Foreclosure Cases 2011 in review California

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California Cases – 2004 to Present
Including Federal cases interpreting California law
LISTED WITH MOST RECENT CASES FIRST
Go to cases 2000 – 2003

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 Company     Docket     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 Partners     Docket
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 XXVI      Modification     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 Mortgage     Modification     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. Rounsavell     Mod 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 Company     Modification     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 Investments     Docket
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 Company     Modification     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. Neilsen      Modification     Docket     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. McCormack     Docket     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-Bloor     Docket
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 Cabinets     Docket
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 Sonoma     Docket     Sup.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 Obispo     Docket     Sup.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 Properties     Docket
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. Lee     Docket
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. Cridlebaugh     Docket
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. Butterfield     Docket     Sup.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 Products     Docket
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. Shetty     Docket     Sup.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. Horton     Modification     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 Lund     Docket
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 Liquors     Docket     Sup.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. Burch     Docket
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 Solano     Docket
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. Butterfield     Modification     Docket     Sup.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. Hilbert     Docket
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. Bollag     Modification     Docket
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 Assn     Modification     Docket     Sup.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     Docket     Sup.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 Park     Docket     Sup.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. Liebermensch     Docket
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 Robinson     Docket     Sup.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 Court     Docket
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 HOA     Docket     Sup.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. Marshall     Docket
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. Markowitz     Docket
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. Lukes     Docket
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. McCormick     Docket     Sup.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 Felder     Docket
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 Trust     Order Modifying Opinion     Docket     Sup.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. Dintino     Docket
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. Allen     Docket     Sup.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 Holtemann     Docket     Sup.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. Pheil     Docket
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 Angeles     Docket     Sup.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. Pereira     Docket     Sup.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 Sausalito     Docket
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 Operations     Docket     Sup.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 Sonoma     Docket     Sup.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 Court     Docket     Sup.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. Ratliff     Docket     Sup.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. Wang     Docket
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. Flora     Docket
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. Schilling     Docket
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. Hustwit     Docket     Sup.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 Estate     Sup.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. Cooper     Docket     Sup.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. Beckham     Docket
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. Thexton     Docket     Sup.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 Cases     Docket
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 Association     Docket
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. Capon     Docket
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. Ng     Docket
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. Martinez     Docket
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. Prun     Docket
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. Rudnick     Docket
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. Vallas     Docket
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. Seith     Docket
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, LLC     Docket
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. Helal     Docket     Sup.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. Partnership     Docket     Sup.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 Investments     Docket     Sup.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. Stapakis     Docket
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. Blechman     Docket     Sup.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. Post     Docket     Sup.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. Burch     Docket     Sup.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. Tseng     Docket     Sup.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 Equalization     Docket     Sup.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. Handlery     Docket     Sup.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. Blankenship     Docket
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. Cooper     Docket
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. Liebermensch     Docket     Sup.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 Ruelas     Docket
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 Partners     Docket     Sup.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. Overton     Docket     Sup.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 Company     Docket     Sup.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.     Docket     Sup.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. Reed     Docket
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 Estates     Order Modifying Opinion     Docket
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. Kamins     Docket
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 Yool     Docket
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 Berkeley     Docket
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.     Docket     Sup.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. Powell     Docket     Sup.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 Court     Docket     Sup.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 Angeles     Docket
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 Estate     Docket
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 Company     Docket     Sup.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. McMcMahon     Docket
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. Taylor     Docket
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. Doherty     Docket
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. Martinez     Docket     Sup.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. Mix     Docket
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 Escrow     Docket
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 Exchange     Docket
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 Industries     Docket
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 Bay     Docket     Sup.Ct. Docket
144 Cal.App.4th 767, 145 Cal.App.4th 309a – 2nd Dist (B176929) 11/7/06     Modification of Opinion 12/6/06     Petition 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 Bank     Docket
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 Foods     Docket     Sup.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. Merrill     Docket
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 Mutual     Docket     Sup.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 Francisco     Docket     Sup.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. Fidelity     Docket     Sup.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 Association     Docket     Sup.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. Foley     Docket
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 Angeles     Docket
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 Company     Docket     Sup.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 House     Docket
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 Association     Docket
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. Lepe     Docket
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.     Docket     Sup.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. Wilde     Docket     Sup.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. UNPUBLISHED Harbor 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. Dunham     Docket     Sup.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 Ranch     Docket     Sup.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. Saladino     Docket     Sup.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. Hussa     Docket
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 Estate     Docket     Sup.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 Investors     Docket     Sup.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. Torres     Docket     Sup.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. Koehler     Order Modifying Opinion     Docket     Sup.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 Mortgage     Docket
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 Foundation     Docket
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 Corporation     Docket     Sup.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 Court     Docket
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. Mix     Docket
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 Clara     Docket
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 Ventura     Docket
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. Molinari     Docket     Sup.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)     Docket     Sup.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 Docket     Docket     Sup.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. Pearson     Docket
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 Benson     Docket
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. Fegen     Docket
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. Edwards     Docket     Sup.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. Nielsen     Docket     Sup.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 Resort     Docket
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 Group     Docket     Sup.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. McAdams     Docket
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.     Docket     Sup.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 Company     Docket
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. Schoellkopf     Docket     Sup.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 Court     Docket     Sup.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 Seifert     Docket     Sup.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 Investment     Docket     Sup.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. Garamendi     Docket     Sup.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 Court     Docket     Sup.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 California     Docket     Sup.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 HOA     Docket
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 America     Docket     Sup.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. Berghold     Docket     Sup.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 Company     Docket     Sup.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.”

State of California v. PriceWaterhouseCoopers
39 Cal.4th 1220 – Cal. Supreme Court (S131807) 8/31/06

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. Davey     Docket
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     Docket      Sup.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 Court     Docket     Sup.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. Berger     Docket     Sup.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. Doherty     Docket
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 Escrow     Docket
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 Court     Docket
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. Uba     Docket
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 Mendocino     Docket
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. Grabach     Docket     Sup.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. Soni     Docket
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. Jones     Docket
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 Corporation     Docket
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. Havis     Docket
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 Francisco     Docket     Sup.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. Soos     Docket
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. Terifaj     Docket
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 Gioia     Docket
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 Beach     Docket     Sup.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.     Docket      Sup.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. Charnley     Docket     Sup.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. Carrigan     Docket
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. Welch     Docket     Sup.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 Company     Docket     Sup.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.     Docket     Sup.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 Investors     Docket
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. Quinones     Docket
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. Ostrovsky     Docket
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-King     Docket     Sup.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.

Go to cases 2000 – 2003

The Trustee sale can be set aside

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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Challenge Your Lender… Now!

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Do you want to hold your lender responsible for their illegal actions?

Challenge Your Lender… Now!

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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.

Best regards,
Tim

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  QUIET TITLE IS NOT A DEFENSE — IT IS OFFENSE AND IT IS A HIGHLY EFFECTIVE LAWSUIT

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  Comptroler of the currecy consent orders

  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,

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  David and Goliath as court overturns case dissmissal

  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 […]
• 

  17 News Investigation: Homeowner challenges bank

  17 News Investigation: Homeowner challenges bank. Filed under: Foreclosure, I Have a Plan, lis pendence, mers, Mortgage modification
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  pending lawsuits and homeowners winnning

  Mark DeMucha v Wells Fargo Bank; Kutak Rock LLP; Homeowner Wins a California Appeal; Reversed and R http://www.scribd.com/doc/60748498/Mark-DeMucha-v-Wells-Fargo-Bank-Kutak-Rock-LLP-Loses-a-California-Appeal-Reversed-and-Remanded Added by PENDING LAWSUIT on July 24, 2011 at 9:30am — No Comments Barry Fagan v Wells Fargo re: KOSAR PETITION WHY ACTION SHOULD NOT BE DISMISSED, WITH PREJUDICE, FO…
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  one west bank and the consent order with admissions of wrongdoing

  One West Bank click to see full order from comptroller of the currency Filed under: I Have a Plan Tagged: one west

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  standing

  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 […]
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  Is the notary responsible or at least negligent or at least negligent per se !!!

  (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 […]

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  The securitization argument a year later

  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. […]
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  MERS and invalid assignments

  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 […]

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  Been evicted and need more time ??Appeals from UD actions are governed by CCP §§901–923. [See CCP §1178; Anchor Marine Repair Co. v Magnan (2001) 93 CA4th 525, 528–530.]

  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 […]

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  Possible Counter-Attack in Unlawful Detainer (Eviction) in Fraudulent Foreclosure Cases (via Livinglies’s Weblog)

  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 […]

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  FREE HOUSE MYTH DEBUNKED BY PORTER AND LEVITIN (via Livinglies’s Weblog)

  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 […]

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  BOA Feeling the Heat is Striking Back at Foreclosure Defense Lawyers as Lawsuits are Filed Against Firms Who Represent BOA (via Livinglies’s Weblog)

  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 […]

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  Robo-signing continues without consequences (via Livinglies’s Weblog)

  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 […]

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  Cloud on title forever post foreclosure {but wait the Banks own the title companies}

  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. […]
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  assingmment please?? 2932.5 with a side of Veal

  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 […]
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  Ask for a 402 hearing and then dissmiss the eviction !!!

  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 […]

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  FINALLY! BOA FACES CLAIMS FOR BOGUS MODIFICATION ACTIONS (via Livinglies’s Weblog)

  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 […]

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  AZ: TRUSTEE CAN BE SUED IF SUBSTITUTION WAS INVALID (via Livinglies’s Weblog)

  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 […]

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  WEIDNER: IT’S THE ALLONGE!!! (via Livinglies’s Weblog)

  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 […]

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  Judicial Notice ?? not so fast

   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. […]

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  One West False statements

  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 […]

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  Javaheri v. JPMorgan Chase finally !!

  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 […]

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  The Banksters will get you any way they can

  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 […]
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  Beware of foreclosure scams currently under investigation by the District Atorney

  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 […]
• 

  Current articles in foreclosure

  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

Homeowners Sue to Block BofA/BNY Deal; Details

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 […]

• U.S. Is Set to Sue a Dozen Big Banks Over Mortgages

  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 […]
• Robo-signed mortgage docs date back to late 1990s

  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 […]
• Goldman Sachs must investigate questionable lending and foreclosure practices in its mortgage unit, Fed says.

  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 […]
• Robo-Signing Redux: Servicers Still Fabricating Foreclosure Documents

  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 […]
• John O’Brien, Southern Essex District Register of Deeds in Salem, Massachusetts extends an invitation to banks and all attorney generals to visit his registry.

  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, […]
• Goldman Sachs, Litton, Ocwen reach deal on robosigning with NY regulator

  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 […]
• Memo: BofA to Sell Correspondent Mortgage Business

  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 […]
• BoNY Mellon CEO Robert Kelly steps down

  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 […]
• New York Attorney General Deposed 53 in Bank of America Case Over Merrill

  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 […]
• Was president of LPS’ Loan Portfolio Solutions division just let go?

  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 […]
• A STATEMENT ON MORTGAGE FRAUD THAT EVERY ATTORNEY GENERAL COULD ISSUE TODAY

  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 Announces Securities Investigation Of Bank Of America

  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 […]
• BREAKING: Bank of America to Exit Mortgage Business

  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 […]
• The Countrywide settlement that NV AG Masto says BofA is flagrantly violating was also signed by… Tom Miller.

  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 […]
• Bank of America Accused of Breaching Accord – Gretchen Morgenson

  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 […]
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  MERS ADMITS LINDA GREEN HAD NO AUTHORITY BUT TRIES TO USE IT ANYWAY

  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 […]

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  Who owns the loan? Ohio Supreme Court is taking up the question

  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 […]

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  EXAMPLE OF NEW TOOLS PROVIDED BY LIVINGLIES: OCC CEASE AND DESIST ORDER V US BANK

  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 […]

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  BLOOMBERG: HOA V BOA: Homeowner Associations Step Up the Pressure on Banks

  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 […]

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  Yves Smith: BANKS HAVE INSTITUTIONALIZED STEALING HOMES

  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. […]

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  Deconsolidation Nation for Mortgages?

  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 […]

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  KISS: KEEP IT SIMPLE STUPID

  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 […]

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  BOA DEATH WATCH: SETTLEMENT FALLING APART, BOA SCRAMBLES FOR DOLLARS

  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 […]

• 

  Bombshell Admission of Failed Securitization Process in American Home Mortgage Servicing/LPS Lawsuit

  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 […]

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  MANDELMAN MATTERS: DEADBEAT BORROWERS AND THIEVES WHO CALL THEM THAT

  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 […]

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  MANDELMAN MATTERS WRITER AND DOCUMENTARY MAKER WILL JOIN NEIL GARFIELD AND OTHERS IN HAWAII WORKSHOP OCTOBER 14, 2011

  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 […]

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  OBAMA ADMINISTRATION PRESSURING STATE AG’S TO CAVE IN TO BANKS

  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 […]

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  DEUTSCH LOSES AGAIN: POOL DID NOT RECEIVE LOAN

  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, […]

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  TENN FED CT ALLOWS CLAIM AGAINST BOA ON OWNERSHIP OF LOAN

  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 […]

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  $1.2 Trillion in Secret Additional Bailout for Banks with No Collateral and No Commitments

  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 […]

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  JUDGE MARGERET MANN (SO. CA BKR) PLUNGES INTO DETAILS AND COMES UP WITH WELL-REASONED DECISION

  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 […]

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  Servicer Sues LPS-DOCX OVER ROBO-SIGNING — “SURROGATE SIGNING”

  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 […]

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  After The Storm – Foreclosure Fraud & Robo-Signing Continues by Nye Lavalle

  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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  AMNESTY FOR BANKS SOUGHT IN NEGOTIATIONS

  MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE SETTLEMENT TARGET: LABOR DAY!! “They wanted to be released from everything, including original sin,” said a U.S. official involved in the discussions. From today’s Wall Street Journal…. FORECLOSURE TALKS SNAG ON BANK LIABILITY By RUTH SIMON, VANESSA O’CONNELL and NICK TIMIRAOS Efforts to […]

TILA law: Truth in Lending $2,000.00 for violation, statutory damages; I paid more for the Audit ?? !!

TRUTH-IN-LENDING

DISCLOSURE REQUIREMENTS, VIOLATIONS, AND REMEDIES

PURPOSE OF THE TRUTH-IN-LENDING ACT (TILA)

TILA seeks to assure meaningful disclosure of credit terms and conditions that the consumer will be informed with accurate costs and benefits of their credit transaction, allowing them to shop for the best credit terms available on the market. 15 U.S.C. § 1601(a).

STANDARD OF LAW

Since TILA specifically remedial in nature, its provisions must be strictly construed. A creditor must comply with TILA in all credit transactions and “misleading disclosure is as much a violation of TILA as a failure to disclose at all.” Smith v. Chapman, 614 F.2d 968, 977 (5th Cir. 1980). It is not sufficient to attempt to comply with the Act, but rather, creditors are required to strictly comply with all the requirements of the Act. There is no need to show that the consumer was misled or deceived by ambiguous credit terms in order to prevail. Noel v. Fleet Finance, Inc., 971 F. Supp. 1102 (E.D. Mich. 1997).

Congress did not intend for creditors to escape liability for merely technical violations, that even minor or technical violations impose liability upon the creditors. Huff v. Steward-Gwinn Furniture Co., 713 F.2d 67, 69 (4th Cir. 1983). See also, Washington v. Ameriquest Mortg. Co., 2006 W.L. 1980201 (N.D. Ill.).

SCOPE

TILA applies to most consumer credit transactions and was specifically enacted to ensure accurate and meaningful disclosure of the charges involved in a transaction, allowing consumers to make their own decisions about obtaining a loan.

A lawsuit for violation of TILA may be based upon a lenders failure to comply with disclosure requirements. U.S.C. §§ 1631-34. Most of TILA violations involve the creditor’s failure to charge the correct amount, failure to disclose all the material terms, or failure to provide necessary forms or documents required by the Act.

TILA does not apply to the following transactions:

1. Transactions that are made for business, commercial, or agricultural purposes. 15 U.S.C. § 1603(1); Reg. Z § 226.3(a)(1).
2. Extensions of Credit to Organizations as opposed to natural persons. U.S.C. § 1603(1); Reg. Z. § 2026.3(a)(2).
3. Credit over $25,000 Not Secured by Real Property or a Dwelling. U.S.C. § 1603(3); Reg. Z. § 226.3(b).
4. Student Loans. U.S.C. § 1603(7); Reg. Z. § 226.3(f).
5. Transactions under Public Utility Tariffs. U.S.C. § 1603(4); Reg. Z. § 226.3(c).
6. Securities or Commodities transactions that are registered with the Securities and Exchange Commission. U.S.C. § 1603(2); Reg. Z. § 226.3(d).

STATUTE OF LIMITATIONS

When a violation of TILA occurs, the one-year limitations period applicable to actions for statutory and actual damages begins to run. U.S.C. § 1641(e).

A TILA violation may occur at the consummation of the transaction between a creditor and its consumer if the transaction is made without the required disclosures.

A creditor may also violate TILA by engaging in fraudulent, misleading, and deceptive practices that conceal the TILA violation occurring at the time of closing. Often consumers do not discover any violation until after they have paid excessive charges imposed by their creditors. Consumers who later learn of the creditor’s TILA violations can allege an equitable tolling of the statute of limitations. When the consumer has an extended right to rescind or pursue other statutory remedies because a violation occurs, the statute of limitations for all the damages the consumers seek extends to three years from the date the violation is revealed. McIntosh v. Irwin Union Bank & Trust Co., 215 F.R.D. 26, 30 (D. Mass. 2003).

TILA AND REGULATION Z

Congress delegated authority for the implementation of TILA to the Federal Reserve Board (FRB). The Board of Governors (the Board) of the FRB interpreted TILA and promulgated a detailed and comprehensive set of rules that sets out the Board’s interpretation known as Regulation Z. Regulation Z is an official set of rules and most pleadings alleging TILA violations also alleging violations of Regulation Z as well.

DISCLOSURE REQUIREMENTS AND VIOLATIONS

1. 1. Form Of Disclosure

TILA requires specific disclosures before the closing of a credit transaction. Disclosures must be “clear and conspicuously, in writing, in a form that the consumer may keep.” § 1632(a); § 226.5(a)(1).

Disclosure statement is a written document that a creditor is required to provide the consumer prior to closing, which contains TILA required material terms[1] related to the costs of the credit transaction. In this statement, a creditor must disclose to the person who is obligated on a consumer credit transaction the information required under TILA.

The Act calls for disclosures to be made in a manner that is reasonably to understand by ordinary persons. Most courts agree that “sufficiency of TILA mandated disclosures is to be viewed from the standpoint of an ordinary consumer, not the perspective of a Federal Reserve Board member, federal judge, or English professor.” Smith v. Cash Store Mgmt., 195 F.3d 325, 328 (7th Cir. 1999). Edmondson v. Allen-Russell Ford, Inc., 577 F.2d 291, 296 (5th Cir. 1978) (“we must assess the adequacy of disclosure […] by the audience for which disclosure was intended).

1. a. Required Disclosures Must be Clear and Conspicuous. U.S.C. § 1632(a). Courts usually look at the particular Disclosure Statement and its content to determine whether it was sufficiently clear and conspicuous.

1)                  Creditor violates TILA for failure to clearly and conspicuously disclose the requirements by disclosing required information in fine print. There was “nothing in the disclosure statement that would call a person’s attention to the relevant clause.” Violation found when disclosures were buried near the bottom of the form. Re Wright, 11 B.R. 590, 592 (S.D. Miss. 1981).

2)                  TILA violation found where a financial company fails to disclose the cost of credit life and disability insurance in the disclosure statement, making the interest of the loan appear less than its actual cost. Woods v. Beneficial Finance Co. of Eugene, 395 F. Supp. 9, 12 (DC Or 1975).

3)                  Disclosures are not clear and conspicuous when the disclosure statement includes contradicting terms. Varner v. Century Finance Co. Inc., 738 F.2d 1143 (11th Cir. 1984) (disclosing two different dollar amounts under the same heading is confusing). See also Andrews v. Chevy Chase Bank, 240 F.R.D 612, 618 (E.D. Wis. 2007) (Disclosure found unclear where the Truth-In-Lending Disclosure Statement shows the APR is 4.047 percent and other disclosure that “strongly implie[s] that the cost of the loan expressed as a yearly rate” at 1.950 percent); Ralls v. Bank of N.Y., 230 B.R. 508, 516 (E.D. Pa. 1999) (where there is a contradiction between TILA disclosures and other information provided by the lender, the disclosures are unclear).

1. b. The terms “finance charge” and “annual percentage rate” (APR) shall be more conspicuous than any other terms. U.S.C. § 1632(a). These terms can be disclosed more conspicuously by using a contrasting type size or boldness and/or placing borders around them. Commentary § 226.5(a)(2)-2.

1)                  Violate for printing the terms “finance charge” and annual percentage rate” in the same typeface as other material terms. Brown v. Payday Check Advance, Inc., 202 F.3d 987, 990 (7th Cir. Ill. 2000). See also, Herrera v. First Northern Sav. & Loan Asso’n, 805 F.2d 896, 898 (NM 1986) (TILA violated when the term “annual percentage rate” appeared on the disclosure statement in identical size, style, and boldness with over 30 other terms and phrases).

2)                  No violation where the term “annual percentage rate” appears in a bolded box and is highlighted by all capital and bolded letter.” Robinson v. First Franklin Financial Corp., 2006 WL 2540777 (E.D. Pa.).

1. c. TILA disclosures must be grouped together and segregated from all unrelated information. U.S.C. § 1632(a). Disclosures must be organized in the contrast so that each section of the disclosure statement is complete without any extra information that confuses the consumers. Reg. Z. § 226.5(b)(1).

1)                  A paragraph at the bottom of the contract referring to the “property described above” is ambiguous and does not comply with the requirement that disclosures be grouped together. Leathers v. Toyota-Volvo, 824 F. Supp. 155 (C.D. Ill. 1993). See also, In re Cook, 76 B.R. 661, 663 (C.D. Ill. 1987) (information in the disclosure statement referred back and forth violates TILA, because the required disclosures must be simplified and grouped in a single location and segregated from everything else).

2)                  Failure to disclose time of payment in the disclosure statement violates TILA because “the timing of payments […] must be grouped with the other required disclosure” such as number of payments and amount of payments. Jones v. Ameriquest Mort. Co., 2006 WL 273545 (N.D. Ill.). See Andrews v. Chevy Chase Bank, 240 F.R.D at 617 (the creditor listed the period of payments in a different place than the number and amount of payments violate TILA requires to group related information together).

1. d. Additional information. Lenders can include additional information on the disclosure statement so long as the additional information relates to the required disclosures. U.S.C. § 1632(b).

1)                  Disclosure of an additional interest rate of 1.950 percent, which only applied to the first monthly payment, in the disclosure statement is violation, because it causes the loan to “appear more attractive than it actually was and serve no useful purpose.” Andrews v. Chevy Chase Bank, 240 F.R.D at 620.

2)                  Additional information setting out the Note Rate disclosed on the Disclosure Statement found “helpful and important to consumers.” Smith v. Anderson, 801 F.2d 661, 663 (Ct. App. Va. 1986).

1. e. The home equity brochure published by the Board or a suitable substitute shall be provided. U.S.C. § 1637A(e). Creditors are required to provide the consumer with a brochure prepared by the FRB describing the home equity plans. If a creditor provides a substitute brochure, the brochure must be comparable to the Board’s brochure in substance and comprehensiveness. Reg. Z. § 226.5b(e)-1. When a third party has provided the consumer with a brochure, the creditor does not have to give the consumer a second copy of the brochure. Reg. Z. § 226.5b(e)-2.
2. 2. Time of Disclosures: “The disclosures and brochure required … shall be provided at the time an application is provided to the consumer.”
   1. a. Creditor failed to provide the consumer disclosure statement at the consummation of the credit transaction violates TILA. Family Fed. Sav. & Loan v. Davis, 172 B.R. 437 (D.C. 1994); In re Schweizer, 354 B.R. 272, 281 (Id. 2006).
   2. b. No Violation where the creditor presents to the consumer, prior to the consummation of the credit transaction, a contract with multiple copies and allows the consumer to keep one of the copies before signing the contract. Queen v. Lynch Jewelers, LLC, 55 P.3d 914, 916 (Kan. App. 2002).
3. 3. Required Disclosures for Open-End Credit Plan

TILA requires the following information to be disclosed, to the extent applicable. U.S.C. § 1637(a).

1. a. Disclosure of the Finance Charge Accrual Date: The conditions under which a finance charge may be imposed together with either the time period, if any in which the customer may pay without incurring additional finance charges or there is no free ride period. Reg. Z. § 226.6(a)(1).
2. b. Disclosure of the Periodic Rate, Range of Balances, and APR: For each period, a creditor must disclose the periodic rate that will be used to compute the finance charge; the balances to which the rate is applied; the corresponding nominal annual percentage rate; if deferent rates apply to different types of transactions, they must be disclosed; and penalty rate and possible conditions that trigger the penalty rate. Reg. Z. § 226.6(a)(2).
3. c. Disclosure of the Periodic Rate, Range of Balances, and APR: The method used to determine the balance on which the finance charged is imposed, and a complex method calls for a more detailed explanation. Reg. Z. § 226.6(a)(3).
4. d. Disclosure of the Finance Charge Amount: The method used to determine the amount of finance charge, including any minimum or fixed amount. Reg. Z. § 226.6(a)(4).
5. e. Disclosure of Charges Other than Finance Charge: Identification of other charges which may be imposed and their method of computation in accordance with the FRB regulations. Significant charges such as membership fees, late charges, default charges, charges for exceeding the credit limit of an account, fee for providing copies of documents, taxes imposed on the credit transaction, real estate charges, and other charges must be disclosed. Reg. Z. §§ 226.6(b), 226.4.
6. f. Disclosure of Security Interest: If a security interest will be secured in connection with the transaction, the collateral must be identified, even if the property is not owed by the consumer. Reg. Z. § 26.2(a)(25).
7. g. Disclosure of Billing Error Right: A statement as to billing error rights and the right to assert claims and defenses in a form prescribed by the FRB must be provided to the consumer at the consummation of a transaction. Reg. Z. § 226.2(a)(d).
8. 4. Required Disclosures of Residential Mortgage Transactions

Most home mortgages are subject to the disclosure requirements of TILA. U.S.C. § 1638. The required disclosures must be provided to the homeowner prior to the consummation of a credit transaction. Homeowners have the right to rescind most credit transactions, including home equity loans and home improvement loans, in which the home is taken as collateral.

1. a. Disclosure of the Creditor: The name of the creditor must be provided and the address and/or telephone number are not required but may be included. U.S.C. § 1602(f); Reg. Z. § 226.2(a)(17).

Failure to disclose of the creditor’s identity properly entitles the consumer only actual damages, if any.

1. b. Amount Financed: This term must be used in disclosure statement, and a brief description of the amount financed must be provided. U.S.C. § 1638(a)(2)(A).

Failures to properly disclose the amount financed gives rise to statutory damages, attorney’s fees, and any actual damages. Reg. Z. § 1640(a)(3). Its violation may also extend the consumer’s right to rescind. U.S.C. § 1602(u); Reg. Z. § 226.23 n. 48.

1. c. Finance Charge: The term “finance charge” must be used and A brief description must be provided. U.S.C. § 1638(a)(3); Reg. Z. § 226.18(d). It can be disclosed only as a total amount, and there is no requirement to itemize finance charge, and overstating finance charge does not violate TILA. Vandenbroeck v. Commonpoint Mortg. Co., 22 F.Supp. 2d 677 (W.D. Mich. 1998).

In real estate closing charges, fees may be excluded from the finance charge are real property and title-related fees; document fees; closing agent, attorney fees; and notary, appraisal, and credit report fees. U.S.C. § 1605(e); Reg. Z. § 226.4(c)(7).

1. d. APR: The term must be used and disclosure must be accurate. U.S.C. §1638(a)(4); Reg. Z. §§ 226.18(e). The APR is accurately disclosed when it is not more than 1/8 of 1 percentage point (.125%) above or below the actual APR. In variable-rate transactions, the description must inform the consumer that the interest rate is subject to change. A historical example illustrating the effects of interest rate changes implemented according to the loan program may be provided to the borrowers. U.S.C. § 1638(a)(14); Reg. Z. § 226.18(f).

Improper disclosure of the APR is a material violation of TILA that extends the consumer’s right to rescind. U.S.C. § 1602(u); Reg. Z. § 226.23 n 48. Statutory damage, attorney’s fee, and actual damage are also available. U.S.C. § 1640(a)(3).

1. e. Payment Schedule: Payment schedule includes the number of payments, the amount of each payment, and the timing of payments scheduled to repay the obligation. U.S.C. § 1638(5)-(6); Reg. Z. § 226.18(g). Failure to disclose that payments were due monthly violates TILA. Andrews v. Chevy Chase Bank, 240 F.R.D. at 617.

Violation of these requirements entitles the consumer statutory damages, attorney’s fees, and actual damages. U.S.C. § 1640(a)(3) Improper disclosure is also a material violation for purposes of rescission. U.S.C. § 1602(u); U.S.C. § 1602(u); Reg. Z. § 226.23 n 48.

1. f. Total Sale Price in a Sale of Property: The total of the cash price of the property or services, additional charges, and the finance charge must be disclosed. U.S.C. § 1638(a)(7). Reg. Z. § 226.18(j). Actual damages may be available for violation to disclose this factor. U.S.C. § 1640(a).
2. g. A statement regarding the taking of the security interest in the property: The creditor must disclose whether it acquires a security interest in the property being purchased, or in other property, as part of the transaction.

Violate this requirement will give rise to statutory damages, attorney’s fees, and actual damages. U.S.C. § 1640(a)(3).

1. h. Late charges: The dollar amount or the percentage charge may be imposed for late charge. U.S.C. § 1638(a)(10); Reg. Z. § 226.18(l). Actual damages may be available for failure to state the late charges. U.S.C. § 1640(a).
2. i. Any Rebate Available: Any funds given to the consumer must be disclose whether it is in the form of cash, check, deposit in a savings or checking account. Reg. Z. § 226.18(r). Actual damages may be available for this violation. U.S.C. § 1640(a).
3. j. Disclosure of Reference to Additional Documents: Information regarding nonpayment, default, and the right to accelerate the maturity of the debt. Prepayment rebates and penalties are not required to be disclosed to simplify the closing process. Instead, the creditor can provide appropriate documents that consumer could refer to. Reg. Z. § 226.17(a)(4). Actual damages may be available for failure to disclose this requirement. U.S.C. § 1640(a).
4. 5. Required Disclosures for Adjustable Rate Mortgages

Adjustable rate mortgages (ARMs), which secured by the borrower’s principal dwelling with a maturity longer than one year, are required to be disclosed with additional information. To simplify disclosure requirements for variable rate loans, creditors may disclose any variable rate transaction applying the ARMs disclosure rule. However, the reverse is not allowed. Reg. Z. § 226.18(f); 52 Fed. Reg. 48665 (Dec. 24, 1987).

Failure to disclose properly and accurately the requirements of variable rate loans entitles the consumer statutory and actual damages and also rescission right. In re Fidler, 210 B.R. 411 (D. Mass. 1997).

1. a. Rate Cap Disclosure: The maximum interest rate that may be imposed during the term of the obligation must be disclosed to the borrower. Reg. Z. § 226.30(a); Fed. Reg. 45611 (Dec. 1, 1987).
2. b. ARM brochure: The Consumer Handbook on Adjustable Rate Mortgages, published by the Board and the Federal Home Loan Bank Board, may be provided to the consumer to fulfill this requirement. Creditors can also provide a suitable consumer handbook that is comparable to the Board’s Consumer Handbook in substance and comprehensiveness. Reg. Z. § 226.19(b)(1).
3. c. Timing of Disclosures: The required disclosures and the Consumer Handbook must be provided to the borrower when an application form is furnished or before the payment of a non-refundable fee is made, whichever earlier. Reg. Z. § 226.19(b). Where the borrower receives the application by mail or a third party agent, the required information must be placed in the mail or delivered within three business days. Reg. Z. § 226.19 (b), n. 45b.
4. d. Specific Disclosures Required for Variable Rate Loan: Major aspects of the variable rate loan program, which the consumer is considering, must be specifically disclosed.

1)                  The Index: Identification of the index will be used to calculate the interest rate and a brief description of the method used in calculating the interest rate are required by the Regulation. § 226.19(b)(2)(ii).

2)                  Current Margin Value and Interest Rate: A statement must be provided to the consumer suggesting the consumer ask for the current margin and interest rate. Reg. Z. § 226.19(b)(2)(iv).

3)                  Frequency of rate change and payment adjustment must be disclosed. Reg. Z. § 226.19(b)(2)(vi).

4)                  Negative Amortization: A statement to inform the consumer the consequences of negative amortization. A creditor must disclose the rules relating to the option, including the effects of exercising the option such as the increase of interest rate will occur and the payment amount will increase. Reg. Z. § 226.19(b)(2)(vii); commentary § 226.19(2). Andrews v. Chevy Chase Bank, 240 F.R.D at 620 (no violation found where the creditor informs the borrowers what will occur when the interest rate increases).

5)                  Conversion Feature: If the loan has a conversion feature, the amount of fees will be charge and the method of the fixed rate interest to be determined must be disclosed. Reg. Z. § 226.19(b)(2)(vii)-3.

1. e. Historical Example Disclosure: Creditors have the option to disclose the maximum interest rate and payment amount for a $10,000 loan amount or the historical example of changes in the index being used. U.S.C. § 1638; Reg. Z. 226.9(b)(2)(viii). If the former method is used, a statement that the periodic payment may increase or decrease substantially. Reg. Z. § 226.19(b)(2)(viii)(B).
2. f. Subsequent Disclosures: Disclosures concerning rate adjustments are required for all variable rate loans. Reg. Z. § 226.19(b). Notice of the adjusted payment amount, interest rate, index rate, and loan balance is required to disclose to the borrower in a timely manner. Reg. Z. § 226.20(c)(1)-(4).

If payment adjustment may accompany interest rate adjustment, creditors are required to send borrowers notice at least 25, but not more than 120, days prior to the due date of a payment at the new interest rate. Notice is required to be sent to borrowers whenever there is an adjustment in interest rate. Reg. Z. § 226.20(c).

If interest rate adjustments are made without a corresponding payment adjustment, the notice can be sent to the borrower once a year. Id.

Incorrect adjustment or used of index value or incorrect disclosing the new payment amount that does not comport with the contract terms violate TILA requirements, giving rise to statutory and actual damages. U.S.C. § 1640(a).

Statue of limitations for an affirmative violation is “one year from the date of the occurrence of the violation” that starts running when the erroneous notice is sent. U.S.C. § 1604(e).

1. 6. Required Disclosure of Rescission Rights: Rescission rights arise when the transaction is a consumer credit transaction, in which a non-purchase lien or security interest is placed on the consumer’s principal dwelling unit. TILA rescission remedies reflect Congress’ intent to keep homeowners from placing their homes in jeopardy without a reasonably clear understanding of the financial risks and benefits of the transaction.
   1. a. Rescission right is vested in the owner of the property that is the subject of the security interest. Reg. Z. §§ 226.15(a)(1)(i), 226.15(b), 226.23(a)(1).
   2. b. The security interest must be the principal residence of the owner of the interest. Reg. Z. § 226.2(a)(11).
   3. c. Time of Delivery: The rescission notice may be given after consummation, though the rescission period does not begin to run until it is effectively delivered. Official Staff Commentary § 226.23(b)-4. It is not effectively delivered until it is given in a form the consumer can keep. Reg. Z. § 226.15(b). A written acknowledgement of receipt of rescission notice creates a rebuttable presumption of delivery. Cole v. Lovett, 672 F. Supp. 947 (S.D. Miss. 1987).
   4. d. Providing Rescission Notice: Each person who has the right to rescind a credit transaction must be provided two copies of rescission notice and the required disclosures in a credit transaction. U.S.C. § 1635(a); Reg. Z. §§ 226.5(b), 226.15(b). Notice of the right to rescind is also required for non-purchase money mortgages. U.S.C. § 1635(a). Giving the TILA notice and another notice of rescission at the same time, which have different rescission dates, confuses an ordinary consumer, violating the “clear and conspicuous” disclosure requirement. Jones v. Ameriquest.
   5. e. Time to Exercise Rescission Right: The consumers have until midnight of the third business day following the delivery of the rescission notice, the transaction, or the receiving of the Truth-In-Lending statement, whichever occurs last. See, Jones v. Ameriquest. Right to rescind can be exercised prior to the consummation of the loan. Community Mutual Sav. Bank v. Gillen, 655 N.Y.S.2d 271 (City Ct. 1997) (the consumer properly rescinds her loan at closing recovering fees paid to the creditor).

If the creditor fails to deliver the required notice of material disclosures, the consumer’s right to rescind is automatically extended from three business days to three years. Reg. Z. § 226.23(a)(3).

1. f. Assignee’s Liability: An assignee is liable for statutory damages for violations by failure to disclosure TILA requirements by its predecessors and its own violation if it fails to respond properly to a rescission notice. Palmer v. Champion Mortg., 465 F.3d 24, 27 (1st Cir. 2006) (“if a creditor does not respond to a rescission request within twenty days, the debtor may file suit in federal court to enforce the rescission right). See also U.S.C. § 1635(b).
2. g. Rescission Process: The consumer must send a written notice to the creditor to trigger the rescission process. When the notice of rescission has been mailed, the notice is considered given. Reg. Z. §§ 226.15(a)(2), 226.23(a)(2).

When the consumer rescinds, the security interest automatically becomes void. The consumer is relieved of any obligation to pay any finance charge or any other charge. U.S.C. § 1635(b); Reg. Z. §§ 226.15(d)(1), 226.23(d)(1). Rescission voids the mortgage and is a complete defense to foreclosure. Yslas v. K.K. Guenther Builders, Inc., 342 So.2d 859 (Fla.2d D.C.A. 1977). See Beach v. Great Western Bank, 670 So.2d 986 (Fla. 4th  D.C.A. 1996).

The creditor has twenty days from receipt of the consumer’s rescission notice to return any money or property given to anyone and to take appropriate and necessary action to reflect the termination of the security interest. U.S.C. § 1635(b); Reg. Z. §§ 226.15(d)(2), 226.23(d)(2).

After the creditor has complied with the preceding mandate, the consumer tenders back to the creditor any money or property received. U.S.C. § 1635(b); Reg. Z. §§ 226.15(d)(3), 226.23(d)(3).

OTHER AVAILABLE REMEDIES

Only creditors are subject to the civil penalties of TILA. U.S.C. § 1640(a). Civil damages are appropriate when disclosure requirements have been violated, and liability is imposed despite the creditor’s alleged good faith and reasonableness. Ratner v. Chemical Bank N.Y. Trust Co., 329 F. Supp. 270 (S.D.N.Y. 1971).

1. 1. Statutory Damages

Violations of the general requirements and rescission requirements give rise to statutory damage claims. U.S.C. § 1640(a). For open-end credit transactions, statutory damages are awarded in the amount twice of the amount of finance charge. If the action arises out of a credit transaction secured by a dwelling, the consumer is entitled to a minimum award of $200 but not more than $2,000. U.S.C. § 1640(a)(2)(A)(i-iii). Only one statutory recovery is allowed even there are multiple disclosure violations in a transaction. U.S.C. § 1640(g).

1. 2. Attorney’s Fees

Consumers are awarded attorney’s fees in a successful action or when they are “determined to have a right of rescission under section 1635,” even if the consumer is not obligated to pay his or her attorney. U.S.C. § 1640(3); Andrews v. Chevy Chase Bank, 240 F.R.D. at 621 (“because […] plaintiffs have a right of rescission, they are entitled to attorneys’ fees”); Kessler v. Associates Financial Servs. Co. of HI, Inc., 639 F.2d 498, 499 (C.A. Hi. 1981) (attorney’s fees are awarded even the plaintiffs are represented without charge by legal services attorneys). Attorney’s fees include the cost of the action and “a reasonable attorney’s fee as determined by the court.” U.S.C. § 1640(3).

1. 3. Actual Damages

A consumer is entitled for actual damages when a creditor fails to comply with the requirements imposed by TILA, in the amount equal to the sum of any actual damage sustained by the consumer as a result of the creditor’s violation. U.S.C. § 1640(a)(1). Courts may require the consumer to show actual reliance upon the accuracy of the disclosures in order to claim actual damages. Perrone v. General Motors Acceptance Corp., 232 F.3d 433, 435-439 (5th Cir. 2000); Peters v. Jim Lupient Oldsmobile Co., 220 F.3d 915, 917 (8th Cir. 2000) (detrimental reliance is established when the plaintiff shows that she read and understood the disclosures and that if the disclosures have been accurate, she would have sought and obtained a lower loan).

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[1] Material terms are annual percentage rate, finance charge, method of determining the finance charge and the balance, amount financed, total of payments, the number and amount of payments, due dates or periods of payments scheduled to repay the indebtedness. U.S.C. § 1602(u); Reg. Z. § 226.23 n. 48.

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perata mortgage relief act	13
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mabry v. aurora loan services, case number g042911	12
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taylor v deutsche bank	11
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lending compliance checklists	11
sample complaint for wrongful foreclosure	11
problems with mers	11
vella v. hudgins	11
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carter v. deutsche bank	11
how to stop a unlawful detainer	11
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how to stop foreclosure timothy mccandless e	9
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save your home post foreclosure!! facing unlawful detainer action?	9
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california civil code 3301	9
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complaint for non-compliance 2923.5	9
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motion summary judgment template	9
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app for tro for foreclosure	9
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where’s the note who’s the holder	9
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pcu2008032	9
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how to sue your mortgage company in federal court and get your deed	9
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501-228-0877	8
ca duly perfected title after foreclosure	8
jeff dembicer	8
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sample wrongful foreclosure complaint, 2923.5	8
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cal. civ. code § 2923.5	8
california civil code 2923.5(c)	8
timothy mccandless legal documents in all motions in foreclosure	8
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respa checklist	8
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badbizfinder	8
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ca 2923.6	8
ca civil code 2823.6(b)	8
foreclosure defense options	8
how do you present issues of standing in court when your lender has filed foreclosure on your home	8
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after the short sale i have second loan heloc purchase money chase bank put to the collection agency but is c .a law	8
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2046 balance sheet as it relates to the original loan	8
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pro value properties inc v quality loan service corp	8
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lawyers guide for defense to an unlawful detainer	7
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timothy mccandless bank vs. martin, a – plaintiff’s motion for summary judgment – denied. the plaintiff as moving party has established a	7
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-lamy a nominee of the owner of a note and mortgage may not effectively assign the note and mortgage to another for want of an ownership interest in said note and mortgage by the nominee.”)	7
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Why modify

California Loan Modification Lawyer

(Effective October 11, 2009  The McCandless Firm complies with SB 94)

By now, you may have made your own attempts at loan modification. You now know what we have known: Despite all the government and media hype, the voluntary loan modifications are not the silver bullet to the foreclosure crisis. Even after President Obama introduced the HAMP program, only about 8% of the anticipated 9 million loan modification applications have been considered. Never forget that lenders and loan servicers are in the business of making money for their shareholders, not solving people’s financial problems. Despite the incentives created by the government, loan servicers remain inconsistent, negligent, understaffed, arrogant and just plain indifferent to the financial plight of most folks. If you’ve ever wondered why the bank doesn’t seem to care? Consider that it is the investor, not loan servicer, takes the financial hit when a property is foreclosed. Loan servicers make more money when a borrower falls into foreclosure. Servicers have an incentive to drag out the foreclosure and loan modification process. Despite what the government and the lenders may say, the loan modification or short sale process is not as quick and easy as has been portrayed.

VIOLATIONS CAN GIVE YOU LEVERAGE to secure a “SETTLEMENT”, not a LOAN MODIFICATION.

Whether hiring a lawyer will increase your chances for success a little or a lot depends on whether the lender has done something wrong. This is why Attorney Roberts encourages every client to commission an audit of the original loan documents, review the appraisal and take measure of any agency relationships between the broker, the lender, the appraiser, the escrow and the title companies. Anecdotally, Attorney Roberts believes that your chances of success increase fourfold if there is litigation or bankruptcy. Hiring a lawyer to review your options and handle the process makes sense. Your chances of obtaining a substantial loan modification will be greatly improved if the lender has violated the law…but how will you ever know? A lawyer can help you gain negotiating leverage on your behalf by finding violations of the law or capitalizing on provisions of the bankruptcy code.

FRONT DOOR LOAN MODIFICATIONS

A loan modification can still be secured even where violations do not exist or the borrower chooses to ignore them. In California, SB94 was recently signed into law effectively banning advance fee loan modification services by even lawyers. Attorney Roberts operates in full compliance of the new law. If you hire a lawyer to provide loan modification services rather than to pursue a violation of your rights, special rules now apply and specific disclosures must be made letting you know that you can do the loan modification yourself and avoid fees.

It’s true; you can pursue a loan modification yourself, just as you have the right to represent yourself in court. And to be honest, even with a lawyer, unless a violation has occurred, you are at the mercy of the loan servicer’s interpretation and analysis of your situation. If the servicer loses your paperwork, berates you, keeps you on hold for hours, ignores you, or simply denies the loan modification without explanation…you have NO RECOURSE. You are not entitled to a loan modification and you have no right to sue if denied. Even if the lender ignores the guidelines of the government’s HAMP program, you can’t sue. When you apply for a front door loan modification, you are asking for a break. It is you and not the lender, who seeks to break the mortgage contract. You have no leverage. You cannot force the lender to give you any consideration, whatsoever. Even if you clearly qualify for a loan modification under the printed guidelines of the government HAMP program, if the lender believes that it would make more money in the long run by foreclosing, you can legitimately be denied.

Why pay a lawyer to work on your loan modification? A lawyer adds attention to detail and diligence to the process, as well as a better idea of the location of each loan servicers’ “sweet spot”. Experience and daily contact with the loan servicers provides some advantage as well. The law firm may act as a force to counter act the incompetence built into the lender’s process. Attorney Roberts and his staff simply assume that the loan mod process will be screwed up by the lender, repeatedly. The firm expects that the lenders will lose paperwork, fail to respond and provide conflicting information. The firm is not shocked when a home is improperly sold despite an approval of a loan modification as it happens all the time. The Law Office of The McCandless Firm is there to respond to these constant lender screw ups and bear the brunt of your frustration.

The The McCandless Firm is always prepared to react to the latest bank screw-up or client crisis. One of the favorite tricks of the lenders is to wait to the very last minute before the sale to approve or deny a postponement or a loan modification. This game of chicken may happen every month as the loan modification process drones on. The firm is always ready with a PLAN B if the lender, in its sole discretion, denies the modification. Having the ability to plan and execute a contingency plan, whether it be Chapter 7, 11, 13, a short sale or a federal lawsuit, is truly the firm’s core strength.

A foreclosure relief company or real estate agent is unqualified to provide you with any of this legal insight – but a California loan modification lawyer at the The McCandless Firm has the knowledge and experience to help. California attorney Joseph Arthur “Joe” Roberts can act as your legal counselor and help you get out of the financial situation that you find yourself in. With offices located in Newport Beach, attorney Roberts helps clients throughout California, including Los Angeles, Orange, Riverside County and the surrounding areas.

Loan Modification Attorney in Los Angeles, Orange and Riverside County, California

In California, voluntary loan modification programs of different companies vary. Most loans are owned in pools by “trusts” and not by the servicing agent with whom you deal. The contract between the trust and the servicing agent, called a PSA, limits the number of loans that can be modified in a given pool. Typically, the PSA limits the number of loans that can be modified in a given pool at 5%. However, that restriction is lifted in the event of a bankruptcy or litigation.

Most servicing agents are understaffed, overwhelmed and for the most part…simply don’t care about you. The servicing companies typically make more money off of late fees, costs and penalties when you remain in default. If the property gets foreclosed on, it becomes the trust’s problem, not necessarily the service agent’s. The application process can take months and usually involves rejection or a token change in the loan terms. Amid the flood of modification requests, mistakes frequently get made and the ball gets dropped. In the meantime, the countdown to foreclosure sale continues. Homeowners already under distress get left with little time to act if a modification is not granted. You need to have a backup plan in place in case the lender’s process fails.

Loan modification is driven by income and complicated when there is a second mortgage company involved. If you lack the income to fund whatever plan the lender is willing to give you, you will be denied. Even if the first mortgage company is willing to modify your loan, it doesn’t mean that the second mortgage company will play ball. In the absence of litigation or bankruptcy, the loan modifications have economic limits. A reduction in principal balance is rare. A mortgage holder will not reduce the principal balance below the value of the property. Interest rate adjustments and recapitalization of back payments are more common. However, don’t expect to get an interest only or negative amortization loan. The very best you can hope for is a fixed rate amortized over 30 years at a decent rate based on the current value of the house. Finally, if the lender “cancels” some of your debt, it may still be considered taxable income by the IRS, despite the passage of the limited Mortgage Forgiveness Debt Relief Act of 2007. Only debt from buying or improving the property is covered by the new law.

How a California Loan Modification Lawyer Can Help

loan modification process can be complex, and it is easy for a lender or servicing agent to take advantage of you. Using an experienced lawyer to assert your rights gets you to the front of the line in this process. The possibility of litigation or bankruptcy may increase your negotiating leverage with your lender. Lenders are forced to get their own lawyers involved in your case, not just an administrative person from the loss mitigation department. We welcome you to contact our firm to discuss your loan, your budget and the benefits of attorney negotiated loan modification.

Contact  loan modification attorney The McCandless Firm today! Northern California 925-957-9797and in Southern California 909-890-9192

Consumer Law E-mail Groups

NCLC
NATIONAL CONSUMER
LAW CENTER’
Advancing Fairness in the Marketplace for All

Why Join an E-Mail Group?
• They are free; all you need is an e-mail address
• Get instant answers to your questions from experts around the country
• Hear the latest developments, practice ideas, and litigation issues
• Obtain copies of pleadings and other useful documents
• Get into the nitty-gritty of the actual practice of consumer law
• Join a community of like-minded attorneys focused on the same subject area
NCLC and NACA sponsor a number of email groups for those representing consumer interests. These groups are not open to those who represent the industry that is the topic of the group or other adverse parties.
NATIONAL CONSUMER LAW CENTER E-MAIL GROUPS
1. Autofraud (Contact: Jon Sheldon) To join: owner-autofraud@lists.nclc.org
This is one of the oldest and most active consumer law e-mail groups with over 350 members, and much email traffic each day. The group focuses on many different issues related to motor vehicles, from financing to sales practices to lemons to repossessions. Like all NCLC e-mail groups, you can perform key-word searches in the archives for past e-mails.
2. Manufactured Homes (Contact: Odette Williamson)
To join: manufacturedhomes-request@lists.nclc.org and CC: owilliamson@nclc.org
If manufactured home cases ever come to your office, this is the e-mail group for you, covering issues of financing, defects, sales, and parks.
3. Student Loans (Contact: Deanne Loonin)
To join: studentloan-request@lists.nclc.org
(dloonin@nclc.org if experiencing technical problems)
This is NCLC’s first group, dating back over 10 years. The discussion covers student loan collections, offsets, vocational schools, and related topics.
4. FCRA – Fair Credit Reporting Act (Contact: Chi Chi Wu)
To join: cwu@nclc.org
A large group of experts exchanging ideas about credit reporting issues.
5. E-payments (Contact: Lauren Saunders) To join: http://lists.nclc.org/subscribe
This is the e-mail group for anyone concerned with the electronic payment of food stamps and other state benefits.
6. UtilityNetwork – Massachusetts (Contact: Charlie Harak)
To join: http://lists.nclc.org/subscribe
Covers issues of utility terminations, energy affordability, payment sources for utility bills, and low-income utility programs FOR MASSACHUSETTS ONLY.
7. EnergyNetwork – National (Contact: Charlie Harak, Olivia Wein, or John Howat)
To join: http://lists.nclc.org/subscribe
Covers issues of utility terminations, energy affordability, telephones, and low-income utility programs. Keep current on policy and programmatic issues.
8. Bankruptcy (Contact: John Rao) To join: http://lists.nclc.org/subscribe
This group is for legal services attorneys and pro bono coordinators and covers many issues relating to representation of low-income consumers in bankruptcy.
9. DC Updates (Contact: Lauren Saunders). To join: http://lists.nclc.org/subscribe
Provides updates on legislative and administrative developments in Washington, including agency comment opportunities and critical moments for legislative input. Open to NACA members and nonprofit consumer advocates (including non-attorneys).
10. California (Contact: Lauren Saunders). To join: http://lists.nclc.org/subscribe
Provides a forum for sharing of information on consumer law activities in California. Open to nonprofit attorneys and to NACA members willing to partner with or mentor nonprofit attorneys.
11. Carchange- Auto Ownership, Finance, and Policy (Contact John Van Alst)
To join: http://lists.nclc.org/subscribe
A new group for advocates seeking to improve the ability of low-income families to get, keep, and use a reliable, affordable car. Includes topics of car finance, sales, and ownership as well as anyone working on broader issues that affect access to transportation for low-income workers and their families (e.g., insurance, driver’s licenses, maintenance, etc.).
NATIONAL ASSOCIATION OF CONSUMER ADVOCATES E-MAIL GROUPS Tlie lists operated by NACA require NACA membership for admission to those lists.
12. Mortgage (Contact: Jeff Dillman) To apply for admission: jdillman@thehousingcenter.org
This NACA group has over 600 members and covers all aspects of protecting a homeowner against foreclosure, from predatory lending to servicer abuses.
13. Class Action (Contact: Steve Gardner) To apply for admission: sgardner@cspinetorg
The place to be if your office handles class actions, if you are interested in co-counseling with other NACA offices experienced in class cases, or if you just want to learn more about the class action remedy.
14. Stop Binding Mandatory Arbitration Campaign (Contact: Cora Ganzglass)
To join: cora@naca.net
This NACA list is to help build awareness and support for state and federal legislation that fights back against binding mandatory arbitration clauses.
15. Statewide Listserves (Contact: Chris Wojcik) To join: chris@naca.net
NACA Statewide listserves exist for NACA members in Alabama, Arkansas, Arizona, DC, Florida, Iowa, Idaho, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Montana, North Carolina, New York, New Jersey, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Virginia, Washington state, and Wisconsin. The listserves provide support, share documents and information, call attention to recent developments, and facilitate group action to protect and promote consumer rights.
16. Military Statewide Listserves (Contact: Chris Wojcik) To join: chris@naca.net A special Military NACA list for military attorneys in any state.
17. Doing Well by Doing Good list (Contact: Chris Wojcik) To join: chris@naca.net A listserve open to all NACA members.

Challenges to Foreclosure Docs Reach a Fever Pitch

American Banker | Wednesday, June 16, 2010

By Kate Berry

Correction: An earlier version of this story misidentified the court
where Judge J. Michael Traynor presides. It is a Florida state court,
not a federal one. An editing error was to blame.

The backlash is intensifying against banks and mortgage servicers that
try to foreclose on homes without all their ducks in a row.

Because the notes were often sold and resold during the boom years, many
financial companies lost track of the documents. Now, legal officials
are accusing companies of forging the documents needed to reclaim the
properties.

On Monday, the Florida Attorney General’s Office said it was
investigating the use of “bogus assignment” documents by Lender
Processing Services Inc. and its former parent, Fidelity National
Financial Inc. And last week a state judge in Florida ordered a hearing
to determine whether M&T Bank Corp. should be charged with fraud after
it changed the assignment of a mortgage note for one borrower three
separate times.

“Mortgage assignments are being created out of whole cloth just for the
purposes of showing a transfer from one entity to another,” said James
Kowalski Jr., an attorney in Jacksonville, Fla., who represents the
borrower in the M&T case.

“Banks got away from very basic banking rules because they securitized
millions of loans and moved them so quickly,” Kowalski said.

In many cases, Kowalski said, it has become impossible to establish when
a mortgage was sold, and to whom, so the servicers are trying to
recreate the paperwork, right down to the stamps that financial
companies use to verify when a note has changed hands.

Some mortgage processors are “simply ordering stamps from stamp makers,”
he said, and are “using those as proof of mortgage assignments after the
fact.”

Such alleged practices are now generating ire from the bench.

In the foreclosure case filed by M&T in February 2009, the bank
initially claimed it lost the underlying mortgage note, and then later
claimed the mortgage was owned by First National Bank of Nevada, which
the Federal Deposit Insurance Corp. shut down in 2008, before the
foreclosure had been started.

M&T then claimed Wells Fargo & Co. owned the note, “contradicting all of
its previous claims,” according to Circuit Court Judge J. Michael
Traynor, who ordered the evidentiary hearing last week into whether M&T
perpetrated a fraud on the court.

“The court has been misled by the plaintiff from the beginning,” Judge
Traynor said in his order, which also dismissed M&T’s foreclosure action
with prejudice.

The Marshall Watson law firm in Fort Lauderdale, Fla., which represents
M&T in the case, declined to comment and the bank said it could not
comment.

In a notice on its website, the Florida attorney general said it is
examining whether Docx, an Alpharetta, Ga., unit of Lender Processing
Services, forged documents so foreclosures could be processed more
quickly.

“These documents are used in court cases as ‘real’ documents of
assignment and presented to the court as so, when it actually appears
that they are fabricated in order to meet the demands of the institution
that does not, in fact, have the necessary documentation to foreclose
according to law,” the notice said.

Docx is the largest lien release processor in the United States working
on behalf of banks and mortgage lenders.

Peter T. Sadowski, an executive vice president and general counsel at
Fidelity National in Fort Lauderdale, said that more than a year ago his
company began requiring that its clients provide all paperwork before
the company would process title claims.

Michelle Kersch, a spokeswoman for Lender Processing Services, said the
reference on the Florida attorney general’s website to “bogus
assignments” referred to documents in which Docx used phrases like
“bogus assignee” as placeholders when attorneys did not provide specific
pieces of information.

“Unfortunately, on occasion, incomplete documents were inadvertently
recorded before the missing information was obtained,” Kersch said. “LPS
regrets these errors and the use of this particular placeholder
phrasing.”

The company, which was spun off from Fidelity National two years ago, is
cooperating with the attorney general and conducting its own internal
investigation.

Lender Processing Services disclosed in its annual report in February
that federal prosecutors were reviewing the business processes of Docx.
The company said it was cooperating with that investigation.

“This is systemic,” said April Charney, a senior staff attorney at
Jacksonville Area Legal Aid and a member of the Florida Supreme Court’s
foreclosure task force.

“Banks can’t show ownership for many of these securitized loans,”
Charney continued. “I call them empty-sack trusts, because in the rush
to securitize, the originating lender failed to check the paper trial
and now they can’t collect.”

In Florida, Georgia, Maryland and other states where the foreclosure
process must be handled through the courts, hundreds of borrowers have
challenged lenders’ rights to take their homes. Some judges have
invalidated mortgages, giving properties back to borrowers while lenders
appeal.

In February, the Florida state Supreme Court set a new standard
stipulating that before foreclosing, a lender had to verify it had all
the proper documents. Lenders that cannot produce such papers can be
fined for perjury, the court said.

Kowalski said the bigger problem is that mortgage servicers are working
“in a vacuum,” handing out foreclosure assignments to third-party firms
such as LPS and Fidelity.

“There’s no meeting to get everybody together and make sure they have
their ducks in a row to comply with these very basic rules that banks
set up many years ago,” Kowalski said. “The disconnect occurs not just
between units within the banks, but among the servicers, their bank
clients and the lawyers.”

He said the banking industry is “being misserved,” because mortgage
servicers and the lawyers they hire to represent them in foreclosure
proceedings are not prepared.

“We’re tarring banks that might obviously do a decent job, and the banks
are complicit because they hired the servicers,” Kowalski said.

Litigating against your lender

“The Fed’s study found that only 3 percent of seriously delinquent borrowers – those more than 60 days behind – had their loans modified to lower monthly payments . . . The servicers are making assumptions that are much too anti-modification, The servicers have the authority’’ to help borrowers, “they just don’t want to use it.’’ www.thestopforeclosureplan.com
The Boston Globe “Lenders Avoid Redoing Loans, Fed Concludes” July 7, 2009.
LITIGATING AGAINST YOUR LENDER
The state and federal government may structure a mortgage modification program as voluntary on the part of the lender, but may provide incentives for the lender to participate. A mandatory mortgage modification program requires the lender to modify mortgages meeting the criteria with respect to the borrower, the property, and the loan payment history.
www.thestopforeclosureplan.com

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

SB 94 and its interferance with the practice

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.

Don’t get HAMP ED out of your home!

By Walter Hackett, Esq.
The federal government has trumpeted its Home Affordable Modification Program or “HAMP” solution as THE solution to runaway foreclosures – few things could be further from the truth. Under HAMP a homeowner will be offered a “workout” that can result in the homeowner being “worked out” of his or her home. Here’s how it works. A participating lender or servicer will send a distressed homeowner a HAMP workout agreement. The agreement consists of an “offer” pursuant to which the homeowner is permitted to remit partial or half of their regular monthly payments for 3 or more months. The required payments are NOT reduced, instead the partial payments are placed into a suspense account. In many cases once enough is gathered to pay the oldest payment due the funds are removed from the suspense account and applied to the mortgage loan. At the end of the trial period the homeowner will be further behind than when they started the “workout” plan.
In California, the agreements clearly specify the acceptance of partial payments by the lender or servicer does NOT cure any default. Further, the fact a homeowner is in the workout program does NOT require the lender or servicer to suspend or postpone any non-judicial foreclosure activity with the possible exception of an actual trustee’s sale. A homeowner could complete the workout plan and be faced with an imminent trustee’s sale. Worse, if a homeowner performs EXACTLY as required by the workout agreement, they are NOT assured a loan modification. Instead the agreement will include vague statements that the homeowner MAY receive an offer to modify his or her loan however there is NO duty on the part of the servicer or lender to modify a loan regardless of the homeowner’s compliance with the agreement.

A homeowner who fully performs under a HAMP workout is all but guaranteed to have given away thousands of dollars with NO assurance of keeping his or her home or ever seeing anything resembling an offer to modify a mortgage loan.
While it may well be the case the government was making an honest effort to help, the reality is the HAMP program is only guaranteed to help those who need help least – lenders and servicers. If you receive ANY written offer to modify your loan meet with a REAL licensed attorney and ask them to review the agreement to determine what you are REALLY agreeing to, the home you save might be your own.

Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief

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.
# # #

Pretender Lenders

— 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.

Leman Tila complaint

Lemantilacomp

Win the eviction by Summary judgement

When title to the property is still in dispute ie. the foreclosure was bad. They (the lender)did not comply with California civil code 2923.5 or 2923.6 or 2924. Or the didn’t possess the documents to foreclose ie. the original note. Or they did not possess a proper assignment 2932.5. at trial you will be ignored by the learned judge but if you file a Motion for Summary Judgmentevans sum ud
template notice of Motion for SJ
TEMPLATE Points and A for SJ Motion
templateDeclaration for SJ
TEMPLATEProposed Order on Motion for SJ
TEMPLATEStatement of Undisputed Facts
you can force the issue and if there is a case filed in the Unlimited jurisdiction Court the judge may be forced to consider title and or consolidate the case with the Unlimited Jurisdiction Case2nd amended complaint (e) manuel
BAKER original complaint (b)
Countrywide Complaint Form
FRAUDULENT OMISSIONS FORM FINAL
sample-bank-final-complaint1-2.docx

CALIFORNIA CODES
CODE OF CIVIL PROCEDURE
SECTION 437c-438

437c. (a) Any party may move for summary judgment in any action or
proceeding if it is contended that the action has no merit or that
there is no defense to the action or proceeding. The motion may be
made at any time after 60 days have elapsed since the general
appearance in the action or proceeding of each party against whom the
motion is directed or at any earlier time after the general
appearance that the court, with or without notice and upon good cause
shown, may direct. Notice of the motion and supporting papers shall
be served on all other parties to the action at least 75 days before
the time appointed for hearing. However, if the notice is served by
mail, the required 75-day period of notice shall be increased by five
days if the place of address is within the State of California, 10
days if the place of address is outside the State of California but
within the United States, and 20 days if the place of address is
outside the United States, and if the notice is served by facsimile
transmission, Express Mail, or another method of delivery providing
for overnight delivery, the required 75-day period of notice shall be
increased by two court days. The motion shall be heard no later than
30 days before the date of trial, unless the court for good cause
orders otherwise. The filing of the motion shall not extend the time
within which a party must otherwise file a responsive pleading.
(b) (1) The motion shall be supported by affidavits, declarations,
admissions, answers to interrogatories, depositions, and matters of
which judicial notice shall or may be taken. The supporting papers
shall include a separate statement setting forth plainly and
concisely all material facts which the moving party contends are
undisputed. Each of the material facts stated shall be followed by a
reference to the supporting evidence. The failure to comply with this
requirement of a separate statement may in the court’s discretion
constitute a sufficient ground for denial of the motion.
(2) Any opposition to the motion shall be served and filed not
less than 14 days preceding the noticed or continued date of hearing,
unless the court for good cause orders otherwise. The opposition,
where appropriate, shall consist of affidavits, declarations,
admissions, answers to interrogatories, depositions, and matters of
which judicial notice shall or may be taken.
(3) The opposition papers shall include a separate statement that
responds to each of the material facts contended by the moving party
to be undisputed, indicating whether the opposing party agrees or
disagrees that those facts are undisputed. The statement also shall
set forth plainly and concisely any other material facts that the
opposing party contends are disputed. Each material fact contended by
the opposing party to be disputed shall be followed by a reference
to the supporting evidence. Failure to comply with this requirement
of a separate statement may constitute a sufficient ground, in the
court’s discretion, for granting the motion.
(4) Any reply to the opposition shall be served and filed by the
moving party not less than five days preceding the noticed or
continued date of hearing, unless the court for good cause orders
otherwise.
(5) Evidentiary objections not made at the hearing shall be deemed
waived.
(6) Except for subdivision (c) of Section 1005 relating to the
method of service of opposition and reply papers, Sections 1005 and
1013, extending the time within which a right may be exercised or an
act may be done, do not apply to this section.
(7) Any incorporation by reference of matter in the court’s file
shall set forth with specificity the exact matter to which reference
is being made and shall not incorporate the entire file.
(c) The motion for summary judgment shall be granted if all the
papers submitted show that there is no triable issue as to any
material fact and that the moving party is entitled to a judgment as
a matter of law. In determining whether the papers show that there is
no triable issue as to any material fact the court shall consider
all of the evidence set forth in the papers, except that to which
objections have been made and sustained by the court, and all
inferences reasonably deducible from the evidence, except summary
judgment may not be granted by the court based on inferences
reasonably deducible from the evidence, if contradicted by other
inferences or evidence, which raise a triable issue as to any
material fact.
(d) Supporting and opposing affidavits or declarations shall be
made by any person on personal knowledge, shall set forth admissible
evidence, and shall show affirmatively that the affiant is competent
to testify to the matters stated in the affidavits or declarations.
Any objections based on the failure to comply with the requirements
of this subdivision shall be made at the hearing or shall be deemed
waived.
(e) If a party is otherwise entitled to a summary judgment
pursuant to this section, summary judgment may not be denied on
grounds of credibility or for want of cross-examination of witnesses
furnishing affidavits or declarations in support of the summary
judgment, except that summary judgment may be denied in the
discretion of the court, where the only proof of a material fact
offered in support of the summary judgment is an affidavit or
declaration made by an individual who was the sole witness to that
fact; or where a material fact is an individual’s state of mind, or
lack thereof, and that fact is sought to be established solely by the
individual’s affirmation thereof.
(f) (1) A party may move for summary adjudication as to one or
more causes of action within an action, one or more affirmative
defenses, one or more claims for damages, or one or more issues of
duty, if that party contends that the cause of action has no merit or
that there is no affirmative defense thereto, or that there is no
merit to an affirmative defense as to any cause of action, or both,
or that there is no merit to a claim for damages, as specified in
Section 3294 of the Civil Code, or that one or more defendants either
owed or did not owe a duty to the plaintiff or plaintiffs. A motion
for summary adjudication shall be granted only if it completely
disposes of a cause of action, an affirmative defense, a claim for
damages, or an issue of duty.
(2) A motion for summary adjudication may be made by itself or as
an alternative to a motion for summary judgment and shall proceed in
all procedural respects as a motion for summary judgment. However, a
party may not move for summary judgment based on issues asserted in a
prior motion for summary adjudication and denied by the court,
unless that party establishes to the satisfaction of the court, newly
discovered facts or circumstances or a change of law supporting the
issues reasserted in the summary judgment motion.
(g) Upon the denial of a motion for summary judgment, on the
ground that there is a triable issue as to one or more material
facts, the court shall, by written or oral order, specify one or more
material facts raised by the motion as to which the court has
determined there exists a triable controversy. This determination
shall specifically refer to the evidence proffered in support of and
in opposition to the motion which indicates that a triable
controversy exists. Upon the grant of a motion for summary judgment,
on the ground that there is no triable issue of material fact, the
court shall, by written or oral order, specify the reasons for its
determination. The order shall specifically refer to the evidence
proffered in support of, and if applicable in opposition to, the
motion which indicates that no triable issue exists. The court shall
also state its reasons for any other determination. The court shall
record its determination by court reporter or written order.
(h) If it appears from the affidavits submitted in opposition to a
motion for summary judgment or summary adjudication or both that
facts essential to justify opposition may exist but cannot, for
reasons stated, then be presented, the court shall deny the motion,
or order a continuance to permit affidavits to be obtained or
discovery to be had or may make any other order as may be just. The
application to continue the motion to obtain necessary discovery may
also be made by ex parte motion at any time on or before the date the
opposition response to the motion is due.
(i) If, after granting a continuance to allow specified additional
discovery, the court determines that the party seeking summary
judgment has unreasonably failed to allow the discovery to be
conducted, the court shall grant a continuance to permit the
discovery to go forward or deny the motion for summary judgment or
summary adjudication. This section does not affect or limit the
ability of any party to compel discovery under the Civil Discovery
Act (Title 4 (commencing with Section 2016.010) of Part 4).
(j) If the court determines at any time that any of the affidavits
are presented in bad faith or solely for purposes of delay, the
court shall order the party presenting the affidavits to pay the
other party the amount of the reasonable expenses which the filing of
the affidavits caused the other party to incur. Sanctions may not be
imposed pursuant to this subdivision, except on notice contained in
a party’s papers, or on the court’s own noticed motion, and after an
opportunity to be heard.
(k) Except when a separate judgment may properly be awarded in the
action, no final judgment may be entered on a motion for summary
judgment prior to the termination of the action, but the final
judgment shall, in addition to any matters determined in the action,
award judgment as established by the summary proceeding herein
provided for.
(l) In actions which arise out of an injury to the person or to
property, if a motion for summary judgment was granted on the basis
that the defendant was without fault, no other defendant during
trial, over plaintiff’s objection, may attempt to attribute fault to
or comment on the absence or involvement of the defendant who was
granted the motion.
(m) (1) A summary judgment entered under this section is an
appealable judgment as in other cases. Upon entry of any order
pursuant to this section, except the entry of summary judgment, a
party may, within 20 days after service upon him or her of a written
notice of entry of the order, petition an appropriate reviewing court
for a peremptory writ. If the notice is served by mail, the initial
period within which to file the petition shall be increased by five
days if the place of address is within the State of California, 10
days if the place of address is outside the State of California but
within the United States, and 20 days if the place of address is
outside the United States. If the notice is served by facsimile
transmission, Express Mail, or another method of delivery providing
for overnight delivery, the initial period within which to file the
petition shall be increased by two court days. The superior court
may, for good cause, and prior to the expiration of the initial
period, extend the time for one additional period not to exceed 10
days.
(2) Before a reviewing court affirms an order granting summary
judgment or summary adjudication on a ground not relied upon by the
trial court, the reviewing court shall afford the parties an
opportunity to present their views on the issue by submitting
supplemental briefs. The supplemental briefing may include an
argument that additional evidence relating to that ground exists, but
that the party has not had an adequate opportunity to present the
evidence or to conduct discovery on the issue. The court may reverse
or remand based upon the supplemental briefing to allow the parties
to present additional evidence or to conduct discovery on the issue.
If the court fails to allow supplemental briefing, a rehearing shall
be ordered upon timely petition of any party.
(n) (1) If a motion for summary adjudication is granted, at the
trial of the action, the cause or causes of action within the action,
affirmative defense or defenses, claim for damages, or issue or
issues of duty as to the motion which has been granted shall be
deemed to be established and the action shall proceed as to the cause
or causes of action, affirmative defense or defenses, claim for
damages, or issue or issues of duty remaining.
(2) In the trial of the action, the fact that a motion for summary
adjudication is granted as to one or more causes of action,
affirmative defenses, claims for damages, or issues of duty within
the action shall not operate to bar any cause of action, affirmative
defense, claim for damages, or issue of duty as to which summary
adjudication was either not sought or denied.
(3) In the trial of an action, neither a party, nor a witness, nor
the court shall comment upon the grant or denial of a motion for
summary adjudication to a jury.
(o) A cause of action has no merit if either of the following
exists:
(1) One or more of the elements of the cause of action cannot be
separately established, even if that element is separately pleaded.
(2) A defendant establishes an affirmative defense to that cause
of action.
(p) For purposes of motions for summary judgment and summary
adjudication:
(1) A plaintiff or cross-complainant has met his or her burden of
showing that there is no defense to a cause of action if that party
has proved each element of the cause of action entitling the party to
judgment on that cause of action. Once the plaintiff or
cross-complainant has met that burden, the burden shifts to the
defendant or cross-defendant to show that a triable issue of one or
more material facts exists as to that cause of action or a defense
thereto. The defendant or cross-defendant may not rely upon the mere
allegations or denials of its pleadings to show that a triable issue
of material fact exists but, instead, shall set forth the specific
facts showing that a triable issue of material fact exists as to that
cause of action or a defense thereto.
(2) A defendant or cross-defendant has met his or her burden of
showing that a cause of action has no merit if that party has shown
that one or more elements of the cause of action, even if not
separately pleaded, cannot be established, or that there is a
complete defense to that cause of action. Once the defendant or
cross-defendant has met that burden, the burden shifts to the
plaintiff or cross-complainant to show that a triable issue of one or
more material facts exists as to that cause of action or a defense
thereto. The plaintiff or cross-complainant may not rely upon the
mere allegations or denials of its pleadings to show that a triable
issue of material fact exists but, instead, shall set forth the
specific facts showing that a triable issue of material fact exists
as to that cause of action or a defense thereto.
(q) This section does not extend the period for trial provided by
Section 1170.5.
(r) Subdivisions (a) and (b) do not apply to actions brought
pursuant to Chapter 4 (commencing with Section 1159) of Title 3 of
Part 3.
(s) For the purposes of this section, a change in law does not
include a later enacted statute without retroactive application.

438. (a) As used in this section:
(1) “Complaint” includes a cross-complaint.
(2) “Plaintiff” includes a cross-complainant.
(3) “Defendant” includes a cross-defendant.
(b) (1) A party may move for judgment on the pleadings.
(2) The court may upon its own motion grant a motion for judgment
on the pleadings.
(c) (1) The motion provided for in this section may only be made
on one of the following grounds:
(A) If the moving party is a plaintiff, that the complaint states
facts sufficient to constitute a cause or causes of action against
the defendant and the answer does not state facts sufficient to
constitute a defense to the complaint.
(B) If the moving party is a defendant, that either of the
following conditions exist:
(i) The court has no jurisdiction of the subject of the cause of
action alleged in the complaint.
(ii) The complaint does not state facts sufficient to constitute a
cause of action against that defendant.
(2) The motion provided for in this section may be made as to
either of the following:
(A) The entire complaint or cross-complaint or as to any of the
causes of action stated therein.
(B) The entire answer or one or more of the affirmative defenses
set forth in the answer.
(3) If the court on its own motion grants the motion for judgment
on the pleadings, it shall be on one of the following bases:
(A) If the motion is granted in favor of the plaintiff, it shall
be based on the grounds that the complaint states facts sufficient to
constitute a cause or causes of action against the defendant and the
answer does not state facts sufficient to constitute a defense to
the complaint.
(B) If the motion is granted in favor of the defendant, that
either of the following conditions exist:
(i) The court has no jurisdiction of the subject of the cause of
action alleged in the complaint.
(ii) The complaint does not state facts sufficient to constitute a
cause of action against that defendant.
(d) The grounds for motion provided for in this section shall
appear on the face of the challenged pleading or from any matter of
which the court is required to take judicial notice. Where the motion
is based on a matter of which the court may take judicial notice
pursuant to Section 452 or 453 of the Evidence Code, the matter shall
be specified in the notice of motion, or in the supporting points
and authorities, except as the court may otherwise permit.
(e) No motion may be made pursuant to this section if a pretrial
conference order has been entered pursuant to Section 575, or within
30 days of the date the action is initially set for trial, whichever
is later, unless the court otherwise permits.
(f) The motion provided for in this section may be made only after
one of the following conditions has occurred:
(1) If the moving party is a plaintiff, and the defendant has
already filed his or her answer to the complaint and the time for the
plaintiff to demur to the answer has expired.
(2) If the moving party is a defendant, and the defendant has
already filed his or her answer to the complaint and the time for the
defendant to demur to the complaint has expired.
(g) The motion provided for in this section may be made even
though either of the following conditions exist:
(1) The moving party has already demurred to the complaint or
answer, as the case may be, on the same grounds as is the basis for
the motion provided for in this section and the demurrer has been
overruled, provided that there has been a material change in
applicable case law or statute since the ruling on the demurrer.
(2) The moving party did not demur to the complaint or answer, as
the case may be, on the same grounds as is the basis for the motion
provided for in this section.
(h) (1) The motion provided for in this section may be granted
with or without leave to file an amended complaint or answer, as the
case may be.
(2) Where a motion is granted pursuant to this section with leave
to file an amended complaint or answer, as the case may be, then the
court shall grant 30 days to the party against whom the motion was
granted to file an amended complaint or answer, as the case may be.
(3) If the motion is granted with respect to the entire complaint
or answer without leave to file an amended complaint or answer, as
the case may be, then judgment shall be entered forthwith in
accordance with the motion granting judgment to the moving party.
(4) If the motion is granted with leave to file an amended
complaint or answer, as the case may be, then the following
procedures shall be followed:
(A) If an amended complaint is filed after the time to file an
amended complaint has expired, then the court may strike the
complaint pursuant to Section 436 and enter judgment in favor of that
defendant against that plaintiff or a plaintiff.
(B) If an amended answer is filed after the time to file an
amended answer has expired, then the court may strike the answer
pursuant to Section 436 and proceed to enter judgment in favor of
that plaintiff and against that defendant or a defendant.
(C) Except where subparagraphs (A) and (B) apply, if the motion is
granted with respect to the entire complaint or answer with leave to
file an amended complaint or answer, as the case may be, but an
amended complaint or answer is not filed, then after the time to file
an amended complaint or answer, as the case may be, has expired,
judgment shall be entered forthwith in favor of the moving party.
(i) (1) Where a motion for judgment on the pleadings is granted
with leave to amend, the court shall not enter a judgment in favor of
a party until the following proceedings are had:
(A) If an amended pleading is filed and the moving party contends
that pleading is filed after the time to file an amended pleading has
expired or that the pleading is in violation of the court’s prior
ruling on the motion, then that party shall move to strike the
pleading and enter judgment in its favor.
(B) If no amended pleading is filed, then the party shall move for
entry of judgment in its favor.
(2) All motions made pursuant to this subdivision shall be made
pursuant to Section 1010.
(3) At the hearing on the motion provided for in this subdivision,
the court shall determine whether to enter judgment in favor of a
particular party.

Borrowers’ Defenses to Forclosure

A great source of information you can use, and since the Guy is in Washington I can give him all the credit
defensestoforeclosure

United First Class Action

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.

Lawyers that get it Niel Garfield list

Lawyers that get it Niel Garfield list
lawyers-that-get-it-02092

My plan for Loan Modifications i.e. Attorney loan mod

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?

Firm pursuing foreclosure might not be your lender

By PAULA LAVIGNE
REGISTER STAFF WRITER

Figuring out which company to deal with during a foreclosure can be daunting. Even if the original mortgage was with a company recognized by the borrower, that company may not be the one acting against the borrower in court.

For example: Wells Fargo filed more than 3,600 foreclosure lawsuits in Iowa from January 2005 to February 2008, more than any other company identified in Iowa court data. But the company could be taking legal action because it processed payments for another mortgage company or acted as a trustee for investors – not because it’s the original lender.

Two company names that often appear on Iowa foreclosures – Deutsche Bank and Mortgage Electronic Registration System, or MERS – can be even more puzzling to borrowers.

Deutsche Bank, a global financial services firm with headquarters in Germany, may be listed as a loan’s owner of record, but it likely doesn’t have an actual stake in foreclosure proceedings. The firm acts as a trustee for investors holding mortgage-backed securities.

A loan winds up in a mortgage- backed security after it is sold by the company that originated the note. An investment bank pools that loan with others. It then sells securities, which represent a portion of the total principal and interest payments on the loans, to investors such as mutual funds, pension funds and insurance companies.

MERS, meanwhile, is neither the servicer nor the lender. Companies pay the firm to represent them and track loans as they change hands.

So while MERS should be able to point borrowers to the appropriate contact in a foreclosure proceeding, Deutsche Bank urges borrowers to contact loan servicers instead.

A tip for borrowers facing a foreclosure action: Make sure the company bringing the foreclosure action has the legal right to do so.

University of Iowa law professor Katherine Porter led a national study of 1,733 foreclosures and found that 40 percent of the creditors filing the lawsuits did not show proof of ownership. The study will be published later this year.

Companies, she said, have been “putting the burden on the consumer – who is bankrupt – to try to decide whether it’s worth it to press the issue.”

Max Gardner III, a bankruptcy attorney in North Carolina and a national foreclosure expert, said the trend is spreading to other states. “You have to prove in North Carolina that you have the original note,” he said. “Judges have not (asked for) that very often, until the last five or six months.”

MERS and Deutsche Bank faced court challenges last year over whether they had legal standing to bring a foreclosure action, with mixed results.

A federal judge in Florida ruled in favor of MERS, dismissing a class-action lawsuit that claimed the company did not have the right to initiate foreclosures. But a federal judge in Ohio ruled against Deutsche Bank, dismissing 14 foreclosure lawsuits after Deutsche Bank couldn’t provide proof of ownership. The Ohio attorney general has not been successful in getting state judges to follow suit.

In Iowa, attorneys and lending experts say they haven’t seen similar rulings against Deutsche Bank

Truth In Lending Audit Checklist

tilaworksheet-21

CTX Mortgage Company, LLC / CTX Mortgage / Centex HomesCTX Mortgage Company / Centex Homes Predatory Lending Bait and Switch? Maitland Central Florida

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)

Cramdown’s A’Comin’ Mid 2009

First lien residential mortgage loan cramdowns will soon be coming to a bankruptcy court near you. Although we haven’t seen the bill yet, Dick Durbin’s office announced today that he, Chuck (“Bank Run”) Schumer and Chris Dodd, had cut a deal with Citigroup on a bill that would permit such cramdowns in Chapter 13 bankruptcy proceedings. According to The Wall Street Journal, which broke the story, this “marks a surprising change of direction by the financial-services industry.”

Banks have consistently fought such legislation, saying cramdowns would raise borrowing costs for all home buyers and jam courts with homeowners who wouldn’t otherwise declare bankruptcy.

“This is the breakthrough we’ve been waiting for, to have a major financial institution support this legislation will create an incentive for others to come our way,” Sen. Durbin said in an interview. “I want to congratulate Citi for being open-minded about this [and] playing a major leadership role.”

The WSJ also reports other “open-minded” financial institutions support the bill, but did not identify them.

Frankly, as described by the WSJ, the bill doesn’t sound as bad as many might have feared, even though it goes beyond what the banking industry has been willing to support in the past.

The Democrats’ proposal allows judges to force major reductions in home loans, after homeowners certify that they have attempted to contact their lenders about a mortgage reduction before bankruptcy proceedings begin. They do not however have to have engaged in negotiations with their banks.

The cramdown bill would apply to all mortgage loans, including but not limited to subprime loans, written any time prior to the bill’s date of enactment. It allows judges the ability to lower principal or interest rate, extend the term of the loan, or any combination of the three. “Cramdown” refers to the ability of judges to lower a mortgage principal so that it is equivalent to the current market value of a home.

In a concession to lenders, if a lender is found to have violated the Truth in Lending Act during bankruptcy proceedings, the institution would be subject to fines, but would not have to forgive the loan, as is the case currently. Major violations would still be subject to full sanctions under the law. The TILA provisions would pre-empt any state lending laws.

I’m certain that many bankers who do not have the heft of major Mastodons like Citi and BofA will be critical. I can admit to a bit of mystification myself as to the fact that the cramdown right will apply only to loans made prior to the date of passage of the legislation. I thought the argument for extending cramdowns to first mortgage loans was to deal with those awful subprime and “exotic” loans made when real estate values were as high as the lenders and borrowers who based their lending decisions upon those values ever rising. Why not single out specific types of loans? Also, why not pick an effective date that is at least no later than mid-2008? Good arguments can be made that an even earlier date should be selected. You’re going to effectively “rewrite” some conventional home mortgage loans that were initially prudently underwritten, to the disadvantage of the lender. That’s done with second loans, auto loans, and commercial loans, but the lenders of those types of loans set pricing based upon the knowledge that there’s the risk that cramdown could occur. That’s not the case for first mortgage loans. Is that “fair,” in light of the fact that the Democrats who support this bill are all about “fairness”?

We’ll be interested to see the effect of this legislation on pricing of loans and loan servicing on pre-effective date mortgage loans. I wonder if prospective purchasers will drive harder bargains on bulk purchases of such loans from the FDIC due to this risk? You think?

At least the cramdown will not apply first loans going forward. Of course, any lender with a brain in his head has to assume that if Congress did it once, Congress could very well do it again, and price the risk accordingly. Moreover, this is likely not only to make first mortgage loans more expensive, but add even more impetus to restrictive underwriting standards. While many people believe that’s not a bad effect, let’s ask them again in a few years. As I observed when Durbin first started this push, the same folks who scream for cramdowns will be some of the first complaining that lenders aren’t making enough loans to those with poor credit, who will likely be members of various classes of the perpetually aggrieved, and supporters of Senator Durbin and the rest of the Gang of Three.

Lime Financial Class action

limeclasscomplaintoregon

California Cramdowns Coming 2009!

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

“California Cramdown” California Civil Code Section 2923.6

(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.

Recent article as to lender liability litigation

Current Trends in Residential Mortgage Litigation

BYLINE: Daniel A. Edelman*; *DANIEL A. EDELMAN is the founding partner of Edelman & Combs, of Chicago, Illinois, a firm that represents injured consumers in actions against banks, mortgage companies, finance companies, insurance companies, and automobile dealers. Mr. Edelman or his firm represented the consumer in a number of the cases discussed in this article.

HIGHLIGHT:

Borrowers Have Successfully Sued Based on Allegations of Over-escrowing, Unauthorized Charges and Brokers’ Fees, Improper Private Mortgage Insurance Procedures, and Incorrectly Adjusted ARMS. The Author Analyzes Such Lending Practices, and the Litigation They Have Spawned.

BODY:

This article surveys current trends in litigation brought on behalf of residential mortgage borrowers against mortgage originators and servicers. The following types of litigation are discussed:(i) over-escrowing; (ii) junk charges; (iii) payment of compensation to mortgage brokers and originators by lenders; (iv) private mortgage insurance; (v) unauthorized servicing charges; and (vi) improper adjustments of interest on adjustable rate mortgages. We have omitted discussion of abuses relating to high-interest and home improvement loans, a subject that would justify an article in itself.1

OVER-ESCROWING In recent years, more than 100 class actions have been brought against mortgage companies complaining about excessive escrow deposit requirements.

Requirements that borrowers make periodic deposits to cover taxes and insurance first became widespread after the Depression. There were few complaints about them until the late 1960s, probably because until that time many lenders used the ”capitalization” method to handle the borrowers’ funds. Under this method, escrow disbursements were added to the principal balance of the loan and escrow deposits were credited in the same manner as principal payments. The effect of this ”capitalization” method is to pay interest on escrow deposits at the note rate, a result that is fair to the borrower. When borrowers could readily find lenders that used this method, there was little ground for complaint.

The ”capitalization” method was almost entirely replaced by the current system of escrow or impound accounts in the 1960s and 1970s. Under this system, lenders require borrowers to make monthly deposits on which no interest is paid. Lenders use the deposits as the equivalent of capital by placing them in non-interest-bearing accounts at related banks or at banks that give ”fund credits” to the lender in return for custody of the funds.2 Often, surpluses greatly in excess of the amounts actually required to make tax and insurance payments as they came due are required. In effect, borrowers are required to make compulsory, interest-free loans to their mortgage companies.

One technique used to increase escrow surpluses is ”individual item analysis.” This term describes a wide variety of practices, all of which create a separate hypothetical escrow account for each item payable with escrow funds. If there are multiple items payable from the escrow account, the amount held for item A is ignored when determining whether there are sufficient funds to pay item B, and surpluses are required for each item. Thus, large surpluses can be built up. Individual item analysis is not per se illegal, but can readily lead to excessive balances.3

During the 1970s, a number of lawsuits were filed alleging that banks had a duty to pay interest on escrow deposits or conspired to eliminate the ”capitalization” method.4 Most courts held that, in the absence of a statute to the contrary, there was no obligation to pay interest on escrow deposits.5 The only exception was Washington. Following these decisions, some 14 states enacted statutes requiring the payment of interest, usually at a very low rate.6

Recent attention has focused on excessive escrow deposits. In 1986, the U.S. District Court for the Northern District of Illinois first suggested, in Leff v. Olympic Fed. S & L Assn.,7 that the aggregate balance in the escrow account had to be examined in order to determine if the amount required to be deposited was excessive. The opinion was noted by a number of state attorneys general, who in April 1990 issued a report finding that many large mortgage servicers were requiring escrow deposits that were excessive by this standard.8 The present wave of over-escrowing cases followed.

Theories that have been upheld in actions challenging excessive escrow deposit requirements include breach of contract,9 state consumer fraud statutes,10 RICO,11 restitution,12 and violation of the Truth in Lending Act (”TILA”).13 Claims have also been alleged under section 10 of the Real Estate Settlement Procedures Act (”RESPA”),14 which provides that the maximum permissible surplus is ”one-sixth of the estimated total amount of such taxes, insurance premiums and other charges to be paid on dates . . . during the ensuing twelve-month period.” However, most courts have held that there is no private right of action under section 10 of RESPA.15 Most of the overescrowing lawsuits have been settled. Refunds in these cases have totalled hundreds of millions of dollars.

On May 9, 1995, in response to the litigation and complaints concerning over-escrowing, HUD issued a regulation implementing section 10 of RESPA.16 The HUD regulation: 1. Provides for a maximum two-month cushion, computed on an aggregate basis (i.e., the mortgage servicer can require the borrower to put enough money in the escrow account so that at its lowest point it contains an amount equal to two months’ worth of escrow deposits); 2. Does not displace contracts if they provide for smaller amounts; and 3. Provides for a phase-in period, so that mortgage servicers do not have to fully comply until October 27, 1997.

Meanwhile, beginning in 1990, the industry adopted new forms of notes and mortgages that allow mortgage servicers to require escrow surpluses equal to the maximum two-month surplus permitted by the new regulation. However, loans written on older forms of note and mortgage, providing for either no surplus 17 or a one-month surplus, will remain in effect for many years to come. ”JUNK CHARGES” AND RODASH In recent years, many mortgage originators attempted to increase their profit margins by breaking out overhead expenses and passing them on to the borrower at the closing. Some of these ”junk charges” were genuine but represented part of the expense of conducting a lending business, while others were completely fictional. By breaking out the charges separately and excluding them from the finance charge and annual percentage rate, lenders were able to quote competitive annual percentage rates while increasing their profits.

Most of these charges fit the standard definition of ”finance charge” under TILA.18 A number of pre-1994 judicial and administrative decisions held that various types of these charges, such as tax service fees,19 fees for reviewing loan documents,20 fees relating to the assignment of notes and mortgages,21 fees for the transportation of documents and funds in connection with loan closings,22 fees for closing loans,23 fees relating to the filing and recordation of documents that were not actually paid over to public officials,24 and the intangible tax imposed on the business of lending money by the states of Florida and Georgia,25 had to be disclosed as part of the ”finance charge” under TILA.

The mortgage industry nevertheless professed great surprise at the March 1994 decision of the U.S. Court of Appeals for the Eleventh Circuit in Rodash v. AIB Mtge. Co.,26 holding that a lender’s pass-on of a $ 204 Florida intangible tax and a $ 22 Federal Express fee had to be included in the finance charge, and that Martha Rodash was entitled to rescind her mortgage as a result of the lender’s failure to do so. The court found that ”the plain language of TILA evinces no explicit exclusion of an intangible tax from the finance charge,” and that the intangible tax did not fall under any of the exclusions in regulation Z dealing with security interest charges.27 Claiming that numerous loans were subject to rescission under Rodash, the industry prevailed upon Congress and the Federal Reserve Board to change the law retroactively through a revision to the FRB Staff Commentary on regulation Z28 and the Truth in Lending Act Amendments of 1995, signed into law on September 30, 1995.29 The amendments:

1. Exclude from the finance charge fees imposed by settlement agents, attorneys, escrow companies, title companies, and other third party closing agents, if the creditor neither expressly requires the imposition of the charges nor retains the charges;30 2. Exclude from the finance charge taxes on security instruments and loan documents if the payment of the tax is a condition to recording the instrument and the item is separately itemized and disclosed (i.e., intangible taxes);31 3. Exclude from the finance charge fees for preparation of loan-related documents;32 4. Exclude from the finance charge fees relating to pest and flood inspections conducted prior to closing;33 5. Eliminate liability for overstatement of the annual percentage rate. 6. Increase the tolerance or margin of error;34 7. Provide that mortgage servicers are not to be treated as assignees.35 The constitutionality of the retroactive provisions of the Amendments is presently under consideration.

The FRB Staff Commentary amendments dealt primarily with the question of third-party charges, and provided that they were not finance charges unless the creditor required or retained the charges.36

The 1995 Amendments substantially eliminated the utility of TILA in challenging ”junk charges” imposed by lenders. However, ”junk charges” are also subject to challenge under RESPA, where they are used as devices to funnel kickbacks or referral fees or excessive compensation to mortgage brokers or originators. This issue is discussed below.

”UPSELLING,” ”OVERAGES,” AND REFERRAL FEES TO MORTGAGE ORIGINATORS A growing number of lawsuits have been brought challenging the payment of ”upsells,” ”overages,” ”yield spread premiums,” and other fees by lenders to mortgage brokers and originators.

During the last decade it became fairly common for mortgage lenders to pay money to mortgage brokers retained by prospective borrowers. In some cases, the payments were expressly conditioned on altering the terms of the loan to the borrower’s detriment by increasing the interest rate or ”points.” For example, a lender might offer brokers a payment of 50 basis points (0.5 percent of the principal amount of the loan) for every 25 basis points above the minimum amount (”par”) at which the lender was willing to make the loan. Industry publications expressly acknowledged that these payments were intended to ”compensate[] mortgage brokers for charging fees higher than what the borrower would normally pay.”37 In other instances, brokers were compensated for convincing the prospective borrower to take an adjustable-rate mortgage instead of a fixed-rate mortgage, or for inducing the purchase of credit insurance by the borrower. 38

In the case of some loans, the payments by the lender to the broker were totally undisclosed. In other cases, particularly in connection with loans made after the amendments to regulation X discussed below, there is an obscure reference to the payment on the loan documents, usually in terms incomprehensible to a lay borrower. For example, the HUD-1 form may contain a cryptic reference to a ”yield spread premium” or ”par plus pricing,” often abbreviated like ”YSP broker (POC) $ 1,500.”39

The burden of the increased interest rates and points resulting from these practices is believed to fall disproportionately on minorities and women.40 These practices are subject to legal challenge on a number of grounds.

Breach of Fiduciary Duty Most courts have held that a mortgage broker is a fiduciary. One who undertakes to find and arrange financing or similar products for another becomes the latter’s agent for that purpose, and owes statutory, contractual, and fiduciary duties to act in the interest of the principal and make full disclosure of all material facts. ”A person who undertakes to manage some affair for another, on the authority and for the account of the latter, is an agent.”41

Courts have described a mortgage loan broker as an agent hired by the borrower to obtain a loan.42 As such, a mortgage broker owes a fiduciary duty of the ”highest good faith toward his principal,” the prospective borrower.43 Most fundamentally, a mortgage broker, like any other agent who undertakes to procure a service, has a duty to contact a variety of providers and attempt to obtain the best possible terms.44

Additionally, a mortgage broker ”is ‘charged with the duty of fullest disclosure of all material facts concerning the transaction that might affect the principal’s decision’.”45 The duty to disclose extends to the agent’s compensation. 46 Thus, a broker may not accept secret compensation from adverse parties.47

Furthermore, the duty to disclose is not satisfied by the insertion of cryptic ”disclosures” on documents. The obligation is to ”make a full, fair and understandable explanation” of why the fiduciary is not acting in the interests of the beneficiary and of the reasons that the beneficiary might not want to agree to the fiduciary’s actions.48

The industry has itself recognized these principles. The National Association of Mortgage Brokers has adopted a Code of Ethics which requires, among other things, that the broker’s duty to the client be paramount. Paragraph 3 of the Code of Ethics states:

In accepting employment as an agent, the mortgage broker pledges himself to protect and promote the interest of the client. The obligation of absolute fidelity to the client’s interest is primary.

Thus, a lender who pays a mortgage broker secret compensation may face

liability for inducing the broker to breach his fiduciary or contractual duties, fraud, or commercial bribery.

Mail/Fraud/ Wire Fraud/ RICO The payment of compensation by a lender to a mortgage broker without full disclosure is also likely to result in liability under the federal mail and wire fraud statutes and RICO. It is well established that a scheme to corrupt a fiduciary or agent violates the mail or wire fraud statute if the mails or interstate wires are used in furtherance of the scheme.49

Real Estate Settlement Procedures Act Irrespective of whether the broker or other originator of a mortgage is a fiduciary, lender payments to such a person may result in liability under section 8 of RESPA,50 which prohibits payments or fee splitting for business referrals, if the payments are either not fully disclosed or exceed reasonable compensation for the services actually performed by the originator.

Prior to 1992, the significance of section 8 of RESPA was minimized by restrictive interpretations. The Sixth Circuit Court of Appeals held that the origination of a mortgage was not a ‘’settlement service” subject to section 8.51 In addition, cases construing the pre-1992 version of implementing HUD regulation X required a splitting of fees paid to a single person.52 Finally, the payment of compensation in secondary market transactions was excluded from RESPA, and there was no distinction made between genuine secondary market transactions and ”table funded” transactions, where a mortgage company originates a loan in its own name, but using funds supplied by a lender, and promptly thereafter assigns the loan to the lender.53

In 1992, RESPA and regulation X were amended to close each of these loopholes. The amendments did not have practical effect until August 9, 1994, the effective date of the new regulation X.54

First, RESPA was amended to provide expressly that the origination of a loan was a ‘’settlement service.” P.L. 102-550 altered the definition of ‘’settlement service” in Section 2602(3) to include ”the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans).” This change and a corresponding change in regulation X were expressly intended to disapprove the Sixth Circuit’s decision in United States v. Graham

Mtge. Corp.55

Second, regulation X was amended to exclude table funded transactions from the definition of ‘’secondary market transactions.” Regulation X addresses ”table funding” in sections 3500.2 and 3500.7. Section 3500.2 provides that ”table funding means a settlement at which a loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds. A table-funded transaction is not a secondary market transaction (see Section 3500.5(b)(7)).” Section 3500.5(b)(7) exempts from regulation by RESPA fees and charges paid in connection with legitimate ‘’secondary market transactions,” but excludes table funded transactions from the scope of legitimate secondary market transactions. Under the current regulation X, RESPA clearly applies to table funded transactions.56 Amounts paid by the first assignee of a loan to a ”table funding” broker for ”rights” to the loan — i.e., for the transfer of the loan by the broker to the lender — are now subject to examination under RESPA.57

Third, any sort of payment to a broker or originator that does not represent reasonable compensation for services actually provided is prohibited. 58

Whatever the payment to the originator or broker is called, it must be reasonable. Another mortgage industry publication states: [A]ny amounts paid under these headings [servicing release premiums or yield spread premiums] must be lumped together with any other origination fees paid to the broker and be subjected to the referral fee/ market value test in Section 8 of RESPA and Section 3500.14 of Regulation X. If the total of this compensation exceeds the market value of the services performed by the broker (excluding the value of the referral), then the compensation does not pass the test, and both the broker and the lender could be subject to the civil and criminal penalties contained in RESPA.59

Normal compensation for a mortgage broker is about one percent of the principal amount of the loan. Where the broker ”table funds” the loan and originates it in its name, an extra .5 percent or one percent may be appropriate.60 This level of reasonableness is recognized by agency regulations. For example, on February 28, 1996, in response to allegations of gouging by brokers on refinancing VA loans, the VA promulgated new regulations prohibiting mortgage lenders from charging more than two points in refinanced transactions.61

The amended regulation makes clear that a payment to a broker for influencing the borrower in any manner is illegal. ”Referral” is defined in Section 3500.14(f)(1) to include ”any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business. . . .” The amended regulation also cannot be evaded by having the borrower pay the originator. An August 14, 1992 letter from Frank Keating, HUD’s General Counsel, states unequivocally: ”We read ‘imposed upon borrowers’ to include all charges which the borrower is directly or indirectly funding as a condition of obtaining the mortgage loan. We find no distinction between whether the payment is paid directly or indirectly by the borrower, at closing or outside the closing. . . . I hereby restate my opinion that RESPA requires the disclosures of mortgage broker fees, however denominated, whether paid for directly or indirectly by the borrower or by the lender.”

Thus, ”yield spread premiums,” ‘’service release fees,” and similar payments for the referral of business are no longer permitted. The new regulation was specifically intended to outlaw the payment of compensation for the referral of business by mortgage brokers, either directly or through the imposition of ”junk charges.” Thus, it provides that payments may not be made ”for the referral of settlement service business” (Section 3500.14(b)).

The mortgage industry has recognized that types of fees that were once viewed as permissible in the past are now ”prohibited and illegal.” The legal counsel for the National Second Mortgage Association acknowledged: ”Even where the amount of the fee is reasonable, the more persuasive conclusion is that RESPA does not permit service release fees.” ”Also, if . . . the lender is ‘table funding’ the loan, he is violating RESPA’s Section 8 anti-kickback provisions.”62

In the first case decided under the new regulation, Briggs v. Countrywide Funding Corp.,63 the U. S. District Court for the Middle District of Alabama denied a motion to dismiss a complaint alleging the payment of a ”yield spread premium” by a lender to a broker in connection with a table funded transaction. Plaintiffs alleged that the payment violated RESPA as well as several state law doctrines. The court acknowledged that RESPA applied to the table funded transactions and noted that whether or not disclosed, the fees could be considered illegal.

Truth in Lending Act Implications Many of the pending cases challenging the payment of ”yield spread premiums” and ”upselling” allege that the payment of compensation to an agent of the lender is a TILA ”finance charge.” The basis of the TILA claims is that the commission a borrower pays to his ”broker” is a finance charge because the ”broker” is really functioning as the agent of the lender. The claim is not that the ”upsell” payment made by the lender to the borrower’s broker is a finance charge.

Decisions under usury statutes uniformly hold that a fee charged to the borrower by the lender’s agent is interest or points.64 The concept of the ”finance charge” under TILA is broader than, but inclusive of, the concept of ”interest” and ”points” at common law and under usury statutes. Regulation Z specifically provides that the ”finance charge” includes any ”interest” and ”points” charged in connection with a transaction.65 Therefore, if the intermediary is in fact acting on behalf of the lender, as is the case where the intermediary accepts secret compensation from the lender or acts in the lender’s interest to increase the amount paid by the borrower, all compensation received by the intermediary, including broker’s fees charged to the borrower, are finance charges.

Unfair and Deceptive Acts and Practices The pending ”upselling” cases also generally allege that the payment of compensation to the mortgage broker violates the general prohibitions of most state ”unfair and deceptive acts and practices” (”UDAP”) statutes. The violations of public policy codified by the federal consumer protection laws create corresponding state consumer protection law claims.66

Civil Rights and Fair Housing Laws The Department of Justice brought two cases in late 1995 alleging that the disproportionate impact of ”overages” and ”upselling” on minorities violated the Fair Housing Act67 and Equal Credit Opportunity Act.68 Both cases alleged disparate pricing of loans according to the borrower’s race and were promptly settled.69 Other investigations are reported to be pending.70 The principal focus of enforcement agencies appears to be on the civil rights implications of overages.71

It is likely that such a practice would also violate 42 U.S.C. Section 1981.While Section 1981 requires intentional discrimination, a lender that decides to take advantage of the fact that other lenders discriminate by making loans to minorities at higher rates is also engaging in intentional discrimination. In Clark v. Universal Builders,72 the Seventh Circuit held that one who exploits and preys on the discriminatory hardship of minorities does not occupy a more protected status than the one who created the hardship in the first instance; that is, a defendant cannot escape liability under the Civil Rights Act by asserting it merely ”exploited a situation crated by socioeconomic forces tainted by racial discrimination.”73

PRIVATE MORTGAGE INSURANCE LITIGATION Another group of pending lawsuits is based on claims of misrepresentation of or failure to disclose the circumstances under which private mortgage insurance (”PMI”) may be terminated. PMI insures the lender against the borrower’s default — the borrower derives no benefit from PMI. It is generally required under a conventional mortgage if the loan to value ratio exceeds about 80 percent.74 Approximately 17.4 percent of all mortgages have PMI.75

Standard form conventional mortgages provide that if PMI is required it maybe terminated as provided by agreement. Most servicers and investors have policies for terminating PMI. However, the borrower is often not told what the policy is, either at the inception of the mortgage or at any later time. As a result, people pay PMI premiums unnecessarily. Since there is about $ 460 billion in PMI in force,76 this is a substantial problem. The failure accurately and clearly to disclose the circumstances under which PMI may be terminated has been challenged under RICO and state consumer fraud statutes.

UNAUTHORIZED SERVICING CHARGES Another fertile ground of litigation concerns the imposition of charges that are not authorized by law or the instruments being serviced. The collection of modest charges is a key component of servicing income.77 For example, many mortgage servicers impose charges in connection with the payoff or satisfaction of mortgages when the instruments either do not authorize the charge or affirmatively prohibit it.

The imposition of payoff and recording charges has been challenged as a breach of contract, as a deceptive trade practice, as a violation of RICO, and as a violation of the Fair Debt Collection Practices Act (”FDCPA”).78 In Sandlin v. State Street Bank,79 the U. S. District Court for the Middle District of Florida held that the imposition of a payoff statement fee is a violation of the standard form ”uniform instrument” issued by the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, and when imposed by someone who qualifies as a ”debt collector” under the FDCPA,80 violates that statute as well.81 However, attempts to challenge such charges under RESPA have been unsuccessful, with courts holding that a charge imposed subsequent to the closing is not covered by RESPA.82

ADJUSTABLE RATE MORTGAGES Adjustable rate mortgages (”ARMs”) were first proposed by the Federal Home Loan Bank Board in the 1970s. They first became widespread in the early 1980s. At the present time, about 25 to 30 percent of all residential mortgages are adjustable rate mortgages (”ARMs”).83

The ARM adjustment practices of the mortgage banking industry have been severely criticized because of widespread errors.84 Published reports beginning in 1990 indicate that 25 to 50 percent of all ARMs may have been adjusted incorrectly at least once.85 The pattern of misadjustments is not random: approximately two-thirds of the inaccuracies favor the mortgage company.86

Grounds for legal challenges to improper ARM adjustments include breach of contract, TILA,87 the Uniform Consumer Credit Code,88 RICO,89 state unfair and deceptive practices statutes,90 failure to properly respond to a ”qualified written request” under section 6(e) of RESPA,and usury.91

Substantial settlements of ARM claims have been made by Citicorp Mortgage,92 First Nationwide Bank,93 and Banc One.94 On the other hand, several cases have rejected borrower claims that particular ARM adjustment actions violated the terms of the instruments. For example, a Connecticut case held that a mortgage that provided for an interest rate tied to the bank’s current ”market rate” was not violated when the bank failed to take into account the rate that could be obtained through the payment of a ”buydown.”95 A Pennsylvania case held that the substitution of one index for another that had been discontinued was consistent with the terms of the note and mortgage.96

A major issue in ARM litigation is whether what the industry erroneously terms ”undercharges” — the failure of the servicer to charge the maximum amount permitted under the terms of the instrument — can be ”netted” or offset against overcharges — the collection of interest in excess of that permitted under the terms of the instrument. Fannie Mae has taken the position that ”netting” is appropriate.97

The validity of this conclusion is questionable. First, nothing requires a financial institution to adjust interest rates upward to the maximum permitted, and there are in fact often sound business reasons for not doing so. On the other hand, the borrower has an absolute right not to pay more than the instrument authorizes. Thus, what the industry terms an ”undercharge” is simply not the same thing as an ”overcharge.”

Second, the upward adjustment of interest rates must be done in compliance with TILA. An Ohio court held that failure to comply made the adjustment unenforceable.98 ”Where a bank violates the Truth-in-Lending Act by insufficient disclosure of a variable interest rate, the court may grant actual damages. . . . If the actual damage is the excess interest charge over the original contract term, the court may order the mortgage to be recalculated at its original terms, and refuse to enforce the variable interest rate provisions.”99

Third, if the borrower is behind in his payments, ”netting” may violate state law requiring the lender to proceed against the collateral before undertaking other collection efforts. A decision of the California intermediate appellate court concluded that the state’s ”one-action rule” had been violated when a lender obtained an offset of interest overcharges against amounts owed by the borrower under an ARM.100

1. E.g., G. Marsh, Lender Liability for Consumer Fraud Practices of Retail

Dealers and Home Improvement Contractors, 45 Ala. L. Rev. 1 (1993); D. Edelman, Second Mortgage Frauds, Nat’l Consumer Rights Litigation Conference 67 (Oct. 19-20, 1992).

2. The lender would deposit the escrow funds in a non-interest-bearing account at a bank which made loans to the lender. The lender would receive a ”funds credit” against the interest payable on its borrowings based on the value of the escrow funds deposited at the bank.

3. Aitken v. Fleet Mtge. Corp., 1991 U.S.Dist. LEXIS 10420 (ND Ill., July 30,1991), and 1992 U.S.Dist. LEXIS 1687 (ND Ill., Feb. 12, 1992); Attorney General v. Michigan Nat’l Bank, 414 Mich. 948, 325 N.W.2d 777 (1982); Burkhardt v. City Nat’l Bank, 57 Mich.App. 649, 226 N.W.2d 678 (1975).

4. See generally, Class Actions Under Anti-Trust Laws on Account of Escrow and Similar Practices, 11 Real Prop., Probate & Trust Journal 352 (Summer 1976).

5. Buchanan v. Century Fed. S. & L. Ass’n, 306 Pa. Super. 253, 452 A.2d 540(1982), later opinion, 374 Pa. Super. 1, 542 A.2d 117 (1986); Carpenter v. Suffolk Franklin Savs. Bank, 370 Mass. 314, 346 N.E.2d 892 (1976); Brooks v. Valley Nat’l Bank, 113 Ariz. 169, 548 P.2d 1166 (1976); Petherbridge v. Prudential S. & L. Ass’n, 79 Cal.App.3d 509, 145 Cal.Rptr. 87 (1978); Marsh v. Home Fed. S. & L. Ass’n, 66 Cal.App.3d 674, 136 Cal.Rptr. 180 (1977); LaThrop v. Bell Fed. S. & L. Ass’n, 68 Ill.2d 375, 370 N.E.2d 188 (1977); Sears v. First Fed. S. & L. Ass’n, 1 Ill.App.3d 621, 275 N.E.2d 300 (1st Dist. 1973); Durkee v. Franklin Savings Ass’n, 17 Ill.App.3d 978, 309 N.E.2d 118 (2d Dist. 1974); Zelickman v. Bell Fed. S. & L. Ass’n, 13 Ill.App.3d 578, 301 N.E.2d 47 (1st Dist. 1973); Yudkin v. Avery Fed. S. & L. Ass’n, 507 S.W.2d 689 (Ky. 1974); First Fed. S. & L. Ass’n of Lincoln v. Board of Equalization of Lancaster County, 182 Neb. 25, 152 N.W.2d 8 (1967); Kronisch v. Howard Savings Institution, 161 N.J.Super. 592, 392 A.2d 178 (1978); Surrey Strathmore Corp. v. Dollar Savings Bank of New York, 36 N.Y.2d 173, 366 N.Y.S.2d 107, 325 N.E.2d 527 (1975); Tierney v. Whitestone S. & L. Ass’n, 83 Misc.2d 855, 373 N.Y.S.2d 724 (1975); Cale v. American Nat’l Bank, 37 Ohio Misc. 56, 66 Ohio Ops.2d 122 (1973); Richman v. Security S. & L. Ass’n, 57 Wis.2d 358, 204 N.W.2d 511 (1973); In re Mortgage Escrow Deposit Litigation, 1995 U.S.Dist. LEXIS 1555 (ND Ill. Feb. 8, 1995).

6. National Mortgage News, Nov. 11, 1991, p. 2.

7. Leff v. Olympic Fed. S & L Ass’n, 1986 WL 10636 (ND Ill 1986).

8. Overcharging on Mortgages: Violations of Escrow Account Limits by the Mortgage Lending Industry: Report by the Attorneys General of California, Florida, Iowa, Massachusetts, Minnesota, New York & Texas (24 Apr 1990).

9. Leff v. Olympic Fed. S. & L. Ass’n, n. 7 supra; Aitken v. Fleet Mtge.Corp., 1992 U.S.Dist. LEXIS 1687 (ND Ill., Feb. 12, 1992); Weinberger v. Bell Federal, 262 Ill.App.3d 1047, 635 N.E.2d 647 (1st Dist. 1994); Poindexter v. National Mtge. Corp., 1995 U.S.Dist. LEXIS 5396 (ND Ill., April, 24, 1995); Markowitz v. Ryland Mtge. Co., 1995 U.S.Dist. LEXIS 11323 (ND Ill. Aug. 8, 1995); Sanders v. Lincoln Service Corp., 1993 U.S.Dist. LEXIS 4454 (ND Ill. Apr. 9, 1993); Cairns v. Ohio Sav. Bank, 1996 Ohio App. LEXIS 637 (Feb. 22, 1996). See generally, GMAC Mtge. Corp. v. Stapleton, 236 Ill.App.3d 486, 603 N.E.2d 767 (1st Dist. 1992), leave to appeal denied, 248 Ill.2d 641, 610 N.E.2d 1262 (1993).

10. Leff v. Olympic Fed. S. & L. Ass’n, n. 7 supra; Aitken v. Fleet Mtge. Corp., n.9 supra; Poindexter v. National Mtge. Corp., n.9 supra; Sanders v. Lincoln Service Corp., n. 9 supra.

11. Leff v. Olympic Fed. S. & L. Ass’n, Aitken v. Fleet Mtge. Corp., n.9 supra; Robinson v. Empire of America Realty Credit Corp., 1991 U.S.Dist. LEXIS 2084 (ND Ill., Feb. 20, 1991); Poindexter v. National Mtge. Corp., n. 9 supra. 12. Poindexter v. National Mtge. Corp., n. 9 supra.

13. Martinez v. Weyerhaeuser Mtge. Co., 1995 U.S.Dist. LEXIS 11367 (ND Ill. Aug. 8, 1995). The theory is that the excessive portion of the escrow deposit is a finance charge.

14. 12 U.S.C. Section 2609.

15. State of Louisiana v. Litton Mtge. Co., 50 F.3d 1298 (5th Cir. 1995); Allison v. Liberty Savings, 695 F.2d 1086, 1091 (7th Cir. 1982); Herrman v. Meridian Mtge. Corp., 901 F.Supp. 915 (ED Pa. 1995); Campbell v. Machias Savings Bank, 865 F.Supp. 26, 31 (D.Me. 1994); Michels v. Resolution Trust Corp., 1994 U.S.Dist. LEXIS 6563 (D.Minn. Apr. 13, 1994); Bergkamp v. New York Guardian Mortgagee Corp., 667 F.Supp. 719, 723 (D.Mont. 1987). Contra, Vega v. First Fed. S. & L. Ass’n, 622 F.2d 918, 925 (6th Cir. 1980).

16. 24 C.F.R. 3400.17, issued at 60 FR 24734.17. The pre-1990 ”uniform instrument” issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation did not provide for any surplus. The pre-1990 FHA form and the VA form provided for a one-month surplus.

18. The finance charge includes ”any charge, payable directly or indirectly by the consumer, imposed directly or indirectly by the creditor, as an incident to or a condition of the extension of credit.” regulation Z, 12 C.F.R. 226.4(a). The definition is all-inclusive: any charge that meets this definition is a finance charge unless it is specifically excluded by TILA or regulation Z. R. Rohner, The Law of Truth in Lending, section 3.02 (1984). There are exclusions from the finance charge which apply only in mortgage transactions. 12 C.F.R. 226.4(c)(7). However, the exclusions require that the charges be bona fide and reasonable in amount, id., and the exclusions are narrowly construed to protect consumers from underdisclosure of the cost of credit. Equity Plus Consumer Fin. & Mtge. Co. v. Howes, 861 P.2d 214, 217 (NM 1993). See also In re Celona, 90 B.R. 104 (Bankr.ED Pa. 1988), aff’d 98 B.R. 705 (Bankr. ED Pa. 1989). ”[O]nly those charges specifically exempted from inclusion in the ‘finance charge’ by statute or regulation may be excluded from it.” Buford v. American Fin. Co., 333 F.Supp. 1243, 1247 (ND Ga. 1971). 19. In re Souders, 1992 U.S.Comp.Gen. LEXIS 1075 (Sept. 29, 1992); In re Barry, 1981 U.S.Comp.Gen. LEXIS 1262 (April 16, 1981); In re Bayer, 1977 U.S.Comp.Gen. LEXIS 2116 (Sept. 19, 1977); In re Wahl, 1974 U.S.Comp.Gen. LEXIS 1610 (Oct. 1, 1974); In re Ray, 1973 U.S.Comp.Gen. LEXIS 1960 (March 13, 1973). A tax service fee represents the purported cost of having someone check the real estate records annually to make sure that the taxes on the property securing the loan are shown as having been paid.

20. In re Celona, 90 B.R. 104, 110-12 (Bankr. E.D.Pa. 1988), aff’d, 98 B.R. 705 (ED Pa. 1989) (lender violated TILA by passing on $ 200 fee charged by attorney to review certain documents without including fee in ”finance charge”); Abel v. Knickerbocker Realty Co., 846 F.Supp. 445 (D.Md. 1994) (lender violated TILA because ”origination fee” of $ 290 excluded from ”finance charge”); Brodo v. Bankers Trust Co., 847 F.Supp. 353 (ED Pa. 1994) (lender violated TILA by imposing charge for preparing TILA disclosure documents without including them in the ”finance charge”).

21. Cheshire Mtge. Service, Inc. v. Montes, 223 Conn. 80, 612 A.2d 1130 (1992) (lender violated TILA by imposing fee for assigning the mortgage when it was sold on the secondary market without including it in the ”finance charge”); In re Brown, 106 B.R. 852 (Bankr. E.D.Pa. 1989) (same); Mayo v. Key Fin. Serv., Inc., 92-6441-D (Mass.Super.Ct., June 22, 1994) (same).

22. In re Anibal L. Toboas, 1985 U.S.Comp.Gen. LEXIS 854 (July 19, 1985) (”The relevant part of Regulation Z expressly categorizes service charges and loan fees as part of the finance charge when they are imposed directly or indirectly on the consumer incident to or as a condition of the extension of credit. The finance charge, therefore, is not limited to interest expenses but includes charges which are imposed to defray a lender’s administrative costs. [citation] A messenger service charge paid to the mortgage lender may not be reimbursed because it is part of the lender’s overhead, a charge for which is considered part of the finance charge under Regulation Z.”); In re Schwartz, 1989 U.S. Comp. Gen. LEXIS 55 (Jan. 19, 1989) (”a messenger service charge or fee is part of the lender’s overhead, a charge which is deemed to be a finance charge and not reimbursable”).

23. Decision of the Comptroller General No. B-181037, 1974 U.S.Comp.Gen. LEXIS 1847 (July 16, 1974) (loan closing fee was part of the finance charge under TILA); Decision of the Comptroller General, No. B-189295 1977, U.S. Comp.Gen. LEXIS 2230 (Aug. 16, 1977) (same); In the Matter of Real Estate Expenses — Finance Charges, No. B-179659, 54 Comp. Gen. 827, 1975 U.S.Comp.Gen. LEXIS 180 (April 4, 1975) (same).

24. Abbey v. Columbus Dodge, 607 F.2d 85 (5th Cir. 1979) (purported $ 37.50 ”filing fee” that creditor pocketed was a finance charge); Therrien v. Resource Finan. Group. Inc., 704 F.Supp. 322, 327 (DNH 1989) (double-charging for recording and discharge fee and title insurance premium constituted undisclosed finance charges).

25. Decision of the Comptroller General, B-174030, 1971 U.S. Comp. Gen. LEXIS 1963 (Nov. 11, 1971).

26. 16 F.3d 1142 (11th Cir. 1994).

27. Id. at 1149.

28. 60 FR 16771, April 3, 1995.

29. See Jean M. Shioji, Truth in Lending Act Reform Amendments of 1995, Rev. of Bank. and Finan. Serv., Dec. 13, 1995, Vol. 11, No. 21; at 235. 30. P.L. 104-29, sections 2(a), (c), (d), and (e), to be codified at 15 U.S.C. 1605(a), (c), (d) and (e).

31. P.L. 104-29, section 2(b), to be codified at 15 U.S.C. 1605(a)(6). 32. The amendment broadened the language in 15 U.S.C. 1605(e)(2), which previously excluded ”fees for preparation of a deed, settlement statement, or other documents.”

33. P.L. 104-29, sections 2(a), (c), (d), and (e), to be codified at 15 U.S.C. 1605(a), (c), (d) and (e).

34. P.L. 104-29, section 3(a), to be codified at 15 U.S.C. 1605(f)(2); P.L. 104-29, section 4(a), to be codified at 15 U.S.C. 1649(a)(3); P.L. 104-29, section 8, to be codified at 15 U.S.C. 1635(i)(2); 15 U.S.C. 1606(c). 35. P.L. 104-29, section 7(b), to be codified at 15 U.S.C. 1641(f). The apparent purpose of this provision was to alter the result in Myers v. Citicorp Mortgage, 1995 U.S.Dist. LEXIS 3356 (MD Ala., March 14, 1995). 36. The amendments were applied to existing transactions in Hickey v. Great W. Mtge. Corp., 158 F.R.D. 603 (ND Ill. 1994), later opinion, 1995 U.S. Dist. LEXIS 405 (ND Ill., Jan. 3, 1995), later opinion, 1995 U.S. Dist. LEXIS 3357 (ND Ill., Mar. 15, 1995), later opinion, 1995 U.S. Dist. LEXIS 4495 (ND Ill., Apr. 4, 1995), later opinion, 1995 U.S. Dist. LEXIS 6989 (ND Ill., May 1, 1995); and Cowen v. Bank United, 1995 U.S.Dist. LEXIS 4495, 1995 WL 38978 (ND Ill., Jan. 25, 1995), aff’d, 70 F.3d 937 (7th Cir. 1995).

37. Jonathan S. Hornblass, Fleet Unit Discontinues Overages on Loans to the Credit-Impaired, American Banker, June 9, 1995, p. 8. See also, Kenneth R. Harney, Loan Firm to Refund $ 2 Million in ‘Overage’ Fees, Los Angeles Times, Nov. 6, 1994, part K, p. 4, col. 1 (”Yield spread premiums” or ”overages” are paid ”to brokers when borrowers lock in or sign contracts at rates or terms that exceed what the lender would otherwise be willing to deliver”); Ruth Hepner, Risk-based loan rates may rate a look, Washington Times, Nov. 4, 1994, p. F1 (such fees are paid to mortgage brokers ”to bring in borrowers at higher-than-market rates and fees”); Jonathan S. Hornblass, Focus on Overages Putting Home Lenders in Legal Hot Seat, American Banker, May 24, 1995, p. 10 (giving examples of how the fees affect the borrower).

38. The extra fees — known in the trade as overages or yield-spread premiums — typically are paid to local mortgage brokers by large lenders who purchase their home loans. The concept is straightforward: If a mortgage company can deliver a loan at higher than the going rate, or with higher fees, the loan is worth more to the large lender who buys it. For every rate notch above ”par” — the lender’s standard rate — the lender will pay a local originator a bonus. Kenneth R. Harney, Suit Targets Extra Fees Paid When Mortgage Rate Inflated, Sacramento Bee, Aug. 13, 1995, p. J1.

39. Prior to 1993, according to industry experts, back-end compensation of this type rarely was disclosed to consumers. More recently, however, some brokers and lenders have sharply limited the size of the fees and disclosed them. They often appear as one or more line items on the standard HUD-1 settlement sheets used for closings nationwide. Id.

40. Jonathan S. Hornblass, Focus on Overages Putting Home Lenders In Legal Hot Seat, American Banker, May 24, 1995, p. 10; K. Harney, U. S. Probes Higher Fees for Women, Minorities, Los Angeles Times, Sept. 24, 1995, p. K4. 41. In re Estate of Morys, 17 Ill.App.3d 6, 9, 307 N.E.2d 669 (1st Dist. 1973).

42. Wyatt v Union Mtge. Co., 24 Cal.3d 773, 782, 157 Cal.Rptr. 392, 397, 598 P.2d 45 (1979); accord: Pierce v. Hom, 178 Cal. Rptr. 553, 558 (Ct. App. 1981) (mortgage broker has duty to use his expertise in real estate financing for the benefit of the borrower); Allabastro v. Cummins, 90 Ill.App.3d 394, 413 N.E.2d 86, 82 (1st Dist. 1980); Armstrong v. Republic Rlty. Mgt. Corp., 631 F.2d 1344 (8th Cir. 1980); In re Dukes, 24 B.R. 404, 411-12 (Bankr. ED Mich. 1982) (”the fiduciary, Salem Mortgage Company, failed to provide the borrower-principal with any sort of estimate as to the ultimate charges until a matter of minutes before the borrower was to enter into the loan agreement”); Community Fed. Savings v. Reynolds, 1989 U.S. Dist. LEXIS 10115 (N.D.Ill., Aug. 18, 1989); Langer v. Haber Mortgages, Ltd., New York Law Journal, August 2, 1995, p. 21 (N.Y. Sup.Ct.). See also, Tomaszewski v. McKeon Ford, Inc., 240 N.J.Super. 404, 573 A.2d 101 (1990) Browder v, Hanley Dawson Cadillac Co., 62 Ill.App.3d 623, 379 N.E.2d 1206 (1st Dist. 1978) Fox v. Industrial Cas. Co., 98 Ill.App.3d 543, 424 N.E.2d 839 (1st Dist. 1981); Hlavaty v. Kribs Ford Inc., 622 S.W.2d 28 (Mo.App. 1981), and Spears v. Colonial Bank, 514 So.2d 814 (Ala. 1987) (Jones, J., concurring), dealing with the duty of a seller of goods or services who undertakes to procure insurance for the purchaser. See generally 12 Am Jur 2d, Brokers, Section 84.

43. Wyatt v. Union Mtge. Co., 24 Cal.3d 773, 782, 157 Cal.Rptr. 392, 397, 598 P.2d 45 (1979).

44. Brink v. Da Lesio, 496 F.Supp. 1350 (D.Md. 1980), modified, 667 F.2d 420 (4th Cir. 1981)

45. Wyatt v Union Mtge. Co., 24 Cal.3d 773, 782, 157 Cal.Rptr. 392, 397, 598 P.2d 45 (1979).

46. Martin v. Heinold Commodities, Inc. 139 Ill.App.3d 1049, 487 N.E.2d 1098. 1102-03 (1st Dist. 1985), aff’d in part and rev’d in part, 117 Ill.2d 67, 510 N.E.2d 840 (1987), appeal after remand, 240 Ill.App.3d 536, 608 N.E.2d 449 (1st Dist. 1992), aff’d in part and rev’d in part, 163 Ill.2d 33, 643 N.E.2d 734 (1994).

47. An agreement between a seller and an agent for a purchaser whereby an increase in the purchase price was to go to the agent unbeknownst to the purchaser, constitutes fraud. Kuntz v. Tonnele, 80 N.J.Eq. 372, 84 A. 624, 626 (Ch. 1912). The buyer may sue both his agent and the seller. Id. 48. Starr v. International Realty, Ltd., 271 Or. 296, 533 P.2d 165, 167-8 (1975).

49. Bunker Ramo Corp. v. United Business Forms, Inc., 713 F.2d 1272 (7th Cir. 1983); Hellenic Lines, Ltd. v. O’Hearn, 523 F.Supp. 244 (SDNY 1981); CNBC, Inc. v. Alvarado, 1994 U.S.Dist. LEXIS 11505 (SDNY 1994). Shushan v. United States, 117 F.2d 110, 115 (5th Cir. 1941), United States v. George, 477 F.2d 508, 513 (7th Cir. 1973); Formax, Inc. v. Hostert, 841 F.2d 388, 390-91 (Fed. Cir. 1988); United States v. Shamy, 656 F.2d 951, 957 (4th Cir. 1981); United States v. Bruno, 809 F.2d 1097, 1104 (5th Cir. 1987); United States v. Isaacs, 493 F.2d 1124, 1150 (7th Cir. 1974); United States v. Mandel, 591 F.2d 1347, 1362 (4th Cir. 1979); United States v. Keane, 522 F.2d 534, 546 (7th Cir. 1975); United States v. Barrett, 505 F.2d 1091, 1104 (7th Cir. 1974); GLM Corp. v. Klein, 684 F.Supp. 1242, 1245 (SDNY 1988); United States v. Procter & Gamble Co., 47 F.Supp. 676, 678-79 (D.Mass. 1942); United States v. Aloi, 449 F.Supp. 698, 718 (EDNY 1977); United States v. Fineman, 434 F.Supp. 189, 195 (EDPa. 1977). 50. U.S.C. Section 2607.

51. United States v. Graham Mtge. Corp., 740 F.2d 414 (6th Cir. 1984). 52. Durr v. Intercounty Title Co., 826 F.Supp. 259, 262 (ND Ill. 1993), aff’d, 14 F.3d 1183 (7th Cir. 1994); Campbell v. Machias Savings Bank, 865 F.Supp. 26, 31 n. 5 (D.Me. 1994); Mercado v. Calumet Fed. S. & L. Ass’n, 763 F.2d 269, 270 (7th Cir. 1985); Family Fed. S. & L. Ass’n v. Davis, 172 B.R. 437, 466 (Bankr. DDC 1994); Adamson v. Alliance Mtge. Co., 677 F.Supp. 871 (ED Va. 1987), aff’d, 861 F.2d 63 (4th Cir. 1988); Duggan v. Independent Mtge. Corp., 670 F.Supp. 652, 653 (ED Va. 1987).

53. The Alabama Supreme Court described the ”table funding” relationship as

follows: Under this arrangement, the mortgage broker or correspondent lender performs all of the originating functions and closes the loan in the name of the mortgage broker with funds supplied by the mortgage lender. The mortgage broker depends upon ”table funding,” the simultaneous advance of the loan funds from the mortgage lender to the mortgage broker. Once the loan is closed, the mortgage broker immediately assigns the mortgage to the mortgage lender. The essence of the table funding relationship is that the mortgage broker identifies itself as the creditor on the loan documents even though the mortgage broker is

not the source of the funds. (Emphasis added). Smith v. First Family Financial Services Inc., 626 So.2d 1266, 1269 (Ala. 1993). 54. 57 FR 49607, Nov. 2, 1992; 57 FR 56857, Dec. 1, 1992; 59 FR 6515, Feb. 10, 1994.

55. N. 51 supra. In conjunction with amending regulation X, the Department of Housing and Urban Development made the following statement regarding the Sixth

Circuit’s interpretation of RESPA and regulation X: HUD has consistently taken the position that the prohibitions of Section 8 of RESPA (12 U.S.C. 2607) extended to loan referrals. Although the making of a loan is not delineated as a ‘’settlement service” in Section 3(3) of RESPA (12 U.S.C. 2602(3)), it has always been HUD’s position, based on the statutory language and the legislative history, that the section 3(3) list was not an inclusive list of all settlement services and that the origination, processing and funding of a mortgage loan was

a settlement service. In U.S. v. Graham Mortgage Corp., 740 F.2d 414 (6th Cir. 1984), the Sixth Circuit Court of Appeals stated that HUD’s interpretation that the making of a mortgage loan was a part of the settlement business was unclear for purposes of criminal prosecution, and based and the rule of lenity, overturned a previous conviction. In response to the Graham case, HUD decided to amend its regulations to state clear and specifically that the making and

processing of a mortgage loan was a settlement service. Accordingly, HUD restates its position unequivocally that the originating, processing, or funding

of a mortgage loan is a settlement service in this rule. 57 F.R. 49600(Nov. 2, 1992).

56. Table Funding Rebuffed Again, National Mortgage News, Feb. 21, 1994, p. 6; HUD May Grant Home Equity Reprieve, Thomson’s International Bank Accountant, Dec. 13, 1993, p. 4; HUD Wants Expansion of Mortgage Broker Fee Disclosure, National Mortgage News, p. 25 (Sept. 14, 1992).

57. Table Funding, Fee Rulings Near, Banking Attorney, Dec. 13, 1993, vol. 3, no. 47, p. 5; Table Funding to Be Disclosed, International Bank Accountant, Dec. 13, 1993, vol. 93, no. 47, p. 4.

58. The current version of regulation X, 24 C.F.R. Section 3500.14, provides,

in part, as follows: Prohibition against kickbacks and unearned fees. (a)Section 8 violation. Any violation of this section is a violation of section 8 of RESPA (12 U.S.C. Section 2607) and is subject to enforcement as such under

Section 3500.19(b). . . (b) No referral fees. No person shall give and no person shall accept any fee, kickback, or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a settlement service involving a federal-related mortgage loan shall be

referred to any person. (c) No split of charges except for actual services performed. No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a settlement service in connection with a transaction involving a federally-related mortgage loan other than for services actually performed. A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable. Nor may the prohibitions of this Part be avoided by creating an arrangement wherein the purchaser of services splits the fee. (Emphasis added)

59. Robert P. Chamness, Compliance Alert: What Changed the Face of the Mortgage Lending Industry Overnight?, ABA Bank Compliance, Spring 1993, p. 23. Accord, Heather Timmons, U.S. Said to Plan Crackdown on Referral Fees, American Banker, Dec. 20, 1995, p. 10. (”Section 8 [of RESPA] has prompted close scrutiny of back-end points, mortgage fees paid to a broker by the lender after closing. Federal attorneys are concerned that some lenders are improperly hiding referral fees in the rates charged to consumers . . . .”); HEL Lenders May Be Sued on Broker Referrals, National Mortgage News, April 3, 1995, p. 11 supra, (”there no longer is any possible justification for paying back-end points . . . [because] the very essence is that the compensation is paid for referral”).

60. Mary Sit, Mortgage Brokers Can Help Borrowers. Boston Globe, Oct. 3, 1993, p. A13; Jeremiah S. Buckley and Joseph M. Kolar, What RESPA has Wrought: Real Estate Settlement Procedures, Savings & Community Banker, Feb. 1993, vol. 2, no. 2, p. 32.

61. 61 F.R. 7414 (February 28, 1996). See also Kenneth Harney, Nation’s Housing: VA Eyes Home-Loan Abuses, Newsday p. D02 (Mar. 15, 1996). See also See Leonard A. Bernstein, RESPA Invades Secondary Mortgage Financing, New Jersey Lawyer, Aug. 1, 1994. HUD Stepping Up RESPA Inspections, American Banker Washington Watch, May 3, 1993.

62. HEL Lenders May Be Sued on Broker Referrals, National Mortgage News, April 3, 1995, p. 11.

63. 95-D-859-N (MD Ala., Mar. 8, 1996),

64. Fowler v. Equitable Trust Co., 141 U.S. 384 (1891); In re West Counties Construction Co., 182 F.2d 729, 731 (7th Cir. 1950) (”Calling the $ 1,000 payment to Walker a commission did not change the fact that it was an additional charge for making the loan”); Union Nat’l Bank v. Louisville, N. A & C. R. Co., 145 Ill. 208, 223, 34 N.E. 135 (1893) (”There can be no doubt that this payment, though attempted to be disguised under the name of ‘commission, was in legal effect an agreement to pay a sum additional to the [lawful rate of interest], as the consideration or compensation for the use of the money borrowed, and is to be regarded as, to all intents and purposes, an agreement for the payment of additional interest”); North Am. Investors v. Cape San Blas Joint Venture, 378 So.2d 287 (Fla. 1978); Feemster v. Schurkman, 291 So.2d 622 (Fla.App. 1974); Howes v. Curtis, 104 Idaho 563, 661 P.2d 729 (1983); Duckworth v. Bernstein, 55 Md.App. 710, 466 A.2d 517 (1983); Coner v Morris S. Berman, Unltd., 65 Md.App. 514, 501 A.2d 458 (1985) (violation of state secondary mortgage and finders’ fees laws); Julian v Burrus, 600 S.W.2d 133 (Mo.App. 1980); DeLee v. Hicks, 96 Nev. 462, 611 P.2d 211(1980); United Mtge. Co. v. Hilldreth, 93 Nev. 79, 559 P.2d 1186 (1977); O’Connor v Lamb, 593 S.W.2d 385 (Tex.Civ.App. 1979) (purported broker was the actual lender); Terry v. Teachworth, 431 S.W.2d 918 (Tex.Civ.App. 1968); Durias v. Boswell, 58 Wash.App. 100, 791 P.2d 282 (1990) (broker’s fee is interest where broker is agent of lender; factors relevant to determining agency include lender’s reliance on broker for information concerning creditworthiness of borrower, preparation of documents necessary to close and adequately secure the loan, and performing recordkeeping functions; not relevant whether lender knew of broker’s fee, as Washington law provides that where broker acts as agent for both borrower and lender, it is deemed lender’s agent for purposes of usury statute); Sparkman & McLean Income Fund v. Wald, 10 Wash.App. 765, 520 P.2d 173 (1974); Payne v Newcomb, 100 Ill. 611, 616-17 (1881) (where intermediary was agent of lender, fees exacted by the intermediary on borrowers made loans usurious); Meers v. Stevens, 106 Ill. 549, 552 (1883) (borrower approaches A for loan, A directs borrower to B, a relative, who makes the loan in the name of A and charges a ”commission” for procuring it; court held transaction was an ”arrangement to charge usury, and cover it up under the claim of commissions); Farrell v. Lincoln Nat’l Bank, 24 Ill.App.3d 142, 146, 320 N.E.2d 208 (1st Dist. 1974) (”if a fee is paid to a lender’s agent for making the loan, with the lender’s knowledge, the amount of the fee is treated as interest for the purposes of determining usury”).

65. 12 C.F.R. Section 226.4(b)(1), (3).

66. FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244-45 (1972); Cheshire Mtge. Service, Inc. v. Montes, 223 Conn. 80, 107, 612 A.2d 1130 (1992) (court found a TILA violation to violate the Connecticut Unfair Trade Practices Act because the violation of TILA was contrary to its public policy of accurate loan disclosure).

67. 42 U.S.C. Section 3601 et seq.

68. 15 U.S.C. Section 1691 et seq.

69. Consent decree, United States v. Security State Bank of Pecos, WD Tex., filed Oct. 18, 1995; consent decree, United States v. Huntington Mortgage Co., ND Ohio, filed Oct. 18, 1995.

70. Bank Said to Face Justice Enforcement Action, Mortgage Marketplace, Mar. 25, 1996, v. 6, no. 12, p. 5.

71. M. Hill, Banks Revise Overage Lending Policies, Cleveland Plain Dealer, July 14, 1994, p. 1C; Jonathan S. Hornblass, Focus on Overages Putting Home Lenders in Legal Hot Seat, American Banker, May 24, 1995, p. 10; John Schmeltzer, Lending investigation expands; U.S. wants to know if minorities are paying higher fees, Chicago Tribune, May 19, 1995, Business section, p. 1. 72. 501 F.2d 324, 330-31 (7th Cir. 1974).

73. See also DuFlambeau v. Stop Treaty Abuse-Wisconsin, Inc., 41 F.3d 1190, 1194 (7th Cir. 1994). See Mescall v. Burrus, 603 F.2d 1266 (7th Cir. 1979); Ortega v. Merit Insurance Co., 433 F.Supp. 135 (ND Ill. 1977) (plaintiff’s allegations that a de facto system of discriminatory credit insurance pricing exists, and that defendant is exploiting this system is sufficient to withstand the defendant’s motion to dismiss); Stackhouse v. DeSitter, 566 F.Supp. 856, 859 (N.D.Ill. 1983) (”Charging a black buyer an unreasonably high price for a home where a dual housing market exists due to racial segregation also violates this section . . .”).

74. John D’Antona Jr., Lenders requiring more mortgage insurance, Pittsburgh Post-Gazette, Feb. 18, 1996, p. J1.

75. Duff & Phelps Credit Rating Co. report on the private mortgage insurance industry, Dec. 7, 1995. The figure is for 1994.

76. No Bump in December MI Numbers, National Mortgage News, Feb. 5, 1996, p. 2. The figure is as of the end of 1995.

77. Charting the Two Paths to Profitability, American Banker, September 13, 1994, p. 11; Tallying Up Servicing Performance in 1993, Mortgage Banking, June 1994, p. 12.

78. 15 U.S.C. Section 1692 et seq.

79. 1996 U.S.Dist.LEXIS 3430 (MD Fla., Feb. 23, 1996). 80. One who regularly acquires and attempts to enforce consumer obligations that are delinquent at the time of acquisition qualifies as an FDCPA ”debt collector” with respect to such obligations. Kimber v. Federal Fin. Corp., 668 F.Supp. 1480, 1485 (M.D.Ala. 1987); Cirkot v. Diversified Systems, 839 F.Supp. 941 (D.Conn. 1993); Coppola v. Connecticut Student Loan Foundation, 1989 U.S.Dist. LEXIS 3415 (D.Conn. 1989); Commercial Service of Perry v. Fitzgerald, 856 P.2d 58 (Colo.App. 1993).

81. The FDCPA defines as a ”deceptive” practice — (2) The false representation of — (A) the character, amount, or legal status of any debt; or 15 U.S.C. Section 1692e. The FDCPA also prohibits as an ”unfair” practice the collection or attempted collection of ”any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” 15 U.S.C. Section 1692f(1).

82. Bloom v. Martin, 865 F.Supp. 1377 (ND Cal. 1994), aff’d, 77 F.31 318 (9th Cir., 1996). See also, Siegel v. American S. & L. Ass’n, 210 Cal.App.3d 953, 258 Cal.Rptr. 746 (1989); and Goodman v. Advance Mtge. Corp., 34 Ill.App.3d 307, 339 N.E.2d 257 (1st Dist. 1981) (state statute construed to permit charge for recording release, at least where mortgage is silent).

83. John Lee, John Mancuso and James Walter, Survey: Housing Finance: Major Developments in 1990,” 46 Business Lawyer 1149 (May 1991).84. Nelson and Whitman, Real Estate Finance Law, Section 11.4 at 816.

85. Thrifts Paying Big Bucks for ARM Errors, American Banker — Bond Buyer, May 23, 1994, p. 8; J. Shiver, Adjustable-Rate Mortgage Mistakes Add Up, Los Angeles Times, Sept. 22, 1991, p. D3.

86. A Call To Arms on ARMs, Business Week, Sept. 6, 1993, p. 72. 87. Hubbard v. Fidelity Fed. Bank, 824 F.Supp. 909 (CD Cal. 1993). 88. The UCCC has been enacted in Colorado, Idaho, Iowa, Kansas, Maine, Oklahoma, Utah and Wyoming. It imposes the same disclosure obligations as TILA, but does not cap classwide statutory damages at the lesser of 1 percent of the net worth of the creditor or $ 500,000.

89. Michaels Building Co. v. Ameritrust Co., N.A., 848 F.2d 674 (6th Cir. 1988); Haroco, Inc. v. American Nat’l Bank & Trust Co., 747 F.2d 384 (7th Cir. 1984); Morosani v. First Nat’l Bank of Atlanta, 703 F.2d 1220 (11th Cir. 1983). 90. Systematic overcharging of consumers in and of itself constitutes an unfair practice violative of state UDAP statutes. Leff v. Olympic Federal, n. 7 supra (overescrowing); People ex rel. Hartigan v. Stianos, 131 Ill.App.3d 575, 475 N.E.2d 1024 (1985) (retailer’s practice of charging consumers sales tax in an amount greater than that authorized by law was UDAP violation); Orkin Exterminating Co., 108 F.T.C. 263 (1986), aff’d, 849 F.2d 1354 (11th Cir. 1988) (Orkin entered into form contracts with thousands of consumers to conduct annual pest inspections for a fixed fee and, without authority in the contracts, raised the fees an average of $ 40).

91. The usury claim is that charging interest at a rate in excess of that agreed upon by the parties is usury. See Howes v. Donart, 104 Idaho 563, 661 P.2d 729 (1983); Garrison v. First Fed. S. & L. Ass’n of South Carolina, 241 Va. 335, 402 S.E.2d 25 (1991). Each of these decisions arose in a state which had ”deregulated” interest rates with respect to some or all loans. There was no statutory limit on the rate of interest the parties could agree upon. However, in each case the court held that a lender that charged more interest than the parties had agreed to violated the usury laws.

92. Barbara Ballman, Citibank mortgage customers due refunds on rate ”maladjustments,” Capital District Business Review, Apr. 5, 1993, p. 2 ($ 3.27 million); Israel v. Citibank, N.A. and Citicorp Mortgage, Inc., No. 629470 (St. Louis County (Mo.) Circuit Court); Englard v. Citibank, N.A., Index No. 459/90 (N.Y.C.S.C. 1991).

93. Whitford v. First Nationwide Bank, 147 F.R.D. 135 (W.D.Ky. 1992). 94. ”A call to arms on ARMs,” Business Week, Sept. 6, 1993, p. 72. 95. Crowley v. Banking Center, 1994 Conn. Super. LEXIS 3026 (Nov. 29, 1994). 96. LeBourgeois v. Firstrust Savings Bank, 27 Phila. 42, 1994 Phila. Cty. Rptr. 15 (CP 1994).

97. Jacob C. Gaffey, Managing the risk of ARM errors, Mortgage Banking, Apr. 1995, p. 73.

98. Preston v. First Bank of Marietta, 16 Ohio App. 3d 4, 473 N.E.2d 1210, 1215 (1983).

99. Baxter v. First Bank of Marietta, 1992 Ohio App. LEXIS 5956 (Nov. 6, 1992).

100. Froland v. Northeast Savings, reported in Lender Liability News, Feb.20, 1996, and American Banker, Jan. 4, 1996, p. 11.

Loan Audit checklist

tilaworksheet

Aurora Loan Services TILA Complaint

frances-m2003

TRUTH IN LENDING COMPLAINT

tila-form-complaint

California predatory lending

calpredatory

countrywide deal on 3.5 billion

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.

Use the law enacted in 1872 to stop the Foreclosure

VIOLATION OF CIVIL CODE §1572

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.

Buy your own house from your lender at todays Value

VIOLATION OF CALIFORNIA CIVIL CODE 2923.6

64. Plaintiff reallege and incorporate by reference the above paragraphs as though set forth fully herein.
65. Defendants’ Pooling and Servicing Agreement (hereinafter “PSA”) contains a duty to maximize net present value to its investors and related parties.
66. California Civil Code 2823.6 broadens and extends this PSA duty by requiring servicers to accept loan modifications with borrowers.
67. Pursuant to California Civil Code 2823.6(a), a servicer acts in the best interest of all parties if it agrees to or implements a loan modification where the (1) loan is in payment default, and (2) anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis.
68. California Civil Code 2823.6(b) now provides 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.
69. Plaintiffs’ loan is presently in default.
70. Plaintiffs are willing, able, and ready to execute a modification of their loan on the following terms:
(a) New Loan Amount: insert amount
(b) New Interest Rate: insert amount
(c) New Loan Length: insert amount
(d) New Payment: insert amount

71. The present fair market value of the property is insert value.
72. 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.
73. 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.
74. The anticipated recovery through foreclosure on a net present value basis is $525,000.00 or less.
75. The recovery under the proposed loan modification at $insert amount exceeds the net present recovery through foreclosure of $insert amount by over $5,000.00.
76. Pursuant to California Civil Code §2823.6, Defendants are now contractually bound to accept the loan modification as provided above.

They can’t foreclose if they did not get it endorsed and the party they purchase from could not endorse they where out of business!

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.

California help for homeowners in forclosure Civil Code 2923.6

CALIFORNIA LEGISLATURE FINDINGS

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.

California and everybody else V Countrywide

COMPLAINT

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

Information needed for a filing

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.

Lost note they can’t legally foreclose

lost-note-complaint-draft

This is how the Big Boys evict you from your house

attorney-2statement-of-disputed-facts-in-opposition-to-sj-motionpoints-and-a-in-opposition-to-sj-motion1149908252declaration-oppto-sj-21079197856

No License No loan Indymac bought it

no-license-no-loan-indymac-buying-that-bad-paper

Opossing the giant in the federal court

mccandless-opposition-to-motion-to-dismiss-federal

Countrywide and truth in predatory lending

second-amended-complaint-countrywide

Litigate truth in lending or be evicted

truth-and-lending-complaint

Lets go to federal court

removal-from-state-court

They agree but foreclose anyway

breach-of-forbearance-agreement

Get the injuction and stop the sale

foreclosure-injunction-tro

Sample class action

Some textfraudulent-omissions-form-finalfraudulent-omissions-form-final1

13 things you can do to stop the foreclosure

calpredatoryforeclosure-1