAC were actually involved or if the standard forms were used from those or any other (HUD) GSE. (Government Sponsored Entity)
9. Identification of title agent with name and address
10. Identification of title insurance company with name and address
11. Identification of the escrow agent with name and address
12. Identification of the closing agent with name and address
13. Identification of the Trustee with name and address
14. The set of closing documents given to the borrower: the ones provided before closing, the ones provided after closing and any documents that were transmitted appointing servicer or substitution of Trustee or assignment etc.
15. SEC reports and annual reports of any of these entities or affiliates
16. If available, Sampling investigation to determine if Pooling and Services Agreement, Assignment and Assumption Agreement, Insurance, Credit Default Swaps, Cross Collateralizing, Over-collateralizing, reserves, and bailouts from Federal Reserve or U.S. Treasury can be produced for examination.
17. Documents, if available, showing authority of any party alleging rights to enforce, collect or perform modifications, issue notices of delinquency, default, sale or file foreclosure actions, unlawful detainer (eviction) actions etc.
2. Basic Required Services — For expediency and cost purposes, the initial “analysis is presumed to be using a “sampling technique” that identifies probably information that is applicable but does not guarantee accuracy or completeness)
1. Retainer Agreement in Writing for analysis, collection etc., that allows for attorney tot ake over relationship on certain conditions.
2. Written authroization form Borrower executed in triplicate and notarized (each copy)
3. Analysis of disclosures and promotional literature to determine the nature of the deal the borrower thought he/she/they were getting and comparison with the actual result.
4. Analysis of GFE etc. and comparison with actual deal, disclosures of third party funding, table funding, surprise fees, undisclosed fees, undisclosed parties, etc.
5. Analysis of settlement statement to determine the representation of the parties at closing to the borrower and comparison with actual deal.
6. Appraisal Sampling analysis to determine negnligence or fraud based upon comparables of time, geography and whether developer asking prices were used to inflate the appraisal. Calculation of potential claim for inflated appraisal. Determination of the expected life of the loan based upon adjustments, expected market conditions etc. Calculation of probable effect on APR over the expected life of the loan.
7. Analysis of whether the closing conformed to GSE guidelines as industry standards
8. Analysis of conduct of the mortgage broker to determine potential claim for negligence or fraud
9. Analysis of conduct of the title agent to determine potential claim for cloud on title, negligence or fraud
10. Analysis of conduct of the title insurance company to determine potential claim for cloud on title, negligence or fraud
11. Analysis of conduct of the escrow agent to determine potential claim for negligence or fraud
12. Analysis of conduct of the closing agent to determine potential claim for negligence or fraud
13. Analysis of results of investigation for compliance with TILA, RESPA, HOEPA, RICO, Deceptive Business, Deceptive Lending, usury etc.
14. Analysis of conduct of the Trustee or successor Trustee on Deed of Trust, if applicable to determine potential claim for negligence or fraud
15. Sampling analysis to identify potential successor trustees (Pool, SIV, SPV etc.)
16. Sampling analysis to determine where the borrowers payments have been sent and how they have been applied, if available.
17. Sampling analysis to determine if the the named entity as Payee on the Promissory note has been paid in full by a third party — and preliminary abalysis as to whether the note became non-negotiable, whether the borrower owes anyone any amount, and if so who that might be and how much it might be, if it is possible to make such determinations in the preliminary investigations.
18. Issuance of Preliminary Findings Report to be sent to servicer or whoever the borrower is sending payments to or otherwise in communication with.
19. Challenge letter to each party seeking to enforce, whether lawyer or party, raising defensive positions concerning their authority to act.
20. Extensive Qualified Written Request with suggestions for resolutions, coupled with Notice and contract for appointment of Borrower or Borrower’s designee as attorney in fact for reconveyance as per RESPA.
21. Demand letter and notice if Lender fails to comply.
22. Challenge letter if Lender denies claims or requires additional written authorization
23. If available, counsel’s recommendation of next steps
3. Extended Services:
1. Appointment of agent for reconveyance
2. Recording reconveyance
3. Recording other instruments in property records
4. Expert Affidavit
5. Expert testimony
6. Exhibits prepared for court
7. Form complaints, motions and affidavits
8. Legal ghost Writing
9. Consultation with Borrower’s attorney
10. Appearances in Court
11. Forensic Review
1. Basic, non sampling
2. Full audit including examination of servicer’s ledgers etc.
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Mortgage Asistance 877-227-4341 