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ud summary judgment motion

17 Apr

These are issues that can be challenged in unlawful detainer after foreclosureud-summary-judgement

90 days plus 90 foreclosure law

5 Apr

Q 83. What, in a nutshell, is the new law extending the foreclosure process by 90 days?
A Under the new California Foreclosure Prevention Act, lenders foreclosing on certain loans are prohibited from giving a notice of sale until the lapse of at least 3 months plus 90 days after the filing of the notice of default (see Question 88). A loan servicer can obtain an exemption from this requirement by demonstrating that it has a comprehensive loan modification program (see Questions 89 to 94).
Q 84. What is the purpose of this law?
A The purpose of this law is to try to stem the tide of foreclosures and their adverse consequences by providing additional time for lenders to work out loan modifications with borrowers as well as creating an incentive for lenders to establish comprehensive loan modification programs.
Q 85. When will this law be in effect?
A This bill was enacted into law on February 20, 2009 along with the state budget. Its provisions take effect on or about March 16, 2009.
More specifically, the law states that the appropriate commissioners must adopt regulations to carry out this law within 10 days of its enactment (see Cal. Civil Code § 2923.53(d)), which would be by March 2, 2009. The law also states that it will become operative 14 days after the issuance of such regulations (Cal. Civil Code § 2923.52(d)), which would be on or about March 16, 2009.
This law will stay in effect only until January 1, 2011 at which time it will be repealed, unless it is deleted or extended by statute (Cal. Civil Code § 2923.52(d)).
Q 86. How does this new law affect the foreclosure timeline?
A Under preexisting law, a lender who files a notice of default in the foreclosure process must wait at least 3 months before giving a notice of sale (Cal. Civil Code § 2924). The new law extends that 3-month period by an additional 90 days.
Also under preexisting law, the general rule of thumb is that the entire foreclosure process takes a minimum of 4 months from the filing of a notice of default until the final trustee’s sale. Under the new law, that general rule of thumb is extended by 90 more days for a total of about 7 months, unless the lender is exempt. For more information about the foreclosure process, C.A.R. offers a legal article entitled Foreclosure Timeline.
Q 87. Under the new law, is the minimum time frame from the filing of a notice of default to the notice of sale a total of 6 months or 180 days?
A Neither. The way the law is written, the minimum time frame from the filing of the notice of default to the notice of sale is technically “3 months plus 90 days.”
Q 88. What type of loan falls under the new law extending the foreclosure process by 90 days?
A Unless otherwise exempt, the 90-day extension to the foreclosure process applies to loans that meet all of the following requirements:
The loan was recorded from January 1, 2003 to January 1, 2008, inclusive;

The loan is secured by a first deed of trust for residential real property;

The borrower occupied the property as a principal residence at the time the loan became delinquent; and

A notice of default has been recorded on the property.
(Cal. Civil Code § 2923.52(a).)
Q 89. What are the exceptions to the new law extending the foreclosure process by 90 days?
A Most notably, a loan servicer is exempt from the 90-day extension to the foreclosure process if the loan servicer has obtained an order of exemption based on the implementation of a comprehensive loan modification program (Cal. Civil Code § 2923.53(a)) (see Questions 89 to 94). The order of exemption must be current and valid at the time the notice of sale is given (Cal. Civil Code § 2923.52(b)).
Other exceptions to the 90-day extension include the following:
Certain state or local public housing agency loans (Cal. Civil Code § 2923.52(c)).

When a borrower has surrendered the property as evidenced by a letter confirming the surrender or delivery of the keys to the property to the lender or authorized agent (Cal. Civil Code § 2923.55(a)).

When a borrower has contracted with any person or entity whose primary business is advising people who have decided to leave their homes on how to extend the foreclosure process and avoid their contractual obligations to the lenders (Cal. Civil Code § 2923.55(b)).

When a borrower has filed a bankruptcy case and the court has not entered an order closing or dismissing the case or granting relief from a stay of foreclosure (Cal. Civil Code § 2923.55(c)).
Q 90. What constitutes a comprehensive loan modification program?
A A comprehensive loan modification program that may exempt the loan servicer from the 90-day extension to the foreclosure process includes all of the following features:
The loan modification program is intended to keep borrowers whose principal residences are located in California in those homes when the anticipated recovery under loan modification exceeds the anticipated recovery through foreclosure on a net present value basis (Cal. Civil Code § 2923.53(a)).

It targets a 38 percent or less ratio of the borrower’s housing-related debt to the borrower’s gross income (Cal. Civil Code § 2923.53(a)). Housing-related debt is debt that includes loan principal, interest, property taxes, hazard insurance, flood insurance, mortgage insurance and homeowner association fees (Cal. Civil Code § 2923.53(k)(2)).

It includes some combination of loan modifications terms as specified (Cal. Civil Code § 2923.53(a)) (see Question 91).

The loan servicer seeks long-term sustainability for the borrower (Cal. Civil Code § 2923.53(a)).
Q 91. What are the loan modification terms that must be included in a comprehensive loan modification program?
A A comprehensive loan modification program that may qualify for exemption from the new law extending the foreclosure process by 90 days must include some combination of the following features:
An interest rate reduction, as needed, for a fixed term of at least five years;
An extension of the amortization period for the loan term to no more than 40 years from the original date of the loan;
Deferral of some portion of the unpaid principal balance until loan maturity;
Principal reduction;
Compliance with a federally mandated loan modification program; or
Other factors that the appropriate commissioner determines.
(Cal. Civil Code § 2923.53(a)(3).) See also Question 92.
Q 92. Does a loan servicer have to modify loans to get an exemption from the 90 day extension to the foreclosure process?
A No. A loan servicer is not required to modify a loan for a borrower who is not willing or able to pay under the modification. Furthermore, a loan servicer is not required to violate any contractor agreement for investor-owned loans. (Cal. Civil Code § 2923.53(i).)
Q 93. How does a loan servicer obtain an order of exemption from the new law extending the foreclosure process by 90 days?
A A loan servicer may apply to the appropriate commissioner (see Question 94) for an order exempting loans that it services from the new law extending the foreclosure process by 90 days (Cal. Civil Code § 2923.53(b)(1)). Upon receipt of an initial application for exemption, the commissioner must issue a temporary order exempting the mortgage loan servicer from the 90-day extension to the foreclosure process (Cal. Civil Code § 2923.53(b)(2)). Within 30 days of receipt of the application, the commissioner must make a final determination by issuing a final order exempting the loan servicer or denying the application (Cal. Civil Code § 2923.53(b)(3)). If the application is denied, the temporary order of exemption shall expire 30 days after the date of denial (Cal. Civil Code § 2923.53(b)(1)).
Q 94. To which commissioner does a loan servicer apply for exemption?
A A lender or loan servicer would apply for an exemption to the following commissioner as appropriate:
Commissioner of the Department of Financial Institutions for commercial and industrial banks, savings associations, and credit unions organized in California to service mortgage loans;

Commissioner of the Department of Real Estate for licensed real estate brokers servicing mortgage loans; and

Commissioner of the Department of Corporations for licensed residential mortgage lenders and servicers, licensed finance lenders and brokers, and any other entities servicing mortgage loans not regulated by the Department of Financial Institutions or Department of Real Estate.
(Cal. Civil Code § 2923.53(k)(1).)
Q 95. How does a homeowner ascertain whether his or her loan servicer is exempt from the 90-day extension to the foreclosure process?
A The Secretary of Business, Transportation and Housing must maintain a publicly-available Internet website disclosing the final orders granting exemptions, the date of each order, and a link to Internet websites describing the loan modification programs (Cal. Civil Code § 2923.52(f)) (see also Question 96).
Q 96. Does a loan servicer have to inform the borrower as to whether the loan servicer is exempt from the longer foreclosure timeframe?
A Yes. A notice of sale must include a declaration from the loan servicer stating both of the following:
Whether the loan servicer has obtained a final or temporary order of exemption from the 90-day extension to the foreclosure process that is current and valid on the date the notice of sale is filed; and
Whether the 90-day extension to the foreclosure process under the new law does not apply.
The law requires the loan servicer’s declaration of exemption on the notice of sale, even though it may have been more helpful for the borrower if the declaration was on the notice of default. This requirement will stay in effect only until January 1, 2011 at which time it will be repealed, unless it is deleted or extended by statute. (Cal. Civil Code § 2923.54.)

Q 97. What is the penalty for violating this law?
A Anyone who violates this law shall be deemed to have violated his or her license law as it relates to these provisions (Cal. Civil Code § 2923.53(h)).
Q 98. Where do I find this law?
A This law is set forth at sections 2923.52 to 2923.55 of the California Civil Code. The full text of this law is available at the California Legislative Counsel website at

HOPE NOW: 134,000 Mortgages Modified in February

31 Mar

Carrie Bay | 03.31.09

HOPE NOW announced on Monday that its members and the larger mortgage lending industry modified 134,000 home loans in February that were in danger of foreclosure, a nine percent increase over the number of mortgages modified in January.

The industry alliance also said that modifications last month made up 55 percent of all workout solutions completed, representing the highest modification percentage since HOPE NOW began collecting data – a positive stat, considering HOPE NOW and its members have historically come under fire from consumer advocacy groups for employing primarily repayment plans, which some experts say are more susceptible to re-default.

In addition to the 134,000 modifications, HOPE NOW said 110,000 repayment plans were executed, meaning that last month, HOPE NOW members and the larger mortgage lending industry helped 244,000 at-risk homeowners avoid foreclosure. This is the first time since HOPE NOW began to compile data in July 2007 that the number of foreclosure preventions has exceeded 200,000 for six consecutive months.

According to Faith Schwartz, HOPE NOW’s executive director, the mortgage lending industry is working hard to provide multiple options for borrowers to avoid foreclosure. “We expect the trend to continue as many companies expand their offerings to include the administration’s Making Home Affordable refinance and modification programs,” she said. “The mortgage lending industry is responding to the needs of its customers and offering solutions that are appropriate to the current market and economic conditions,” Schwartz added.

Despite the positive monthly trend in mortgage workouts, HOPE NOW reported that the number of foreclosures started in February increased to 243,000, up from 217,000 in January. Completed foreclosure sales also increased, from 68,000 in January to 87,000 in February.

The HOPE NOW February data does not yet reflect the impact of the Obama administration’s recently announced, but not yet implemented, Homeowner Affordability and Stability Plan.

Schwartz said, “Currently 5.5 percent of the total mortgage market is 60 days or more delinquent. Because of this, HOPE NOW members are working hard to help the administration implement its recently-announced foreclosure prevention initiative as well as working on additional ways we can be more efficient in helping at-risk homeowners.”

California Real esate blogs

27 Mar

California real estate blogs

United First Bankruptcy Stay

14 Mar

On March 9, 2009 an involuntary bankruptcy was filed by some of the victims of the unconscionable contract of United First Inc. While I make no warranty and you should seek the advise of counsel before undertaking this action. The Stay applicable to United First may be applicable to the 2000 plus victims of the United First Inc. there pending cases and pending evictions. See Notice of Stay Form united-first-bankruptcy-notice-of-stay


6 Mar


Banking and Lender Liability – Is the Genie Slipping out of the Bottle?

15 Feb

Title: Banking and Lender Liability – Is the Genie Slipping out of the Bottle?
Date: March 1998
Publication: Commercial Lending UPDATE
Author(s): Kenneth M. Van Deventer
Area(s) of Practice: Financial Services, Litigation

Recent decisions from courts in the State of New Jersey and a new wave of lawsuits against financial institutions – particularly class action lawsuits – may be a signal that this is no time for complacency in banking. Plaintiffs’ lawyers have regrouped and are ready for a creative new wave of attacks on banking practices. The present case law may give the plaintiffs’ lawyers the openings they have been waiting for. A general survey of some of these developments follows:

Sons of Thunder – The Duty of Good Faith and Fair Dealing

In Sons of Thunder, Inc. v. Borden, Inc., the Supreme Court of New Jersey fundamentally altered generally accepted rules of contract construction. Before Sons of Thunder, if a party did not breach its contractual obligations it could not be liable for bad faith. In the banking context, this meant, among other things, that a bank could call a loan, refuse to fund, refuse to roll over a loan, set off accounts, etc., no matter how drastic the foreseeable consequences might be to the borrower/customer, so long as the bank acted within expressly granted rights under the controlling loan documents. That may no longer be the case.

In Sons of Thunder, one party (“Borden”) to a contract for the supply of clams exercised a termination clause in the contract with the knowledge that the foreseeable consequences of its action would be the demise of the other party (“Sons of Thunder”). The Supreme Court upheld a jury verdict that, even though Borden did not breach express obligations of the contract in terminating the contract, it did breach the implied covenant of good faith and fair dealing and was, therefore, liable to Sons of Thunder for consequential damages, including lost profits.

In other words, the Court found that Borden had breached the implied covenant of good faith in fair dealing in performing its obligations under the contract. Specifically the Court ruled:

Because its conduct destroyed Sons of Thunder’s reasonable expectations and right to receive the fruits of the contract, Borden also breached the implied covenant of good faith found in New Jersey’s common law.

Bankers should not take comfort in the fact that Sons of Thunder involved clams instead of dollars. In Maharaja Travel, Inc. (“Maharaja”) v. Bank of India (“BOI”) a federal judge ruled that, under New York law, a bank could be liable for breach of the implied covenant of good faith of fair dealing even if it performed correctly under the expressed terms of the contract. In Maharaja, BOI entered into a credit facility with Maharaja pursuant to which it would provide letters of credit and other arrangements necessary for Maharaja to operate its travel business. The commitment letter signed by the parties specifically stated that “[t]hese facilities are available at [BOI’s] discretion.” After BOI refused to provide funds to Maharaja, Maharaja’s business failed and the law suit ensued. As in Sons of Thunder, the court found that BOI had not breached its contractual obligations under the credit facility. Nevertheless, the court refused to dismiss Maharaja’s claim for breach of contract because it found that even where a party performs according to the express terms of the contract:

A party’s action implicates the implied covenant of good faith if it acts so directly to impair the value of the contract for another party that it may be assumed that they are inconsistent with the intent of the parties.

Read together, Sons of Thunder and Maharaja signal an erosion, if not an outright end to the general rule of contract construction that a party will not incur liability for simply exercising the rights it contracted for, even if the consequences of that action are harsh on the other party to the contract. Banks in particular will now have to consider both the express terms of its contractual obligations, as well as the consequences of its acts or failure to act. Indeed, banks should assume that in every loan document there is a covenant substantively providing as follows:

Notwithstanding any right granted herein to Bank, nor any obligations undertaken by borrowers/customer, Bank shall be obligated to take such action as necessary to carry out the purposes for which this Agreement was made and to refrain from doing anything that would destroy or injure borrowers/customers’ right to receive the reasonably anticipated benefits of this Agreement.

Fiduciary Duties/Duty to Disclose

Last year, the New Jersey Appellate Division issued two important opinions addressing the legal relationship between a bank and its borrower/customer. In United Jersey Bank, Central v. 914 Westfield Avenue Associates, et al., the borrower claimed that the bank had fraudulently induced him to borrow funds in order to purchase a business that was also a customer of the bank and which t he bank knew was in declining financial condition.

According to the court, the borrower’s contentions raised “novel and far-reaching issues concerning a bank’s relationship with a client/customer and whether such relationship carries some fiduciary obligations.” The court denied summary judgment to the bank on the theory that a duty to disclose may exist even in the absence of a fiduciary relationship. Here, where the allegation was that the bank officers did offer some opinion as to the viability of the business, the allegations were sufficient to state a prima facia case for common law fraud against the bank. United Jersey Bank v. Kensey, et al., the courts were presented with different facts but substantively the same issue. In Kensey, the borrower knew that it was borrowing money to purchase a business and some property from an individual who was also a borrower of the bank, but whose loans were in default and being handled by the work-out department. The bank did not disclose, however, that it had an appraisal in its files indicating that the value of the property/business was less than the purchase price the borrower was paying for the property/business. When the new borrower defaulted and litigation ensued, he claimed that the bank breached a fiduciary duty owed to him to disclose the value in the bank’s own appraisal. Once again, the Appellate Division saw the case as presenting “novel and far-reaching issues concerning a bank’s relationship with its customers.”

The court noted, however, “the growing trend to impose a duty to disclose in many circumstances in which silence historically sufficed.” According to the court, “the common thread running through them is that the lender encouraged the borrower to repose special trust or confidence in its advice, thereby inducing the borrower’s reliance.” Finding that factor to be absent in the case before it, the court reaffirmed the general rule that banks have no duty to disclose information they may have concerning the financial viability of the transactions their borrowers are about to enter into. Accordingly, summary judgment was entered for the bank.

Although Kensey was a win for the bank, it is troubling that the Kensey and 914 Westfield Avenue courts recognized a trend of cases imposing liabilities on banks that historically were only imposed in the context of fiduciary relationships.

Other Banking Litigation Developments

Class Actions. There is a trend, which we predict will grow, for class actions attacking any uniform bank practice. Earlier updates discussed the wave of collateral protection insurance class action lawsuits. Now, the New Jersey Supreme Court in Lemelledo v. Beneficial Management, has ruled that the New Jersey Consumer Fraud Act, which allows treble damages and recovery of attorney’s fees, applies to a financial institution’s sale of insurance in conjunction with loans. Also, in Noel v. Fleet Finance, Inc., a Federal Judge in the Eastern District of Michigan recognized, among other things, the viability of a class action claim against lenders and mortgage brokers under the Truth In Lending Act for failing to disclose the yield spread premium paid by the lender to mortgage brokers. And this year, after the Eleventh Circuit in Culpepper v. Inland Mtge ruled that yield spread premiums were prohibited referral fees under RESPA, plaintiffs instituted a RICO class action based on that practice. Finally, in Cannon v. Nationwide Acceptance Corporation, a Federal Judge in the Northern District of Illinois allowed a RICO class action to be maintained on the basic premise that the lenders’ solicitation of new business induced existing borrowers to refinance existing loans rather than going the cheaper route of just borrowing more funds.

Environmental. In CoreStates/New Jersey National Bank v. D.E.P., a New Jersey Administrative Law Judge ruled that a lender obtaining property through foreclosure may lose the protections otherwise provided to lenders under the Spill Act if, after obtaining the property, it acts negligently in its maintenance of the property.

ECOA. In Machis Savings Bank v. Ramsdell, the Maine Supreme Court ruled that wives who co-signed a series of loans to their husbands’ construction company could defeat summary judgment on a foreclosure action on the basis of the allegation that they had not signed the loan modification agreements and on the affirmative defense of ECOA violations.

Parole Evidence/Statute of Frauds. In Nation Banks of Tennessee v. JDRC Corporation, et al., the Court of Appeals of Tennessee ruled that an internal commercial loan memorandum could satisfy the Statute of Frauds and that such internal bank documents were admissible, notwithstanding the Parole Evidence Rule, to prove an oral modification to written loan documents.

Bankruptcy. In, In re: Shady Grove Tech Center Associates Limited Partnership, a federal bankruptcy court in Maryland found “cause” to lift a stay where the debtor had executed a pre-p etition stay waiver, even though the real estate mortgage lender was adequately protected. The case is particularly interesting for its thorough discussion of the enforceability of pre-petition stay waiver agreements.

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