Pacific Western Bank $227,000 in attorney fees for a 2 hour bench trial eviction wow !!!!

Brillouet Trial Brief 7-8-15

Timothy L. McCandless, Esq. SBN 145577
Law Offices of Timothy L. McCandless
26875 Calle Hermosa Suite A,
Capistrano Beach, CA 92624
Telephone: (925) 957-9797

Attorneys for Defendants
Pierrick Briolette and Yong C. Briolette

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF VENTURA
COASTLINE REAL ESTATE HOLDINGS, INC.

Plaintiff,

vs.

PIERRICK BRILLOUET, an individual;
YONG BRILLOUET, an individual; and DOE 1 through DOE 10, INCLUSIVE;
Defendants.
)
)
) Case No. 56-2014-00461981-CU-UD-VTA

DEFENDANTS’ OPPOSITION TO
PLAINTIFF’S MOTION FOR
ATTORNEY’S FEES AND COSTS, MEMORANDUM OF POINTS AND
AUTHORITIES

DATE: January 6, 2016
TIME: 8:30 a.m.
DEPT.: 41

Defendants Pierrick Brillouet and Yong C. Brillouet respectfully submit their Opposition to Plaintiff’s Motion for Attorney’s Fees and Costs as follows:
MEMORANDUM OF POINTS AND AUTHORITIES
I.
INTRODUCTION AND HISTORICAL PERSPECTIVE
Dates relevant to this matter are as follows:
On December 31, 2014, Plaintiff Coastline Real Estate Holdings, LLC filed the instant unlawful detainer action.
A two hour bench trial was conducted on September 8, 2015, and the court awarded possession to the Plaintiff.
Judgment was entered on October 7, 2015. The time to file an appeal was November 6, 2015, because the matter was filed as a limited action.
Additionally, the deadline to file the present Motion For Attorney’s was November 6, 2015, pursuant to California Rules of Court Rule 3.1702(b)(1). However the Motion was not filed until December 4, 2015. As such, the Motion was filed almost one month after the deadline and for that reason alone must be denied.
Plaintiff now seeks the award of $227,084.50 in attorney’s fees. The Declaration of Attorney Richman at Paragraph 19 specifically alleges that he expended 769.85 hours “in this matter.” However, when you review the charges, the hours were actually incurred for by other parties (Western Commercial Bank, Pacific Western Bank), in entirely different actions. The assertion of 769.85 hours by Plaintiff’s counsel related to this action is an intentional misrepresentation pursuant to California Rules of Professional Conduct 5-200(b).
Additionally, the identical charges were already disallowed in a prior motion in a different action, and therefore are barred by collateral estoppel.
Even worse, Defendant redacted in its Motion what attorney services were performed and the amount of time which was expended in completing those tasks. As a result, even if Plaintiff was entitled to recovery attorney’s fees for this case, based on the information served on Defendant, it is impossible to determine: (1) the nature of the service provided, (2) whether that service was necessary, (3) the amount of time which was expended to complete the service, and (4) is the amount of time and charge a reasonable fees for the “alleged” services. Given the foregoing, the Motion must be denied.
II. THE MOTION IS UNTIMELY FILED.
The unlawful detainer action was filed as a limited action, the Plaintiff paid the filing fee for a limited action, and the defendants likewise paid the filing fees for a limited action. The action was tried as a limited action.
Judgment was entered on October 7, 2015.
The deadline to file the present Motion For Attorney’s was thirty (30) days later, or November 6, 2015, pursuant to California Rules of Court Rule 3.1702(b)(1). Section 3.1702 provides in pertinent part:
(b) Attorney’s fees before trial court judgment
(1) Time for motion
“A notice of motion to claim attorney’s fees for services up to and including the rendition of judgment in the trial court-including attorney’s fees on an appeal before the rendition of judgment in the trial court-must be served and filed within the time for filing a notice of appeal under rules 8.104 and 8.108 in an unlimited civil case or under rules 8.822 and 8.823 in a limited civil case.”

The parties did not enter into a stipulation to extend the time for Plaintiff to file its Motion for Attorney’s Fees.
Plaintiff filed the instant Motion on December 4, 2015.
California Rules of Court Rule 8.822(1)(A) provides in pertinent part:
Rule 8.822. Time to appeal
(a) Normal time
(1) “Unless a statute or rule 8.823 provides otherwise, a notice of appeal must be filed on or before the earliest of:

(A) 30 days after the trial court clerk serves the party filing the notice of appeal a document entitled “Notice of Entry” of judgment or a file-stamped copy of the judgment, showing the date it was served;”

As such, the Motion was filed almost one month after the deadline and for that reason alone must be denied.

III. THE INSTANT MOTION IS NOT SUPPORTED IN CONTRACT OR
STATUTE AND MUST BE DENIED.
Plaintiff Coastline Real Estate Holdings, LLC purchased the position of Pacific Western Bank. Defendants believe that Plaintiff is a wholly owned subsidiary of Pacific Western Bank.
Pacific Western Bank (as successor in interest) became a Defendant in Superior Court of California, County of Ventura Case No. 56-2014-00458447-CU-OR-VTA stylized as:
Pierrick Brillouet and Yong Brillouet v. Western Commerical Bank, brought the identical motion for attorney’s fees. That motion was denied. The court adopted its Tentative Ruling which stated:

The Bank is only entitled to an award of attorney fees in this matter if a contractual provision exists which provides for such an award.
The Bank argues that the construction trust deed contains an attorney provision which provides it with a basis for attorney fees. However, the deed only permits an award of attorney fees by a court “[i]f Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys’ fees at trial and upon any appeal.” (Emphasis added). Only actions which the “Lender institutes” are subject to the attorney’s fees provision and this action was not brought by the lender. The Bank has made no argument for the extension of the plain language of the provision which would encompass the current suit and as such it has not demonstrated it is entitled to fees under the construction trust deed.
The Bank claims that it is also entitled to attorney fees under the Promissory Note which provides:
Lender may hire or pay someone else to collect this note. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fee and Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower will also pay any court costs, in addition to all other sums provided by law.
This was not a suit brought to collect the note. While “that amount” includes attorney fees and legal expenses, there is no indication that the court is authorized to make an award of these fees and expenses as a result of the current litigation. The Promissory Note does not indicate that the prevailing party in an action such as this is entitled to reasonable attorney fees.
The Bank also points to the assumption agreement as a basis for fees. It allegedly provides that “[i]f any lawsuit, arbitration or other proceedings is brought to interpret or enforce the terms of this Agreement, the prevailing party shall be entitled to recover the reasonable fees and costs of its attorneys in such proceeding.” This lawsuit didn’t involve the interpretation or enforcement of the terms of the assumption agreement. Santisas v. Goodin (1988) 17 Cal.4th 599 is of no help to the Bank as it involved an expansive attorney’s fee clause that clearly applied to the suit and the question was whether Civil Code §1717(b)(2) thwarted its application. That is not the case here.” A true and correct copy of the Tentative Ruling is attached hereto as Exhibit “1” and is incorporated by this reference.
Notwithstanding the court’s prior Order denying the very same attorney’s fees, Plaintiff in the instant action once again argues the identical points and seeks fees which are unsupported, unreasonable, and which are untimely. As such, the Motion for Attorney’s fees must be denied.
IV. MOVANTS HAVE THE BURDEN OF PROVING THE REASONABLE
NATURE OF THE SERVICES ALLEGED.
The Declaration of Attorney Steven N. Richman contains an attachment which purports to be a listing of the attorney services which were provided. However, a summary inspection shows that the listing of services, the time incurred for such service and the amount charged for such services have been redacted.
As such, Plaintiffs cannot determine the propriety of: (1) the nature of the services provided, (2) whether those services were necessary, (3) the amount of time which was expended to complete the services, and (4) whether the amount of time and charge is a reasonable fee for the particular service rendered.
Attorney fee shifting statutes and contractual provisions usually provide only the right to recover “reasonable attorneys’ fees” incurred as a result of the litigation. In order to determine the reasonableness of the fee award requested, courts generally start with the “lodestar amount,” which is the reasonable number of hours spent on the litigation multiplied by the reasonable hourly rate. Serrano v. Priest, 20 Cal.3d 25, 48 (1977); Thayer v. Wells Fargo Bank, N.A., 92 Cal.App.4th 819 (2001).
Once this amount is determined, the court can take into consideration additional factors to adjust the “lodestar” either up or down as appropriate. Such factors include: the novelty or difficulty of the issues involved in the case and the skill required to present those issues; the extent to which the nature of the case precluded the employment of other attorneys; and the fee arrangement of the attorney and the client. Serrano, 20 Cal.3d at 48; Thayer, 92 Cal. App.4th at 833. The party seeking the fees has the burden of proof to establish that the time spent and the hourly fee charged is reasonable. Levy v. Toyota Motor Sales, U.S.A., Inc., 4 Cal.App.4th 807 (1992).
This particular case was an unlawful detainer action, the trial lasted two hours, the trial presented no novel issues, nor did it require herculean efforts. The case was disposed by bench trial within two hours. As such, although Defendants believe that no right to attorney’s fees exists in this matter, if the court is going to award attorney’s fees, then Movant has failed to prove the reasonableness of the fees requested. Given the foregoing the Motion should be denied.
Dated: December 22, 2015 LAW OFFICES OF
TIMOTHY L. MCCANDLESS
By ____________________________
Timothy L. McCandless, Esq.
Attorney for Defendants
Pierrick Brillouet and Yong C. Brillouet

 

Tenants in rentals that is forclosed have rights to a new agreement with new owner Civil code 1962 if they evict they are liable wrongful eviction = Punative damages !!!

Civil Code – CIV

DIVISION 3. OBLIGATIONS [1427. – 3272.9.]

( Heading of Division 3 amended by Stats. 1988, Ch. 160, Sec. 14. )

PART 4. OBLIGATIONS ARISING FROM PARTICULAR TRANSACTIONS [1738. – 3272.9.]

( Part 4 enacted 1872. )

TITLE 5. HIRING [1925. – 1997.270.]

( Title 5 enacted 1872. )

 

CHAPTER 4. Identification of Property Owners [1961. – 1962.7.]

( Chapter 4 added by Stats. 1972, Ch. 941. )

 

1961.

This chapter shall apply to every dwelling structure containing one or more units offered to the public for rent or for lease for residential purposes.

(Amended by Stats. 1987, Ch. 769, Sec. 1.)

1962.

(a) Any owner of a dwelling structure specified in Section 1961 or a party signing a rental agreement or lease on behalf of the owner shall do all of the following:

(1) Disclose therein the name, telephone number, and usual street address at which personal service may be effected of each person who is:

(A) Authorized to manage the premises.

(B) An owner of the premises or a person who is authorized to act for and on behalf of the owner for the purpose of service of process and for the purpose of receiving and receipting for all notices and demands.

(2) Disclose therein the name, telephone number, and address of the person or entity to whom rent payments shall be made.

(A) If rent payments may be made personally, the usual days and hours that the person will be available to receive the payments shall also be disclosed.

(B) At the owner’s option, the rental agreement or lease shall instead disclose the number of either:

(i) The account in a financial institution into which rent payments may be made, and the name and street address of the institution; provided that the institution is located within five miles of the rental property.

(ii) The information necessary to establish an electronic funds transfer procedure for paying the rent.

(3) Disclose therein the form or forms in which rent payments are to be made.

(4) Provide a copy of the rental agreement or lease to the tenant within 15 days of its execution by the tenant. Once each calendar year thereafter, upon request by the tenant, the owner or owner’s agent shall provide an additional copy to the tenant within 15 days. If the owner or owner’s agent does not possess the rental agreement or lease or a copy of it, the owner or owner’s agent shall instead furnish the tenant with a written statement stating that fact and containing the information required by paragraphs (1), (2), and (3).

(b) In the case of an oral rental agreement, the owner, or a person acting on behalf of the owner for the receipt of rent or otherwise, shall furnish the tenant, within 15 days of the agreement, with a written statement containing the information required by paragraphs (1), (2), and (3) of subdivision (a). Once each calendar year thereafter, upon request by the tenant, the owner or owner’s agent shall provide an additional copy of the statement to the tenant within 15 days.

(c) The information required by this section shall be kept current and this section shall extend to and be enforceable against any successor owner or manager, who shall comply with this section within 15 days of succeeding the previous owner or manager. A successor owner or manager shall not serve a notice pursuant to paragraph (2) of Section 1161 of the Code of Civil Procedure or otherwise evict a tenant for nonpayment of rent that accrued during the period of noncompliance by a successor owner or manager with this subdivision. Nothing in this subdivision shall relieve the tenant of any liability for unpaid rent.

(d) A party who enters into a rental agreement on behalf of the owner who fails to comply with this section is deemed an agent of each person who is an owner:

(1) For the purpose of service of process and receiving and receipting for notices and demands.

(2) For the purpose of performing the obligations of the owner under law and under the rental agreement.

(3) For the purpose of receiving rental payments, which may be made in cash, by check, by money order, or in any form previously accepted by the owner or owner’s agent, unless the form of payment has been specified in the oral or written agreement, or the tenant has been notified by the owner in writing that a particular form of payment is unacceptable.

(e) Nothing in this section limits or excludes the liability of any undisclosed owner.

(f) If the address provided by the owner does not allow for personal delivery, then it shall be conclusively presumed that upon the mailing of any rent or notice to the owner by the tenant to the name and address provided, the notice or rent is deemed receivable by the owner on the date posted, if the tenant can show proof of mailing to the name and address provided by the owner.

(Amended by Stats. 2012, Ch. 695, Sec. 1. Effective January 1, 2013.)

1962.5.

(a) Notwithstanding subdivisions (a) and (b) of Section 1962, the information required by paragraph (1) of subdivision (a) of Section 1962 to be disclosed to a tenant may, instead of being disclosed in the manner described in subdivisions (a) and (b) of Section 1962, be disclosed by the following method:

(1) In each dwelling structure containing an elevator a printed or typewritten notice containing the information required by paragraph (1) of subdivision (a) of Section 1962 shall be placed in every elevator and in one other conspicuous place.

(2) In each structure not containing an elevator, a printed or typewritten notice containing the information required by paragraph (1) of subdivision (a) of Section 1962 shall be placed in at least two conspicuous places.

(3) In the case of a single unit dwelling structure, the information to be disclosed under this section may be disclosed by complying with either paragraph (1) or (2).

(b) Except as provided in subdivision (a), all the provisions of Section 1962 shall be applicable.

(Amended by Stats. 2001, Ch. 729, Sec. 4. Effective January 1, 2002.)

1962.7.

In the event an owner, successor owner, manager, or agent specified in Section 1961 fails to comply with the requirements of this chapter, service of process by a tenant with respect to a dispute arising out of the tenancy may be made by registered or certified mail sent to the address at which rent is paid, in which case the provisions of Section 1013 of the Code of Civil Procedure shall apply.

(Amended by Stats. 2001, Ch. 729, Sec. 5. Effective January 1, 2002.)

1159.  Every person is guilty of a forcible entry who either:
   1. By breaking open doors, windows, or other parts of a house, or
by any kind of violence or circumstance of terror enters upon or into
any real property; or,
   2. Who, after entering peaceably upon real property, turns out by
force, threats, or menacing conduct, the party in possession.
   The "party in possession" means any person who hires real property
and includes a boarder or lodger, except those persons whose
occupancy is described in subdivision (b) of Section 1940 of the
Civil Code.

1160.  Every person is guilty of a forcible detainer who either:
   1. By force, or by menaces and threats of violence, unlawfully
holds and keeps the possession of any real property, whether the same
was acquired peaceably or otherwise; or,
   2. Who, in the night-time, or during the absence of the occupant
of any lands, unlawfully enters upon real property, and who, after
demand made for the surrender thereof, for the period of five days,
refuses to surrender the same to such former occupant.
   The occupant of real property, within the meaning of this
subdivision, is one who, within five days preceding such unlawful
entry, was in the peaceable and undisturbed possession of such lands.

1161.  A tenant of real property, for a term less than life, or the
executor or administrator of his or her estate heretofore qualified
and now acting or hereafter to be qualified and act, is guilty of
unlawful detainer:
   1. When he or she continues in possession, in person or by
subtenant, of the property, or any part thereof, after the expiration
of the term for which it is let to him or her; provided the
expiration is of a nondefault nature however brought about without
the permission of his or her landlord, or the successor in estate of
his or her landlord, if applicable; including the case where the
person to be removed became the occupant of the premises as a
servant, employee, agent, or licensee and the relation of master and
servant, or employer and employee, or principal and agent, or
licensor and licensee, has been lawfully terminated or the time fixed
for occupancy by the agreement between the parties has expired; but
nothing in this subdivision shall be construed as preventing the
removal of the occupant in any other lawful manner; but in case of a
tenancy at will, it must first be terminated by notice, as prescribed
in the Civil Code.
   2. When he or she continues in possession, in person or by
subtenant, without the permission of his or her landlord, or the
successor in estate of his or her landlord, if applicable, after
default in the payment of rent, pursuant to the lease or agreement
under which the property is held, and three days' notice, in writing,
requiring its payment, stating the amount which is due, the name,
telephone number, and address of the person to whom the rent payment
shall be made, and, if payment may be made personally, the usual days
and hours that person will be available to receive the payment
(provided that, if the address does not allow for personal delivery,
then it shall be conclusively presumed that upon the mailing of any
rent or notice to the owner by the tenant to the name and address
provided, the notice or rent is deemed received by the owner on the
date posted, if the tenant can show proof of mailing to the name and
address provided by the owner), or the number of an account in a
financial institution into which the rental payment may be made, and
the name and street address of the institution (provided that the
institution is located within five miles of the rental property), or
if an electronic funds transfer procedure has been previously
established, that payment may be made pursuant to that procedure, or
possession of the property, shall have been served upon him or her
and if there is a subtenant in actual occupation of the premises,
also upon the subtenant.
   The notice may be served at any time within one year after the
rent becomes due. In all cases of tenancy upon agricultural lands,
where the tenant has held over and retained possession for more than
60 days after the expiration of the term without any demand of
possession or notice to quit by the landlord or the successor in
estate of his or her landlord, if applicable, he or she shall be
deemed to be holding by permission of the landlord or successor in
estate of his or her landlord, if applicable, and shall be entitled
to hold under the terms of the lease for another full year, and shall
not be guilty of an unlawful detainer during that year, and the
holding over for that period shall be taken and construed as a
consent on the part of a tenant to hold for another year.
   3. When he or she continues in possession, in person or by
subtenant, after a neglect or failure to perform other conditions or
covenants of the lease or agreement under which the property is held,
including any covenant not to assign or sublet, than the one for the
payment of rent, and three days' notice, in writing, requiring the
performance of such conditions or covenants, or the possession of the
property, shall have been served upon him or her, and if there is a
subtenant in actual occupation of the premises, also, upon the
subtenant. Within three days after the service of the notice, the
tenant, or any subtenant in actual occupation of the premises, or any
mortgagee of the term, or other person interested in its
continuance, may perform the conditions or covenants of the lease or
pay the stipulated rent, as the case may be, and thereby save the
lease from forfeiture; provided, if the conditions and covenants of
the lease, violated by the lessee, cannot afterward be performed,
then no notice, as last prescribed herein, need be given to the
lessee or his or her subtenant, demanding the performance of the
violated conditions or covenants of the lease.
   A tenant may take proceedings, similar to those prescribed in this
chapter, to obtain possession of the premises let to a subtenant or
held by a servant, employee, agent, or licensee, in case of his or
her unlawful detention of the premises underlet to him or her or held
by him or her.
   4. Any tenant, subtenant, or executor or administrator of his or
her estate heretofore qualified and now acting, or hereafter to be
qualified and act, assigning or subletting or committing waste upon
the demised premises, contrary to the conditions or covenants of his
or her lease, or maintaining, committing, or permitting the
maintenance or commission of a nuisance upon the demised premises or
using the premises for an unlawful purpose, thereby terminates the
lease, and the landlord, or his or her successor in estate, shall
upon service of three days' notice to quit upon the person or persons
in possession, be entitled to restitution of possession of the
demised premises under this chapter. For purposes of this
subdivision, a person who commits or maintains a public nuisance as
described in Section 3482.8 of the Civil Code, or who commits an
offense described in subdivision (c) of Section 3485 of the Civil
Code, or subdivision (c) of Section 3486 of the Civil Code, or uses
the premises to further the purpose of that offense shall be deemed
to have committed a nuisance upon the premises.
   5. When he or she gives written notice as provided in Section 1946
of the Civil Code of his or her intention to terminate the hiring of
the real property, or makes a written offer to surrender which is
accepted in writing by the landlord, but fails to deliver possession
at the time specified in that written notice, without the permission
of his or her landlord, or the successor in estate of the landlord,
if applicable.
   As used in this section, tenant includes any person who hires real
property except those persons whose occupancy is described in
subdivision (b) of Section 1940 of the Civil Code.
   This section shall become operative on January 1, 2012.

1161.1.  With respect to application of Section 1161 in cases of
possession of commercial real property after default in the payment
of rent:
   (a) If the amount stated in the notice provided to the tenant
pursuant to subdivision (2) of Section 1161 is clearly identified by
the notice as an estimate and the amount claimed is not in fact
correct, but it is determined upon the trial or other judicial
determination that rent was owing, and the amount claimed in the
notice was reasonably estimated, the tenant shall be subject to
judgment for possession and the actual amount of rent and other sums
found to be due. However, if (1) upon receipt of such a notice
claiming an amount identified by the notice as an estimate, the
tenant tenders to the landlord within the time for payment required
by the notice, the amount which the tenant has reasonably estimated
to be due and (2) if at trial it is determined that the amount of
rent then due was the amount tendered by the tenant or a lesser
amount, the tenant shall be deemed the prevailing party for all
purposes. If the court determines that the amount so tendered by the
tenant was less than the amount due, but was reasonably estimated,
the tenant shall retain the right to possession if the tenant pays to
the landlord within five days of the effective date of the judgment
(1) the amount previously tendered if it had not been previously
accepted, (2) the difference between the amount tendered and the
amount determined by the court to be due, and (3) any other sums as
ordered by the court.
   (b) If the landlord accepts a partial payment of rent, including
any payment pursuant to subdivision (a), after serving notice
pursuant to Section 1161, the landlord, without any further notice to
the tenant, may commence and pursue an action under this chapter to
recover the difference between the amount demanded in that notice and
the payment actually received, and this shall be specified in the
complaint.
   (c) If the landlord accepts a partial payment of rent after filing
the complaint pursuant to Section 1166, the landlord's acceptance of
the partial payment is evidence only of that payment, without waiver
of any rights or defenses of any of the parties. The landlord shall
be entitled to amend the complaint to reflect the partial payment
without creating a necessity for the filing of an additional answer
or other responsive pleading by the tenant, and without prior leave
of court, and such an amendment shall not delay the matter from
proceeding. However, this subdivision shall apply only if the
landlord provides actual notice to the tenant that acceptance of the
partial rent payment does not constitute a waiver of any rights,
including any right the landlord may have to recover possession of
the property.
   (d) "Commercial real property" as used in this section, means all
real property in this state except dwelling units made subject to
Chapter 2 (commencing with Section 1940) of Title 5 of Part 4 of
Division 3 of the Civil Code, mobilehomes as defined in Section 798.3
of the Civil Code, or recreational vehicles as defined in Section
799.24 of the Civil Code.
   (e) For the purposes of this section, there is a presumption
affecting the burden of proof that the amount of rent claimed or
tendered is reasonably estimated if, in relation to the amount
determined to be due upon the trial or other judicial determination
of that issue, the amount claimed or tendered was no more than 20
percent more or less than the amount determined to be due. However,
if the rent due is contingent upon information primarily within the
knowledge of the one party to the lease and that information has not
been furnished to, or has not accurately been furnished to, the other
party, the court shall consider that fact in determining the
reasonableness of the amount of rent claimed or tendered pursuant to
subdivision (a).

1161.2.  (a) The clerk may allow access to limited civil case
records filed under this chapter, including the court file, index,
and register of actions, only as follows:
   (1) To a party to the action, including a party's attorney.
   (2) To any person who provides the clerk with the names of at
least one plaintiff and one defendant and the address of the
premises, including the apartment or unit number, if any.
   (3) To a resident of the premises who provides the clerk with the
name of one of the parties or the case number and shows proof of
residency.
   (4) To any person by order of the court, which may be granted ex
parte, on a showing of good cause.
   (5) Except as provided in paragraph (6), to any other person 60
days after the complaint has been filed, unless a defendant prevails
in the action within 60 days of the filing of the complaint, in which
case the clerk may not allow access to any court records in the
action, except as provided in paragraphs (1) to (4), inclusive.
   (6) In the case of a complaint involving residential property
based on Section 1161a as indicated in the caption of the complaint,
as required in subdivision (c) of Section 1166, to any other person,
if 60 days have elapsed since the complaint was filed with the court,
and, as of that date, judgment against all defendants has been
entered for the plaintiff, after a trial. If judgment is not entered
under the conditions described in this paragraph, the clerk shall not
allow access to any court records in the action, except as provided
in paragraphs (1) to (4), inclusive.
   (b) For purposes of this section, "good cause" includes, but is
not limited to, the gathering of newsworthy facts by a person
described in Section 1070 of the Evidence Code. It is the intent of
the Legislature that a simple procedure be established to request the
ex parte order described in subdivision (a).
   (c) Upon the filing of any case so restricted, the court clerk
shall mail notice to each defendant named in the action. The notice
shall be mailed to the address provided in the complaint. The notice
shall contain a statement that an unlawful detainer complaint
(eviction action) has been filed naming that party as a defendant,
and that access to the court file will be delayed for 60 days except
to a party, an attorney for one of the parties, or any other person
who (1) provides to the clerk the names of at least one plaintiff and
one defendant in the action and provides to the clerk the address,
including any applicable apartment, unit, or space number, of the
subject premises, or (2) provides to the clerk the name of one of the
parties in the action or the case number and can establish through
proper identification that he or she lives at the subject premises.
The notice shall also contain a statement that access to the court
index, register of actions, or other records is not permitted until
60 days after the complaint is filed, except pursuant to an order
upon a showing of good cause therefor. The notice shall contain on
its face the following information:
   (1) The name and telephone number of the county bar association.
   (2) The name and telephone number of any entity that requests
inclusion on the notice and demonstrates to the satisfaction of the
court that it has been certified by the State Bar as a lawyer
referral service and maintains a panel of attorneys qualified in the
practice of landlord-tenant law pursuant to the minimum standards for
a lawyer referral service established by the State Bar and Section
6155 of the Business and Professions Code.
   (3) The following statement:

   "The State Bar of California certifies lawyer referral services in
California and publishes a list of certified lawyer referral
services organized by county. To locate a lawyer referral service in
your county, go to the State Bar's website at www.calbar.ca.gov or
call 1-866-442-2529."

   (4) The name and telephone number of an office or offices funded
by the federal Legal Services Corporation or qualified legal services
projects that receive funds distributed pursuant to Section 6216 of
the Business and Professions Code that provide legal services to
low-income persons in the county in which the action is filed. The
notice shall state that these numbers may be called for legal advice
regarding the case. The notice shall be issued between 24 and 48
hours of the filing of the complaint, excluding weekends and
holidays. One copy of the notice shall be addressed to "all occupants"
and mailed separately to the subject premises. The notice shall not
constitute service of the summons and complaint.
   (d) Notwithstanding any other provision of law, the court shall
charge an additional fee of fifteen dollars ($15) for filing a first
appearance by the plaintiff. This fee shall be added to the uniform
filing fee for actions filed under this chapter.
   (e) This section does not apply to a case that seeks to terminate
a mobilehome park tenancy if the statement of the character of the
proceeding in the caption of the complaint clearly indicates that the
complaint seeks termination of a mobilehome park tenancy.

1161.3.  (a) Except as provided in subdivision (b), a landlord shall
not terminate a tenancy or fail to renew a tenancy based upon an act
or acts against a tenant or a tenant's household member that
constitute domestic violence as defined in Section 6211 of the Family
Code, sexual assault as defined in Section 1219, stalking as defined
in Section 1708.7 of the Civil Code or Section 646.9 of the Penal
Code, or abuse of an elder or a dependent adult as defined in Section
15610.07 of the Welfare and Institutions Code, if both of the
following apply:
   (1) The act or acts of domestic violence, sexual assault,
stalking, or abuse of an elder or a dependent adult have been
documented by one of the following:
   (A) A temporary restraining order, emergency protective order, or
protective order lawfully issued within the last 180 days pursuant to
Section 527.6, Part 3 (commencing with Section 6240), Part 4
(commencing with Section 6300), or Part 5 (commencing with Section
6400) of Division 10 of the Family Code, Section 136.2 of the Penal
Code, or Section 213.5 or 15657.03 of the Welfare and Institutions
Code that protects the tenant or household member from domestic
violence, sexual assault, stalking, or abuse of an elder or a
dependent adult.
   (B) A copy of a written report, written within the last 180 days,
by a peace officer employed by a state or local law enforcement
agency acting in his or her official capacity, stating that the
tenant or household member has filed a report alleging that he or she
or the household member is a victim of domestic violence, sexual
assault, stalking, or abuse of an elder or a dependent adult.
   (2) The person against whom the protection order has been issued
or who was named in the police report of the act or acts of domestic
violence, sexual assault, stalking, or abuse of an elder or dependent
adult is not a tenant of the same dwelling unit as the tenant or
household member.
   (b) A landlord may terminate or decline to renew a tenancy after
the tenant has availed himself or herself of the protections afforded
by subdivision (a) if both of the following apply:
   (1) Either of the following:
   (A) The tenant allows the person against whom the protection order
has been issued or who was named in the police report of the act or
acts of domestic violence, sexual assault, stalking, or abuse of an
elder or a dependent adult to visit the property.
   (B) The landlord reasonably believes that the presence of the
person against whom the protection order has been issued or who was
named in the police report of the act or acts of domestic violence,
sexual assault, stalking, or abuse of an elder or dependent adult
poses a physical threat to other tenants, guests, invitees, or
licensees, or to a tenant's right to quiet possession pursuant to
Section 1927 of the Civil Code.
   (2) The landlord previously gave at least three days' notice to
the tenant to correct a violation of paragraph (1).
   (c) Notwithstanding any provision in the lease to the contrary,
the landlord shall not be liable to any other tenants for any action
that arises due to the landlord's compliance with this section.
   (d) For the purposes of this section, "tenant" means tenant,
subtenant, lessee, or sublessee.
   (e) The Judicial Council shall, on or before January 1, 2014,
develop a new form or revise an existing form that may be used by a
party to assert in the responsive pleading the grounds set forth in
this section as an affirmative defense to an unlawful detainer
action.

1161.5.  When the notice required by Section 1161 states that the
lessor or the landlord may elect to declare the forfeiture of the
lease or rental agreement, that declaration shall be nullified and
the lease or rental agreement shall remain in effect if the lessee or
tenant performs within three days after service of the notice or if
the breach is waived by the lessor or the landlord after service of
the notice.

1161a.  (a) As used in this section:
   (1) "Manufactured home" has the same meaning as provided in
Section 18007 of the Health and Safety Code.
   (2) "Mobilehome" has the same meaning as provided in Section 18008
of the Health and Safety Code.
   (3) "Floating home" has the same meaning as provided in
subdivision (d) of Section 18075.55 of the Health and Safety Code.
   (b) In any of the following cases, a person who holds over and
continues in possession of a manufactured home, mobilehome, floating
home, or real property after a three-day written notice to quit the
property has been served upon the person, or if there is a subtenant
in actual occupation of the premises, also upon such subtenant, as
prescribed in Section 1162, may be removed therefrom as prescribed in
this chapter:
   (1) Where the property has been sold pursuant to a writ of
execution against such person, or a person under whom such person
claims, and the title under the sale has been duly perfected.
   (2) Where the property has been sold pursuant to a writ of sale,
upon the foreclosure by proceedings taken as prescribed in this code
of a mortgage, or under an express power of sale contained therein,
executed by such person, or a person under whom such person claims,
and the title under the foreclosure has been duly perfected.
   (3) Where the property has been sold in accordance with Section
2924 of the Civil Code, under a power of sale contained in a deed of
trust executed by such person, or a person under whom such person
claims, and the title under the sale has been duly perfected.
   (4) Where the property has been sold by such person, or a person
under whom such person claims, and the title under the sale has been
duly perfected.
   (5) Where the property has been sold in accordance with Section
18037.5 of the Health and Safety Code under the default provisions of
a conditional sale contract or security agreement executed by such
person, or a person under whom such person claims, and the title
under the sale has been duly perfected.
   (c) Notwithstanding the provisions of subdivision (b), a tenant or
subtenant in possession of a rental housing unit which has been sold
by reason of any of the causes enumerated in subdivision (b), who
rents or leases the rental housing unit either on a periodic basis
from week to week, month to month, or other interval, or for a fixed
period of time, shall be given written notice to quit pursuant to
Section 1162, at least as long as the term of hiring itself but not
exceeding 30 days, before the tenant or subtenant may be removed
therefrom as prescribed in this chapter.
   (d) For the purpose of subdivision (c), "rental housing unit"
means any structure or any part thereof which is rented or offered
for rent for residential occupancy in this state.

1161b.  (a) Notwithstanding Section 1161a, a tenant or subtenant in
possession of a rental housing unit under a month-to-month lease or
periodic tenancy at the time the property is sold in foreclosure
shall be given 90 days' written notice to quit pursuant to Section
1162 before the tenant or subtenant may be removed from the property
as prescribed in this chapter.
   (b) In addition to the rights set forth in subdivision (a),
tenants or subtenants holding possession of a rental housing unit
under a fixed-term residential lease entered into before transfer of
title at the foreclosure sale shall have the right to possession
until the end of the lease term, and all rights and obligations under
the lease shall survive foreclosure, except that the tenancy may be
terminated upon 90 days' written notice to quit pursuant to
subdivision (a) if any of the following conditions apply:
   (1) The purchaser or successor in interest will occupy the housing
unit as a primary residence.
   (2) The lessee is the mortgagor or the child, spouse, or parent of
the mortgagor.
   (3) The lease was not the result of an arms' length transaction.
   (4) The lease requires the receipt of rent that is substantially
less than fair market rent for the property, except when rent is
reduced or subsidized due to a federal, state, or local subsidy or
law.
   (c) The purchaser or successor in interest shall bear the burden
of proof in establishing that a fixed-term residential lease is not
entitled to protection under subdivision (b).
   (d) This section shall not apply if any party to the note remains
in the property as a tenant, subtenant, or occupant.
   (e) Nothing in this section is intended to affect any local just
cause eviction ordinance. This section does not, and shall not be
construed to, affect the authority of a public entity that otherwise
exists to regulate or monitor the basis for eviction.
   (f) This section shall remain in effect only until December 31,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before December 31, 2019, deletes or extends
that date.

1161c.  (a) In the case of any foreclosure on a residential
property, the immediate successor in interest in the property
pursuant to the foreclosure shall attach a cover sheet, in the form
as set forth in subdivision (b), to any notice of termination of
tenancy served on a tenant of that property within the first year
after the foreclosure sale. This notice shall not be required if any
of the following apply:
   (1) The tenancy is terminated pursuant to Section 1161.
   (2) The successor in interest and the tenant have executed a
written rental agreement or lease or a written acknowledgment of a
preexisting rental agreement or lease.
   (3) The tenant receiving the notice was not a tenant at the time
of the foreclosure.
   (b) The cover sheet shall consist of the following notice, in at
least 12-point type:

   Notice to Any Renters Living At
   [street address of the unit]
   The attached notice means that your home was recently sold in
foreclosure and the new owner plans to evict you.
   You should talk to a lawyer NOW to see what your rights are. You
may receive court papers in a few days. If your name is on the papers
it may hurt your credit if you do not respond and simply move out.
   Also, if you do not respond within five days of receiving the
papers, even if you are not named in the papers, you will likely lose
any rights you may have. In some cases, you can respond without
hurting your credit. You should ask a lawyer about it.
   You may have the right to stay in your home for 90 days or longer,
regardless of any deadlines stated on any attached papers. In some
cases and in some cities with a "just cause for eviction law," you
may not have to move at all. But you must take the proper legal steps
in order to protect your rights.
   How to Get Legal Help
   If you cannot afford an attorney, you may be eligible for free
legal services from a nonprofit legal services program. You can
locate these nonprofit groups at the California Legal Services
Internet Web site (www.lawhelpca.org), the California Courts Online
Self-Help Center (www.courtinfo.ca.gov/selfhelp), or by contacting
your local court or county bar association.

   (c) If the notice to quit specifies an effective date of at least
90 days after the notice is served, without qualification, no cover
sheet shall be required, provided that the notice incorporates the
text of the cover sheet, as set forth in subdivision (b) in at least
10-point type. The incorporated text shall omit the caption and the
first paragraph of the cover sheet and the fourth paragraph of the
cover sheet shall be replaced by the following language:

   You may have the right to stay in your home for longer than 90
days. If you have a lease that ends more than 90 days from now, the
new owner must honor the lease under many circumstances. Also, in
some cases and in some cities with a "just cause for eviction law,"
you may not have to move at all. But you must take the proper legal
steps in order to protect your rights.

   (d) This section shall remain in effect only until December 31,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before December 31, 2019, deletes or extends
that date.

1162.  (a) Except as provided in subdivision (b), the notices
required by Sections 1161 and 1161a may be served by any of the
following methods:
   (1) By delivering a copy to the tenant personally.
   (2) If he or she is absent from his or her place of residence, and
from his or her usual place of business, by leaving a copy with some
person of suitable age and discretion at either place, and sending a
copy through the mail addressed to the tenant at his or her place of
residence.
   (3) If such place of residence and business cannot be ascertained,
or a person of suitable age or discretion there can not be found,
then by affixing a copy in a conspicuous place on the property, and
also delivering a copy to a person there residing, if such person can
be found; and also sending a copy through the mail addressed to the
tenant at the place where the property is situated. Service upon a
subtenant may be made in the same manner.
   (b) The notices required by Section 1161 may be served upon a
commercial tenant by any of the following methods:
   (1) By delivering a copy to the tenant personally.
   (2) If he or she is absent from the commercial rental property, by
leaving a copy with some person of suitable age and discretion at
the property, and sending a copy through the mail addressed to the
tenant at the address where the property is situated.
   (3) If, at the time of attempted service, a person of suitable age
or discretion is not found at the rental property through the
exercise of reasonable diligence, then by affixing a copy in a
conspicuous place on the property, and also sending a copy through
the mail addressed to the tenant at the address where the property is
situated. Service upon a subtenant may be made in the same manner.
   (c) For purposes of subdivision (b), "commercial tenant" means a
person or entity that hires any real property in this state that is
not a dwelling unit, as defined in subdivision (c) of Section 1940 of
the Civil Code, or a mobilehome, as defined in Section 798.3 of the
Civil Code.

1162a.  In any case in which service or exhibition of a receiver's
or levying officer's deed is required, in lieu thereof service of a
copy or copies of the deed may be made as provided in Section 1162.

1164.  No person other than the tenant of the premises and
subtenant, if there be one, in the actual occupation of the premises
when the complaint is filed, need be made parties defendant in the
proceeding, nor shall any proceeding abate, nor the plaintiff be
nonsuited for the nonjoinder of any person who might have been made
party defendant, but when it appears that any of the parties served
with process, or appearing in the proceeding, are guilty of the
offense charged, judgment must be rendered against him or her. In
case a defendant has become a subtenant of the premises in
controversy, after the service of the notice provided for by
subdivision 2 of Section 1161 of this code, upon the tenant of the
premises, the fact that such notice was not served on each subtenant
shall constitute no defense to the action. All persons who enter the
premises under the tenant, after the commencement of the suit, shall
be bound by the judgment, the same as if he or they had been made
party to the action.

1165.  Except as provided in the preceding section, the provisions
of Part II of this Code, relating to parties to civil actions, are
applicable to this proceeding.

1166.  (a) The complaint shall:
   (1) Be verified and include the typed or printed name of the
person verifying the complaint.
   (2) Set forth the facts on which the plaintiff seeks to recover.
   (3) Describe the premises with reasonable certainty.
   (4) If the action is based on paragraph (2) of Section 1161, state
the amount of rent in default.
   (5) State specifically the method used to serve the defendant with
the notice or notices of termination upon which the complaint is
based. This requirement may be satisfied by using and completing all
items relating to service of the notice or notices in an appropriate
Judicial Council form complaint, or by attaching a proof of service
of the notice or notices of termination served on the defendant.
   (b) The complaint may set forth any circumstances of fraud, force,
or violence that may have accompanied the alleged forcible entry or
forcible or unlawful detainer, and claim damages therefor.
   (c) In an action regarding residential real property based on
Section 1161a, the plaintiff shall state in the caption of the
complaint "Action based on Code of Civil Procedure Section 1161a."
   (d) (1) In an action regarding residential property, the plaintiff
shall attach to the complaint the following:
   (A) A copy of the notice or notices of termination served on the
defendant upon which the complaint is based.
   (B) A copy of any written lease or rental agreement regarding the
premises. Any addenda or attachments to the lease or written
agreement that form the basis of the complaint shall also be
attached. The documents required by this subparagraph are not
required to be attached if the complaint alleges any of the
following:
   (i) The lease or rental agreement is oral.
   (ii) A written lease or rental agreement regarding the premises is
not in the possession of the landlord or any agent or employee of
the landlord.
   (iii) An action based solely on subdivision (2) of Section 1161.
   (2) If the plaintiff fails to attach the documents required by
this subdivision, the court shall grant leave to amend the complaint
for a five-day period in order to include the required attachments.
   (e) Upon filing the complaint, a summons shall be issued thereon.

1166a.  (a) Upon filing the complaint, the plaintiff may, upon
motion, have immediate possession of the premises by a writ of
possession of a manufactured home, mobilehome, or real property
issued by the court and directed to the sheriff of the county or
marshal, for execution, where it appears to the satisfaction of the
court, after a hearing on the motion, from the verified complaint and
from any affidavits filed or oral testimony given by or on behalf of
the parties, that the defendant resides out of state, has departed
from the state, cannot, after due diligence, be found within the
state, or has concealed himself or herself to avoid the service of
summons. The motion shall indicate that the writ applies to all
tenants, subtenants, if any, named claimants, if any, and any other
occupants of the premises.
   (b) Written notice of the hearing on the motion shall be served on
the defendant by the plaintiff in accordance with the provisions of
Section 1011, and shall inform the defendant as follows: "You may
file affidavits on your own behalf with the court and may appear and
present testimony on your own behalf. However, if you fail to appear,
the plaintiff will apply to the court for a writ of possession of a
manufactured home, mobilehome, or real property."
   (c) The plaintiff shall file an undertaking in a sum that shall be
fixed and determined by the judge, to the effect that, if the
plaintiff fails to recover judgment against the defendant for the
possession of the premises or if the suit is dismissed, the plaintiff
will pay to the defendant those damages, not to exceed the amount
fixed in the undertaking, as may be sustained by the defendant by
reason of that dispossession under the writ of possession of a
manufactured home, mobilehome, or real property.
   (d) If, at the hearing on the motion, the findings of the court
are in favor of the plaintiff and against the defendant, an order
shall be entered for the immediate possession of the premises.
   (e) The order for the immediate possession of the premises may be
enforced as provided in Division 3 (commencing with Section 712.010)
of Title 9 of Part 2.
   (f) For the purposes of this section, references in Division 3
(commencing with Section 712.010) of Title 9 of Part 2 and in
subdivisions (e) to (m), inclusive, of Section 1174, to the "judgment
debtor" shall be deemed references to the defendant, to the
"judgment creditor" shall be deemed references to the plaintiff, and
to the "judgment of possession or sale of property" shall be deemed
references to an order for the immediate possession of the premises.

1167.  The summons shall be in the form specified in Section 412.20
except that when the defendant is served, the defendant's response
shall be filed within five days, including Saturdays and Sundays but
excluding all other judicial holidays, after the complaint is served
upon him or her. If the last day for filing the response falls on a
Saturday or Sunday, the response period shall be extended to and
including the next court day.
   In all other respects the summons shall be issued and served and
returned in the same manner as a summons in a civil action.

1167.3.  In any action under this chapter, unless otherwise ordered
by the court for good cause shown, the time allowed the defendant to
answer the complaint, answer the complaint, if amended, or amend the
answer under paragraph (2), (3), (5), (6), or (7) of subdivision (a)
of Section 586 shall not exceed five days.

1167.4.  Notwithstanding any other provision of law, in any action
under this chapter:
   (a) Where the defendant files a notice of motion as provided for
in subdivision (a) of Section 418.10, the time for making the motion
shall be not less than three days nor more than seven days after the
filing of the notice.
   (b) The service and filing of a notice of motion under subdivision
(a) shall extend the defendant's time to plead until five days after
service upon him of the written notice of entry of an order denying
his motion, except that for good cause shown the court may extend the
defendant's time to plead for an additional period not exceeding 15
days.

1167.5.  Unless otherwise ordered by the court for good cause shown,
no extension of time allowed in any action under this chapter for
the causes specified in Section 1054 shall exceed 10 days without the
consent of the adverse party.

1169.  If, at the time appointed, any defendant served with a
summons does not appear and defend, the clerk, upon written
application of the plaintiff and proof of the service of summons and
complaint, shall enter the default of any defendant so served, and,
if requested by the plaintiff, immediately shall enter judgment for
restitution of the premises and shall issue a writ of execution
thereon. The application for default judgment and the default
judgment shall include a place to indicate that the judgment includes
tenants, subtenants, if any, named claimants, if any, and any other
occupants of the premises. Thereafter, the plaintiff may apply to the
court for any other relief demanded in the complaint, including the
costs, against the defendant, or defendants, or against one or more
of the defendants.

1170.  On or before the day fixed for his appearance, the defendant
may appear and answer or demur.

1170.5.  (a) If the defendant appears pursuant to Section 1170,
trial of the proceeding shall be held not later than the 20th day
following the date that the request to set the time of the trial is
made. Judgment shall be entered thereon and, if the plaintiff
prevails, a writ of execution shall be issued immediately by the
court upon the request of the plaintiff.
   (b) The court may extend the period for trial upon the agreement
of all of the parties. No other extension of the time for trial of an
action under this chapter may be granted unless the court, upon its
own motion or on motion of any party, holds a hearing and renders a
decision thereon as specified in subdivision (c).
   (c) If trial is not held within the time specified in this
section, the court, upon finding that there is a reasonable
probability that the plaintiff will prevail in the action, shall
determine the amount of damages, if any, to be suffered by the
plaintiff by reason of the extension, and shall issue an order
requiring the defendant to pay that amount into court as the rent
would have otherwise become due and payable or into an escrow
designated by the court for so long as the defendant remains in
possession pending the termination of the action.
   The determination of the amount of the payment shall be based on
the plaintiff's verified statement of the contract rent for rental
payment, any verified objection thereto filed by the defendant, and
the oral or demonstrative evidence presented at the hearing. The
court's determination of the amount of damages shall include
consideration of any evidence, presented by the parties, embracing
the issue of diminution of value or any set off permitted by law.
   (d) If the defendant fails to make a payment ordered by the court,
trial of the action shall be held within 15 days of the date payment
was due.
   (e) Any cost for administration of an escrow account pursuant to
this section shall be recoverable by the prevailing party as part of
any recoverable cost in the action.
   (f) After trial of the action, the court shall determine the
distribution of the payment made into court or the escrow designated
by the court.
   (g) Where payments into court or the escrow designated by the
court are made pursuant to this section, the court may order that the
payments be invested in an insured interest-bearing account.
Interest on the account shall be allocated to the parties in the same
proportions as the original funds are allocated.
   (h) If any provision of this section or the application thereof to
any person or circumstances is held invalid, such invalidity shall
not affect other provisions or applications of the section which can
be given effect without the invalid provision or application, and to
this end the provisions of this section are severable.
   (i) Nothing in this section shall be construed to abrogate or
interfere with the precedence given to the trial of criminal cases
over the trial of civil matters by Section 1050 of the Penal Code.

1170.7.  A motion for summary judgment may be made at any time after
the answer is filed upon giving five days notice. Summary judgment
shall be granted or denied on the same basis as a motion under
Section 437c.

1170.8.  In any action under this chapter, a discovery motion may be
made at any time upon giving five days' notice.

1170.9.  The Judicial Council shall adopt rules, not inconsistent
with statute, prescribing the time for filing and serving opposition
and reply papers, if any, relating to a motion under Section 1167.4,
1170.7, or 1170.8.

1171.  Whenever an issue of fact is presented by the pleadings, it
must be tried by a jury, unless such jury be waived as in other
cases. The jury shall be formed in the same manner as other trial
juries in an action of the same jurisdictional classification in the
Court in which the action is pending.

1172.  On the trial of any proceeding for any forcible entry or
forcible detainer, the plaintiff shall only be required to show, in
addition to the forcible entry or forcible detainer complained of,
that he was peaceably in the actual possession at the time of the
forcible entry, or was entitled to the possession at the time of the
forcible detainer. The defendant may show in his defense that he or
his ancestors, or those whose interest in such premises he claims,
have been in the quiet possession thereof for the space of one whole
year together next before the commencement of the proceedings, and
that his interest therein is not then ended or determined; and such
showing is a bar to the proceedings.

1173.  When, upon the trial of any proceeding under this chapter, it
appears from the evidence that the defendant has been guilty of
either a forcible entry or a forcible or unlawful detainer, and other
than the offense charged in the complaint, the Judge must order that
such complaint be forthwith amended to conform to such proofs; such
amendment must be made without any imposition of terms. No
continuance shall be permitted upon account of such amendment unless
the defendant, by affidavit filed, shows to the satisfaction of the
Court good cause therefor.

1174.  (a) If upon the trial, the verdict of the jury, or, if the
case be tried without a jury, the findings of the court be in favor
of the plaintiff and against the defendant, judgment shall be entered
for the possession of the premises; and if the proceedings be for an
unlawful detainer after neglect, or failure to perform the
conditions or covenants of the lease or agreement under which the
property is held, or after default in the payment of rent, the
judgment shall also declare the forfeiture of that lease or agreement
if the notice required by Section 1161 states the election of the
landlord to declare the forfeiture thereof, but if that notice does
not so state that election, the lease or agreement shall not be
forfeited.
   Except as provided in Section 1166a, in any action for unlawful
detainer brought by a petroleum distributor against a gasoline
dealer, possession shall not be restored to the petroleum distributor
unless the court in the unlawful detainer action determines that the
petroleum distributor had good cause under Section 20999.1 of the
Business and Professions Code to terminate, cancel, or refuse to
renew the franchise of the gasoline dealer.
   In any action for unlawful detainer brought by a petroleum
distributor against the gasoline dealer, the court may, at the time
of request of either party, require the tenant to make rental
payments into the court, for the lessor, at the contract rate,
pending the resolution of the action.
   (b) The jury or the court, if the proceedings be tried without a
jury, shall also assess the damages occasioned to the plaintiff by
any forcible entry, or by any forcible or unlawful detainer, alleged
in the complaint and proved on the trial, and find the amount of any
rent due, if the alleged unlawful detainer be after default in the
payment of rent. If the defendant is found guilty of forcible entry,
or forcible or unlawful detainer, and malice is shown, the plaintiff
may be awarded statutory damages of up to six hundred dollars ($600),
in addition to actual damages, including rent found due. The trier
of fact shall determine whether actual damages, statutory damages, or
both, shall be awarded, and judgment shall be entered accordingly.
   (c) When the proceeding is for an unlawful detainer after default
in the payment of rent, and the lease or agreement under which the
rent is payable has not by its terms expired, and the notice required
by Section 1161 has not stated the election of the landlord to
declare the forfeiture thereof, the court may, and, if the lease or
agreement is in writing, is for a term of more than one year, and
does not contain a forfeiture clause, shall order that a writ shall
not be issued to enforce the judgment until the expiration of five
days after the entry of the judgment, within which time the tenant,
or any subtenant, or any mortgagee of the term, or any other party
interested in its continuance, may pay into the court, for the
landlord, the amount found due as rent, with interest thereon, and
the amount of the damages found by the jury or the court for the
unlawful detainer, and the costs of the proceedings, and thereupon
the judgment shall be satisfied and the tenant be restored to the
tenant's estate. If payment as provided in this subdivision is not
made within five days, the judgment may be enforced for its full
amount and for the possession of the premises. In all other cases the
judgment may be enforced immediately.
   (d) Subject to subdivision (c), the judgment for possession of the
premises may be enforced as provided in Division 3 (commencing with
Section 712.010) of Title 9 of Part 2.
   (e) Personal property remaining on the premises which the landlord
reasonably believes to have been lost shall be disposed of pursuant
to Article 1 (commencing with Section 2080) of Chapter 4 of Title 6
of Part 4 of Division 3 of the Civil Code. The landlord is not liable
to the owner of any property which is disposed of in this manner. If
the appropriate police or sheriff's department refuses to accept
that property, it shall be deemed not to have been lost for the
purposes of this subdivision.
   (f) The landlord shall give notice pursuant to Section 1983 of the
Civil Code to any person (other than the tenant) reasonably believed
by the landlord to be the owner of personal property remaining on
the premises unless the procedure for surrender of property under
Section 1965 of the Civil Code has been initiated or completed.
   (g) The landlord shall store the personal property in a place of
safekeeping until it is either released pursuant to subdivision (h)
or disposed of pursuant to subdivision (i).
   (h) The landlord shall release the personal property pursuant to
Section 1965 of the Civil Code or shall release it to the tenant or,
at the landlord's option, to a person reasonably believed by the
landlord to be its owner if the tenant or other person pays the costs
of storage as provided in Section 1990 of the Civil Code and claims
the property not later than the date specified in the writ of
possession before which the tenant must make his or her claim or the
date specified in the notice before which a person other than the
tenant must make his or her claim.
   (i) Personal property not released pursuant to subdivision (h)
shall be disposed of pursuant to Section 1988 of the Civil Code.
   (j) Where the landlord releases personal property to the tenant
pursuant to subdivision (h), the landlord is not liable with respect
to that property to any person.
   (k) Where the landlord releases personal property pursuant to
subdivision (h) to a person (other than the tenant) reasonably
believed by the landlord to be its owner, the landlord is not liable
with respect to that property to:
   (1) The tenant or to any person to whom notice was given pursuant
to subdivision (f); or
   (2) Any other person, unless that person proves that, prior to
releasing the property, the landlord believed or reasonably should
have believed that the person had an interest in the property and
also that the landlord knew or should have known upon reasonable
investigation the address of that person.
   (l) Where personal property is disposed of pursuant to Section
1988 of the Civil Code, the landlord is not liable with respect to
that property to:
   (1) The tenant or to any person to whom notice was given pursuant
to subdivision (f); or
   (2) Any other person, unless that person proves that, prior to
disposing of the property pursuant to Section 1988 of the Civil Code,
the landlord believed or reasonably should have believed that the
person had an interest in the property and also that the landlord
knew or should have known upon reasonable investigation the address
of that person.
   (m) For the purposes of subdivisions (e), (f), (h), (k), and (l),
the terms "owner," "premises," and "reasonable belief" have the same
meaning as provided in Section 1980 of the Civil Code.

1174.2.  (a) In an unlawful detainer proceeding involving
residential premises after default in payment of rent and in which
the tenant has raised as an affirmative defense a breach of the
landlord's obligations under Section 1941 of the Civil Code or of any
warranty of habitability, the court shall determine whether a
substantial breach of these obligations has occurred. If the court
finds that a substantial breach has occurred, the court (1) shall
determine the reasonable rental value of the premises in its
untenantable state to the date of trial, (2) shall deny possession to
the landlord and adjudge the tenant to be the prevailing party,
conditioned upon the payment by the tenant of the rent that has
accrued to the date of the trial as adjusted pursuant to this
subdivision within a reasonable period of time not exceeding five
days, from the date of the court's judgment or, if service of the
court's judgment is made by mail, the payment shall be made within
the time set forth in Section 1013, (3) may order the landlord to
make repairs and correct the conditions which constitute a breach of
the landlord's obligations, (4) shall order that the monthly rent be
limited to the reasonable rental value of the premises as determined
pursuant to this subdivision until repairs are completed, and (5)
except as otherwise provided in subdivision (b), shall award the
tenant costs and attorneys' fees if provided by, and pursuant to, any
statute or the contract of the parties. If the court orders repairs
or corrections, or both, pursuant to paragraph (3), the court's
jurisdiction continues over the matter for the purpose of ensuring
compliance. The court shall, however, award possession of the
premises to the landlord if the tenant fails to pay all rent accrued
to the date of trial, as determined due in the judgment, within the
period prescribed by the court pursuant to this subdivision. The
tenant shall, however, retain any rights conferred by Section 1174.
   (b) If the court determines that there has been no substantial
breach of Section 1941 of the Civil Code or of any warranty of
habitability by the landlord or if the tenant fails to pay all rent
accrued to the date of trial, as required by the court pursuant to
subdivision (a), then judgment shall be entered in favor of the
landlord, and the landlord shall be the prevailing party for the
purposes of awarding costs or attorneys' fees pursuant to any statute
or the contract of the parties.
   (c) As used in this section, "substantial breach" means the
failure of the landlord to comply with applicable building and
housing code standards which materially affect health and safety.
   (d) Nothing in this section is intended to deny the tenant the
right to a trial by jury. Nothing in this section shall limit or
supersede any provision of Chapter 12.75 (commencing with Section
7060) of Division 7 of Title 1 of the Government Code.

1174.21.  A landlord who institutes an unlawful detainer proceeding
based upon a tenant's nonpayment of rent, and who is liable for a
violation of Section 1942.4 of the Civil Code, shall be liable to the
tenant or lessee for reasonable attorneys' fees and costs of the
suit, in an amount to be fixed by the court.

1174.25.  (a) Any occupant who is served with a prejudgment claim of
right to possession in accordance with Section 415.46 may file a
claim as prescribed in Section 415.46, with the court within 10 days
of the date of service of the prejudgment claim to right of
possession as shown on the return of service, which period shall
include Saturday and Sunday but excluding all other judicial
holidays. If the last day for filing the claim falls on a Saturday or
Sunday, the filing period shall be extended to and including the
next court day. Filing the prejudgment claim of right to possession
shall constitute a general appearance for which a fee shall be
collected as provided in Section 70614 of the Government Code.
Section 68511.3 of the Government Code applies to the prejudgment
claim of right to possession.
   (b) At the time of filing, the claimant shall be added as a
defendant in the action for unlawful detainer and the clerk shall
notify the plaintiff that the claimant has been added as a defendant
in the action by mailing a copy of the claim filed with the court to
the plaintiff with a notation so indicating. The claimant shall
answer or otherwise respond to the summons and complaint within five
days, including Saturdays and Sundays but excluding all other
judicial holidays, after filing the prejudgment claim of possession.
Thereafter, the name of the claimant shall be added to any pleading,
filing or form filed in the action for unlawful detainer.

1174.3.  (a) Unless a prejudgment claim of right to possession has
been served upon occupants in accordance with Section 415.46, any
occupant not named in the judgment for possession who occupied the
premises on the date of the filing of the action may object to
enforcement of the judgment against that occupant by filing a claim
of right to possession as prescribed in this section. A claim of
right to possession may be filed at any time after service or posting
of the writ of possession pursuant to subdivision (a) or (b) of
Section 715.020, up to and including the time at which the levying
officer returns to effect the eviction of those named in the judgment
of possession. Filing the claim of right to possession shall
constitute a general appearance for which a fee shall be collected as
provided in Section 70614 of the Government Code. Section 68511.3 of
the Government Code applies to the claim of right to possession. An
occupant or tenant who is named in the action shall not be required
to file a claim of right to possession to protect that occupant's
right to possession of the premises.
   (b) The court issuing the writ of possession of real property
shall set a date or dates when the court will hold a hearing to
determine the validity of objections to enforcement of the judgment
specified in subdivision (a). An occupant of the real property for
which the writ is issued may make an objection to eviction to the
levying officer at the office of the levying officer or at the
premises at the time of the eviction.
   If a claim of right to possession is completed and presented to
the sheriff, marshal, or other levying officer, the officer shall
forthwith (1) stop the eviction of occupants at the premises, and (2)
provide a receipt or copy of the completed claim of right of
possession to the claimant indicating the date and time the completed
form was received, and (3) deliver the original completed claim of
right to possession to the court issuing the writ of possession of
real property.
   (c) A claim of right to possession is effected by any of the
following:
   (1) Presenting a completed claim form in person with
identification to the sheriff, marshal, or other levying officer as
prescribed in this section, and delivering to the court within two
court days after its presentation, an amount equal to 15 days' rent
together with the appropriate fee or form for proceeding in forma
pauperis. Upon receipt of a claim of right to possession, the
sheriff, marshal, or other levying officer shall indicate thereon the
date and time of its receipt and forthwith deliver the original to
the issuing court and a receipt or copy of the claim to the claimant
and notify the plaintiff of that fact. Immediately upon receipt of an
amount equal to 15 days' rent and the appropriate fee or form for
proceeding in forma pauperis, the court shall file the claim of right
to possession and serve an endorsed copy with the notice of the
hearing date on the plaintiff and the claimant by first-class mail.
The court issuing the writ of possession shall set and hold a hearing
on the claim not less than five nor more than 15 days after the
claim is filed with the court.
   (2) Presenting a completed claim form in person with
identification to the sheriff, marshal, or other levying officer as
prescribed in this section, and delivering to the court within two
court days after its presentation, the appropriate fee or form for
proceeding in forma pauperis without delivering the amount equivalent
to 15 days' rent. In this case, the court shall immediately set a
hearing on the claim to be held on the fifth day after the filing is
completed. The court shall notify the claimant of the hearing date at
the time the claimant completes the filing by delivering to the
court the appropriate fee or form for proceeding in forma pauperis,
and shall notify the plaintiff of the hearing date by first-class
mail. Upon receipt of a claim of right to possession, the sheriff,
marshal, or other levying officer shall indicate thereon the date and
time of its receipt and forthwith deliver the original to the
issuing court and a receipt or copy of the claim to the claimant and
notify the plaintiff of that fact.
   (d) At the hearing, the court shall determine whether there is a
valid claim of possession by the claimant who filed the claim, and
the court shall consider all evidence produced at the hearing,
including, but not limited to, the information set forth in the
claim. The court may determine the claim to be valid or invalid based
upon the evidence presented at the hearing. The court shall
determine the claim to be invalid if the court determines that the
claimant is an invitee, licensee, guest, or trespasser. If the court
determines the claim is invalid, the court shall order the return to
the claimant of the amount of the 15 days' rent paid by the claimant,
if that amount was paid pursuant to paragraph (1) or (3) of
subdivision (c), less a pro rata amount for each day that enforcement
of the judgment was delayed by reason of making the claim of right
to possession, which pro rata amount shall be paid to the landlord.
If the court determines the claim is valid, the amount equal to 15
days' rent paid by the claimant shall be returned immediately to the
claimant.
   (e) If, upon hearing, the court determines that the claim is
valid, then the court shall order further proceedings as follows:
   (1) If the unlawful detainer is based upon a curable breach, and
the claimant was not previously served with a proper notice, if any
notice is required, then the required notice may at the plaintiff's
discretion be served on the claimant at the hearing or thereafter. If
the claimant does not cure the breach within the required time, then
a supplemental complaint may be filed and served on the claimant as
defendant if the plaintiff proceeds against the claimant in the same
action. For the purposes of this section only, service of the
required notice, if any notice is required, and of the supplemental
complaint may be made by first-class mail addressed to the claimant
at the subject premises or upon his or her attorney of record and, in
either case, Section 1013 shall otherwise apply. Further proceedings
on the merits of the claimant's continued right to possession after
service of the Summons and Supplemental Complaint as prescribed by
this subdivision shall be conducted pursuant to this chapter.
   (2) In all other cases, the court shall deem the unlawful detainer
Summons and Complaint to be amended on their faces to include the
claimant as defendant, service of the Summons and Complaint, as thus
amended, may at the plaintiff's discretion be made at the hearing or
thereafter, and the claimant thus named and served as a defendant in
the action shall answer or otherwise respond within five days
thereafter.
   (f) If a claim is made without delivery to the court of the
appropriate filing fee or a form for proceeding in forma pauperis, as
prescribed in this section, the claim shall be immediately deemed
denied and the court shall so order. Upon the denial of the claim,
the court shall immediately deliver an endorsed copy of the order to
the levying officer and shall serve an endorsed copy of the order on
the plaintiff and claimant by first-class mail.
   (g) If the claim of right to possession is denied pursuant to
subdivision (f), or if the claimant fails to appear at the hearing
or, upon hearing, if the court determines that there are no valid
claims, or if the claimant does not prevail at a trial on the merits
of the unlawful detainer action, the court shall order the levying
officer to proceed with enforcement of the original writ of
possession of real property as deemed amended to include the
claimant, which shall be effected within a reasonable time not to
exceed five days. Upon receipt of the court's order, the levying
officer shall enforce the writ of possession of real property against
any occupant or occupants.
   (h) The claim of right to possession shall be made on the
following form:

* * * * * * * * * * * * * * * * *

NOTICE OF INCOMPLETE TEXT: The Claim of Right to Possession form
appears in the hard-copy publication of the chaptered bill.
See Sec. 43 of Chapter 75, Statutes of 2005.

* * * * * * * * * * * * * * * * *

1174.5.  A judgment in unlawful detainer declaring the forfeiture of
the lease or agreement under which real property is held shall not
relieve the lessee from liability pursuant to Section 1951.2 of the
Civil Code.

1176.  (a) An appeal taken by the defendant shall not automatically
stay proceedings upon the judgment. Petition for stay of the judgment
pending appeal shall first be directed to the judge before whom it
was rendered. Stay of judgment shall be granted when the court finds
that the moving party will suffer extreme hardship in the absence of
a stay and that the nonmoving party will not be irreparably injured
by its issuance. If the stay is denied by the trial court, the
defendant may forthwith file a petition for an extraordinary writ
with the appropriate appeals court. If the trial or appellate court
stays enforcement of the judgment, the court may condition the stay
on whatever conditions the court deems just, but in any case it shall
order the payment of the reasonable monthly rental value to the
court monthly in advance as rent would otherwise become due as a
condition of issuing the stay of enforcement. As used in this
subdivision, "reasonable rental value" means the contract rent unless
the rental value has been modified by the trial court in which case
that modified rental value shall be used.
   (b) A new cause of action on the same agreement for the rental of
real property shall not be barred because of an appeal by any party.

1177.  Except as otherwise provided in this Chapter the provisions
of Part II of this Code are applicable to, and constitute the rules
of practice in the proceedings mentioned in this Chapter.

1178.  The provisions of Part 2 of this code, relative to new trials
and appeals, except insofar as they are inconsistent with the
provisions of this chapter or with rules adopted by the Judicial
Council, apply to the proceedings mentioned in this chapter.

1179.  The court may relieve a tenant against a forfeiture of a
lease or rental agreement, whether written or oral, and whether or
not the tenancy has terminated, and restore him or her to his or her
former estate or tenancy, in case of hardship, as provided in Section
1174. The court has the discretion to relieve any person against
forfeiture on its own motion.
   An application for relief against forfeiture may be made at any
time prior to restoration of the premises to the landlord. The
application may be made by a tenant or subtenant, or a mortgagee of
the term, or any person interested in the continuance of the term. It
must be made upon petition, setting forth the facts upon which the
relief is sought, and be verified by the applicant. Notice of the
application, with a copy of the petition, must be served at least
five days prior to the hearing on the plaintiff in the judgment, who
may appear and contest the application. Alternatively, a person
appearing without an attorney may make the application orally, if the
plaintiff either is present and has an opportunity to contest the
application, or has been given ex parte notice of the hearing and the
purpose of the oral application. In no case shall the application or
motion be granted except on condition that full payment of rent due,
or full performance of conditions or covenants stipulated, so far as
the same is practicable, be made.

1179a.  In all proceedings brought to recover the possession of real
property pursuant to the provisions of this chapter all courts,
wherein such actions are or may hereafter be pending, shall give such
actions precedence over all other civil actions therein, except
actions to which special precedence is given by law, in the matter of
the setting the same for hearing or trial, and in hearing the same,
to the end that all such actions shall be quickly heard and
determined.


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	mso-bidi-font-family:"Times New Roman";
	mso-bidi-theme-font:minor-bidi;}

 FIRST CAUSE OF ACTION Plaintiff alleges:

1.
[Capacity
and residence. See § 334.58(1}, 9 1.]

2.   [Plaintiff s former residence. See §
334.58[1], 9 2. ]

3.   [Fictitious name allegation, if
appropriate. See § 334.50(1}, 9 2. \

4.   On or about_______ [date], defendant landlord,___________ [name],

with the intent to terminate plaintiffs occupancy of the premises, did

willfully and maliciously, directly and indirectly,__________ [specify
action

proscribed by Civ. Code § 789.3(b), e.g., prevent plaintiff from gaining reasonable
access to the premises by changing the locks on all the doors without giving
plaintiff keys for the new locks].

5.
[Specify
length of time during which interference with occupancy of premises continued,
e.g., Plaintiff was prevented reasonable access to the premises for a period of seven days.]

6.  As a direct and proximate result of defendant’s actions, plaintiff has suffered and
is suffering general damages in the amount of $_____________________________________________

7.Plaintiff is entitled to statutory punitive damages under Civil Code Section 789.3(c) in
the amount of $100 for each day or part of a day that defendant remains in
violation of Civil Code Section 789.3(b) and in no event is plaintiff entitled
to less than $250 for each cause of action.

8.  Plaintiff is entitled to receive from defendant______________
[name]

punitive damages.

SECOND CAUSE OF ACTION Plaintiff alleges:

9.Plaintiff hereby incorporates Paragraphs 1, 2, and 3 of his/her First
Cause of Action.

10.The written tenancy agreement mentioned above created a periodic estate in
plaintiffs favor in           [street address and city ], California.

11.  On or about_______ [date], defendant landlord,__________ [name],

willfully and maliciously trespassed on plaintiffs estate for the purpose of

________ [specify,
e.g., changing the locks on all the doors and windows

12.                                                   As
a direct and proximate result thereof, plaintiff has suffered general
damages in the amount of $———–

THIRD CAUSE OF ACTION
Plaintiff alleges:

13.Plaintiff
hereby incorporates Paragraphs 1, 2, and 3 of his/her First Cause of Action.

14.On or about______ [date ], defendant landlord,__________ [name ],

with
the intent to terminate plaintiffs occupancy of the premises, did

willfully and maliciously, directly and indirectly,_________ [specify action

proscribed by Civ. Code § 789.3(b), e.g., prevent plaintiff from gaining reasonable
access to the premises by changing the locks on all the doors and windows
without giving plaintiff keys for the new locks].

[15. If
the landlord ceased interfering with plaintiffs use and occupancy of the
premises, specify when this occurred, e.g., Plaintiff received keys for

the new locks
from defendant landlord,__________ {name),
on or about

______ [date),
following a demand letter from plaintiffs attorney.]

[16. Specify
length of time during which interference with occupancy continued, e.g., Plaintiff
was prevented reasonable access to the premises

from_______
[date), to and including__________
[date), or a total of

________ [e.g.,
seven) days or fraction thereof.]

17.As a further direct and
proximate result of defendant’s actions,

plaintiff_________ [specify
loss or damages, e.g„ was forced to pay fines

for_________ [e.g.,
20) library books which were overdue since he/she

could not gain
access to them to return them on the due date, all to his/her
special damage in the amount of $_______ 1.

18.  As a direct and proximate result of
defendant’s actions, plaintiff has suffered and is suffering damages in the
amount of $_________________________________________

19.  Plaintiff is entitled to statutory
punitive damages under Civil Code Section 789.3(c) in the amount of $100 for
each day or part of a day that defendant remains in violation of Civil Code
Section 789.3(b) and in no event is plaintiff entitled to less than $250 for
each cause of action.

20.  Plaintiff is entitled to receive from
defendant landlord,___________

[name ], punitive damages.

FOURTH CAUSE OF
ACTION Plaintiff
alleges:

21.  Plaintiff hereby incorporates Paragraphs
1, 2, and 3 of his/her First Cause of Action; and Paragraphs 14,15,16, and 17
of his/her Third Cause of Action.

22.  Plaintiff is entitled to appropriate
injunctive relief during the pen­dency of this action under Civil Code Section
789.3(c) and without this injunctive relief will suffer irreparable injury in
that     [specify

facts that wUl constitute great and irreparable injury, e.g., plaintiff will continue to be without a home and
without access to his/her, personal possessions and will be forced to stay in a
motel and buy new personal possessions such as clothes and cooking utensils).
Plaintiff has no plain,

speedy, and adequate remedy at law because__________ [specify facts in

addition to those
previously alleged that tend to show the inadequacy of any legal remedy that plaintiff might pursue, e.g., it will be
impossible for plaintiff
to determine the precise amount of damage that he/she will suffer if
defendant’s conduct is not restrained].

WHEREFORE, Plaintiff prays for judgment as
follows:

1.
For
an order requiring defendant to show cause, if any he/she has, why he/she
should not be enjoined as hereinafter set forth, during the pendency of this
action;

2.
For a
temporary restraining order and preliminary injunction enjoin­ing defendant and
his/her agents, servants, and employees, and all per­sons acting under, in
concert with, or for defendant from         

[specify, e.g., interfering with plaintiffs reasonable
access to the premises by changing the locks].

3.
For
general damages on the First Cause of Action in the amount of $ 

4.
For
punitive damages on the First Cause of Action.

5.
For
general damages on the Second Cause of Action in the amount of$         

6.
For
punitive damages on the Second Cause of Action.

7.
For
general damages on the Third Cause of Action in the amount of $

8.
For
punitive damages on the Third Cause of Action.

9.
For
reasonable attorney’s fees as provided in Civil Code Section 789.3(d).

 

10.
For
costs of suit.

11.
For
such other and further relief as the court may deem just and proper and
according to equity.

___________________________ [firm
name, if any]

By:_______________________________ [signature]

________________________________ [typed
name]

Attorney
for Plaintiff

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Watchdog Report: Foreclosure Review Scrapped On Eve Of Critical, Congressman Says

Posted: 12/31/2012 3:53 pm EST  |  Updated: 12/31/2012 4:08 pm EST

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Bank Of America, Foreclosure Crisis, Foreclosure Crisis, Video, Brad Miller, Foreclosure Settlement, Independent Foreclosure Review, Foreclosure Review, Office Of The Comptroller Of The Currency, Business News

The surprising decision by regulators to scrap a massive and expensive foreclosure review program in favor of a $10 billion settlement with 14 banks — reported by The New York Times Sunday night — came after a year of mounting concerns about the independence and effectiveness of the controversial program.

The program, known as the Independent Foreclosure Review, was supposed to give homeowners who believe that their bank made a mistake in handling their foreclosure an opportunity for a neutral third party to review the claim. It’s not clear what factors led banking regulators to abandon the program in favor of a settlement, but the final straw may have been a pending report by the Government Accountability Office, a nonpartisan investigative arm of Congress, which was investigating the review program.

Rep. Brad Miller, a North Carolina Democrat, told The Huffington Post that the report, which has not been released, was “critical” and that the Office of the Comptroller of the Currency, which administers the review, was aware of its findings. Miller said that that one problem the GAO was likely to highlight was an “unacceptably high” error rate of 11 percent in a sampling of bank loan files.

The sample files were chosen at random by the banks from their broader pool of foreclosed homeowners, who had not necessarily applied for relief. The data suggests that of the 4 million families who lost their homes to foreclosure since the housing crash, more than 400,000 had some bank-caused problem in their loan file. It also suggests that many thousands of those who could have applied for relief didn’t — because they weren’t aware of the review, or weren’t aware that their bank had made a mistake. Some of these mistakes pushed homeowners into foreclosure who otherwise could have afforded to keep their homes.

Miller said the news that a settlement to replace the review was in the works caught him by surprise, and stressed that he had no way of knowing whether the impending GAO report had triggered the decision.

It’s not clear what will happen to the 250,000 homeowners who have already applied to the Independent Foreclosure Review for relief. The Times, citing people familiar with the negotiations, said that a deal between the banks and banking regulators, led by the Office of the Comptroller of the Currency, could be reached by the end of the week. It wasn’t clear how that money would be distributed or how many current and former homeowners who lost their homes to foreclosure — or who were hit with an unnecessary fee — might qualify.

Bryan Hubbard, a spokesman for the OCC, which administers the program, declined to comment on the Times’ story. Hubbard told HuffPost, “The Office of the Comptroller of the Currency is committed to ensuring the Independent Foreclosure Review proceeds efficiently and to ensuring harmed borrowers are compensated as quickly as possible.”

Since the housing market crashed in 2007, thousands of foreclosed homeowners have complained that their mortgage company made a mistake in the management of their home loan, such as foreclosing on someone making payments on a loan modification plan. The Independent Foreclosure Review emerged from a legal agreement in April 2011 between 14 mortgage companies and bank regulators over these abusive “servicing” practices. It was supposed to give homeowners an opportunity to have an unbiased third party review their foreclosure and determine whether they might qualify for a cash payout of up to $125,000.

The initial response was tepid, at best. Homeowners and advocates complained that the application forms were confusing and that information about what type of compensation they might get was missing. Some told HuffPost that they were so disillusioned by the federal government’s anemic response to widely reported bank errors that they weren’t going to bother to apply.

In one instance, Daniel Casper, an Illinois wedding videographer, applied to the program in January after years of combat with Bank of America over his home loan. As The Huffington Post reported in October, he was initially rejected, because, according to the bank, his mortgage was not in the foreclosure process during the eligible review period. Promontory Financial Group, which Bank of America hired to review his loan, apparently did not double check Bank of America’s analysis against the extensive documentation that Chase submitted. That documentation clearly showed that his loan was eligible for review.

In recent months ProPublica, an investigative nonprofit, has issued a series of damning articles about the Independent Foreclosure Review. The most recent found that supposedly independent third-party reviewers looking over Bank of America loan files were given the “correct” answers in advance by the bank. These reviewers could override the answers, but they weren’t starting from a blank slate.

Banks, if they did not find a “compensable error,” did not have to pay anything, giving them a strong incentive to find no flaws with their own work.

“It was flawed from the start,” Miller said of the review program. “There was an inherent conflict of interest by just about everyone involved.”

Also on HuffPost:

• Columbine Shooting Survivor Fighting Foreclosure With Occupy LA’s Help

  Richard Castaldo survived the shooting at Columbine High School 13 years ago and now he is fighting to <a href=”http://www.huffingtonpost.com/2012/11/27/richard-castaldo-columbine-foreclosure-occupy-la_n_2198146.html?utm_hp_ref=business&#8221; target=”_hplink”>rescue his home from foreclosure</a>. The people of Occupy Los Angeles are helping Castaldo and others like him to save their homes.

• USDA Forecloses On 78-Year-Old Cancer Patient

  The USDA foreclosed on 78-year-old Texas resident Alicia Ramirez, reportedly <a href=”http://www.huffingtonpost.com/2012/08/06/alicia-ramirez-cancer-eviction_n_1747933.html?utm_hp_ref=business&#8221; target=”_hplink”>after she was diagnosed with cancer.</a> While the USDA has thus far allowed Ramirez to remain in her home, a court order evicting the senior citizen could be issued at any time.

• Foreclosure Victims Lose Belongings After Free Yard Sale Goes Wrong

  The Vercher family of Woodstock, Georgia, offered to give away a <a href=”http://www.huffingtonpost.com/2012/10/25/vercher-family-woodstock-craigslist-foreclosed_n_2017738.html?1351188857&#8243; target=”_hplink”>number of household items in a Craigslist ad</a> after their house was foreclosed on. Instead, they ended up losing nearly all of their belongings when people began taking items from inside the house.

• Wells Fargo Offers Cancer Patient ‘Assistance’ Then Forecloses

  Terminal breast cancer patient Cindi Davis could no longer keep up with her mortgage payments due to the cost of her medical bills. Faced with media scrutiny, her lender <a href=”http://www.huffingtonpost.com/2012/09/14/wells-fargo-forecloses-cancer-patient-cindi-davis_n_1883956.html?1347635836&#8243; target=”_hplink”>Wells Fargo told a local radio station it was seeking “assistance”</a> for Davis just weeks before setting the date to auction her home for December 19th, 2012.

• Coca-Cola Heirs Lose $37.5 Million To Foreclosure

  Descendants of Coca-Cola founder Asa Candler have been hit hard by the housing bust with their <a href=”http://www.huffingtonpost.com/2012/09/17/candler-family-foreclosure-losses_n_1890911.html?1347906436&#8243; target=”_hplink”>real estate development company losing $37.5 million to foreclosure since the Great Recession began</a>. (Pictured: the former mansion of Coca-Cola heir Asa Griggs “Buddy” Candler, Jr.)

• Mom Evicted On Mother’s Day

  After she and her husband were allegedly duped into a bad loan, California mom Sheri Prizant faced the possibility of being evicted from her home on Mother’s Day, <a href=”http://www.huffingtonpost.com/2012/05/11/sheri-prizant-eviction-mothers-day_n_1507681.html?1336741860&#8243; target=”_hplink”>MSNBC</a> reports.

• CT Family Never Missed A Payment

  Shock Baitch and his wife Lisa of Connecticut <a href=”http://www.huffingtonpost.com/2010/12/30/bank-of-america-foreclosure_n_802861.html&#8221; target=”_hplink”>were threatened with foreclosure by Bank of America</a> after never missing a payment. BofA mistakenly told credit agencies they were seeking a loan modification. “Now I am literally and financially paying for it,” Baitch told <a href=”http://ctwatchdog.com/finance/bank-of-americas-christmas-present-foreclose-even-though-not-a-payment-missed&#8221; target=”_hplink”>CTWatchdog.com</a>.

• Man Gets Free Home After Lender Shutdown

  Facing foreclosure, Perry Laspina of Jacksonville, Florida ended up with a home practically for free after his mortgage lender was shut down by parent company Wells Fargo, <a href=”http://realestate.aol.com/blog/2011/04/14/foreclosure-foul-up-wins-man-a-free-home/&#8221; target=”_hplink”>AOL Real Estate reports</a>. Laspina got the home “because of the significant decreased value of the property,” a bank spokesman said.

• BofA Forecloses On Building With Own Branch Office

  In Boynton Beach, Florida, Bank of America filed a foreclosure lawsuit against the owner of a building that houses one of its own branches, <a href=”http://www.bizjournals.com/southflorida/news/2011/05/27/foreclosure-roundup.html?page=all&#8221; target=”_hplink”>South Florida Business Journal reports</a>.

• Threatened Over $0.00 Unpaid Mortgage Payment

  A Massachusetts man was told he’d <a href=”http://www.huffingtonpost.com/2011/06/08/massachusetts-homeowner-receives-foreclosure_n_872518.html&#8221; target=”_hplink”>face foreclosure unless he paid an outstanding mortgage payment worth $0.00</a>. “I’m going to write a check to them for zero dollars and have it clear? I couldn’t help but laugh,” he joked with local <a href=”http://www.wwlp.com/dpp/news/i_team/I-Team:Man-gets-a-$0-foreclosure-notice&#8221; target=”_hplink”>News 22 WWLP</a>.

• Home Allegedly Ransacked By Mortgage Company

  Chris Boudreau of Brooksville, Florida <a href=”http://www.huffingtonpost.com/2011/07/06/florida-home-ransacked_n_890656.html&#8221; target=”_hplink”>told local news that his house was ransacked by his mortgage company</a>, 21st Mortgage Corporation, who he says even shredded his wife’s wedding dress. “When she saw what happened…she was crying her eyes out,” <a href=”http://www.wtsp.com/news/local/article/199268/8/Mans-home-trashed-by-mortgage-company&#8221; target=”_hplink”>he told WTSP 10 News</a>.

• Mortgage Payment Made Too Early

  A senior couple in Pasco County, Florida faced foreclosure not for missing payments, <a href=”http://www.huffingtonpost.com/2011/08/22/senior-florida-couple-faces-foreclosure-mortgage-early_n_933147.html&#8221; target=”_hplink”>but for making one too early</a>. According to a Bank of America representative, they made themselves ineligible for a mortgage modification under the Home Affordable Modification Program when they did not make their payment in the “month in which it [was] due.”

• Foreclosure In ‘World’s Richest Apartment Building’

  Property developer Kent Swig and his soon-to-be ex-wife Elizabeth faced foreclosure from their apartment at 740 Park Avenue, <a href=”http://www.huffingtonpost.com/2011/08/26/foreclosure-hits-property-developer-billionaire-building_n_937676.html&#8221; target=”_hplink”>a New York City address often cited as “the world’s richest apartment building.”</a>

• Untransferred Title Leads To Unfair Foreclosure

  Brian and Khanklink Pyron of Houston, Texas were <a href=”http://www.huffingtonpost.com/2011/10/10/brian-khanklink-pyron-foreclosure_n_1003339.html&#8221; target=”_hplink”>threatened with foreclosure despite keeping current on their payments due to an untransferred title</a>. “We did everything we were supposed to do,” Brian Pyron told <a href=”http://www.myfoxhouston.com/dpp/news/local/110926-family-hit-by-surprise-foreclosure?CMP=201110_emailshare&#8221; target=”_hplink”>MyFoxHouston</a>.

• Foreclosure On Hurricane-Destroyed Home

  Brad Gana, of Seabrook, Texas was threatened with foreclosure by Bank of America even though his <a href=”http://www.huffingtonpost.com/2011/10/31/foreclosure-crisis-bank-of-america-hurricane-ike_n_1068080.html&#8221; target=”_hplink”>house had been completely destroyed years earlier in Hurricane Ike</a>. “Bank of America is ruthless in their incompetency,” <a href=”http://www.click2houston.com/news/Bank-Forecloses-On-Home-Destroyed-By-Ike/-/1735978/4718190/-/vpooliz/-/index.html&#8221; target=”_hplink”>he told Houston 2 News</a>.

• $1 Coding Error Leads To Foreclosure

  Utah’s Shantell Curtis and her family were threatened with <a href=”http://www.huffingtonpost.com/2011/11/03/bofa-foreclosure-missing-1-already-sold-home_n_1074538.html&#8221; target=”_hplink”>foreclosure by Bank of America on a home they had already sold years prior</a>. On top of that, the whole episode concerned the matter of just a $1 coding error.

• Investigative Journalist Becomes Foreclosure Victim

  George Knapp, chief investigative reporter for Las Vegas CBS affiliate KLAS, found he was a <a href=”http://www.huffingtonpost.com/2011/11/29/foreclosure-crisis-investigative-reporter-george-knapp-victims_n_1119480.html?ref=business&#8221; target=”_hplink”>victim of the very brand of foreclosure fraud he was investigating</a> for a news report. Him being the reporter, the episode put him in a “very weird spot,” <a href=”http://www.poynter.org/latest-news/als-morning-meeting/153585/local-tv-station-tackles-mortgage-mess-as-investigative-reporter-discovers-hes-a-victim-too/&#8221; target=”_hplink”>he told the Poynter Insitute</a>.

• BofA Falsely Threatens Paralyzed Man With Foreclosure

  Robert Galanida, a 41-year-old man paralyzed from the shoulders down, <a href=”http://www.huffingtonpost.com/2012/01/12/bank-of-america-sends-false-statements-paralyzed-eviction_n_1202463.html&#8221; target=”_hplink”>battled Bank of America for nearly a decade</a> because it repeatedly sent him false statements threatening foreclosure.

• Tracy Morgan Refuses Mother Foreclosure Help

  In January 2012, actor Tracy Morgan reportedly refused to give his mother <a href=”http://www.huffingtonpost.com/2012/01/31/tracy-morgan-foreclosure-mother_n_1244641.html&#8221; target=”_hplink”>$25,000 she needed to avoid foreclosure</a>, instead offering only $2,000.

• Bank Of America Plaza Foreclosure

  The Bank of America Plaza in Atlanta was sold at a foreclosure auction in February after its landlord, BentleyForbes, could no longer afford mortgage payments, <a href=”http://www.businessweek.com/news/2012-02-14/american-foreclosure-bottoms-at-atlanta-tower-auction-mortgages.html&#8221; target=”_hplink”>BusinessWeek reports</a>. BofA <a href=”http://www.huffingtonpost.com/2012/01/10/bank-of-america-plaza-foreclosure_n_1197040.html&#8221; target=”_hplink”>was a tenant in the building at the time</a> but had no other connection besides sharing the tower’s ironic name.

• JPMorgan Tries To Foreclose On Civil Rights Activist

  Even while it promoted a February 2012 campaign to “fulfill” the “vision” of Martin Luther King Jr., <a href=”http://www.huffingtonpost.com/2012/02/07/helen-bailey-foreclosure_n_1260078.html?ref=foreclosure-crisis&#8221; target=”_hplink”>JPMorgan Chase threatened 78-year-old civil rights activist Helen Bailey with foreclosure</a>. The bank ultimately allowed Bailey to stay in her home indefinitely after Occupy Nashville helped bring national attention to the issue, <a href=”http://thinkprogress.org/economy/2012/02/14/425255/helen-bailey-foreclosure/&#8221; target=”_hplink”>Think Progress</a> reports.

• Foreclosure At Luxury Retirement Home

  Despite being billed as “cosmopolitan living for ages 60+,” the luxury <a href=”http://www.huffingtonpost.com/2012/03/02/fox-hill-foreclosure_n_1314970.html&#8221; target=”_hplink”>Fox Hill Senior Condominiums was threatened with foreclosure</a> in March after its lenders said they were backing out.

• Man Fined For Not Mowing His Old Lawn

  David Englett was charged with fines by the city of Arlington, Texas for not mowing the lawn of <a href=”http://www.huffingtonpost.com/2012/03/02/david-englett_n_1317276.html&#8221; target=”_hplink”>a house he had already lost to foreclosure years earlier</a>.

• 101-Year-Old Woman Evicted From Home

  Texana Hollis was evicted from her home due to foreclosure in September 2011, then <a href=”http://www.huffingtonpost.com/2012/01/22/texana-hollis-evicted-detroit-woman_n_1222452.html?ref=foreclosure-crisis&#8221; target=”_hplink”>denied a subsequent promise that she could move back in</a> by the U.S. Department of Housing and Urban Development. It wasn’t until April 2012 that <a href=”http://www.cbsnews.com/8301-201_162-57409700/texana-hollis-evicted-at-101-allowed-back-home/&#8221; target=”_hplink”>she was finally granted permission to return to the home</a> she’s lived in for 60 years.

• BofA Forecloses On Woman After Telling Her To Miss Payments

  According to Pamela Flores, an Atlanta homeowner, <a href=”http://www.huffingtonpost.com/2012/04/10/bank-america-foreclosure-miss-mortgage-payment_n_1414988.html&#8221; target=”_hplink”>Bank of America advised her to stop making payments</a> on her loan in order to negotiate a modification. After doing so, the bank foreclosed on her anyway, claiming she’d missed a trial payment

• Mother, Disabled Daughter Forced Out Of Home Even After BofA Modification

  Dirma Rodriguez and her disabled daughter<a href=”https://editorial.huffingtonpost.com/entry/?blog_id=2&entry_id=1423883&#8243; target=”_hplink”> were forced to flee their home in minutes</a> after Bank of America sold it to a flipper at a foreclosure auction, even though the bank had already modified her loan. But not all hope is lost; Rodriguez may get her home back after the Occupy Fights Foreclosure movement intervened.

Related News On Huffington Post:

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Predatory Lending and Predatory Servicing together at last Jan 1, 2013 Civil Code §2924.12(b)

Predatory Lending are abusive practices used in the mortgage industry that strip borrowers of home equity and threaten families with bankruptcy and foreclosure.

Predatory Lending can be broken down into three categories: Mortgage Origination, Mortgage Servicing; and Mortgage Collection and Foreclosure.

Mortgage Origination is the process by which you obtain your home loan from a mortgage broker or a bank.

Predatory lending practices in Mortgage Origination include:
# Excessive points;
# Charging fees not allowed or for services not delivered;
# Charging more than once for the same fee
# Providing a low teaser rate that adjusts to a rate you cannot afford;
# Successively refinancing your loan of “flipping;”
# “Steering” you into a loan that is more profitable to the Mortgage Originator;
# Changing the loan terms at closing or “bait & switch;”
# Closing in a location where you cannot adequately review the documents;
# Serving alcohol prior to closing;
# Coaching you to put minimum income or assets on you loan so that you will qualify for a certain amount;
# Securing an inflated appraisal;
# Receiving a kickback in money or favors from a particular escrow, title, appraiser or other service provider;
# Promising they will refinance your mortgage before your payment resets to a higher amount;
# Having you sign blank documents;
# Forging documents and signatures;
# Changing documents after you have signed them; and
# Loans with prepayment penalties or balloon payments.

Mortgage Servicing is the process of collecting loan payments and credit your loan.

Predatory lending practices in Mortgage Servicing include:
# Not applying payments on time;
# Applying payments to “Suspense;”
# “Jamming” illegal or improper fees;
# Creating an escrow or impounds account not allowed by the documents;
# Force placing insurance when you have adequate coverage;
# Improperly reporting negative credit history;
# Failing to provide you a detailed loan history; and
# Refusing to return your calls or letters.
#

Mortgage Collection & Foreclosure is the process Lenders use when you pay off your loan or when you house is repossessed for non-payment

Predatory lending practices in Mortgage Collection & Foreclosure include:
# Producing a payoff statement that includes improper charges & fees;
# Foreclosing in the name of an entity that is not the true owner of the mortgage;
# Failing to provide Default Loan Servicing required by all Fannie Mae mortgages;
# Failing to follow due process in foreclosure;
# Fraud on the court;
# Failing to provide copies of all documents and assignments; and
# Refusing to adequately communicate with you.

Abuses by Mortgage Service Companies

Although predatory lending has received far more attention than abusive servicing, a significant percentage of consumer complaints over loans involve servicing, not origination. For example, the director of the Nevada Fair Housing Center testified that of the hundreds of complaints of predatory lending issues her office received in 2002, about 42 percent involved servicing once the loan was transferred

Abusive Mortgage Servicing Defined:

Abusive servicing occurs when a servicer, either through action or inaction, obtains or attempts to obtain unwarranted fees or other costs from borrowers, engages in unfair collection practices, or through its own improper behavior or inaction causes borrowers to be more likely to go into default or have their homes foreclosed. Abusive practices should be distinguished from appropriate actions that may harm borrowers, such as a servicer merely collecting appropriate late fees or foreclosing on borrowers who do not make their payments despite proper loss mitigation efforts. Servicing can be abusive either intentionally, when there is intent to obtain unwarranted fees, or negligently, when, for example, a servicer’s records are so disorganized that borrowers are regularly charged late fees even when mortgage payments were made on time.

Abusive servicing often happens to debtors who have filed a Chapter 13 Bankruptcy Plan and are in the process of making payments under the Plan. If you suspect that your mortgage servicer is abusing your relationship by charging unnecessary fees while you are paying off your Chapter 13 Plan, call us. We can help.

There is significant evidence that some Mortgage servicers have engaged in abusive behavior and that borrowers have frequently been the victims. Some servicers have engaged in practices that are not only detrimental to borrowers but also illegal Such abuse has been documented in court opinions and decisions, in the decisions and findings of ratings agencies, in litigation and settlements obtained by government agencies against prominent servicers, in congressional testimony, and in newspaper accounts of borrowers who claim to have been mistreated by servicers. The abusive servicing practices documented in these sources include improper foreclosure or attempted foreclosure, improper fees, improper forced-placed insurance, and improper use or oversight of escrow funds .

Civil Code §2924.12(b) Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees. : )

5 Dec

H. Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees

2013 is going to be a good year

One of the most important provisions of the Act from a lender’s perspective is that it provides borrowers with the right to sue mortgage servicers for injunctive relief before the trustee’s deed upon sale has recorded, or if it has already recorded, to sue for actual economic damages, if the mortgage servicer has not corrected any “material” violation of certain enumerated portions of the Act before the trustee’s deed upon sale recorded. (Civil Code §2924.12(a).) In an area that will certainly open up a Pandora’s Box of litigation, the Act does not define what constitutes a “material” violation of the Act. If a court finds that the violation was intentional, reckless or willful, the court can award the borrower the greater of treble (triple) damages or $50,000. (Civil Code §2924.12(b).) Furthermore, a violation of the enumerated provisions of the Act is also deemed to be a violation of the licensing laws if committed by a person licensed as a consumer or commercial finance lender or broker, a residential mortgage lender or servicer, or a licensed real estate broker or salesman. (Civil Code §2924.12(d).) Lastly, in a one-sided attorney’s fee provision that only benefits borrowers, the court may award a borrower who obtains an injunction or receives an award of economic damages as a result of the violation of the Act their reasonable attorney’s fees and costs as the prevailing party. (Civil Code §2924.12(i).) This provides all the more reason for lenders and mortgage servicers to comply with the terms of the Act. This provision for the recovery by only the borrower of their reasonable attorney’s fees makes it more likely that borrowers will file litigation against mortgage lenders or servicers than they otherwise would. Compliance is the lender’s or mortgage servicer’s best defense to litigation under the Act.

Significantly for lenders, as long as the mortgage servicer remedies the material violation of the Act before the trustee’s deed upon sale has recorded, the Act specifically provides that the mortgage servicer shall not be liable under the Act for any violation or damages. (Civil Code §2924.12(b) & (c).) The Act also clarifies that signatories to the National Mortgage Settlement who are in compliance with the terms of that settlement, as they relate to the terms of the Act, will not face liability under the Act. (Civil Code §2924.12(g).

Improper foreclosure or attempted foreclosure

Because servicers can exact fees associated with foreclosures, such as attorneys’ fees, some servicers have attempted to foreclose on property even when borrowers are current on their payments or without giving borrowers enough time to repay or otherwise working with them on a repayment plan Furthermore, a speedy foreclosure may save servicers the cost of attempting other techniques that might have prevented the foreclosure.

Some servicers have been so brazen that they have regularly claimed to the courts that borrowers were in default so as to justify foreclosure, even though the borrowers were current on their payments. Other courts have also decried the frequent use of false statements to obtain relief from stay in order to foreclose on borrowers’ homes. For example, in Hart v. GMAC Mortgage Corporation, et al., 246 B.R. 709 (2000), even though the borrower had made the payments required of him by a forbearance agreement he had entered into with the servicer (GMAC Mortgage Corporation), it created a “negative suspense account” for moneys it had paid out, improperly charged the borrower an additional monthly sum to repay the negative suspense account, charged him late fees for failing to make the entire payment demanded, and began foreclosure proceedings.

Improper fees

Claiming that borrowers are in default when they are actually current allows servicers to charge unwarranted fees, either late fees or fees related to default and foreclosure. Servicers receive as a conventional fee a percentage of the total value of the loans they service, typically 25 basis points for prime loans and 50 basis points for subprime loans In addition, contracts typically provide that the servicer, not the trustee or investors, has the right to keep any and all late fees or fees associated with defaults. Servicers charge late fees not only because they act as a prod to coax borrowers into making payments on time, but also because borrowers who fail to make payments impose additional costs on servicers, which must then engage in loss mitigation to induce payment.

Such fees are a crucial part of servicers’ income. For example, one servicer’s CEO reportedly stated that extra fees, such as late fees, appeared to be paying for all of the operating costs of the company’s entire servicing department, leaving the conventional servicing fee almost completely profit The pressure to collect such fees appears to be higher on subprime servicers than on prime servicers:

Because borrowers typically cannot prove the exact date a payment was received, servicers can charge late fees even when they receive the payment on time Improper late fees may also be based on the loss of borrowers’ payments by servicers, their inability to track those payments accurately, or their failure to post payments in a timely fashion. In Ronemus v. FTB Mortgage Services, 201 B.R. 458 (1996), under a Chapter 13 bankruptcy plan, the borrowers had made all of their payments on time except for two; they received permission to pay these two late and paid late fees for the privilege. However, the servicer, FTB Mortgage Services, misapplied their payments, then began placing their payments into a suspense account and collecting unauthorized late fees. The servicer ignored several letters from the borrowers’ attorney attempting to clear up the matter, sent regular demands for late fees, and began harassing the borrowers with collection efforts. When the borrowers sued, the servicer submitted to the court an artificially inflated accounting of how much the borrowers owed.

Some servicers have sent out late notices even when they have received timely payments and even before the end of a borrower’s grace period Worse yet, a servicer might pocket the payment, such as an extra payment of principal, and never credit it to the borrower Late fees on timely payments are a common problem when borrowers are making mortgage payments through a bankruptcy plan

Moreover, some servicers have also added false fees and charges not authorized by law or contract to their monthly payment demands, relying on borrowers’ ignorance of the exact amount owed. They can collect such fees or other unwarranted claims by submitting inaccurate payoff demands when a borrower refinances or sells the house). Or they can place the borrowers’ monthly payments in a suspense account and then charge late fees even though they received the payment Worse yet, some servicers pyramid their late fees, applying a portion of the current payment to a previous late fee and then charging an additional late fee even though the borrower has made a timely and full payment for the new month Pyramiding late fees allows servicers to charge late fees month after month even though the borrower made only one late payment

Servicers can turn their fees into a profit center by sending inaccurate monthly payment demands, demanding unearned fees or charges not owed, or imposing fees higher than the expenses for a panoply of actions For example, some servicers take advantage of borrowers’ ignorance by charging fees, such as prepayment penalties, where the note does not provide for them Servicers have sometimes imposed a uniform set of fees over an entire pool of loans, disregarding the fact that some of the loan documents did not provide for those particular fees. Or they charge more for attorneys’, property inspection, or appraisal fees than were actually incurred. Some servicers may add a fee by conducting unnecessary property inspections, having an agent drive by even when the borrower is not in default, or conducting multiple inspections during a single period of default to charge the resulting multiple fees

The complexity of the terms of many loans makes it difficult for borrowers to discover whether they are being overcharged Moreover, servicers can frustrate any attempts to sort out which fees are genuine.

Improperly forced-placed insurance

Mortgage holders are entitled under the terms of the loan to require borrowers to carry homeowners’ insurance naming the holder as the payee in case of loss and to force-place insurance by buying policies for borrowers who fail to do so and charging them for the premiums However, some servicers have force-placed insurance even in cases where the borrower already had it and even provided evidence of it to the servicer Worse yet, servicers have charged for force-placed insurance without even purchasing it. Premiums for force-placed insurance are often inflated in that they provide protection in excess of what the loan.

Escrow Account Mismanagement

One of the benefits of servicing mortgages is controlling escrow accounts to pay for insurance, taxes, and the like and, in most states, keeping any interest earned on these accounts Borrowers have complained that servicers have failed to make tax or insurance payments when they were due or at all. The treasurer of the country’s second largest county estimated that this failure to make timely payments cost borrowers late fees of at least $2 million in that county over a two-year span, causing some to lose their homes. If servicers fail to make insurance payments and a policy lapses, borrowers may face much higher insurance costs even if they purchase their own, non-force-placed policy. Worse yet, borrowers may find themselves unable to buy insurance at all if they cannot find a new insurer willing to write them a policy

You can make a claim for mortgage service abuse, and often the court will award actual and punitive damages. If you think you have been a victim of mortgage service abuse, contact us. We can help you make a claim.

Many a client call me when its toooooo late however sometimes something can be done it would envolve an appeal and this application for a stay. Most likely you will have to pay the reasonable rental value till the case is decided. And … Yes we have had this motion granted. ex-parte-application-for-stay-of-judgment-or-unlawful-detainer3
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 Case

BILL NUMBER: AB 278	CHAPTERED
	BILL TEXT

	CHAPTER  86
	FILED WITH SECRETARY OF STATE  JULY 11, 2012
	APPROVED BY GOVERNOR  JULY 11, 2012
	PASSED THE SENATE  JULY 2, 2012
	PASSED THE ASSEMBLY  JULY 2, 2012
	AMENDED IN SENATE  SEPTEMBER 1, 2011
	AMENDED IN SENATE  JUNE 23, 2011

INTRODUCED BY   Assembly Members Eng, Feuer, Mitchell, and John A.
Pérez
   (Principal coauthors: Assembly Members Davis, Carter, and Skinner)

   (Principal coauthors: Senators Leno, Evans, Calderon, Corbett,
DeSaulnier, Hancock, Pavley, and Steinberg)

                        FEBRUARY 8, 2011

   An act to amend and add Sections 2923.5 and 2923.6 of, to amend
and repeal Section 2924 of, to add Sections 2920.5, 2923.4, 2923.7,
2924.17, and 2924.20 to, to add and repeal Sections 2923.55, 2924.9,
2924.10, 2924.18, and 2924.19 of, and to add, repeal, and add
Sections 2924.11, 2924.12, and 2924.15 of, the Civil Code, relating
to mortgages.

	LEGISLATIVE COUNSEL'S DIGEST

   AB 278, Eng. Mortgages and deeds of trust: foreclosure.
   (1) Existing law, until January 1, 2013, requires a mortgagee,
trustee, beneficiary, or authorized agent to contact the borrower
prior to filing a notice of default to explore options for the
borrower to avoid foreclosure, as specified. Existing law requires a
notice of default or, in certain circumstances, a notice of sale, to
include a declaration stating that the mortgagee, trustee,
beneficiary, or authorized agent has contacted the borrower, or has
tried with due diligence to contact the borrower, or that no contact
was required for a specified reason.
   This bill would add mortgage servicers, as defined, to these
provisions and would extend the operation of these provisions
indefinitely, except that it would delete the requirement with
respect to a notice of sale. The bill would, until January 1, 2018,
additionally require the borrower, as defined, to be provided with
specified information in writing prior to recordation of a notice of
default and, in certain circumstances, within 5 business days after
recordation. The bill would prohibit a mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent from recording a notice of
default or, until January 1, 2018, recording a notice of sale or
conducting a trustee's sale while a complete first lien loan
modification application is pending, under specified conditions. The
bill would, until January 1, 2018, establish additional procedures to
be followed regarding a first lien loan modification application,
the denial of an application, and a borrower's right to appeal a
denial.
   (2) Existing law imposes various requirements that must be
satisfied prior to exercising a power of sale under a mortgage or
deed of trust, including, among other things, recording a notice of
default and a notice of sale.
   The bill would, until January 1, 2018, require a written notice to
the borrower after the postponement of a foreclosure sale in order
to advise the borrower of any new sale date and time, as specified.
The bill would provide that an entity shall not record a notice of
default or otherwise initiate the foreclosure process unless it is
the holder of the beneficial interest under the deed of trust, the
original or substituted trustee, or the designated agent of the
holder of the beneficial interest, as specified.
   The bill would prohibit recordation of a notice of default or a
notice of sale or the conduct of a trustee's sale if a foreclosure
prevention alternative has been approved and certain conditions exist
and would, until January 1, 2018, require recordation of a
rescission of those notices upon execution of a permanent foreclosure
prevention alternative. The bill would, until January 1, 2018,
prohibit the collection of application fees and the collection of
late fees while a foreclosure prevention alternative is being
considered, if certain criteria are met, and would require a
subsequent mortgage servicer to honor any previously approved
foreclosure prevention alternative.
   The bill would authorize a borrower to seek an injunction and
damages for violations of certain of the provisions described above,
except as specified. The bill would authorize the greater of treble
actual damages or $50,000 in statutory damages if a violation of
certain provisions is found to be intentional or reckless or resulted
from willful misconduct, as specified. The bill would authorize the
awarding of attorneys' fees for prevailing borrowers, as specified.
Violations of these provisions by licensees of the Department of
Corporations, the Department of Financial Institutions, and the
Department of Real Estate would also be violations of those
respective licensing laws. Because a violation of certain of those
licensing laws is a crime, the bill would impose a state-mandated
local program.
   The bill would provide that the requirements imposed on mortgage
servicers, and mortgagees, trustees, beneficiaries, and authorized
agents, described above are applicable only to mortgages or deeds of
trust secured by residential real property not exceeding 4 dwelling
units that is owner-occupied, as defined, and, until January 1, 2018,
only to those entities who conduct more than 175 foreclosure sales
per year or annual reporting period, except as specified.
   The bill would require, upon request from a borrower who requests
a foreclosure prevention alternative, a mortgage servicer who
conducts more than 175 foreclosure sales per year or annual reporting
period to establish a single point of contact and provide the
borrower with one or more direct means of communication with the
single point of contact. The bill would specify various
responsibilities of the single point of contact. The bill would
define single point of contact for these purposes.
   (3) Existing law prescribes documents that may be recorded or
filed in court.
   This bill would require that a specified declaration, notice of
default, notice of sale, deed of trust, assignment of a deed of
trust, substitution of trustee, or declaration or affidavit filed in
any court relative to a foreclosure proceeding or recorded by or on
behalf of a mortgage servicer shall be accurate and complete and
supported by competent and reliable evidence. The bill would require
that before recording or filing any of those documents, a mortgage
servicer shall ensure that it has reviewed competent and reliable
evidence to substantiate the borrower's default and the right to
foreclose, including the borrower's loan status and loan information.
The bill would, until January 1, 2018, provide that any mortgage
servicer that engages in multiple and repeated violations of these
requirements shall be liable for a civil penalty of up to $7,500 per
mortgage or deed of trust, in an action brought by specified state
and local government entities, and would also authorize
administrative enforcement against licensees of the Department of
Corporations, the Department of Financial Institutions, and the
Department of Real Estate.
   The bill would authorize the Department of Corporations, the
Department of Financial Institutions, and the Department of Real
Estate to adopt regulations applicable to persons and entities under
their respective jurisdictions for purposes of the provisions
described above. The bill would provide that a violation of those
regulations would be enforceable only by the regulating agency.
   (4) The bill would state findings and declarations of the
Legislature in relation to foreclosures in the state generally, and
would state the purposes of the bill.
   (5) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) California is still reeling from the economic impacts of a
wave of residential property foreclosures that began in 2007. From
2007 to 2011 alone, there were over 900,000 completed foreclosure
sales. In 2011, 38 of the top 100 hardest hit ZIP Codes in the nation
were in California, and the current wave of foreclosures continues
apace. All of this foreclosure activity has adversely affected
property values and resulted in less money for schools, public
safety, and other public services. In addition, according to the
Urban Institute, every foreclosure imposes significant costs on local
governments, including an estimated nineteen thousand two hundred
twenty-nine dollars ($19,229) in local government costs. And the
foreclosure crisis is not over; there remain more than two million
"underwater" mortgages in California.
   (b) It is essential to the economic health of this state to
mitigate the negative effects on the state and local economies and
the housing market that are the result of continued foreclosures by
modifying the foreclosure process to ensure that borrowers who may
qualify for a foreclosure alternative are considered for, and have a
meaningful opportunity to obtain, available loss mitigation options.
These changes to the state's foreclosure process are essential to
ensure that the current crisis is not worsened by unnecessarily
adding foreclosed properties to the market when an alternative to
foreclosure may be available. Avoiding foreclosure, where possible,
will help stabilize the state's housing market and avoid the
substantial, corresponding negative effects of foreclosures on
families, communities, and the state and local economy.
   (c) This act is necessary to provide stability to California's
statewide and regional economies and housing market by facilitating
opportunities for borrowers to pursue loss mitigation options.
  SEC. 2.  Section 2920.5 is added to the Civil Code, to read:
   2920.5.  For purposes of this article, the following definitions
apply:
   (a) "Mortgage servicer" means a person or entity who directly
services a loan, or who is responsible for interacting with the
borrower, managing the loan account on a daily basis including
collecting and crediting periodic loan payments, managing any escrow
account, or enforcing the note and security instrument, either as the
current owner of the promissory note or as the current owner's
authorized agent. "Mortgage servicer" also means a subservicing agent
to a master servicer by contract. "Mortgage servicer" shall not
include a trustee, or a trustee's authorized agent, acting under a
power of sale pursuant to a deed of trust.
   (b) "Foreclosure prevention alternative" means a first lien loan
modification or another available loss mitigation option.
   (c) (1) Unless otherwise provided and for purposes of Sections
2923.4, 2923.5, 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11,
2924.18, and 2924.19, "borrower" means any natural person who is a
mortgagor or trustor and who is potentially eligible for any federal,
state, or proprietary foreclosure prevention alternative program
offered by, or through, his or her mortgage servicer.
   (2) For purposes of the sections listed in paragraph (1),
"borrower" shall not include any of the following:
   (A) An individual who has surrendered the secured property as
evidenced by either a letter confirming the surrender or delivery of
the keys to the property to the mortgagee, trustee, beneficiary, or
authorized agent.
   (B) An individual who has contracted with an organization, person,
or entity whose primary business is advising people who have decided
to leave their homes on how to extend the foreclosure process and
avoid their contractual obligations to mortgagees or beneficiaries.
   (C) An individual who has filed a case under Chapter 7, 11, 12, or
13 of Title 11 of the United States Code and the bankruptcy court
has not entered an order closing or dismissing the bankruptcy case,
or granting relief from a stay of foreclosure.
   (d) "First lien" means the most senior mortgage or deed of trust
on the property that is the subject of the notice of default or
notice of sale.
  SEC. 3.  Section 2923.4 is added to the Civil Code, to read:
   2923.4.  (a) The purpose of the act that added this section is to
ensure that, as part of the nonjudicial foreclosure process,
borrowers are considered for, and have a meaningful opportunity to
obtain, available loss mitigation options, if any, offered by or
through the borrower's mortgage servicer, such as loan modifications
or other alternatives to foreclosure. Nothing in the act that added
this section, however, shall be interpreted to require a particular
result of that process.
   (b) Nothing in this article obviates or supersedes the obligations
of the signatories to the consent judgment entered in the case
entitled United States of America et al. v. Bank of America
Corporation et al., filed in the United States District Court for the
District of Columbia, case number 1:12-cv-00361 RMC.
  SEC. 4.  Section 2923.5 of the Civil Code is amended to read:
   2923.5.  (a) (1) A mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent may not record a notice of default
pursuant to Section 2924 until both of the following:
   (A) Either 30 days after initial contact is made as required by
paragraph (2) or 30 days after satisfying the due diligence
requirements as described in subdivision (e).
   (B) The mortgage servicer complies with paragraph (1) of
subdivision (a) of Section 2924.18, if the borrower has provided a
complete application as defined in subdivision (d) of Section
2924.18.
   (2) A mortgage servicer shall contact the borrower in person or by
telephone in order to assess the borrower's financial situation and
explore options for the borrower to avoid foreclosure. During the
initial contact, the mortgage servicer shall advise the borrower that
he or she has the right to request a subsequent meeting and, if
requested, the mortgage servicer shall schedule the meeting to occur
within 14 days. The assessment of the borrower's financial situation
and discussion of options may occur during the first contact, or at
the subsequent meeting scheduled for that purpose. In either case,
the borrower shall be provided the toll-free telephone number made
available by the United States Department of Housing and Urban
Development (HUD) to find a HUD-certified housing counseling agency.
Any meeting may occur telephonically.
   (b) A notice of default recorded pursuant to Section 2924 shall
include a declaration that the mortgage servicer has contacted the
borrower, has tried with due diligence to contact the borrower as
required by this section, or that no contact was required because the
individual did not meet the definition of "borrower" pursuant to
subdivision (c) of Section 2920.5.
   (c) A mortgage servicer's loss mitigation personnel may
participate by telephone during any contact required by this section.

    (d) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other adviser
to discuss with the mortgage servicer, on the borrower's behalf, the
borrower's financial situation and options for the borrower to avoid
foreclosure. That contact made at the direction of the borrower shall
satisfy the contact requirements of paragraph (2) of subdivision
(a). Any loan modification or workout plan offered at the meeting by
the mortgage servicer is subject to approval by the borrower.
    (e) A notice of default may be recorded pursuant to Section 2924
when a mortgage servicer has not contacted a borrower as required by
paragraph (2) of subdivision (a) provided that the failure to contact
the borrower occurred despite the due diligence of the mortgage
servicer. For purposes of this section, "due diligence" shall require
and mean all of the following:
   (1) A mortgage servicer shall first attempt to contact a borrower
by sending a first-class letter that includes the toll-free telephone
number made available by HUD to find a HUD-certified housing
counseling agency.
   (2) (A) After the letter has been sent, the mortgage servicer
shall attempt to contact the borrower by telephone at least three
times at different hours and on different days. Telephone calls shall
be made to the primary telephone number on file.
   (B) A mortgage servicer may attempt to contact a borrower using an
automated system to dial borrowers, provided that, if the telephone
call is answered, the call is connected to a live representative of
the mortgage servicer.
   (C) A mortgage servicer satisfies the telephone contact
requirements of this paragraph if it determines, after attempting
contact pursuant to this paragraph, that the borrower's primary
telephone number and secondary telephone number or numbers on file,
if any, have been disconnected.
   (3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
mortgage servicer shall then send a certified letter, with return
receipt requested.
   (4) The mortgage servicer shall provide a means for the borrower
to contact it in a timely manner, including a toll-free telephone
number that will provide access to a live representative during
business hours.
   (5) The mortgage servicer has posted a prominent link on the
homepage of its Internet Web site, if any, to the following
information:
   (A) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options.
   (B) A list of financial documents borrowers should collect and be
prepared to present to the mortgage servicer when discussing options
for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgage servicer.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
    (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g) This section shall apply only to entities described in
subdivision (b) of Section 2924.18.
    (h) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 5.  Section 2923.5 is added to the Civil Code, to read:
   2923.5.  (a) (1) A mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent may not record a notice of default
pursuant to Section 2924 until both of the following:
   (A) Either 30 days after initial contact is made as required by
paragraph (2) or 30 days after satisfying the due diligence
requirements as described in subdivision (e).
   (B) The mortgage servicer complies with subdivision (a) of Section
2924.11, if the borrower has provided a complete application as
defined in subdivision (f) of Section 2924.11.
   (2) A mortgage servicer shall contact the borrower in person or by
telephone in order to assess the borrower's financial situation and
explore options for the borrower to avoid foreclosure. During the
initial contact, the mortgage servicer shall advise the borrower that
he or she has the right to request a subsequent meeting and, if
requested, the mortgage servicer shall schedule the meeting to occur
within 14 days. The assessment of the borrower's financial situation
and discussion of options may occur during the first contact, or at
the subsequent meeting scheduled for that purpose. In either case,
the borrower shall be provided the toll-free telephone number made
available by the United States Department of Housing and Urban
Development (HUD) to find a HUD-certified housing counseling agency.
Any meeting may occur telephonically.
   (b) A notice of default recorded pursuant to Section 2924 shall
include a declaration that the mortgage servicer has contacted the
borrower, has tried with due diligence to contact the borrower as
required by this section, or that no contact was required because the
individual did not meet the definition of "borrower" pursuant to
subdivision (c) of Section 2920.5.
   (c) A mortgage servicer's loss mitigation personnel may
participate by telephone during any contact required by this section.

   (d) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other adviser
to discuss with the mortgage servicer, on the borrower's behalf, the
borrower's financial situation and options for the borrower to avoid
foreclosure. That contact made at the direction of the borrower shall
satisfy the contact requirements of paragraph (2) of subdivision
(a). Any loan modification or workout plan offered at the meeting by
the mortgage servicer is subject to approval by the borrower.
   (e) A notice of default may be recorded pursuant to Section 2924
when a mortgage servicer has not contacted a borrower as required by
paragraph (2) of subdivision (a) provided that the failure to contact
the borrower occurred despite the due diligence of the mortgage
servicer. For purposes of this section, "due diligence" shall require
and mean all of the following:
   (1) A mortgage servicer shall first attempt to contact a borrower
by sending a first-class letter that includes the toll-free telephone
number made available by HUD to find a HUD-certified housing
counseling agency.
   (2) (A) After the letter has been sent, the mortgage servicer
shall attempt to contact the borrower by telephone at least three
times at different hours and on different days. Telephone calls shall
be made to the primary telephone number on file.
   (B) A mortgage servicer may attempt to contact a borrower using an
automated system to dial borrowers, provided that, if the telephone
call is answered, the call is connected to a live representative of
the mortgage servicer.
   (C) A mortgage servicer satisfies the telephone contact
requirements of this paragraph if it determines, after attempting
contact pursuant to this paragraph, that the borrower's primary
telephone number and secondary telephone number or numbers on file,
if any, have been disconnected.
   (3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
mortgage servicer shall then send a certified letter, with return
receipt requested.
   (4) The mortgage servicer shall provide a means for the borrower
to contact it in a timely manner, including a toll-free telephone
number that will provide access to a live representative during
business hours.
   (5) The mortgage servicer has posted a prominent link on the
homepage of its Internet Web site, if any, to the following
information:
   (A) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options.
   (B) A list of financial documents borrowers should collect and be
prepared to present to the mortgage servicer when discussing options
for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgage servicer.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
   (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g) This section shall become operative on January 1, 2018.
  SEC. 6.  Section 2923.55 is added to the Civil Code, to read:
   2923.55.  (a) A mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent may not record a notice of default
pursuant to Section 2924 until all of the following:
    (1) The mortgage servicer has satisfied the requirements of
paragraph (1) of subdivision (b).
   (2) Either 30 days after initial contact is made as required by
paragraph (2) of subdivision (b) or 30 days after satisfying the due
diligence requirements as described in subdivision (f).
   (3) The mortgage servicer complies with subdivision (c) of Section
2923.6, if the borrower has provided a complete application as
defined in subdivision (h) of Section 2923.6.
   (b) (1) As specified in subdivision (a), a mortgage servicer shall
send the following information in writing to the borrower:
   (A) A statement that if the borrower is a servicemember or a
dependent of a servicemember, he or she may be entitled to certain
protections under the federal Servicemembers Civil Relief Act (50
U.S.C. Sec. 501 et seq.) regarding the servicemember's interest rate
and the risk of foreclosure, and counseling for covered
servicemembers that is available at agencies such as Military
OneSource and Armed Forces Legal Assistance.
   (B) A statement that the borrower may request the following:
   (i) A copy of the borrower's promissory note or other evidence of
indebtedness.
   (ii) A copy of the borrower's deed of trust or mortgage.
   (iii) A copy of any assignment, if applicable, of the borrower's
mortgage or deed of trust required to demonstrate the right of the
mortgage servicer to foreclose.
   (iv) A copy of the borrower's payment history since the borrower
was last less than 60 days past due.
   (2) A mortgage servicer shall contact the borrower in person or by
telephone in order to assess the borrower's financial situation and
explore options for the borrower to avoid foreclosure. During the
initial contact, the mortgage servicer shall advise the borrower that
he or she has the right to request a subsequent meeting and, if
requested, the mortgage servicer shall schedule the meeting to occur
within 14 days. The assessment of the borrower's financial situation
and discussion of options may occur during the first contact, or at
the subsequent meeting scheduled for that purpose. In either case,
the borrower shall be provided the toll-free telephone number made
available by the United States Department of Housing and Urban
Development (HUD) to find a HUD-certified housing counseling agency.
Any meeting may occur telephonically.
   (c) A notice of default recorded pursuant to Section 2924 shall
include a declaration that the mortgage servicer has contacted the
borrower, has tried with due diligence to contact the borrower as
required by this section, or that no contact was required because the
individual did not meet the definition of "borrower" pursuant to
subdivision (c) of Section 2920.5.
   (d) A mortgage servicer's loss mitigation personnel may
participate by telephone during any contact required by this section.

   (e) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other adviser
to discuss with the mortgage servicer, on the borrower's behalf, the
borrower's financial situation and options for the borrower to avoid
foreclosure. That contact made at the direction of the borrower shall
satisfy the contact requirements of paragraph (2) of subdivision
(b). Any foreclosure prevention alternative offered at the meeting by
the mortgage servicer is subject to approval by the borrower.
   (f) A notice of default may be recorded pursuant to Section 2924
when a mortgage servicer has not contacted a borrower as required by
paragraph (2) of subdivision (b), provided that the failure to
contact the borrower occurred despite the due diligence of the
mortgage servicer. For purposes of this section, "due diligence"
shall require and mean all of the following:
   (1) A mortgage servicer shall first attempt to contact a borrower
by sending a first-class letter that includes the toll-free telephone
number made available by HUD to find a HUD-certified housing
counseling agency.
   (2) (A) After the letter has been sent, the mortgage servicer
shall attempt to contact the borrower by telephone at least three
times at different hours and on different days. Telephone calls shall
be made to the primary telephone number on file.
   (B) A mortgage servicer may attempt to contact a borrower using an
automated system to dial borrowers, provided that, if the telephone
call is answered, the call is connected to a live representative of
the mortgage servicer.
   (C) A mortgage servicer satisfies the telephone contact
requirements of this paragraph if it determines, after attempting
contact pursuant to this paragraph, that the borrower's primary
telephone number and secondary telephone number or numbers on file,
if any, have been disconnected.
   (3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
mortgage servicer shall then send a certified letter, with return
receipt requested, that includes the toll-free telephone number made
available by HUD to find a HUD-certified housing counseling agency.
   (4) The mortgage servicer shall provide a means for the borrower
to contact it in a timely manner, including a toll-free telephone
number that will provide access to a live representative during
business hours.
   (5) The mortgage servicer has posted a prominent link on the
homepage of its Internet Web site, if any, to the following
information:
   (A) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options.
   (B) A list of financial documents borrowers should collect and be
prepared to present to the mortgage servicer when discussing options
for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgage servicer.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
   (g) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (h) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (i)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 7.  Section 2923.6 of the Civil Code is amended to read:
   2923.6.  (a) The Legislature finds and declares that any duty that
mortgage servicers may have to maximize net present value under
their pooling and servicing agreements is owed to all parties in a
loan pool, or to all investors under a pooling and servicing
agreement, not to any particular party in the loan pool or investor
under a pooling and servicing agreement, and that a mortgage servicer
acts in the best interests of all parties to the loan pool or
investors in the pooling and servicing agreement 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 mortgage servicer
offer the borrower a loan modification or workout plan if such a
modification or plan is consistent with its contractual or other
authority.
   (c) If a borrower submits a complete application for a first lien
loan modification offered by, or through, the borrower's mortgage
servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent shall not record a notice of default or notice of
sale, or conduct a trustee's sale, while the complete first lien loan
modification application is pending. A mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent shall not record a notice
of default or notice of sale or conduct a trustee's sale until any of
the following occurs:
   (1) The mortgage servicer makes a written determination that the
borrower is not eligible for a first lien loan modification, and any
appeal period pursuant to subdivision (d) has expired.
   (2) The borrower does not accept an offered first lien loan
modification within 14 days of the offer.
   (3) The borrower accepts a written first lien loan modification,
but defaults on, or otherwise breaches the borrower's obligations
under, the first lien loan modification.
   (d) If the borrower's application for a first lien loan
modification is denied, the borrower shall have at least 30 days from
the date of the written denial to appeal the denial and to provide
evidence that the mortgage servicer's determination was in error.
   (e) If the borrower's application for a first lien loan
modification is denied, the mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent shall not record a notice of default
or, if a notice of default has already been recorded, record a
notice of sale or conduct a trustee's sale until the later of:
   (1) Thirty-one days after the borrower is notified in writing of
the denial.
   (2) If the borrower appeals the denial pursuant to subdivision
(d), the later of 15 days after the denial of the appeal or 14 days
after a first lien loan modification is offered after appeal but
declined by the borrower, or, if a first lien loan modification is
offered and accepted after appeal, the date on which the borrower
fails to timely submit the first payment or otherwise breaches the
terms of the offer.
   (f) Following the denial of a first lien loan modification
application, the mortgage servicer shall send a written notice to the
borrower identifying the reasons for denial, including the
following:
   (1) The amount of time from the date of the denial letter in which
the borrower may request an appeal of the denial of the first lien
loan modification and instructions regarding how to appeal the
denial.
   (2) If the denial was based on investor disallowance, the specific
reasons for the investor disallowance.
   (3) If the denial is the result of a net present value
calculation, the monthly gross income and property value used to
calculate the net present value and a statement that the borrower may
obtain all of the inputs used in the net present value calculation
upon written request to the mortgage servicer.
   (4) If applicable, a finding that the borrower was previously
offered a first lien loan modification and failed to successfully
make payments under the terms of the modified loan.

         (5) If applicable, a description of other foreclosure
prevention alternatives for which the borrower may be eligible, and a
list of the steps the borrower must take in order to be considered
for those options. If the mortgage servicer has already approved the
borrower for another foreclosure prevention alternative, information
necessary to complete the foreclosure prevention alternative.
   (g) In order to minimize the risk of borrowers submitting multiple
applications for first lien loan modifications for the purpose of
delay, the mortgage servicer shall not be obligated to evaluate
applications from borrowers who have already been evaluated or
afforded a fair opportunity to be evaluated for a first lien loan
modification prior to January 1, 2013, or who have been evaluated or
afforded a fair opportunity to be evaluated consistent with the
requirements of this section, unless there has been a material change
in the borrower's financial circumstances since the date of the
borrower's previous application and that change is documented by the
borrower and submitted to the mortgage servicer.
   (h) For purposes of this section, an application shall be deemed
"complete" when a borrower has supplied the mortgage servicer with
all documents required by the mortgage servicer within the reasonable
timeframes specified by the mortgage servicer.
   (i) Subdivisions (c) to (h), inclusive, shall not apply to
entities described in subdivision (b) of Section 2924.18.
   (j) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
    (k)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 8.  Section 2923.6 is added to the Civil Code, to read:
   2923.6.  (a) The Legislature finds and declares that any duty
mortgage servicers may have to maximize net present value under their
pooling and servicing agreements is owed to all parties in a loan
pool, or to all investors under a pooling and servicing agreement,
not to any particular party in the loan pool or investor under a
pooling and servicing agreement, and that a mortgage servicer acts in
the best interests of all parties to the loan pool or investors in
the pooling and servicing agreement 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 mortgage servicer
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 become operative on January 1, 2018.
  SEC. 9.  Section 2923.7 is added to the Civil Code, to read:
   2923.7.  (a) Upon request from a borrower who requests a
foreclosure prevention alternative, the mortgage servicer shall
promptly establish a single point of contact and provide to the
borrower one or more direct means of communication with the single
point of contact.
   (b) The single point of contact shall be responsible for doing all
of the following:
   (1) Communicating the process by which a borrower may apply for an
available foreclosure prevention alternative and the deadline for
any required submissions to be considered for these options.
   (2) Coordinating receipt of all documents associated with
available foreclosure prevention alternatives and notifying the
borrower of any missing documents necessary to complete the
application.
   (3) Having access to current information and personnel sufficient
to timely, accurately, and adequately inform the borrower of the
current status of the foreclosure prevention alternative.
   (4) Ensuring that a borrower is considered for all foreclosure
prevention alternatives offered by, or through, the mortgage
servicer, if any.
   (5) Having access to individuals with the ability and authority to
stop foreclosure proceedings when necessary.
   (c) The single point of contact shall remain assigned to the
borrower's account until the mortgage servicer determines that all
loss mitigation options offered by, or through, the mortgage servicer
have been exhausted or the borrower's account becomes current.
   (d) The mortgage servicer shall ensure that a single point of
contact refers and transfers a borrower to an appropriate supervisor
upon request of the borrower, if the single point of contact has a
supervisor.
   (e) For purposes of this section, "single point of contact" means
an individual or team of personnel each of whom has the ability and
authority to perform the responsibilities described in subdivisions
(b) to (d), inclusive. The mortgage servicer shall ensure that each
member of the team is knowledgeable about the borrower's situation
and current status in the alternatives to foreclosure process.
   (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g) (1) This section shall not apply to a depository institution
chartered under state or federal law, a person licensed pursuant to
Division 9 (commencing with Section 22000) or Division 20 (commencing
with Section 50000) of the Financial Code, or a person licensed
pursuant to Part 1 (commencing with Section 10000) of Division 4 of
the Business and Professions Code, that, during its immediately
preceding annual reporting period, as established with its primary
regulator, foreclosed on 175 or fewer residential real properties,
containing no more than four dwelling units, that are located in
California.
   (2) Within three months after the close of any calendar year or
annual reporting period as established with its primary regulator
during which an entity or person described in paragraph (1) exceeds
the threshold of 175 specified in paragraph (1), that entity shall
notify its primary regulator, in a manner acceptable to its primary
regulator, and any mortgagor or trustor who is delinquent on a
residential mortgage loan serviced by that entity of the date on
which that entity will be subject to this section, which date shall
be the first day of the first month that is six months after the
close of the calendar year or annual reporting period during which
that entity exceeded the threshold.
  SEC. 10.  Section 2924 of the Civil Code, as amended by Section 1
of Chapter 180 of the Statutes of 2010, is amended to read:
   2924.  (a) Every transfer of an interest in property, other than
in trust, made only as a security for the performance of another act,
is to be deemed a mortgage, except when in the case of personal
property it is accompanied by actual change of possession, in which
case it is to be deemed a pledge. Where, by a mortgage created after
July 27, 1917, of any estate in real property, other than an estate
at will or for years, less than two, or in any transfer in trust made
after July 27, 1917, of a like estate to secure the performance of
an obligation, a power of sale is conferred upon the mortgagee,
trustee, or any other person, to be exercised after a breach of the
obligation for which that mortgage or transfer is a security, the
power shall not be exercised except where the mortgage or transfer is
made pursuant to an order, judgment, or decree of a court of record,
or to secure the payment of bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations, or is made by a public utility subject to the
provisions of the Public Utilities Act, until all of the following
apply:
   (1) The trustee, mortgagee, or beneficiary, or any of their
authorized agents shall first file for record, in the office of the
recorder of each county wherein the mortgaged or trust property or
some part or parcel thereof is situated, a notice of default. That
notice of default shall include all of the following:
   (A) A statement identifying the mortgage or deed of trust by
stating the name or names of the trustor or trustors and giving the
book and page, or instrument number, if applicable, where the
mortgage or deed of trust is recorded or a description of the
mortgaged or trust property.
   (B) A statement that a breach of the obligation for which the
mortgage or transfer in trust is security has occurred.
   (C) A statement setting forth the nature of each breach actually
known to the beneficiary and of his or her election to sell or cause
to be sold the property to satisfy that obligation and any other
obligation secured by the deed of trust or mortgage that is in
default.
   (D) If the default is curable pursuant to Section 2924c, the
statement specified in paragraph (1) of subdivision (b) of Section
2924c.
   (2) Not less than three months shall elapse from the filing of the
notice of default.
   (3) Except as provided in paragraph (4), after the lapse of the
three months described in paragraph (2), the mortgagee, trustee, or
other person authorized to take the sale shall give notice of sale,
stating the time and place thereof, in the manner and for a time not
less than that set forth in Section 2924f.
   (4) Notwithstanding paragraph (3), the mortgagee, trustee, or
other person authorized to take sale may record a notice of sale
pursuant to Section 2924f up to five days before the lapse of the
three-month period described in paragraph (2), provided that the date
of sale is no earlier than three months and 20 days after the
recording of the notice of default.
   (5) Until January 1, 2018, whenever a sale is postponed for a
period of at least 10 business days pursuant to Section 2924g, a
mortgagee, beneficiary, or authorized agent shall provide written
notice to a borrower regarding the new sale date and time, within
five business days following the postponement. Information provided
pursuant to this paragraph shall not constitute the public
declaration required by subdivision (d) of Section 2924g. Failure to
comply with this paragraph shall not invalidate any sale that would
otherwise be valid under Section 2924f. This paragraph shall be
inoperative on January 1, 2018.
   (6) No entity shall record or cause a notice of default to be
recorded or otherwise initiate the foreclosure process unless it is
the holder of the beneficial interest under the mortgage or deed of
trust, the original trustee or the substituted trustee under the deed
of trust, or the designated agent of the holder of the beneficial
interest. No agent of the holder of the beneficial interest under the
mortgage or deed of trust, original trustee or substituted trustee
under the deed of trust may record a notice of default or otherwise
commence the foreclosure process except when acting within the scope
of authority designated by the holder of the beneficial interest.
   (b) In performing acts required by this article, the trustee shall
incur no liability for any good faith error resulting from reliance
on information provided in good faith by the beneficiary regarding
the nature and the amount of the default under the secured
obligation, deed of trust, or mortgage. In performing the acts
required by this article, a trustee shall not be subject to Title
1.6c (commencing with Section 1788) of Part 4.
   (c) A recital in the deed executed pursuant to the power of sale
of compliance with all requirements of law regarding the mailing of
copies of notices or the publication of a copy of the notice of
default or the personal delivery of the copy of the notice of default
or the posting of copies of the notice of sale or the publication of
a copy thereof shall constitute prima facie evidence of compliance
with these requirements and conclusive evidence thereof in favor of
bona fide purchasers and encumbrancers for value and without notice.
   (d) All of the following shall constitute privileged
communications pursuant to Section 47:
   (1) The mailing, publication, and delivery of notices as required
by this section.
   (2) Performance of the procedures set forth in this article.
   (3) Performance of the functions and procedures set forth in this
article if those functions and procedures are necessary to carry out
the duties described in Sections 729.040, 729.050, and 729.080 of the
Code of Civil Procedure.
   (e) There is a rebuttable presumption that the beneficiary
actually knew of all unpaid loan payments on the obligation owed to
the beneficiary and secured by the deed of trust or mortgage subject
to the notice of default. However, the failure to include an actually
known default shall not invalidate the notice of sale and the
beneficiary shall not be precluded from asserting a claim to this
omitted default or defaults in a separate notice of default.
  SEC. 11.  Section 2924 of the Civil Code, as amended by Section 2
of Chapter 180 of the Statutes of 2010, is repealed.
  SEC. 12.  Section 2924.9 is added to the Civil Code, to read:
   2924.9.  (a) Unless a borrower has previously exhausted the first
lien loan modification process offered by, or through, his or her
mortgage servicer described in Section 2923.6, within five business
days after recording a notice of default pursuant to Section 2924, a
mortgage servicer that offers one or more foreclosure prevention
alternatives shall send a written communication to the borrower that
includes all of the following information:
   (1) That the borrower may be evaluated for a foreclosure
prevention alternative or, if applicable, foreclosure prevention
alternatives.
   (2) Whether an application is required to be submitted by the
borrower in order to be considered for a foreclosure prevention
alternative.
   (3) The means and process by which a borrower may obtain an
application for a foreclosure prevention alternative.
   (b) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (c) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (d)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 13.  Section 2924.10 is added to the Civil Code, to read:
   2924.10.  (a) When a borrower submits a complete first lien
modification application or any document in connection with a first
lien modification application, the mortgage servicer shall provide
written acknowledgment of the receipt of the documentation within
five business days of receipt. In its initial acknowledgment of
receipt of the loan modification application, the mortgage servicer
shall include the following information:
   (1) A description of the loan modification process, including an
estimate of when a decision on the loan modification will be made
after a complete application has been submitted by the borrower and
the length of time the borrower will have to consider an offer of a
loan modification or other foreclosure prevention alternative.
   (2) Any deadlines, including deadlines to submit missing
documentation, that would affect the processing of a first lien loan
modification application.
   (3) Any expiration dates for submitted documents.
   (4) Any deficiency in the borrower's first lien loan modification
application.
   (b) For purposes of this section, a borrower's first lien loan
modification application shall be deemed to be "complete" when a
borrower has supplied the mortgage servicer with all documents
required by the mortgage servicer within the reasonable timeframes
specified by the mortgage servicer.
   (c) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (d) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (e)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 14.  Section 2924.11 is added to the Civil Code, to read:
   2924.11.  (a) If a foreclosure prevention alternative is approved
in writing prior to the recordation of a notice of default, a
mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent shall not record a notice of default under either of the
following circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (b) If a foreclosure prevention alternative is approved in writing
after the recordation of a notice of default, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall not record
a notice of sale or conduct a trustee's sale under either of the
following circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (c) When a borrower accepts an offered first lien loan
modification or other foreclosure prevention alternative, the
mortgage servicer shall provide the borrower with a copy of the fully
executed loan modification agreement or agreement evidencing the
foreclosure prevention alternative following receipt of the executed
copy from the borrower.
   (d) A mortgagee, beneficiary, or authorized agent shall record a
rescission of a notice of default or cancel a pending trustee's sale,
if applicable, upon the borrower executing a permanent foreclosure
prevention alternative. In the case of a short sale, the rescission
or cancellation of the pending trustee's sale shall occur when the
short sale has been approved by all parties and proof of funds or
financing has been provided to the mortgagee, beneficiary, or
authorized agent.
   (e) The mortgage servicer shall not charge any application,
processing, or other fee for a first lien loan modification or other
foreclosure prevention alternative.
   (f) The mortgage servicer shall not collect any late fees for
periods during which a complete first lien loan modification
application is under consideration or a denial is being appealed, the
borrower is making timely modification payments, or a foreclosure
prevention alternative is being evaluated or exercised.
   (g) If a borrower has been approved in writing for a first lien
loan modification or other foreclosure prevention alternative, and
the servicing of that borrower's loan is transferred or sold to
another mortgage servicer, the subsequent mortgage servicer shall
continue to honor any previously approved first lien loan
modification or other foreclosure prevention alternative, in
accordance with the provisions of the act that added this section.
   (h) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (i) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (j)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 15.  Section 2924.11 is added to the Civil Code, to read:
   2924.11.  (a) If a borrower submits a complete application for a
foreclosure prevention alternative offered by, or through, the
borrower's mortgage servicer, a mortgage servicer, trustee,
mortgagee, beneficiary, or authorized agent shall not record a notice
of sale or conduct a trustee's sale while the complete foreclosure
prevention alternative application is pending, and until the borrower
has been provided with a written determination by the mortgage
servicer regarding that borrower's eligibility for the requested
foreclosure prevention alternative.
   (b) Following the denial of a first lien loan modification
application, the mortgage servicer shall send a written notice to the
borrower identifying with specificity the reasons for the denial and
shall include a statement that the borrower may obtain additional
documentation supporting the denial decision upon written request to
the mortgage servicer.
   (c) If a foreclosure prevention alternative is approved in writing
prior to the recordation of a notice of default, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
not record a notice of default under either of the following
circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (d) If a foreclosure prevention alternative is approved in writing
after the recordation of a notice of default, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall not record
a notice of sale or conduct a trustee's sale under either of the
following circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (e) This section applies only to mortgages or deeds of trust as
described in Section 2924.15.
   (f) For purposes of this section, an application shall be deemed
"complete" when a borrower has supplied the mortgage servicer with
all documents required by the mortgage servicer within the reasonable
timeframes specified by the mortgage servicer.
   (g) This section shall become operative on January 1, 2018.
  SEC. 16.  Section 2924.12 is added to the Civil Code, to read:
   2924.12.  (a) (1) If a trustee's deed upon sale has not been
recorded, a borrower may bring an action for injunctive relief to
enjoin a material violation of Section 2923.55, 2923.6, 2923.7,
2924.9, 2924.10, 2924.11, or 2924.17.
   (2) Any injunction shall remain in place and any trustee's sale
shall be enjoined until the court determines that the mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent has
corrected and remedied the violation or violations giving rise to the
action for injunctive relief. An enjoined entity may move to
dissolve an injunction based on a showing that the material violation
has been corrected and remedied.
   (b) After a trustee's deed upon sale has been recorded, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
be liable to a borrower for actual economic damages pursuant to
Section 3281, resulting from a material violation of Section 2923.55,
2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 by that
mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent where the violation was not corrected and remedied prior to the
recordation of the trustee's deed upon sale. If the court finds that
the material violation was intentional or reckless, or resulted from
willful misconduct by a mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent, the court may award the borrower
the greater of treble actual damages or statutory damages of fifty
thousand dollars ($50,000).
   (c) A mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent shall not be liable for any violation that it has
corrected and remedied prior to the recordation of a trustee's deed
upon sale, or that has been corrected and remedied by third parties
working on its behalf prior to the recordation of a trustee's deed
upon sale.
   (d) A violation of Section 2923.55, 2923.6, 2923.7, 2924.9,
2924.10, 2924.11, or 2924.17 by a person licensed by the Department
of Corporations, Department of Financial Institutions, or Department
of Real Estate shall be deemed to be a violation of that person's
licensing law.
   (e) No violation of this article shall affect the validity of a
sale in favor of a bona fide purchaser and any of its encumbrancers
for value without notice.
   (f) A third-party encumbrancer shall not be relieved of liability
resulting from violations of Section 2923.55, 2923.6, 2923.7, 2924.9,
2924.10, 2924.11, or 2924.17 committed by that third-party
encumbrancer, that occurred prior to the sale of the subject property
to the bona fide purchaser.
   (g) A signatory to a consent judgment entered in the case entitled
United States of America et al. v. Bank of America Corporation et
al., filed in the United States District Court for the District of
Columbia, case number 1:12-cv-00361 RMC, that is in compliance with
the relevant terms of the Settlement Term Sheet of that consent
judgment with respect to the borrower who brought an action pursuant
to this section while the consent judgment is in effect shall have no
liability for a violation of Section 2923.55, 2923.6, 2923.7,
2924.9, 2924.10, 2924.11, or 2924.17.
   (h) The rights, remedies, and procedures provided by this section
are in addition to and independent of any other rights, remedies, or
procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or
procedures provided by law.
   (i) A court may award a prevailing borrower reasonable attorney's
fees and costs in an action brought pursuant to this section. A
borrower shall be deemed to have prevailed for purposes of this
subdivision if the borrower obtained injunctive relief or was awarded
damages pursuant to this section.
   (j) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (k)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 17.  Section 2924.12 is added to the Civil Code, to read:
   2924.12.  (a) (1) If a trustee's deed upon sale has not been
recorded, a borrower may bring an action for injunctive relief to
enjoin a                                                 material
violation of Section 2923.5, 2923.7, 2924.11, or 2924.17.
   (2) Any injunction shall remain in place and any trustee's sale
shall be enjoined until the court determines that the mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent has
corrected and remedied the violation or violations giving rise to the
action for injunctive relief. An enjoined entity may move to
dissolve an injunction based on a showing that the material violation
has been corrected and remedied.
   (b) After a trustee's deed upon sale has been recorded, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
be liable to a borrower for actual economic damages pursuant to
Section 3281, resulting from a material violation of Section 2923.5,
2923.7, 2924.11, or 2924.17 by that mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent where the violation was not
corrected and remedied prior to the recordation of the trustee's
deed upon sale. If the court finds that the material violation was
intentional or reckless, or resulted from willful misconduct by a
mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent, the court may award the borrower the greater of treble actual
damages or statutory damages of fifty thousand dollars ($50,000).
   (c) A mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent shall not be liable for any violation that it has
corrected and remedied prior to the recordation of the trustee's deed
upon sale, or that has been corrected and remedied by third parties
working on its behalf prior to the recordation of the trustee's deed
upon sale.
   (d) A violation of Section 2923.5, 2923.7, 2924.11, or 2924.17 by
a person licensed by the Department of Corporations, Department of
Financial Institutions, or Department of Real Estate shall be deemed
to be a violation of that person's licensing law.
   (e) No violation of this article shall affect the validity of a
sale in favor of a bona fide purchaser and any of its encumbrancers
for value without notice.
   (f) A third-party encumbrancer shall not be relieved of liability
resulting from violations of Section 2923.5, 2923.7, 2924.11, or
2924.17 committed by that third-party encumbrancer, that occurred
prior to the sale of the subject property to the bona fide purchaser.

   (g) The rights, remedies, and procedures provided by this section
are in addition to and independent of any other rights, remedies, or
procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or
procedures provided by law.
   (h) A court may award a prevailing borrower reasonable attorney's
fees and costs in an action brought pursuant to this section. A
borrower shall be deemed to have prevailed for purposes of this
subdivision if the borrower obtained injunctive relief or was awarded
damages pursuant to this section.
   (i) This section shall become operative on January 1, 2018.
  SEC. 18.  Section 2924.15 is added to the Civil Code, to read:
   2924.15.  (a) Unless otherwise provided, paragraph (5) of
subdivision (a) of Section 2924, and Sections 2923.5, 2923.55,
2923.6, 2923.7, 2924.9, 2924.10, 2924.11, and 2924.18 shall apply
only to first lien mortgages or deeds of trust that are secured by
owner-occupied residential real property containing no more than four
dwelling units. For these purposes, "owner-occupied" means that the
property is the principal residence of the borrower and is security
for a loan made for personal, family, or household purposes.
   (b)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 19.  Section 2924.15 is added to the Civil Code, to read:
   2924.15.  (a) Unless otherwise provided, Sections 2923.5, 2923.7,
and 2924.11 shall apply only to first lien mortgages or deeds of
trust that are secured by owner-occupied residential real property
containing no more than four dwelling units. For these purposes,
"owner-occupied" means that the property is the principal residence
of the borrower and is security for a loan made for personal, family,
or household purposes.
   (b) This section shall become operative on January 1, 2018.
  SEC. 20.  Section 2924.17 is added to the Civil Code, to read:
   2924.17.  (a) A declaration recorded pursuant to Section 2923.5
or, until January 1, 2018, pursuant to Section 2923.55, a notice of
default, notice of sale, assignment of a deed of trust, or
substitution of trustee recorded by or on behalf of a mortgage
servicer in connection with a foreclosure subject to the requirements
of Section 2924, or a declaration or affidavit filed in any court
relative to a foreclosure proceeding shall be accurate and complete
and supported by competent and reliable evidence.
   (b) Before recording or filing any of the documents described in
subdivision (a), a mortgage servicer shall ensure that it has
reviewed competent and reliable evidence to substantiate the borrower'
s default and the right to foreclose, including the borrower's loan
status and loan information.
   (c) Until January 1, 2018, any mortgage servicer that engages in
multiple and repeated uncorrected violations of subdivision (b) in
recording documents or filing documents in any court relative to a
foreclosure proceeding shall be liable for a civil penalty of up to
seven thousand five hundred dollars ($7,500) per mortgage or deed of
trust in an action brought by a government entity identified in
Section 17204 of the Business and Professions Code, or in an
administrative proceeding brought by the Department of Corporations,
the Department of Real Estate, or the Department of Financial
Institutions against a respective licensee, in addition to any other
remedies available to these entities. This subdivision shall be
inoperative on January 1, 2018.
  SEC. 21.  Section 2924.18 is added to the Civil Code, to read:
   2924.18.  (a) (1) If a borrower submits a complete application for
a first lien loan modification offered by, or through, the borrower'
s mortgage servicer, a mortgage servicer, trustee, mortgagee,
beneficiary, or authorized agent shall not record a notice of
default, notice of sale, or conduct a trustee's sale while the
complete first lien loan modification application is pending, and
until the borrower has been provided with a written determination by
the mortgage servicer regarding that borrower's eligibility for the
requested loan modification.
   (2) If a foreclosure prevention alternative has been approved in
writing prior to the recordation of a notice of default, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
not record a notice of default under either of the following
circumstances:
   (A) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (B) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (3) If a foreclosure prevention alternative is approved in writing
after the recordation of a notice of default, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall not record
a notice of sale or conduct a trustee's sale under either of the
following circumstances:
   (A) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (B) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (b) This section shall apply only to a depository institution
chartered under state or federal law, a person licensed pursuant to
Division 9 (commencing with Section 22000) or Division 20 (commencing
with Section 50000) of the Financial Code, or a person licensed
pursuant to Part 1 (commencing with Section 10000) of Division 4 of
the Business and Professions Code, that, during its immediately
preceding annual reporting period, as established with its primary
regulator, foreclosed on 175 or fewer residential real properties,
containing no more than four dwelling units, that are located in
California.
   (c) Within three months after the close of any calendar year or
annual reporting period as established with its primary regulator
during which an entity or person described in subdivision (b) exceeds
the threshold of 175 specified in subdivision (b), that entity shall
notify its primary regulator, in a manner acceptable to its primary
regulator, and any mortgagor or trustor who is delinquent on a
residential mortgage loan serviced by that entity of the date on
which that entity will be subject to Sections 2923.55, 2923.6,
2923.7, 2924.9, 2924.10, 2924.11, and 2924.12, which date shall be
the first day of the first month that is six months after the close
of the calendar year or annual reporting period during which that
entity exceeded the threshold.
   (d) For purposes of this section, an application shall be deemed
"complete" when a borrower has supplied the mortgage servicer with
all documents required by the mortgage servicer within the reasonable
timeframes specified by the mortgage servicer.
   (e) If a borrower has been approved in writing for a first lien
loan modification or other foreclosure prevention alternative, and
the servicing of the borrower's loan is transferred or sold to
another mortgage servicer, the subsequent mortgage servicer shall
continue to honor any previously approved first lien loan
modification or other foreclosure prevention alternative, in
accordance with the provisions of the act that added this section.
   (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 22.  Section 2924.19 is added to the Civil Code, to read:
   2924.19.  (a) (1) If a trustee's deed upon sale has not been
recorded, a borrower may bring an action for injunctive relief to
enjoin a material violation of Section 2923.5, 2924.17, or 2924.18.
   (2) Any injunction shall remain in place and any trustee's sale
shall be enjoined until the court determines that the mortgage
servicer, mortgagee, beneficiary, or authorized agent has corrected
and remedied the violation or violations giving rise to the action
for injunctive relief. An enjoined entity may move to dissolve an
injunction based on a showing that the material violation has been
corrected and remedied.
   (b) After a trustee's deed upon sale has been recorded, a mortgage
servicer, mortgagee, beneficiary, or authorized agent shall be
liable to a borrower for actual economic damages pursuant to Section
3281, resulting from a material violation of Section 2923.5, 2924.17,
or 2924.18 by that mortgage servicer, mortgagee, beneficiary, or
authorized agent where the violation was not corrected and remedied
prior to the recordation of the trustee's deed upon sale. If the
court finds that the material violation was intentional or reckless,
or resulted from willful misconduct by a mortgage servicer,
mortgagee, beneficiary, or authorized agent, the court may award the
borrower the greater of treble actual damages or statutory damages of
fifty thousand dollars ($50,000).
   (c) A mortgage servicer, mortgagee, beneficiary, or authorized
agent shall not be liable for any violation that it has corrected and
remedied prior to the recordation of the trustee's deed upon sale,
or that has been corrected and remedied by third parties working on
its behalf prior to the recordation of the trustee's deed upon sale.
   (d) A violation of Section 2923.5, 2924.17, or 2917.18 by a person
licensed by the Department of Corporations, the Department of
Financial Institutions, or the Department of Real Estate shall be
deemed to be a violation of that person's licensing law.
   (e) No violation of this article shall affect the validity of a
sale in favor of a bona fide purchaser and any of its encumbrancers
for value without notice.
   (f) A third-party encumbrancer shall not be relieved of liability
resulting from violations of Section 2923.5, 2924.17 or 2924.18,
committed by that third-party encumbrancer, that occurred prior to
the sale of the subject property to the bona fide purchaser.
   (g) The rights, remedies, and procedures provided by this section
are in addition to and independent of any other rights, remedies, or
procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or
procedures provided by law.
   (h) A court may award a prevailing borrower reasonable attorney's
fees and costs in an action brought pursuant to this section. A
borrower shall be deemed to have prevailed for purposes of this
subdivision if the borrower obtained injunctive relief or damages
pursuant to this section.
   (i) This section shall apply only to entities described in
subdivision (b) of Section 2924.18.
   (j)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 23.  Section 2924.20 is added to the Civil Code, to read:
   2924.20.  Consistent with their general regulatory authority, and
notwithstanding subdivisions (b) and (c) of Section 2924.18, the
Department of Corporations, the Department of Financial Institutions,
and the Department of Real Estate may adopt regulations applicable
to any entity or person under their respective jurisdictions that are
necessary to carry out the purposes of the act that added this
section. A violation of the regulations adopted pursuant to this
section shall only be enforceable by the regulatory agency.
  SEC. 24.  The provisions of this act are severable. If any
provision of this act or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
  SEC. 25.   No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.

Civil Code §2924.12(b) Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees. : )

H. Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees

2013 is going to be a good year

One of the most important provisions of the Act from a lender’s perspective is that it provides borrowers with the right to sue mortgage servicers for injunctive relief before the trustee’s deed upon sale has recorded, or if it has already recorded, to sue for actual economic damages, if the mortgage servicer has not corrected any “material” violation of certain enumerated portions of the Act before the trustee’s deed upon sale recorded. (Civil Code §2924.12(a).) In an area that will certainly open up a Pandora’s Box of litigation, the Act does not define what constitutes a “material” violation of the Act. If a court finds that the violation was intentional, reckless or willful, the court can award the borrower the greater of treble (triple) damages or $50,000. (Civil Code §2924.12(b).) Furthermore, a violation of the enumerated provisions of the Act is also deemed to be a violation of the licensing laws if committed by a person licensed as a consumer or commercial finance lender or broker, a residential mortgage lender or servicer, or a licensed real estate broker or salesman. (Civil Code §2924.12(d).) Lastly, in a one-sided attorney’s fee provision that only benefits borrowers, the court may award a borrower who obtains an injunction or receives an award of economic damages as a result of the violation of the Act their reasonable attorney’s fees and costs as the prevailing party. (Civil Code §2924.12(i).) This provides all the more reason for lenders and mortgage servicers to comply with the terms of the Act. This provision for the recovery by only the borrower of their reasonable attorney’s fees makes it more likely that borrowers will file litigation against mortgage lenders or servicers than they otherwise would. Compliance is the lender’s or mortgage servicer’s best defense to litigation under the Act.

Significantly for lenders, as long as the mortgage servicer remedies the material violation of the Act before the trustee’s deed upon sale has recorded, the Act specifically provides that the mortgage servicer shall not be liable under the Act for any violation or damages. (Civil Code §2924.12(b) & (c).) The Act also clarifies that signatories to the National Mortgage Settlement who are in compliance with the terms of that settlement, as they relate to the terms of the Act, will not face liability under the Act. (Civil Code §2924.12(g).

 

No right to “HAMP” as third party bene try Negligence with a side of “HAMP”

For all those who have found out the hard way that judges do not like a breach of HAMP contract cause of action, here is a way around it: sue for negligent handling of the HAMP application and use this citation in your opposition to demurrer:

“It is well established that a person may become liable in tort for negligently failing to perform a voluntarily assumed undertaking even in the absence of a contract so to do. A person may not be required to perform a service for another but he may undertake to do so — called a voluntary undertaking. In such a case the person undertaking to perform the service is under a duty to exercise due care in performing the voluntarily assumed duty, and a failure to exercise due care is negligence. [emphasis added]” Valdez v. Taylor Auto. Co. (1954) 129 Cal.App.2d 810, 817; Aim Ins. Co. v. Culcasi (1991) 229 Cal. App. 3d 209, 217-218.

California’s antideficiency rules latest holding

 

Bank of America v Mitchell (2012)

The Editor’s Take: Watching our courts attempt to steer California’s antideficiency rules through the treacherous currents of multiple security contexts is always somewhat painful. Code of Civil Procedure §580d, enacted in 1939, prohibits recovery of a deficiency judgment after a nonjudicial sale, which seems straightforward enough at the start. But 24 years later, the California Supreme Court held that this prohibition did not apply to a creditor suing on its junior note after having been sold out in a senior foreclosure sale (the “sold-out junior exception”). Roseleaf Corp. v Chierighino (1963) 59 C2d 35, 41, 27 CR 873. But then, 30 years after that, a court of appeal held that this sold-out junior exception did not apply to a creditor who held both the senior and junior notes. Simon v Superior Court (1992) 4 CA4th 63, 71, 5 CR2d 428. So from then on, we had a “being your own junior” exception to the “sold-out junior” exception.

A decade after that came two more exceptions to the exception to the exception: The court in Ostayan v Serrano Reconveyance Co. (2000) 77 CA4th 1411, 1422, 92 CR2d 577, , allowed a two-note-holding creditor to foreclose on its junior deed of trust and sell the property subject to its own senior encumbrance (although that is not a §580d issue). More importantly, National Enters., Inc. v Woods (2001) 94 CA4th 1217, 115 CR2d 37, allowed the holder of two notes to judicially foreclose on the first one and to sell the second note to a third party, who then was held able to sue on it as a sold-out junior. This was technically not a §580d issue, since the senior foreclosure was not by power of sale, but the reasoning made it look like we were going to have a “third party transferee” or “unbundling the package” exception to the “being your own junior” exception of Simon. It began to look like Simon would be eaten away with exceptions, especially when the original lender made a timely divestment of one of its notes.

But instead, we now learn from Mitchell that the Simon doctrine will be applied against a third party transferee who took the junior paper from the common lender after that lender had trustee sold the property under its senior deed of trust. Both National Enters. and Mitchell involved a transfer of the junior loan after a sale under the senior security, differing only with regard to whether the senior foreclosure was judicial or nonjudicial, which distinction should perhaps matter more to the selling senior than to the nonselling junior.

So many factors potentially affect the outcomes in these situations that it is really impossible to make any confident predictions. How much does it matter whether the two loans were made at the same or different times? Whether they were for related or entirely different purposes? Whether one of them was transferred (and before or after the other was foreclosed)? Whether the transferred loan was the senior or junior? Whether the one foreclosed was the senior or junior? Whether the foreclosure was judicial or nonjudicial? I can point out these distinctions, but that doesn’t mean I can forecast their effect on the outcome of the next case that comes up. —Roger Bernhardt

 

204 Cal.App.4th 1199 (2012)

139 Cal. Rptr. 3d 562

BANK OF AMERICA, N.A., Plaintiff and Appellant,
v.
MICHAEL MITCHELL, Defendant and Respondent.

No. B233924.

Court of Appeals of California, Second District, Division Four.

April 10, 2012.

1202*1202 The Dreyfuss Firm and Bruce Dannemeyer for Plaintiff and Appellant.

Law Offices of Ulric E. J. Usher, Ulric E. J. Usher and Richard Kavonian for Defendant and Respondent.

OPINION

SUZUKAWA, J.—

Appellant Bank of America’s (Bank) predecessor in interest loaned respondent Michael Mitchell (Mitchell) $315,000 to purchase a home, secured by two notes and first and second deeds of trust. When Mitchell defaulted on the loan, the lender foreclosed and sold the property. The lender then assigned the second deed of trust to the Bank, which initiated the present action to recover the indebtedness evidenced by the note. Mitchell demurred, and the court sustained the demurrer without leave to amend, concluding that the Bank’s action was barred by California’s antideficiency law. The Bank appeals from the judgment of dismissal and from the subsequent award of prevailing party attorney fees to Mitchell. We affirm.

STATEMENT OF THE CASE

The Bank filed the present action on September 16, 2010, and it filed the operative first amended complaint (complaint), asserting causes of action for 1203*1203 breach of contract, open book account, and money lent, on December 2, 2010. The complaint alleges that Mitchell obtained a loan from GreenPoint Mortgage Funding, Inc. (GreenPoint), on or about September 14, 2006. The loan was evidenced by a note secured by a deed of trust recorded against real property located at 45245 Kingtree Avenue, Lancaster, California (the property). The security for the loan was eliminated by a senior foreclosure sale in 2009. Because Mitchell defaulted on payments owing on the loan, the complaint alleged that he breached the terms of the contract, resulting in damage to the Bank in the principal sum of $63,000, plus interest at the note rate of 11.625 percent from March 1, 2010, through the date of judgment.

Mitchell demurred. Concurrently with his demurrer, he sought judicial notice of several documents, including two deeds of trust, a notice of trustee’s sale, and a trustee’s deed upon sale. On the basis of these documents, he contended that on September 14, 2006, GreenPoint made him two loans to purchase the property, with a note and deed of trust for each loan recorded against the property. The first note and deed of trust were for $252,000, and the second note and deed of trust were for $63,000. Both deeds of trust were recorded on September 21, 2006. Mitchell defaulted on the notes sometime in 2008. A notice of default was recorded, and the property was sold at trustee sale for $53,955.01 on November 6, 2009. More than a year later, on November 18, 2010, GreenPoint assigned the second deed of trust to Bank of America, which subsequently filed the present action to recover on the second note and deed of trust. Mitchell contended that the action was barred by California’s antideficiency legislation, which bars a deficiency judgment following nonjudicial foreclosure of real property.

The trial court granted Mitchell’s request for judicial notice and sustained the demurrer without leave to amend on January 27, 2011, concluding that the Bank’s breach of contract and common counts claims seek recovery of the balance owed on the obligation secured by the second deed of trust and, thus, are barred by the antideficiency statutes as a matter of law. On April 7, 2011, the court awarded Mitchell prevailing party attorney fees of $8,400 and costs of $534.72.

Judgment for Mitchell was entered on July 8, 2011. The Bank appealed from the award of attorney fees on June 17, 2011, and from the judgment on August 8, 2011. We ordered the two appeals consolidated on October 13, 2011.

STANDARD OF REVIEW

“A demurrer tests the legal sufficiency of the factual allegations in a complaint. We independently review the sustaining of a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of 1204*1204 action or discloses a complete defense. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415 [106 Cal.Rptr.2d 271, 21 P.3d 1189]; Cryolife, Inc. v. Superior Court (2003) 110 Cal.App.4th 1145, 1152 [2 Cal.Rptr.3d 396].) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded, and matters of which judicial notice has been taken. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 [6 Cal.Rptr.3d 457, 79 P.3d 569].) We construe the pleading in a reasonable manner and read the allegations in context. (Ibid.)” (City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 205 [129 Cal.Rptr.3d 433].)

“If we determine the facts as pleaded do not state a cause of action, we then consider whether the court abused its discretion in denying leave to amend the complaint. (McClain v. Octagon Plaza, LLC [(2008)] 159 Cal.App.4th [784,] 791-792 [71 Cal.Rptr.3d 885].) It is an abuse of discretion for the trial court to sustain a demurrer without leave to amend if the plaintiff demonstrates a reasonable possibility that the defect can be cured by amendment. (Schifando v. City of Los Angeles[,supra,] 31 Cal.4th [at p.] 1081. . . .)” (Estate of Dito (2011) 198 Cal.App.4th 791, 800-801 [130 Cal.Rptr.3d 279].)

Attorney fee awards normally are reviewed for abuse of discretion. In the present case, however, the Bank contends that the trial court lacked the authority as a matter of law to award attorney fees in any amount. Accordingly, our review is de novo. (Connerly v. Sate Personnel Bd. (2006) 37 Cal.4th 1169, 1175 [39 Cal.Rptr.3d 788, 129 P.3d 1].)

DISCUSSION

I. The Trial Court Properly Sustained the Demurrer Without Leave to Amend

A. Code of Civil Procedure Section 580d

(1) “`In California, as in most states, a creditor’s right to enforce a debt secured by a mortgage or deed of trust on real property is restricted by statute. Under California law, “the creditor must rely upon his security before enforcing the debt. (Code Civ. Proc., §§ 580a, 725a, 726.) If the security is insufficient, his right to a judgment against the debtor for the deficiency may be limited or barred . . . .” [Citation.]’ [Citation.]” (In re Marriage of Oropallo (1998) 68 Cal.App.4th 997, 1003 [80 Cal.Rptr.2d 669].)

Code of Civil Procedure section 580d (section 580d) prohibits a creditor from seeking a judgment for a deficiency on all notes “secured by a deed of 1205*1205 trust or mortgage upon real property . . . in any case in which the real property . . . has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust.”^[1] The effect of section 580d is that “`the beneficiary of a deed of trust executed after 1939 cannot hold the debtor for a deficiency unless he uses the remedy of judicial foreclosure. . . .'” (Simon v. Superior Court (1992) 4 Cal.App.4th 63, 71 [5 Cal.Rptr.2d 428] (Simon).)

(2) In Roseleaf Corp. v. Chierighino (1963) 59 Cal.2d 35 [27 Cal.Rptr. 873, 378 P.2d 97] (Roseleaf), the California Supreme Court held that where two deeds of trust are held against a single property and the senior creditor nonjudicially forecloses on the property, section 580d does not prohibit the holder of the junior lienor “whose security has been rendered valueless by a senior sale” from recovering a deficiency judgment. (59 Cal.2d at p. 39.) There, defendant Chierighino purchased a hotel from plaintiff Roseleaf Corporation. The consideration for the hotel included three notes, each secured by a second trust deed on parcels owned by Chierighino. After the sale of the hotel, the third parties who held the first trust deeds on the three parcels nonjudicially foreclosed on them, rendering Roseleaf’s second trust deeds valueless. Roseleaf then brought an action to recover the full amount unpaid on the three notes secured by the second trust deeds. (Id. at p. 38.)

The trial court entered judgment for Roseleaf. Chierighino appealed, contending that Roseleaf’s action was barred by section 580d, but the Supreme Court disagreed and affirmed. It explained that the purpose of section 580d was to “put judicial enforcement [of powers of sale] on a parity with private enforcement.” (Roseleaf, supra, 59 Cal.2d at p. 43.) That purpose, the court said, would not be served by applying section 580d against a nonselling junior lienor: “Even without the section the junior has fewer rights after a senior private sale than after a senior judicial sale. He may redeem from a senior judicial sale (Code Civ. Proc., § 701), or he may obtain a deficiency judgment. [Citations.] After a senior private sale, the junior has no right to redeem. This disparity of rights would be aggravated were he also denied a right to a deficiency judgment by section 580d. There is no purpose in denying the junior his single remedy after a senior private sale while leaving 1206*1206 him with two alternative remedies after a senior judicial sale. The junior’s right to recover should not be controlled by the whim of the senior, and there is no reason to extend the language of section 580d to reach that result.” (59 Cal.2d at p. 44.)

In Simon, supra, 4 Cal.App.4th 63, the court held that the rule articulated in Roseleafdid not apply to protect a junior lienor who also held the senior lien. There, Bank of America (Lender) lent the Simons $1,575,000, for which the Simons gave it two separate promissory notes. Each note was secured by a separate deed of trust naming the Bank as beneficiary and describing the same real property (the property). Subsequently, the Simons defaulted on the senior note and the Lender foreclosed. The Lender purchased the property at the nonjudicial foreclosure sale and then filed an action to recover the unpaid balance of the junior note. (Id. at p. 66.)

(3) After detailing the history of the antideficiency legislation and the governing case law, the court held that section 580d barred the Lender’s deficiency causes of action. It noted that in Roseleaf, the Supreme Court explained that the purpose of section 580d was to create parity between judicial and nonjudicial enforcement. Such parity would not be served “if [the Lender] here is permitted to make successive loans secured by a senior and junior deed of trust on the same property; utilize its power of sale to foreclose the senior lien, thereby eliminating the Simons’ right to redeem; and having so terminated that right of redemption, obtain a deficiency judgment against the Simons on the junior obligation whose security [the Lender], thus, made the choice to eliminate.” (Simon, supra, 4 Cal.App.4th at p. 77.) The court continued: “Unlike a true third party sold-out junior, [the Lender’s] right to recover as a junior lienor which is also the purchasing senior lienor is obviously not controlled by the `whim of the senior.’ We will not sanction the creation of multiple trust deeds on the same property, securing loans represented by successive promissory notes from the same debtor, as a means of circumventing the provisions of section 580d. [Fn. omitted.] The elevation of the form of such a contrived procedure over its easily perceived substance would deal a mortal blow to the antideficiency legislation of this state. Assuming, arguendo, legitimate reasons do exist to divide a loan to a debtor into multiple notes thus secured, section 580d must nonetheless be viewed as controlling where, as here, the senior and junior lenders and lienors are identical and those liens are placed on the same real property. Otherwise, creditors would be free to structure their loans to a single debtor, and the security therefor, so as to obtain on default the secured property on a trustee’s sale under a senior deed of trust; thereby eliminate the debtor’s right of redemption thereto; and thereafter effect an excessive recovery by obtaining a deficiency judgment against that debtor on an obligation secured by a junior lien the creditor chose to eliminate.” (Id. at pp. 77-78.)

1207*1207 B. Simon and Roseleaf Bar a Deficiency Judgment in the Present Case

(4) Simon is dispositive of the present case. Here, Mitchell executed two promissory notes, for $252,000 and $63,000, secured by the first and second deeds of trust in the property. As in Simon, the first and second deeds of trust were held by a single lender, GreenPoint. GreenPoint, as beneficiary under the first deed of trust, chose to exercise its power of sale by holding a nonjudicial foreclosure sale. GreenPoint thus was not a “sold-out junior” lienor and would not have been permitted to obtain a deficiency judgment against Mitchell under the rule articulated in Simon. The result is no different because GreenPoint, after the trustee sale, assigned the second deed of trust to the Bank. “An assignment transfers the interest of the assignor to the assignee. Thereafter, `”[t]he assignee `stands in the shoes’ of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of the assignment.”‘ [Citation.]” (Manson, Iver & York v. Black (2009) 176 Cal.App.4th 36, 49 [97 Cal.Rptr.3d 522].) Accordingly, because GreenPoint could not have obtained a deficiency judgment against Mitchell, the Bank also is precluded from doing so.

The Bank urges that Simon is distinguishable because in that case, the lender ultimately purchased the property for a credit bid at its own foreclosure sale, whereas in this case, the property was sold to a third party. The Bank thus contends that “[u]nder Simon if (a) both loans are held by the same lender and (b) that lender acquires the property at the foreclosure sale, the risk of manipulation by the lender is too great, so no deficiency is allowed. But if either is missing, the risk of manipulation is reduced, and a deficiency should be allowed.” Like the trial court, we reject the contention that the lender must have acquired the property at the foreclosure sale forSimon to apply. Although Simon noted the lender’s purchase at the foreclosure sale, that purchase was not material to its holding. Instead, the court’s focus was on the lender’s dual position as holder of the first and second deeds of trust, and its consequent ability to protect its own interest. (Simon, supra, 4 Cal.App.4th at p. 72 [“[The Lender] was not a third party sold-out junior lienholder as was the case inRoseleaf. As the holder of both the first and second liens, [the Lender] was fully able to protect its secured position. It was not required to protect its junior lien from its own foreclosure of the senior lien by the investment of additional funds. Its position of dual lienholder eliminated any possibility that [the Lender], after foreclosure and sale of the liened property under its first lien, might end up with no interest in the secured property, the principal rationale of the court’s decision in Roseleaf.“].)

The Bank further contends that the present case is distinguishable from Simonbecause the presence of a third party purchaser at the foreclosure sale 1208*1208prevented the kind of “manipulation” possible in Simon. According to the Bank, “[w]hen the foreclosure sale results in acquisition by a third party, who competed with the foreclosing lender and all other bidders at the public auction, a low-ball bid is impossible. If the foreclosing lender bids below market, it will be outbid; it will not acquire the property. The lender cannot manipulate the price. The presence of third party bids demonstrates the market is at work to achieve a fair price. Third party bids provide the functional equivalent of a right of redemption. By outbidding the lender, the third party prevents the lender from manipulating the process.” We disagree. Whatever the merits of the Bank’s argument as a matter of policy, it has no support in the statute, and the Bank suggests none. Indeed, nothing in the antideficiency legislation suggests that the presence of a third party bidder at a foreclosure sale excepts the sale from the legislation and permits the lender to seek a deficiency judgment.^[2]

For all the foregoing reasons, section 580d bars the deficiency judgment the Bank seeks in the present case and, thus, the trial court properly sustained the demurrer. Because the Bank suggests no way in which the legal defects identified could be cured by amendment, the demurrer was properly sustained without leave to amend.

II. The Trial Court Properly Awarded Mitchell Attorney Fees

A. Relevant Facts

Following the trial court’s order sustaining Mitchell’s demurrer without leave to amend, Mitchell filed a motion for attorney fees pursuant to Civil Code section 1717. Two days later, on February 10, 2011, the Bank filed a request for dismissal with prejudice. It then filed opposition to the motion for attorney fees, contending that there could be no prevailing party within the meaning of Civil Code section 1717 because it had voluntarily dismissed its action.^[3]

On March 8, 2011, the trial court vacated the dismissal and granted Mitchell’s motion for attorney fees. It explained that because it had sustained a demurrer to the Bank’s complaint without leave to amend, the Bank did not have a right pursuant to Code of Civil Procedure section 581 to voluntarily dismiss the action, and the dismissal had been entered in error. It awarded Mitchell attorney fees of $8,400 and costs of $534.72.

1209*1209 B. Analysis

The Bank contends that the trial court lacked authority to award Mitchell attorney fees. It urges that under Code of Civil Procedure section 581, it had an absolute right to dismiss its case voluntarily, so long as it did so with prejudice. Because it did so, there was no prevailing party pursuant to Civil Code section 1717, subdivision (b)(2), and thus the trial court lacked authority to award Mitchell contractual attorney fees.

(5) The Bank is correct that under Civil Code section 1717, a defendant in a contract action is not deemed a prevailing party where the plaintiff voluntarily dismisses the action. (Id., subd. (b)(2) [“Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.”].) Therefore, if the Bank’s dismissal was valid, the Bank is correct that the trial court erred in awarding attorney fees. The trial court determined, however, that the Bank’s dismissal was not valid, the issue to which we now turn.

(6) Pursuant to Code of Civil Procedure section 581, a plaintiff may voluntarily dismiss an action, “with or without prejudice,” at any time before the “actual commencement of trial.” (§ 581, subds. (b)(1), (c).) Further, a plaintiff may voluntarily dismiss an action with prejudice “at any time before the submission of the cause.” (Estate of Somers (1947) 82 Cal.App.2d 757, 759 [187 P.2d 433].) Upon the proper exercise of the right of voluntary dismissal, a trial court “`would thereafter lack jurisdiction to enter further orders in the dismissed action.’ (Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 784 [176 Cal.Rptr. 104, 632 P.2d 217].) `Alternatively stated, voluntary dismissal of an entire action deprives the court of both subject matter and personal jurisdiction in that case, except for the limited purpose of awarding costs and . . . attorney fees. [Citations.]’ (Gogri v. Jack in the Box, Inc.(2008) 166 Cal.App.4th 255, 261 [82 Cal.Rptr.3d 629].)” (Lewis C. Nelson & Sons, Inc. v. Lynx Iron Corp. (2009) 174 Cal.App.4th 67, 76 [94 Cal.Rptr.3d 468].)

A plaintiff’s right to voluntarily dismiss an action before commencement of trial is not absolute, however. (Lewis C. Nelson & Sons, Inc. v. Lynx Iron Corp., supra, 174 Cal.App.4th at pp. 76-77; Zapanta v. Universal Care, Inc. (2003) 107 Cal.App.4th 1167, 1171 [132 Cal.Rptr.2d 842].) “Code of Civil Procedure section 581 recognizes exceptions to the right; other limitations have evolved through the courts’ construction of the term `commencement of trial.’ These exceptions generally arise where the action has proceeded to a determinative adjudication, or to a decision that is tantamount to an adjudication.” (Harris v. Billings (1993) 16 Cal.App.4th 1396, 1402 [20 Cal.Rptr.2d 718].)

1210*1210 (7) The Supreme Court found such a “determinative adjudication” in Goldtree v. Spreckels (1902) 135 Cal. 666 [67 P. 1091] (Goldtree). There, the defendant’s demurrer to each of the plaintiff’s causes of action was sustained without leave to amend as to the first two. The plaintiff then filed a written request to dismiss the entire case, and the court clerk entered an order of dismissal. The trial court vacated the dismissal, and the plaintiff appealed. (Id. at pp. 667-668.) The Supreme Court affirmed: “In our opinion the subdivision of the section 581 of the Code of Civil Procedure in question cannot be restricted in its meaning to trials of the merits after answer, for there may be such a trial on a general demurrer to the complaint as will effectually dispose of the case where the plaintiff has properly alleged all the facts which constitute his cause of action. If the demurrer is sustained, he stands on his pleading and submits to judgment on the demurrer, and, if not satisfied, has his remedy by appeal. In such a case, we think, there would be a trial within the meaning of the code, and the judgment would cut off the right of dismissal, unless it was first set aside or leave given to amend. [¶] The clerk had no authority, therefore, to enter the dismissal, and being void the court rightly set it aside.” (Id. at pp. 672-673.)

(8) The Supreme Court reached a similar result in Wells v. Marina City Properties, Inc., supra, 29 Cal.3d 781 (Wells). There, the trial court sustained the defendant’s demurrer with leave to amend. The plaintiff failed to amend within the time provided, but instead sought to voluntarily dismiss the action without prejudice. The Supreme Court held that the voluntary dismissal was improperly entered: “[O]nce a general demurrer is sustained with leave to amend and plaintiff does not so amend within the time authorized by the court or otherwise extended by stipulation or appropriate order, he can no longer voluntarily dismiss his action pursuant to section 581, subdivision 1, even if the trial court has yet to enter a judgment of dismissal on the sustained demurrer.” (Id. at p. 789.)

In the present case, the trial court sustained defendant’s demurrer without leave to amend on January 27, 2011. Although the trial court had not yet entered a judgment of dismissal when the Bank filed a request for voluntary dismissal on February 10, 2011, as in Goldtree and Wells, the trial court had already made a determinative adjudication on the legal merits of the Bank’s claim. Accordingly, as in those cases, the Bank no longer had the right to voluntarily dismiss under Code of Civil Procedure section 581.

The Bank contends that the present case is distinguishable from Goldtree and Wellsbecause here it sought to dismiss with prejudice, while in those cases the attempted dismissal was without prejudice. We do not agree. The 1211*1211 court rejected a similar contention in Vanderkous v. Conley (2010) 188 Cal.App.4th 111 [115 Cal.Rptr.3d 249] (Vanderkous). There, the plaintiff and the defendant formerly had lived together on a multilot parcel owned by the plaintiff. An arbitration award entered after their relationship ended directed the parties to cooperate in a lot line adjustment that would result in the home and a garage on a single lot to be owned by the defendant, with the remainder of the parcel to be owned by the plaintiff. The plaintiff was also to have access and utility easements over the garage area for the benefit of his parcel. The easements were executed by the defendant and recorded, but the garage and surrounding property were never transferred because the plaintiff never recorded either the lot line adjustment or the grant deed to the defendant for the garage and setback area. When the plaintiff subsequently sought to record a subdivision map, the title company that was to record the map refused to do so because the grants of easement by the defendant created a cloud on the plaintiff’s title. The plaintiff thus filed a complaint for declaratory relief and to quiet title. (Id. at pp. 114-115.)

Following a trial, the court filed a statement of decision that ordered the defendant to execute a quitclaim deed in favor of the plaintiff, and ordered the plaintiff to compensate the defendant in an amount equal to the full market value of the garage area. If the parties could not agree on the amount the plaintiff was to pay the defendant, each party was ordered to submit an appraisal for the court’s final determination. The defendant submitted an appraisal that valued the garage area at $410,000, and the plaintiff submitted an appraisal that valued the property at $75,000, but also requested a continuance and an evidentiary hearing on the value of the property. The day before the evidentiary hearing, the plaintiff filed a request for dismissal with prejudice with the clerk. The trial court ruled that the plaintiff’s attempt to dismiss was void ab initio and ordered the plaintiff to pay the defendant $199,246 plus attorney fees and costs. (Vanderkous, supra, 188 Cal.App.4th at p. 116.)

(9) The plaintiff appealed, contending that the trial court lacked jurisdiction to set aside his voluntary dismissal of his action and to award attorney fees. (Vanderkous, supra, 188 Cal.App.4th at p. 117.) The court disagreed and affirmed the judgment. It explained: “Section 581, subdivision (d) provides that a complaint may be dismissed with prejudice when the plaintiff abandons it before the final submission of the case.Here, the court’s statement of decision following the three-day court trial, states `[t]he matter was deemed submitted on March 10, 2008, following receipt of closing briefs from both sides.’ The statement of decision resolved Vanderkous’s quiet title cause of action and his claim for declaratory relief, and ordered him to compensate Conley for the fair market value of property she was required to quitclaim to 1212*1212 him. [¶] … [¶] Because Vanderkous has not convinced us that he had an absolute right to dismiss his complaint, we also reject his argument that the trial court lacked jurisdiction to set aside his attempted dismissal. [Citations.] A contrary rule would enable Vanderkous to avoid compliance with the court’s decision and would undermine the trial court’s authority to provide for the orderly conduct of proceedings before it and compel obedience to its judgments, orders, and process. (See § 128, subd. (a).)” (Vanderkous, supra, at pp. 117-118; see also Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2011) ¶ 11:28, p. 11-16 (rev. # 1, 2011) [“[O]nce the case is finally submitted for decision, there is no further right to dismiss with prejudice. At that point, plaintiffs cannot avoid an adverse ruling by abandoning the case.”].)

The present case is analogous. As in Vanderkous, the Bank sought to dismiss afterthe court made a dispositive ruling against it, not before. To allow the Bank to dismiss at that late stage would permit procedural gamesmanship inconsistent with the trial court’s authority to provide for the orderly conduct of proceedings before it.

We do not agree with the Bank that its right to dismiss is supported by this division’s decision in Marina Glencoe, L.P. v. Neue Sentimental Film AG (2008) 168 Cal.App.4th 874 [85 Cal.Rptr.3d 800] (Marina Glencoe). There, after the plaintiff presented its evidence on the single bifurcated issue of alter ego liability, the defendant moved for judgment. The court heard argument on the motion but did not rule; the following day, before a ruling on the pending motion, the plaintiff voluntarily dismissed the action with prejudice. The defendant moved for prevailing party attorney fees, and the court denied the motion, concluding that the defendant was not entitled to such fees under Civil Code section 1717. The defendant appealed. We affirmed, noting that because the plaintiff voluntarily dismissed with prejudice, “[i]ts intent was to end the litigation, not to manipulate the judicial process to avoid its inevitable end. This was entirely proper.” (168 Cal.App.4th at p. 878.)

The present case is distinguishable from Marina Glencoe. In Marina Glencoe, the plaintiff dismissed its action before the trial court ruled on a dispositive motion, and thus judgment in the defendant’s favor was not inevitable. In the present case, in contrast, the trial court had already sustained Mitchell’s demurrer without leave to amend, and thus judgment against the Bank had already “ripened to the point of inevitability.” (Marina Glencoe, supra, 168 Cal.App.4th at p. 878.) Accordingly, unlike in Marina Glencoe, the Bank no longer had the right to voluntarily dismiss its action, either with or without prejudice.

1213*1213 DISPOSITION

We affirm the judgment of dismissal and award of attorney fees. Mitchell shall recover his appellate costs.

Willhite, Acting P. J., and Manella, J., concurred.

[1] The full text of section 580d is as follows: “No judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property or an estate for years therein hereafter executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust.

“This section does not apply to any deed of trust, mortgage or other lien given to secure the payment of bonds or other evidences of indebtedness authorized or permitted to be issued by the Commissioner of Corporations, or which is made by a public utility subject to the Public Utilities Act (Part 1 (commencing with Section 201) of Division 1 of the Public Utilities Code).”

[2] Although not relevant to our analysis, we note that the property’s foreclosure sale purchase price of $53,955.01 does not convincingly demonstrate, as the Bank asserts, that the presence of a third party bidder made a “low-ball bid . . . impossible.”

[3] In its opposition, the Bank represented to the court as follows: “The litigation is over. There will be no appeal.”

 

Related articles

• Borrower’s “show me the note” argument fails to halt foreclosure (timothymccandless.wordpress.com)
• Deficiency Judgments and Arbitration Clauses in Notes and Mortgages (livinglies.wordpress.com)
• BOA DEATH WATCH: Ironic Twist for Zombie Banks (livinglies.wordpress.com)
• Fighting Foreclosure Fatigue – Credit Slips (mbcalyn.com)
• Homeowner Evicted and Foreclosed – Case Over: Regains Title and Possession of House. NOW IT’S OVER! (timothymccandless.wordpress.com)
• A New Wave of Foreclosures is Looming (blogs.lawyers.com)
• Why anti-foreclosure laws are ruining the U.S. recovery (business.financialpost.com)
• Averting The Apocalypse: Foreclosing Lenders Avoid Disaster and Given More Options To Foreclose In Eaton v. Fannie Mae Case (ritholtz.com)
• Foreclosure, Deficiency Judgments and the Perils of Anti-Deficiency Statutes (forbes.com)

The Top Twelve Reasons Why You Should Hate the Mortgage Settlement

As readers may know by now, 49 of 50 states have agreed to join the so-called mortgage settlement, with Oklahoma the lone refusenik. Although the fine points are still being hammered out, various news outlets (New York Times, Financial Times, Wall Street Journal) have details, with Dave Dayen’s overview at Firedoglake the best thus far.

The Wall Street Journal is also reporting that the SEC is about to launch some securities litigation against major banks. Since the statue of limitations has already run out on securities filings more than five years old, this means they’ll clip the banks for some of the very last (and dreckiest) deals they shoved out the door before the subprime market gave up the ghost.

The various news services are touting this pact at the biggest multi-state settlement since the tobacco deal in 1998. While narrowly accurate, this deal is bush league by comparison even though the underlying abuses in both cases have had devastating consequences.

The tobacco agreement was pegged as being worth nearly $250 billion over the first 25 years. Adjust that for inflation, and the disparity is even bigger. That shows you the difference in outcomes between a case where the prosecutors have solid evidence backing their charges, versus one where everyone know a lot of bad stuff happened, but no one has come close to marshaling the evidence.

The mortgage settlement terms have not been released, but more of the details have been leaked:

1. The total for the top five servicers is now touted as $26 billion (annoyingly, the FT is calling it “nearly $40 billion”), but of that, roughly $17 billion is credits for principal modifications, which as we pointed out earlier, can and almost assuredly will come largely from mortgages owned by investors. $3 billion is for refis, and only $5 billion will be in the form of hard cash payments, including $1500 to $2000 per borrower foreclosed on between September 2008 and December 2011.

Banks will be required to modify second liens that sit behind firsts “at least” pari passu, which in practice will mean at most pari passu. So this guarantees banks will also focus on borrowers where they do not have second lien exposure, and this also makes the settlement less helpful to struggling homeowners, since borrowers with both second and first liens default at much higher rates than those without second mortgages. Per the Journal:

“It’s not new money. It’s all soft dollars to the banks,” said Paul Miller, a bank analyst at FBR Capital Markets.

The Times is also subdued:

Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.

2. Schneiderman’s MERS suit survives, and he can add more banks as defendants. It isn’t clear what became of the Biden and Coakley MERS suits, but Biden sounded pretty adamant in past media presentations on preserving that.

3. Nevada’s and Arizona’s suits against Countrywide for violating its past consent decree on mortgage servicing has, in a new Orwellianism, been “folded into” the settlement.

4. The five big players in the settlement have already set aside reserves sufficient for this deal.

Here are the top twelve reasons why this deal stinks:

1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

2. That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors.

3. That $5 billion divided among the big banks wouldn’t even represent a significant quarterly hit. Freddie and Fannie putbacks to the major banks have been running at that level each quarter.

4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.

5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. The framework is similar to that of the OCC consent decrees implemented last year, which Adam Levitin and yours truly, among others, decried as regulatory theater.

6. The past history of servicer consent decrees shows the servicers all fail to comply. Why? Servicer records and systems are terrible in the best of times, and their systems and fee structures aren’t set up to handle much in the way of delinquencies. As Tom Adams has pointed out in earlier posts, servicer behavior is predictable when their portfolios are hit with a high level of delinquencies and defaults: they cheat in all sorts of ways to reduce their losses.

7. The cave-in Nevada and Arizona on the Countrywide settlement suit is a special gift for Bank of America, who is by far the worst offender in the chain of title disaster (since, according to sworn testimony of its own employee in Kemp v. Countrywide, Countrywide failed to comply with trust delivery requirements). This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. These cases also alleged HAMP violations as consumer fraud violations and could have gotten costly and emboldened other states to file similar suits not just against Countrywide but other servicers, so it was useful to the other banks as well.

8. If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating. It’s a bad idea to settle obvious, widespread wrongdoing on the cheap. You use the stuff that is easy to prove to gather information and secure cooperation on the stuff that is harder to prove. In Missouri and Nevada, the robosigning investigation led to criminal charges against agents of the servicers. But even though these companies were acting at the express direction and approval of the services, no individuals or entities higher up the food chain will face any sort of meaningful charges.

9. There is plenty of evidence of widespread abuses that appear not to be on the attorney generals’ or media’s radar, such as servicer driven foreclosures and looting of investors’ funds via impermissible and inflated charges. While no serious probe was undertaken, even the limited or peripheral investigations show massive failures (60% of documents had errors in AGs/Fed’s pathetically small sample). Similarly, the US Trustee’s office found widespread evidence of significant servicer errors in bankruptcy-related filings, such as inflated and bogus fees, and even substantial, completely made up charges. Yet the services and banks will suffer no real consequences for these abuses.

10. A deal on robosiginging serves to cover up the much deeper chain of title problem. And don’t get too excited about the New York, Massachusetts, and Delaware MERS suits. They put pressure on banks to clean up this monstrous mess only if the AGs go through to trial and get tough penalties. The banks will want to settle their way out of that too. And even if these cases do go to trial and produce significant victories for the AGs, they still do not address the problem of failures to transfer notes correctly.

11. Don’t bet on a deus ex machina in terms of the new Federal foreclosure task force to improve this picture much. If you think Schneiderman, as a co-chairman who already has a full time day job in New York, is going to outfox a bunch of DC insiders who are part of the problem, I have a bridge I’d like to sell to you.

12. We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. But the problems will fester and the housing market will continue to suffer. Investors in mortgage-backed securities, who know that services have been screwing them for years, will be hung out to dry and will likely never return to a private MBS market, since the problems won’t ever be fixed. This settlement has not only revealed the residential mortgage market to be too big to fail, but puts it on long term, perhaps permanent, government life support.

As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.

Related articles

• $26 Billion Settlement Meager Compared to Damages (loans.org)
• Less than meets the eye in mortgage settlement (seattletimes.nwsource.com)
• Mortgage Servicing Settlement Is Final – What Does it Mean To You? (mickdoesloans.wordpress.com)
• 49-State Foreclosure Fraud Settlement Will Be Finalized Today (news.firedoglake.com)
• If You Read One Paragraph In Attorney General Holder’s Mortgage Settlement Statement, Read This One (businessinsider.com)

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

 

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

If there’s no money to be made solving something… no profit incentive… then for the most part, we don’t quite have a handle on to solving it.  For example, we’re not very good at cleaning up our oceans in general, and if there weren’t money to be made cleaning up oceans after oil spills, my guess would be that we wouldn’t be very good at doing that either.

To-date, however, BP has reportedly spent $21 billion cleaning up the Gulf of Mexico since its last mega-disaster, and guess what?  The Gulf of Mexico is pretty clean again… just two years later!  I remember hearing environmentalists predict that it could take 100 years to clean up the Gulf after the Deepwater Horizon catastrophe.  I guess they were underestimating just how much solution $21 billion can often buy.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 A MESSAGE TO OUR NATION’S LAWYERS…

It’s the biggest financial opportunity for the legal profession

SINCE THE REAR END COLLISION. 

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

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

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

The California Example…

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

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

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

Now they face yet another obstacle: hiring a lawyer.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 Without the lawyer, Mr. Stone said, “I’d be living under a bridge.

”The legal bill, paid in advance, was $3,500. “Worth every penny,” said Mr. Stone, who is now back at work.

“This law,” Mr. Royston said, “took the wrong people out of the game.”

A Bleak Picture in California…

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

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

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

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

Mandelman out.

~~~

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

The Answer is Money…

What Was Your Question?

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Foreclosure Cases 2011 in review California

Image by dave.cournoyer via Flickr

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!

Don’t delay – Opt in to the follow Blog and gain access to over 680 ideas and posts to hold your Lender accountable new post every day!

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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Fighting Foreclosure in California

Using the Courts to Fight a California or Other Non-Judicial Foreclosure – 3-Stage Analysis – including a Homeowner Action to “Foreclose” on the Bank’s Mortgage Security Interest – rev.

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California real property foreclosures are totally different from foreclosures in New York and many other states. The reason is that more than 99% of the California foreclosures take place without a court action, in a proceeding called a “non-judicial foreclosure”. Twenty-one states do not have a non-judicial foreclosure. [These states are CT, DE, FL, IL, IN, KS, KY, LA, ME, MD, MA, NE, NJ, NM, NY, ND, OH, PA, SC, UT, VT. – Source: realtytrac.com] In California, the lending institution can go through a non-judicial foreclosure in about 4 months from the date of the filing and recording of a “Notice of Default”, ending in a sale of the property without any court getting involved. The California homeowner can stop the sale by making full payment of all alleged arrears no later than 5 days prior to the scheduled sale. Unlike a judicial foreclosure, the homeowner will have no right to redeem the property after the sale (“equity of redemption”, usually a one-year period after judicial foreclosure and sale). For a visual presentation of the timeline for California and other state non-judicial foreclosures, go to Visual Timeline for California Non-Judicial Foreclosures.

A 50-state analysis of judicial and non-judicial foreclosure procedures is available at 50-State Analysis of Judicial and Non-Judicial Foreclosure Procedures.]

The problem I am going to analyze and discuss is under what circumstances can a homeowner/mortgagor go into court to obtain some type of judicial relief for wrongful or illegal conduct by the lender or others relating to the property and mortgage. My discussion applies as to all states in which non-judicial foreclosures are permitted.

There are three distinct stages that need to be separately discussed. These stages are the borrower’s current situation. The three stages are:

 

• Homeowner is not in any mortgage arrears [declaratory judgment action]
• Homeowner is behind in mortgage payments – at least 5 days before auction [injunction action, which could even be called an action by a homeowner to “foreclose” upon or eliminate the lending institution’s mortgage security interest]
• Property was sold at auction [wrongful foreclosure action]

 

I. Homeowner Is Not in any Mortgage Arrears [Declaratory Judgment Action]

As long as a homeowner keeps making the mortgage payments, and cures any occasional short-term default, the homeowner is in a position to commence an action in federal or state court for various types of relief relating to the mortgage and the obligations thereunder. One typical claim is a declaratory judgment action to declare that the mortgage and note are invalid or that the terms are not properly set forth. There are various other types of claims, as well. The filing of such an action would not precipitate a non-judicial foreclosure. Compare this to a regular foreclosure, in which the homeowner stops paying on the mortgage, gets sued in a foreclosure action, and then is able in the lawsuit to raise the issues (as “defenses”) which the California homeowner would raise as “claims” or “causes of action” in the lawsuit being discussed for this first stage.

II. Homeowner Is Behind in Mortgage Payments – at Least 5 Days before Auction [Injunction Action seeking TRO and Preliminary Injunction, which you might say is a homeowner’s own “foreclosure proceeding against the bank and its mortgage interest”]

This is the most difficult of the three stages for making use of the courts to oppose foreclosure. The reasons are: foreclosure and sale is apt to take place too quickly; the cost of seeking extraordinary (injunctive) relief is higher because of the litigation papers and hearing that have to be done in a very short period of time to obtain fast TRO and preliminary injunctive relief to stop the threatened sale; the cost of this expensive type of injunctive litigation is probably much higher for many homeowners than just keeping up the mortgage payments; and, finally, you would have to show a greater probability of success on the merits of the action than you would need to file a lawsuit as in Stage 1, so that the homeowner’s chances of prevailing (and getting the requested injunction) are low and the costs and risks are high.

Nevertheless, when the facts are in the homeowner’s favor, the homeowner should consider bringing his plight to the attention of the court, to obtain relief from oppressive lending procedures. The problem with most borrower-homeowners is that they do not have any idea what valid bases they may have to seek this kind of relief. What anyone should do in this case is talk with a competent lawyer as soon as possible, to prevent any further delay from causing you to lose an opportunity to fight back. You need to weigh the cost of commencing a court proceeding (which could be $5,000 more or less to commence) against the loss of the home through non-judicial foreclosure.

 

III. Property Was Sold at Auction [Wrongful Foreclosure Action]

If the property has already been sold, you still have the right to pursue your claims, but in the context of a “wrongful foreclosure” lawsuit, which has various legal underpinnings including tort, breach of contract and statute. This type of suit could not precipitate any foreclosure and sale of the property because the foreclosure and sale have already taken place. Your remedy would probably be monetary damages, which you would have to prove. You should commence the action as soon as possible after the wrongful foreclosure and sale, and particularly within a period of less than one year from the sale. The reason is that some of your claims could be barred by a short, 1-year statute of limitations.

If you would like to talk about any possible claims relating to your mortgage transaction, please give me a call. There are various federal and state statutes and court decisions to consider, with some claims being substantially better than others. I am available to draft a complaint in any of the 3 stages for review by your local attorney, and to be counsel on a California or other-state action “pro hac vice” (i.e., for the one case) when associating with a local lawyer.

The Law of Capitalism THE MASS MISS JOINDER

I attended the Attorney General and state Bar hearing as to the intervention of the state bar into the law practice of Mitchell Stein and the K2 mass Joinder cases in Los Angeles in front of Judge Johnson. The tentative was a scathing implication of Mitchell Stein and his purported involvement with the “marketing companies” and the allegations of unfair business practices all needed for the AG and the State Bar to step in and confiscate 1.6 million in various accounts.

I was there to opine the status of the case itself and the merits of the cases and as to the victims rights as against the banks. If the Bar took over the practice would they defend the cases would they protect the victims right. No they are not; right now they the State Bar are telling the victims they are on there own.

Once again these suits I have been following and hoping could get past the Demur stage the Banks would be forced to answer. Then there would be motions for Summary Judgement and if the Victims could survive the Summary Judgement and thousands of requests for admissions and interrogatories propounded on the thousands of plaintiffs. It could be done I would have to associate about 10 other lawyers and 30 paralegals but it could be done for about $700,000.00. Then I believe the Banks would enter settlement negotiations with the victims witch I calculate to be about 6500 victims to date.

Mandelman characterized the case as follows:

The case at the core of the Kramer and Kaslow mass joinder lawsuit is: Ronald vs. Bank of America. Basically, the case accuses Countrywide (subsequent cases being filed include Citibank, One West, GMAC/Ally Bank, and perhaps others) of perpetrating a massive fraud upon homeowners by knowingly inflating appraisals, creating a bubble the bank knew would pop and leave homeowner equity devastated, violate privacy statutes, and then Civil Code sections when they refused to modify… you get the idea.

The case says that Countrywide execs knew and did it anyway in order to make zillions of dollars securitizing the loans and therefore only others would incur the future losses.

Here’s an overview of what the third amended complaint says in its Introduction section:

2. This action seeks remedies for the foregoing improper activities, including a massive fraud perpetrated upon Plaintiffs and other borrowers by the Countrywide Defendants that devastated the values of their residences, in most cases resulting in Plaintiffs’ loss of all or substantially all of their net worths.

6. Hand-in-hand with its fraudulently-obtained mortgages, Mozilo and others at Countrywide hatched a plan to “pool” the foregoing mortgages and sell the pools for inflated value. Rapidly, these two intertwined schemes grew into a brazen plan to disregard underwriting standards and fraudulently inflate property values – county-by- county, city-by-city, person-by-person – in order to take business from legitimate mortgage-providers, and moved on to massive securities fraud hand-in-hand with concealment from, and deception of, Plaintiffs and other mortgagees on an unprecedented scale.

7. From as early as 2004, Countrywide’s senior management led by Mozilo knew the scheme would cause a liquidity crisis that would devastate Plaintiffs’ home values and net worths. But, they didn’t care, because their plan was based on insider trading – pumping for as long as they could and then dumping before the truth came out and Plaintiffs’ losses were locked in.

9. It is now all too clear that this was the ultimate high-stakes fraudulent investment scheme of the last decade. Couched in banking and securities jargon, the deceptive gamble with consumers’ primary assets – their homes – was nothing more than a financial fraud perpetrated by Defendants and others on a scale never before seen. This scheme led directly to a mortgage meltdown in California that was substantially worse than any economic problems facing the rest of the United States. From 2008 to the present, Californians’ home values decreased by considerably more than most other areas in the United States as a direct and proximate result of the Defendants’ scheme set forth herein.

This massive fraudulent scheme was a disaster both foreseen by Countrywide and waiting to happen. Defendants knew it, and yet Defendants still induced the Plaintiffs into their scheme without telling them.

10. As a result, Plaintiffs lost their equity in their homes, their credit ratings and histories were damaged or destroyed, and Plaintiffs incurred material other costs and expenses, described herein. At the same time, Defendants took from Plaintiffs and other borrowers billions of dollars in interest payments and fees and generated billions of dollars in profits by selling their loans at inflated values.

14. Since the time Plaintiffs filed the initial Complaint herein, Defendants’ improper acts have continued, including, inter alia: (i) issuing Notices of Default in violation of Cal. Civil Code §2923.5; (ii) misrepresenting their intention to arrange loan modifications for Plaintiffs, while in fact creating abusive roadblocks to deprive Plaintiffs of their legal rights; and (iii) engaging in intrinsic fraud in this Court and in Kentucky by stalling in addressing Plaintiffs’ legitimate requests to cancel notices of default and for loan modifications, and by refusing to respond, in any way, to Plaintiffs’ privacy causes of action.

Now, there’s no question… this is a real lawsuit. Some attorneys believe it will be a very difficult case to win, while others think it’s quite viable and likely to settle. I can see both sides of that argument.

On one hand, it would seem difficult to prove that Countrywide caused the housing bubble; there were certainly many parties involved and numerous other contributing factors as well. On the other hand, the case has numerous aspects that are unquestionably true and certainly wrong.

Then there’s what’s known as “the banker factor.” Actually, I’m making that up, but you know what I mean. The banks aren’t going to lay down for this as it would open an enormous can of litigating worms… so they have to fight… or is there no percentage in that either? Well, now you’ve seen first hand why I chose not to go to law school.

I really haven’t the foggiest idea what’s going to happen… and neither does anyone else.

But then, Columbus couldn’t exactly stop and ask for directions either, which, it’s worth noting is why, when sailing for The New World, he landed in the Bahamas and named them San Salvador, but assumed he had found the Indies so he named the native people Indians (leading me to always wonder what he would have named them had he not gotten so hopelessly lost.)

(What if his favorite word was “Jujubees,” and he had named the natives “Jujubees?” Then I would have grown up playing Cowboys & Jujubees?)

So, since no one can know what’s going to happen in the future of this case, I thought I’d take a look at where it is today. From a review of the Los Angeles Superior Court’s online records database we find these events have transpired to-date or are set for the near future…
1. Original complaint was filed in March 2009.
2. First amended complaint was in June of 2009.
3. Second amended complaint March 2010.
4. August 2010: the banks try to remove the case to federal court, but fail.
5. Third amended complaint was filed July 7, 2010.
6. The defendant banksters have demurred again, but it doesn’t appear that the demurs filed in December have been heard.
7. Status conference set for Thursday, February 3rd, 2011.
8. There is a hearing date scheduled for March 29, 2011, but it’s not clear to me what will be happening at that hearing.

So, this is their third “amended complaint.” That means the defendants… the banks… have demurred twice. That means that the banks have come to court claiming that the mass joinder plaintiffs don’t state a cause of action… or in other words saying the plaintiffs have no case… and the court has allowed the plaintiffs to amend the complaint three times so far.

Like almost everything in the law, I guess you could read that a couple of different ways. On one hand it seems positive… the case brought by the mass joinder plaintiffs has not been tossed out by the judge yet. That’s good, right?
On the other hand… the court could “sustain the demur without leave to amend,” in which case the mass joinder suit would be over and done.

And that’s why litigating is always a gamble, and by no means a sure thing.
Here’s an oversimplified look at the mass joinder’s causes of action.

First Cause of Action… Fraudulent Concealment – This is saying that the bank was hiding things from the borrowers.

Second Cause of Action… Intentional Misrepresentation – This is lying when you knew you were lying. In other words, you knew an appraisal was wrong… it came in at $500,000, but you knew it was worth $400,000 and you passed it off anyway.

Third Cause of Action… Negligent Misrepresentation – This is like saying that you’re lying but it wasn’t intentional. Let’s say that you ordered an appraisal but never really looked at the appraisal to make sure it was done correctly. You include this cause of action in case the conduct doesn’t rise to the level of intentional misrepresentation, and perhaps because some insurance policies don’t cover intentional acts.

Fourth Cause if Action… Invasion of Constitutional Right to Privacy – This is saying that the banks disclosed personal information… perhaps when selling the loans to another investor.

Fifth Cause of Action… Violation of California Financial Information Privacy Act – See above or read the actual complaint.

Sixth Cause of Action… Civil Code 2923.5 – Defendants are prohibited by statute from recording a Notice of Default against the primary residential property of any Californian without first making contact with that person as required under § 2923.5 and then interacting with that person in the manner set forth in detail under § 2923.5. Nothing special here, but its been upheld by other courts in California.

Seventh Cause of Action… Civil Code 1798 – When they gave away your private information, they didn’t tell you they did it? Defendants failed to timely disclose to Plaintiffs the disclosure of their personal information as required under California Civil Code § 1798.82

Eighth Cause of Action… Unfair Competition Against All Defendants – Defendants’ actions in implementing and perpetrating their fraudulent scheme of inducing Plaintiffs to accept mortgages for which they were not qualified based on inflated property valuations and undisclosed disregard of their own underwriting standards and the sale of overpriced collateralized mortgage pools, all the while knowing that the plan would crash and burn, taking the Plaintiffs down and costing them the equity in their homes and other damages, violates numerous federal and state statutes and common law protections enacted for consumer protection, privacy, trade disclosure, and fair trade and commerce.

In Conclusion…

Attorney Phillip Kramer, in his own words, made it quite clear that his firm was not responsible for the mailer I received or the telemarketing about which I’ve been notified. Once again, he says…

“I know of no outbound calling. If asked, I would not approve of that. I knew that some law firms wanted to send out mailers. I have insisted that everyone comply with State Bar rules and that anything with my name must be pre-approved. As of this date, no one has submitted any proposed marketing for my review. That piece was done without my knowledge.

I am happy to pay a referral fee to other law firms. I do not split fees, pay commissions, nor do I pay referral fees to non-lawyers. I do not use cappers, and have never authorized anyone to robocall, telemarket, spam email, or undertake any mass marketing on my behalf.”

With that said I was going to apply to the Bar to take over the cases if they would relinquish the 1.6 to pay for the work to be done for the victims. Before making such a wild leap into this caos I called my State bar lawyer. He informed me that I should not even go close to these cases that all lawyers involved will be DISBARRED. I said wow but what about the merits of the cases the judge in the case had already overruled the demur as to some of the causes of action. The State Bar (by their actions in not finding a lawyer to protect the victims) is recommending that case be dismissed the Attorney General IS NOT PURSUING THE RIGHTS OF THE VICTIMS . I persisted with my lawyer. To which he exclaimed ” DON’T YOU GET IT MCCANDLESS THE AG AND THE BAR ARE WORKING FOR THE BANKS”.

Fannie Mae Foreclosure Lawyers Acted Improperly

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

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

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

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

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

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

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

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

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

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

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

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

Three Hundred Billion to compensate homeownners “really?” no probably 50 bucks a case!!!

Millions of current and former homeowners will have a chance to get their foreclosure cases examined to determine whether they should be compensated for banks’ mistakes, under a wide-ranging review being planned by federal regulators. Ssoo let’s see 6 Million foreclosures 50,000.00 each that’s 300 BILLION I think they are going to sweep this under the carpet just like the Countrywide deal and say they fixed it. I believe that the only way to get compensated is through litigation although this is a great admission and could be used in future litigation.

The review process, which could be unveiled in the next few weeks, will be open to borrowers who were in some stage of foreclosure in 2009 or 2010. Estimates prepared by the Office of the Comptroller of the Currency, which will oversee the review, indicate that 4.5 million borrowers could be eligible for review.

John Walsh, acting head of the OCC, unveiled some aspects of the plan in a speech last month to banking executives, when he said the agency was exploring “the best means of ensuring that injured homeowners had the opportunity to seek relief,” when they were harmed by lender improprieties.

WSJ’s Nick Timiraos has details of a plan by which 4.5 million homeowners who faced foreclosure in 2009 and 2010 could face a review of their foreclosure procedures due to errors by banks. Photo by John Moore/Getty Images

The process will include a broad public-outreach campaign, including direct mail to eligible borrowers and a single website and toll-free number. The reviews will be conducted by independent third-party companies that were hired earlier this year by 14 banks that signed consent orders in April with the OCC and the Federal Reserve. The regulators had to sign off on the selection of these companies.

“It’s a substantial undertaking at great expense to the banks,” said Tim Rood, a partner at Collingwood Group, a housing-finance consulting firm.

Borrowers who are determined to have suffered “financial injury” could be eligible for compensation that would be determined on a case-by-case basis by the third-party firms. Borrowers will have to request reviews before a cutoff date, likely to fall near the end of the first quarter of 2012. It hasn’t been determined whether borrowers that accept restitution would have to agree to surrender related legal claims.

Regulators declined to provide estimates of the amount of money that injured borrowers might receive or how much the program might cost lenders.

However, few if any borrowers are expected to have foreclosures overturned.

More

• Developments: Report: Fannie Mae, Regulator Missed Abuses
• Real Time Economics: Fed’s Raskin Calls for Mortgage-Servicing Changes

The review process is one of several continuing efforts to address disclosures that surfaced a year ago over banks’ use of “robo-signers,” bank employees who signed off on huge numbers of legal foreclosure filings daily and falsely claimed in the documents to have personally reviewed each case. The disclosures prompted some judges to question the veracity of other bank foreclosure practices.

The process is separate from the months-long talks between federal agencies, state attorneys general and banks to reach a multibillion-dollar settlement over foreclosure abuses. That effort took a big step backwards Friday, when California Attorney General Kamala D. Harris called the deal “inadequate” and pulled out of the settlement talks.

The loss of California could cripple any settlement because the state has among the nation’s highest volumes of foreclosures. Banks are less likely to agree to the $25 billion price tag pushed by federal and state officials without the participation of California. Banks, federal officials and state attorneys general are set to resume meetings in Washington on Tuesday.

Representatives for both sides said they still hope to reach an agreement despite Friday’s setback. The banks “remain committed to the dialogue and continue to believe that a global settlement would be an effective means of supporting the recovery of the housing market and helping to strengthen the economy,” said one person familiar with the banks’ thinking.

“We are still full-steam ahead,” said a spokesman for Iowa Attorney General Tom Miller, who is spearheading the 50-state negotiations. “With or without some states, we are still moving forward.”

Enlarge Image

Bloomberg NewsBorrowers who suffered ‘financial injury’ could be eligible for compensation. Here, a foreclosure sign hangs in front of a house in Canton, Mich., in March.

In the OCC review process, financial injury could cover a wide range of misrepresentations or errors committed by mortgage companies, according to people familiar with the process.

Banks could be liable if they miscalculated mortgage payments or applied impermissible fees or penalties. A handful of borrowers have alleged that mortgage-servicing companies, for example, improperly placed expensive insurance coverage onto their mortgage, pushing them into default and preventing them from becoming current with their payments.

Borrowers may be able to receive compensation if the review finds that the bank moved a borrower to foreclosure while the bank was receiving partial payments as part of a trial or permanent loan modification. Compensation might also be due if borrowers provide evidence that they provided the necessary documentation required to qualify for a modification but were denied the modification.

A separate report to be released on Tuesday raises new questions over Fannie Mae‘s oversight of the attorneys that conduct foreclosures on its behalf. The report, from the inspector general for the Federal Housing Finance Agency, faulted Fannie for inadequate oversight of those firms

Since 2008, Fannie has required its mortgage servicers to use designated law firms that are part of its “retained attorney network.” The network arrangement allows Fannie to negotiate discounted rates with approved firms, which in turn can lock in business from the nation’s largest mortgage investor.

The report said that in June 2010, the FHFA conducted a two-day field visit to Florida, where it found that “documentation problems were evident and law firms…were not devoting the time necessary to their cases due to Fannie Mae’s flat fee structure and volume-based processing model.”

FHFA staff subsequently informed senior Fannie officials that its attorneys were “increasingly unprepared when they enter the courtroom,” leading to a larger backlog of foreclosures.

Fannie Mae declined to comment on the report.

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  Attorney General Kamala D. Harris Sues Law Firms Engaged in National “Mass Joinder” Mortgage Fraud

  SAN FRANCISCO — Attorney General Kamala D. Harris today announced that the California Department of Justice, in conjunction with the State Bar of California, has sued multiple entities accused of fraudulently taking millions of dollars from thousands of homeowners who were led to believe they would receive relief on their mortgages. Attorney General Harris sued […]
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  NY POST: 92% —BANKS STILL FORECLOSING WITHOUT ANY RIGHT (via Livinglies’s Weblog)

  MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE IF THE BANKS DON’T OWN THE PROPERTY OR THE MORTGAGE, WHO DOES? EDITOR’S NOTE: My figures tracking thousands of foreclosures indicate the same thing that the New York Post found. There are a scattered few foreclosures that are good old-fashioned foreclosures of valid […]

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  Should Borrower File Eviction Against Bank? (via Livinglies’s Weblog)

  MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S COMMENT: I was talking with an expert in landlord tenant law and I received an interesting suggestion. The case involved someone who has just been served with a writ of restitution where the owner had to peaceably leave her home — or […]

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  Gomes and the U.S. Supreme court some body had better help these attorneys argue and brief the case

  Wednesday, August 17th, 2011, 2:49 pm A controversial case challenging the ability of Mortgage Electronic Registration Systems to foreclose on a California man was filed with the Supreme Court Monday, making it the first major MERS case to reach the nation’s highest court. If the Supreme Court agrees to hear Gomes v. Countrywide, Gomes’ attorney, […]
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  California man wants foreclosures deemed unconstitutional in the state

  by KERRI PANCHUK Proposed Illinois Legislation Would Freeze Evictions for Four Months California AG Wants Pay Option ARM Answers Does the Senate’s housing bill encourage foreclosures? California Law Freezes Foreclosures, Burns Servicers Short Sales Cost Lenders $310m More Than Necessary, CoreLogic Study Finds Thursday, August 4th, 2011, 7:31 am A California man is on a […]
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  JUDGES: ASSUME THE BORROWER IS WRONG

  So you have denied the claims of the pretenders and put that in issue. You have even alleged fraud, forgery and fabrication and the catch-word “robosigning”. But the Judge, alleging that he did not want to “make new law” (which wasn’t true) or allegedly because he didn’t want to start an avalanche of litigation interfering […]

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  SAY NO TO LENDERS FRAUD!

  Contact Us: MortgageReductionLaw.com Dear Homeowner, It’s been widely reported around the country, via internet, blogs and newspapers, how the lenders used the foreclosure mills and other legal ways, to fabricate fraudulent documents to record in the county recorder offices and pretend they have legal standing to initiate the foreclosure procedure. Neil Garfield in his blog […]
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  Keep the trustees deed out of evidence in the unlawful detainer

  TIMOTHY L. MCCANDLESS, ESQ. SBN 147715 LAW OFFICES OF TIMOTHY L. MCCANDLESS 820 Main Street, Ste. 1 Martinez, CA             (925) 957-9797       Telephone             (909) 382-9956       Facsimile Attorney for Defendant Zenkarla S. Salazar SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SANTA CLARA GMAC MORTGAGE, LLC FKA GMAC MORTGAGE CORPORATION, Plaintiff, vs. […]
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  STUDY: Mortgage Assignments to Washington Mutual Trusts Are Fraudulent (via Livinglies’s Weblog)

  MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE EDITOR’S NOTE: We know the foreclosures were gross misrepresentations of fact to the Courts, to the Borrowers and to the Investors. This article shows the crossover between the MegaBanks — sharing and diluting the responsibility for these fabrications as they went along. If […]

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  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 to get a “free house.” There are a few instances of consumer getting a free house, […]
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  MERS in California

  From LivingLies: I think that everyone is missing the #1 problem MERS has in CA. MERS is a Non-Authorized Agent and cannot legally assign the Promissory Note, making any foreclosure by other than the original lender wrongful, for the following reasons. 1) Under established and binding Ca law, a Nominee can’t assign the Note. Born […]
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  QUIET TITLE IS NOT A DEFENSE — IT IS OFFENSE AND IT IS A HIGHLY EFFECTIVE LAWSUIT

  Posted on August 1, 2011 by Neil Garfield I WRITE THIS BECAUSE WITH SO MANY PRO SE LITIGANTS AND UNINFORMED LAWYERS WEIGHING IN IT IS SOMETIMES NECESSARY TO CLARIFY THE ISSUES. Quiet Title is not a defense. If used defensively you will most likely lose your case and also unintentionally waive rights that you might […]
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  Its about standing

  Pro Per Debtor Stops Attorneys for US Bank – in RE Deamicis Posted: 31 Jul 2011 10:21 PM PDT Pro Per Debtor Stops Attorneys for US Bank – in RE Deamicis By Daniel Edstrom DTC Systems, Inc. She has been fighting tooth and nail. Nobody was listening. The current bankruptcy judge was skeptical when she […]
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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 […]
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  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 […]
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  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 […]

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  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 […]

KISS: KEEP IT SIMPLE STUPID from Garfield

Finality versus good and evil. In the battlefield it isn’t about good and evil. It is about winner and losers. In military battles around the world many battles have been one by the worst tyrants imaginable.

Just because you are right, just because the banks did bad things, just because they have no right to do what they are doing, doesn’t mean you will win. You might if you do it right, but you are up against a superior army with a dubious judge looking on thinking that this deadbeat borrower wants to get out of paying.

The court system is there to mediate disputes and bring them to a conclusion. Once a matter is decided they don’t want it to be easy to reopen a bankruptcy or issues that have already been litigated. The court presumably wants justice to prevail, but it also wants to end the dispute for better or for worse.

Otherwise NOTHING would end. Everyone who lost would come in with some excuse to have another trial. So you need to show fundamental error, gross injustice or an error that causes more problems that it solves.

These are the same issues BEFORE the matter is decided in court. Foreclosures are viewed as a clerical act or ministerial act. The outcome is generally viewed as inevitable.

And where the homeowner already admits the loan exists (a mistake), that the lien is exists and was properly filed and executed (a mistake) and admits that he didn’t make payments — he is admitting something he doesn’t even know is true — that there were payments due and he didn’t make them, which by definition puts him in default.

It’s not true that the homeowner would even know if the payment is due because the banks refuse to provide any accounting on the third party payments from bailout, insurance CDS, and credit enhancement.

That’s why you need reports on title, securitization, forensic reviews for TILA compliance and loan level accounting. If the Judges stuck to the law, they would require the proof first from the banks, but they don’t. They put the burden on the borrowers —who are the only ones who have the least information and the least access to information — to essentially make the case for the banks and then disprove it. The borrowers are litigating against themselves.

In the battlefield it isn’t about good and evil, it is about winners and losers. Name calling and vague accusations won’t cut it.

Sure you want to use the words surrogate signing, robo-signing, forgery, fabrication and misrepresentation. You also want to show that the court’s action would or did cloud title in a way that cannot be repaired without a decision on the question of whether the lien was perfected and whether the banks should be able to say they transferred bad loans to investors who don’t want them — just so they can foreclose.

But you need some proffers of real evidence — reports, exhibits and opinions from experts that will show that there is a real problem here and that this case has not been heard on the merits because of an unfair presumption: the presumption is that just because a bank’s lawyer says it in court, it must be true.

Check with the notary licensing boards, and see if the notaries on their documents have been disciplined and if not, file a grievance if you have grounds. Once you have that, maybe you have a grievance against the lawyers. After that maybe you have a lawsuit against the banks and their lawyers.

But the primary way to control the narrative or at least trip up the narrative of the banks is to object on the basis that counsel for the bank is referring to things not in the record. That is simple and the judge can understand that.

Don’t rely on name-calling, rely on the simplest legal requirements that you can find that have been violated. Was the lien perfected?

If the record shows that others were involved in the original transaction with the borrowers at the inception of the deal, then you might be able to show that there were only nominees instead of real parties in interest named on the note and mortgage.

Without disclosure of the principal, the lien is not perfected because the world doesn’t know who to go to for a satisfaction of that lien. If you know the other parties involved were part of a securitization scheme, you should say that — these parties can only be claiming an interest by virtue of a pooling and servicing agreement. And then make the point that they are only now trying to transfer what they are calling a bad loan into the pool that the investors bought — which is expressly prohibited for multiple reasons in the PSA.

This is impersonation of the investor because the investors don’t want to come forward and get countersued for the bad and illegal lending practices that were used in getting the borrower’s signature.

Point out that the auction of the property was improperly conducted where you can show that to be the case. Nearly all of the 5 million foreclosures were allowed to be conducted with a single bid from a non-creditor.

If you are not a creditor you must bid cash, put up a portion before you bid, and then pay the balance usually within 24-72 hours.

But instead they pretended to be the creditor when their own documents show they were supposed to be representing the investors who were not part of the lawsuit nor the judgment.

SO they didn’t pay cash and they didn’t tender the note. THEY PAID NOTHING. In Florida the original note must actually be filed with the court to make sure that the matter is actually concluded.

There is a whole ripe area of inquiry of inspecting the so-called original notes and bringing to the attention the fraud upon the court in submitting a false original. It invalidates the sale, by operation of law.

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 to get a “free house.” There are a few instances of consumer getting a free house, see here and here, for examples, but these are extreme situations not premised on ownership, but on a more fundamental flaw with the mortgage. In general, the idea that even a successful ownership challenge will create a free house to the borrower is an urban myth. I’ll explain why below, but there is a policy point here. The myth of the free house drives policymakers to complain about the moral hazard risks of holding mortgage companies to the law and tries to set up homeowners who are paying their mortgages against those who are not. It serves the banks’ political agenda to be able to point to the “free house” as an obviously unacceptable alternative of consumers winning legal challenges. It’s key then to understand that the “free house” is largely a creature of consumers’
and banks’ over-active imaginations.

In sorting out why even a successful ownership challenge does not give homeowners a free house, it is helpful to parse some key concepts. The first one is standing, which is the right of a party to ask a court for the relief it seeks. This comes in different flavors, including constitutional standing, but in the foreclosure context, usually boils down to whether the moving party is the “real party in interest.” In re Veal, the recent decision from the 9th Circuit BAP authored by Judge Bruce Markell, mentioned previously on Credit Slips , contains a discussion of standing in the foreclosure context. At least in part, the concern of the real party in interest doctrine is to make sure that the plaintiff is the right person to get legal relief in order to protect the defendant from a later action by the person truly entitled to relief. Note that standing is a concept that only applies in court; here that means in judicial foreclosures. In states that allow non-judicial foreclosure, the issue is slightly different. Does the party initiating the non-judicial foreclosure have the authority to do so under the state statute authorizing the sale? For example, cases such as In re Salazar discuss whether a recorded assignment of the mortgage is needed, as opposed to an unrecorded assignment, to initiate a foreclosure. Under either standing or statutory authority, a “win” by the homeowner leads to the same result. The foreclosure cannot proceed.

But this win is not the same as a free house. Just because a party lacked standing or statutory authority does not mean that there is not some party out there that does have the authority to foreclosure. Nor does a win on standing mean that there cannot be action taken to give the initial foreclosing party the authority that they need, which might occur by transferring possession of the note or by executing a series of assignments, to foreclose at a later date. Unless other problems exist, there is still a valid note that obligates the homeowner to pay money due and there is still a mortgage encumbering the house. The homeowner does not get a free house. Rather, the homeowner just doesn’t lose her house today to foreclosure. These are pretty different outcomes!

This doesn’t mean that I think the standing/ownership issue is inconsequential. For homeowners, a successful challenge that results in the dismissal of a foreclosure can lead to a loan modification or the delay itself can give the homeowner the time to find another solution. For investors in mortgage-backed securities, the problems with paperwork likely increase their loss severities in foreclosure, both because of increased litigation costs and because of delay in correcting problems. (And there may be even more serious problems for investors relating to whether the transfers even succeeded in putting the homes in the trust.) But we shouldn’t confuse these issues with the idea that what is at stake in sorting out this mess is giving a “free house” to some Americans, despite the lamentations of this LaSalle Bank lawyer after a judge ruled that LaSalle as trustee lacked standing to foreclose. A fruitful discussion of these issues needs to begin with a clear understanding of the consequences of the problem, as well as empirical evidence on how widespread these problems are.
The free house is political handwringing, not legal reality.

July 18, 2011 at 4:22 AM in Mortgage Debt & Home Equity Comments It’s certainly not a “free” house. I think it’ll be a nightmare for homeowners who prevail in one of these actions to try and sell their homes. Just because party X can’t foreclose doesn’t mean that there isn’t a valid mortgage still on the property. No buyer is going to want to buy (and no title insurer will want to insure) unless that mortgage is paid off. And that means determining who is the mortgagee.
Adverse possession and/or quiet title actions might help solve some of this, but they are not self-executing solutions. Homeowners will have to go to court and litigate. That’s expensive and it takes time. So, at best, these homeowners are getting not “free” houses but houses with a severely depressed value.

Posted by: Adam Levitin | July 18, 2011 at 06:46 AM

The author skims the surface of the latte and finds after skimming the surface there is no more cream. Duh.
The Banks are often appearing as trustees on behalf of NY Trusts most of which died on or about 2008. If the trusts are dead than who has the right to appear in court? Nemo est hires viventis. No one is the heir of a living person and I would suggest, no one is the a trustee able to act on behalf of a dead trust. If the paper was successfully transferred to the trust, then perhaps the thousands of suckers who bought a RMBS are the owners. But if the paper was never successfully transferred, then the trusts and the trustees are certainly not the owners with standing. The original lenders might be but after phony documents have been created assigning the note and the mortgage to dead trusts, how could they possibly have the right of ownership?
The “myth” of the free houses was created not by consumers “oy!!” but by the very Banks who are picking up “free” houses every day by pretending to be trustees acting on behalf of dead trusts or trusts that never properly held the mortgages and notes. It is very much like Ronald Reagan calling a nuclear submarine the Corpus Christie or calling armed combatants “peacekeepers.” The “free house” was the Orwellian double speak created by Bankers for Bankers and their judicial minions and hand maidens have adopted their language very well.

—
Jake Naumer
Resolution Advisors
3187 Morgan Ford
St Louis Missouri 63116
314 961 7600
Fax Voice Mail 314 754 9086

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 Security Instrument from MERS before initiating foreclosure proceedings or filing Legal Proceedings and promptly send the assignment of the Security Instrument for recording in the applicable public land records

Well, harumph says I…what of all those damn post filing assignments?  What about all them specious arguments made in courtrooms all across this country that said the date of assignment didn’t matter?  What about the absurd argument that an “equitable assignment” had already occurred? (despite the fact that neither the pooling and servicing a agreement nor law permit such assignments)  For foreclosure cases already adjudged this is problematic and for all those hundreds of thousands still pending, this change in policy is exhibit #1 in the argument that a post filing assignment cannot confer standing.

This certainly ain’t “Ding Dong The Witch Is Dead”, it’s just another stanza in “Humpty Dumpty Sat on A Wall”

And all the kings horses and all the kings men couldn’t put Humpty Dumpty back together again.

Humpty Dumpty is our real property recording system that was developed over hundreds of years in this country.  A key read is Hernando Desoto’s “The Mystery of Capital” for a long explanation that our country’s success is tied largely to our real property record system that has been completely obliterated in just a few short years by all this mortgage madness.  What is most astonishing (and the biggest indictment of the whole MERS madness) is the fact that no law, legislation or court decision was ever rendered to justify the MERS system prior to its widespread implementation.  It was merely spread all across this country like a virulent virus that was transmitted and lay dormant in the property records impacting millions of homes all across America.

MERS Policy Bulletin

current rulings on wrongful foreclosure

20.  TIME:  9:00   CASE#: MSC11-00162  CASE NAME: CHRISTINA PENNES  vs.  PNC MORTGAGE  HEARING ON DEMURRER TO COMPLAINT of PENNES  FILED BY PNC BANK, NATIONAL ASSOCIATION * TENTATIVE RULING: *     Defendant PNC Bank, N.A.’s Demurrer to each cause of action within the Complaint is sustained with leave to amend in part and without leave to amend in part. (Cal. Code Civ. Proc., section 430.10, subd. (e).)   1st cause of action for Cancellation of Instruments (Assignment of Deed of Trust), 2nd cause of action for Cancellation of Instruments (Notice of Default), and  3rd cause of action for Cancellation of Instruments (Notice of Default), sustained with leave to amend. Actions to remove a cloud on title, under Civil Code section 3412, are equitable in nature, and differ from actions to quiet title in that they are aimed at a particular instrument or piece of evidence. Reiner v. Danial (1989) 211 Cal. App. 3d 682, 689.  To state a cause of action to remove a cloud, instead of pleading in general terms that the defendant claims an adverse interest, the plaintiff must allege, inter alia, facts showing actual invalidity of the apparently valid instrument or piece of evidence. (5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, sections 671-674, pp. 97-99.) Plaintiffs have not met this burden. See Complaint par 20, Ex D. See also, Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal. App. 4th 1149 1154-55 [under Civ C  section 2924(a)(1), a trustee, mortgagee, or beneficiary, or any of their authorized agents, may initiate the foreclosure process. Nowhere, however, does the statute provide for a judicial action to determine whether the person initiating the foreclosure process is indeed authorized, and the court saw no ground for implying such an action, which would have been inconsistent with the policy behind nonjudicial foreclosure of providing a quick, inexpensive and efficient remedy.]   4th cause of action for wrongful foreclosure, sustained with leave to amend. The elements of a common-law cause of action for damages for wrongful foreclosure are:  (1) Trustee or mortgagee caused an illegal, fraudulent or willfully oppressive sale of real property; (2) pursuant to a power of sale contained in a mortgage or deed of trust; and (3) the Trustor or mortgagor sustained damages. (Munger v. Moore (1970) 11 Cal. App. 3d 1, 7; see 4 Witkin, Sum. Of Cal. Law (10th ed. 2005) Secured Transactions in Real Property, §168.) The Plaintiffs  do not allege that the foreclosure sale has taken place. Thus, Plaintiffs fail to plead a necessary element of this cause of action.   5th cause of action for violation of UCL,  and 8th caused of action for violation of Rosenthal Debt Collection Practices Act [Civ C section 1788], sustained without leave to amend. California’s Unfair Competition Law (UCL) prohibits any unlawful, unfair or fraudulent business practice. (B&P Code section 17200.)  The broad scope of the statute encompasses both anti-competitive business practices and practices injurious to consumers. (Cel‑Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) This cause of action is based in part upon the 8th cause of action for violation of the Rosenthal Debt Collection Practices Act [Civ C § 1788.] The Rosenthal Debt Collection Practices Act [RDCPA] prohibits debt collectors from engaging in abusive, deceptive and unfair practices in the collection of consumer debts.  (Civ. Code  section 1788, et. Seq.)  Consumer debt is statutorily defined as money, property or the equivalent owed by reason of a consumer credit transaction, which in turn is defined as a transaction in which property, etc. is acquired on credit for personal, family or household purposes. Cal. Civ. Code  section 1788.2(b), (e)-(f), (h).  There are no California State Court opinions to date applying this statute to the enforcement of deeds of trust or to foreclosure proceedings.   6th cause of action for quiet title, sustained with leave to amend: To state a claim for quiet title,  the complaint shall be verified. CCP section 761.020.  The Complaint is not verified.  Additionally, in order to quiet title, plaintiff  must tender the entire outstanding principal.  See, e.g., Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477 [Plaintiff cannot quiet title without discharging his debt; the cloud upon his title persists until the debt is paid.]   7th cause of action for rescission, sustained without leave to amend. To state a claim for contract rescission, plaintiff must allege some grounds for rescission-fraud, mistake, coercion, etc. (Civ. Code, § 1689, subd. (b).) plaintiffs do not meet hits pleading burden. Plaintiffs Opposition does not address this cause of action, therefore, they concede that it has no merit.   9th cause of action for  violation of Civ C § 2923.5, sustained with leave to amend: Actual contact is not required. See, Civil Code section 2923.59(g). Additionally, the only remedy for a Section 2923.5 violation is a postponement of the foreclosure sale to enable the defendants to comply with the requirements of the statute — not a claim for damages. (Mabry v. Superior Court (2010) 185 Cal. App. 4th 208, 235.) The Plaintiffs do not allege that a foreclosure sale date has been noticed. Defendant’s Request for Judicial Notice is granted. (Evid. Code, section 452(c)[public records].   In light of the ruling on the general demurrer, the special demurrer is moot. (Cal. Code Civ. Proc., section 430.10, subd. (f).)

21.  TIME:  9:00   CASE#: MSC11-00162  CASE NAME: CHRISTINA PENNES  vs.  PNC MORTGAGE  HEARING ON MOTION TO STRIKE PORTIONS OF PLAINTIFFS’ COMPLAINT  FILED BY PNC BANK, NATIONAL ASSOCIATION * TENTATIVE RULING: *   In llight of the ruling on the general demurrer, the Motion to Strike is moot.

THE GREAT SECURITIZATION SCAM AND THE GREAT RECESSION

By Neil Garfield

 

            Both the class action lawyers and the AG offices are looking for settlements that will cure the “foreclosure” problem. This is based upon the perceived benefit of getting the foreclosures either litigated or settled, SO THE “MARKET” CAN RESUME “FORWARD” MOTION. But what if the basic transaction was so defective as to be incapable of understanding, much less enforcement?  We ignore the fact that the basic transaction was a lie, that lies are not enforceable and while they could be modified by agreement into enforceable written instruments (completely absent from the current landscape) the inescapable fact is that in order to do so, you will need the signature of borrowers on loans that are based upon fair market values, reality and set-off for the damages inflicted on the homeowners by the Great Securitization Scam.

 

            So we start with the myth that there was a valid legal contract at origination, an assumption that upon examination by a paralegal, much less a first-year law student, is patently untrue.  Thus we proceed with the following ten (10) lies that form the foundation of our impotent financial and economic policies in the Great Recession triggered by the housing crisis:

1. 1.       VALID MORTGAGE TRANSACTION: There was a loan of money, but not by either the payee, the mortgagee, the trustee or anyone else that is mentioned in the closing papers or the foreclosure papers filed anywhere. That is why the pretenders would rather play with the word “holder” than “creditor.”

1. 2.       LEGAL MORTGAGE TRANSACTION: Even if the right parties were at the table, the transaction was illegal because of appraisal fraud, underwriting fraud, Securities Fraud and Servicing Fraud.

1. 3.       LEGAL LOAN: Even if the right parties were at two different tables, the transaction was illegal because of ratings fraud, securities fraud, common law fraud, predatory loan practices and servicing fraud.

1. 4.       KNOWN CREDITOR: Neither the investor who was the source of funds, nor the investment banker who only committed SOME of those funds to loan transactions, nor the borrower (homeowner) even knew of the existence of each other. After the “reconstituted” bogus mortgage pools that never existed in the first place, payments by insurance, credit de fault swaps, and federal  bailouts, it is at the very least a question of fact to determine the identity of the creditor at any given point in time — i.e., to whom is an obligation owed and how many parties have liability to pay on that transaction either as borrower, guarantors, insurers, or anything else? The dart board approach currently used in foreclosures and mortgage modifications, prepayments and refinancing has generally been frowned upon by the Courts.

1. 5.       KNOWN OBLIGATION AMOUNT: The amount advanced by the Lender (investor in bogus mortgage bonds) was far in excess of that amount used by intermediaries to fund mortgages — the rest was used to create synthetic derivative trading devices and charge fees every step of the way. Part of the difference between the funding of the residential loans and the amount advanced by the lender (investor) is easily computed by applying the same formula used to compute a yield spread premium that was paid to mortgage brokers under the table. By obscuring the real nature of the loans in the mix that offered (sold forward without ownership by the investment bank with the intent of acquiring he mortgages later) a 6% return promised to an investor could result in a yield spread premium of perhaps 12% if the loan was toxic waste and the nominal rate was 18%. Thus a $900,000 investment was converted into a $300,000 loan with no hope of repayment based upon a wildly inflated appraisal. Payments by servicers, counterparties, guarantors, insurers and bailout agencies were neither credited to the investor nor to the obligation owed to that investor. Since there was no obligor other than the homeowner according to the documents creating the securitization scam infrastructure, the borrower was part of a transaction where he “borrowed” $900,000 but only received $300,000. Third party payments made under expressly and carefully written waivers of subrogation were not applied to the amount owed to the investor and therefore not applied to the amount owed by the borrower. The absence of this information makes the servicer “accounting” a farce.

1. VALID ACCOUNTING BY ALL PARTIES: Continuing with the facts illuminated in the preceding paragraph, both mortgage closing documents and foreclosure documents are devoid of any reference to the dozens of transactions carried out in the name of, or under agency of, or as constructive trustee of the investor who as lender is obliged to account for the balance due after third party payments.

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From the Dark side on Wrongful foreclosure

Defending Wrongful Foreclosure Actions in California

Nearly all foreclosure professionals and loan servicers are familiar with the process for a non-judicial foreclosure action in California. A notice of intent to foreclose is followed by a notice of default which is followed by a notice of trustee’s sale. The last step, the actual non-judicial foreclosure sale, usually occurs within approximately 120 days from the filing of the notice of default. For the vast majority of loans, the California non-judicial foreclosure process is an effective and relatively inexpensive method for a servicer to obtain its security. In most non-judicial foreclosures, the only court time and court costs involved are those for the usually uncontested municipal court unlawful detainer which is initiated by the servicer in order to obtain possession from former borrowers who refuse to vacate their former homes.

For a small but seemingly growing number of loans, the non-judicial foreclosure process has become rather judicial. To borrowers who choose to allocate their resources away from debt payment towards fighting a loan servicer’s right to its payments and its security, the nonjudicial foreclosure process is a war of attrition which ranges from the bankruptcy court, to superior court to municipal court. While serial bankruptcy filings are often a frustrating delay to a servicer obtaining possession of its security, the wrongful foreclosure action filed in superior court is potentially the most time consuming weapon in the arsenal of the litigious borrower.

What is a Wrongful Foreclosure Action?

A wrongful foreclosure action is an action filed in superior court by the borrower against the servicer, the holder of the note, and usually the foreclosing trustee. The complaint usually alleges that there was an “illegal, fraudulent or willfully oppressive sale of property under a power of sale contained in a mortgage or deed of trust.” Munger v. Moore (1970) 11 Cal.App.3d. 1. The wrongful foreclosure action is often brought prior to the non-judicial foreclosure sale in order to delay the sale, but the action may also be brought after the non-judicial foreclosure sale. In most cases, a wrongful foreclosure action alleges that the amount stated as due and owing in the notice of default is incorrect for one or more of the following reasons: an incorrect interest rate adjustment, incorrect tax impound accounts, misapplied payments, a forbearance agreement which was not adhered to by the servicer, unnecessary forced place insurance, improper accounting for a confirmed chapter 11 or chapter 13 bankruptcy plan. Wrongful foreclosure actions are also brought when the servicers accept partial payments after initiation of the wrongful foreclosure process, then continue with the foreclosure. Companion allegations for emotional distress and punitive damages usually accompany any wrongful foreclosure action.

The causes of action alleged in a wrongful foreclosure action filed in California may include the following: breach of contract, intentional infliction of emotional distress, negligent infliction of emotional distress, violation of Business and Professions Code Section 17200 (Unfair Business Practices), quiet title, wrongful foreclosure (violation of Civil Code Section 2924), accounting and/or promissory estoppel.

The reciprocal nature of attorney fees provisions in all real property notes and deeds of trust dictate that any wrongful foreclosure action be taken seriously. Damages available to a borrower in a wrongful foreclosure action are an amount sufficient to compensate for all detriment proximately caused by the servicer or trustee’s wrongful conduct. Civil Code Section 3333. Damages are usually measured by value of the property at the time of the sale in excess of the mortgage and lien against the property. Munger v. Moore (1970) 11 Cal.App.3d. 1. Additionally, the borrower may also obtain damages for emotional distress in a wrongful foreclosure action. Young v. Bank of America (1983) 141 Cal.App.3d 108; Anderson v. Heart Federal Savings & Loan Assn. (1989) 208 Cal.App.3d. 202. Further, if the borrower can prove by clear and convincing evidence that the servicer or trustee was guilty of fraud, oppression or malice in its wrongful conduct, punitive damages may be awarded.

How Can a Wrongful Foreclosure Action Delay Recovery of the Security?

A wrongful foreclosure suit filed in superior court will not necessarily delay a servicer’s recovery of its security. The companion filings to such a suit (notice of pending action, injunction and/or motion to consolidate) however can delay a servicer’s ultimate recovery. Delay caused by a wrongful foreclosure action can be anywhere from forty-five days to two years.

A notice of pending action (“lis pendens”) is the most common companion to a wrongful foreclosure action. A lis pendens is recorded in the county in which the real property security is located at the time the wrongful foreclosure action is filed. The only requirement for a lis pendens to be recorded is an attorney’s signature that the action which is being noticed actually involves a real property claim. The purpose of the lis pendens is to put all third parties on notice that the borrower and the servicer are litigating over the real property security. Once a lis pendens is recorded, no title insurance company will issue a title insurance policy unless and until the lis pendens is removed. Although the servicer may “bond around” the lis pendens without title insurance, the real property security is virtually inalienable.

A summary procedure for removing a lis pendens is provided in the California Code of Civil Procedure Section 405.3 et seq. This section allows a “mini trial” on the merits of the borrower’s claim. At the “mini trial”, the borrower must establish the probable validity of his/her claim by a preponderance of the evidence. California Code of Civil Procedure Section 405.32. If the borrower cannot establish his or her claim by a preponderance of evidence, the lis pendens is expunged. The penalty for the borrower who wrongfully records a notice of pending action is that, in most cases, the court directs such a borrower to pay the servicer’s attorneys’ fees. California Code of Civil Procedure Section 405.38.

While a lis pendens can be filed at any time in the foreclosure process, a borrower applies for an injunction prior to the foreclosure sale with the intent of keeping the foreclosure sale at bay until issues in the lawsuit are resolved. The lawsuit can take anywhere from ten to twenty-four months. Generally, an injunction will only be issued if it appears to the court that: (1) the borrower is entitled to the injunction; and (2) that if the injunction is not granted, the borrower will be subject to irreparable harm. Like an action to expunge a lis pendens, a borrower’s application for an injunction is essentially a “mini-trial” on the merits. California Civil Code of Civil Procedure Section 526 et seq.

The issue at stake in nearly all injunctive relief action applications is the amount due and owing on the note and deed of trust. For the injunction hearing, it is imperative that the servicer provide a detailed analysis of the amount it contends is due and owing on the note and deed of trust at issue. If for some reason the servicer is unable to provide a breakdown of the amounts due and owing on the note and deed of trust at issue, or at least provide sufficient information to refute the borrower’s allegations, it is likely the injunction will be issued. In most cases, the injunction will be conditioned upon the borrower’s filing a significant bond and making timely debt payments. Upon occasion, judges who are not particularly enamoured with servicers and who are provided a heart wrenching tale in the borrower’s injunction application will issue minimal bonds and little or no debt service requirements. This worst case scenario translates into a servicer being unable to sell the security and receiving no payments on the underlying debt during the life of the lawsuit. Technically, modifications of injunctions are allowed for a change in law, a change in circumstances, or to prevent injustice. California Civil Code § 533. In reality, judges are loath to modify an injunction after it is issued and prior to a decision on the merits. Once an injunction with little or no debt service or bond is in place, the wrongful foreclosure suit will be a long and expensive process because the borrower has lost all incentive for a quick resolution of the action.

Another way borrowers delay a servicer’s recovery of its security through a wrongful foreclosure action is by consolidating their wrongful foreclosure action with their unlawful detainer action. Asuncion v. Superior Court (1980) 108 Cal. App. 3d 141. The Asuncion case which is usually relied upon by borrowers for consolidation contains an egregious fact scenario including clear fraud in the inducement of the loan. Judges however, do not limit the application of Asuncion to cases where fraud is alleged by the borrower. In applying Asuncion, a court can allow the unlawful detainer suit to be consolidated with the wrongful foreclosure action if there is a mere similarity of issues in the cases.

If the superior court allows consolidation, a servicer’s right to possession of the real property security will be stayed until a verdict for the servicer is obtained in the wrongful foreclosure action. Courts generally will condition such consolidation on borrower debt service payments. Again, though, the real property security will not be recovered until a final decision on the merits in the wrongful foreclosure action is reached. As discussed above, this can be anywhere from ten months to two years.

SELF-EXAMINATION: What to do when sued for a wrongful foreclosure?

The most important words in defending a wrongful foreclosure action are “critical self-examination”. Before determining strategy for the upcoming (possibly lengthy) lawsuit, it is critical to know if any of the borrower’s allegations of the servicers breach of duty are correct. If the borrower’s allegations are correct and the borrower wins the lawsuit, the servicer will have to unwind (or be precluded from conducting) the foreclosure sale, and pay the borrowers legal bill. Accordingly, the self-examination must be critical and comprehensive.

The necessary self-examination is much more than: Did we apply the payments correctly?… Yes… next question. In addition to reviewing proper payment application, the servicer should review all facets of servicing the loan in question. If we imposed force place insurance, did we have a right to do so? Did we inadvertently charge the escrow account (for excessive amount of taxes, for example)? Did we improperly account for a debtor with a confirmed bankruptcy plan? Did we adjust the interest rate correctly? Did we enter into a forbearance agreement to which we did not adhere? These are the types of questions a servicer needs to ask itself in preparing for a defense of a wrongful foreclosure action.

If, after a careful analysis of the borrower’s complaint, the servicer determines that an error was made, and given that the servicer may be required to pay for the borrower’s attorney, the question then becomes, what is the quickest way out of this lawsuit? For example, can the servicer rescind the sale, clarify negative credit information and get the borrower to dismiss the action? If the borrower appears intransigent and trial is likely, the servicer’s first concern should be to counter the “shifting” of attorney’s fees under the note.

“Offers in compromise” can counteract the shifting of the claims provided for in the note and deed of trust. Cal Code Civ. Proc. Section 998. An offer in compromise is a procedure which allows a servicer to determine the borrower’s likely damages and offer that sum to a borrower to settle the action. If the borrower refuses to settle and ultimately is awarded less than the servicer’s offer in compromise, the borrower will not recover his/her post-offer attorney fees and will be required to pay the servicer’s post-offer attorney fees. California Code Civil Procedure Section 998.

An offer in compromise is only appropriate if the borrower is “in it for the long haul,” is represented by an attorney and is likely to obtain a judgment in its favor. If the borrower is self-represented, an aggressive defense of significant discovery and early dispositive motions may be appropriate. Other areas of weakness in a borrower’s case may be lack of damages and lack of standing. As Munson v. Moore, supra indicates if there is no equity at the time of the alleged wrongful foreclosure sale, the borrower may not have suffered recoverable damages. The borrower’s standing to bring the action may be successfully attacked if the borrower has filed for chapter 7 bankruptcy protection to delay eviction or if the borrower can be declared a vexatious litigant. If a review of the borrower’s origination file uncovers material misrepresentations of fact, a counter-suit for mortgage fraud may be appropriate. The best strategy for defending a wrongful foreclosure action is never delay for delay’s sake.

If the servicer, after an exhaustive self-examination, determines that the borrower’s lawsuit is not justified, the goal shifts from control of damages to obtaining possession and clean title as soon as possible. Usually, the best method for this is the motion to expunge lis pendens. This procedure, as discussed above, is usually a mini-trial on the merits. Oftentimes, after the lis pendens is expunged and the real property security is sold, the borrower’s motivation to litigate is lost. The strategies previously discussed are also available when the borrower’s suit is likely non-meritorious, but they are usually not necessary. If no lis pendens was recorded by the borrower, early aggressive discovery followed by an early summary judgment motion is often the best route available to the servicer for the early resolution of the action.

Conclusion: Can wrongful foreclosure actions be avoided?

All of the preventive actions that an army of lawyers could recommend will not dissuade the borrower who feels wronged by his bank and wants the bank “to pay” from filing a wrongful foreclosure action. Many marginal wrongful foreclosure actions can be avoided, however, if the servicer reviews every communication sent to a borrower, (note adjustment letter, bankruptcy coupon letter, partial payment acceptance letter, etc.); with the following critical question: can this communication be misunderstood by the borrower or can its meaning be twisted by a clever debtor’s lawyer? If the answer to this question is yes, can this letter be written in a manner which more completely protects the servicer’s interest? Additionally, the servicer must truly understand the numbers which comprise the amount due stated on the notice of default and be certain of their accuracy.

California law provides many unique procedural remedies which may be employed in battling a wrongful foreclosure action. Judicious use of these procedures by counsel and close coordination between counsel and client can lessen the pain of defending a wrongful foreclosure action

Find Your Home’s Pooling And Servicing Agreement

Critical Information: How to Find Your Home’s Pooling And Servicing Agreement

February 28th, 2011 • Foreclosure

The pooling and servicing agreement (PSA) is a contract that should govern the terms under which trillions of dollars-worth of equity in the land of the United States of America was flung around the world. These contracts should govern how disputes over ownership and interest in the land that was the United States of America should be resolved. Pretty simple stuff, right? I mean if I’m a millionaire big shot New York Lawyer working for big shot billionaire Wall Street Investors and banks, then I’d do my job as a lawyer to make sure the contract was right and that all the i’s were dotted and the t’s were crossed right?

But that’s not at all what’s happened. In our scraggly street level offices, far below the big fancy marble encased towers of American law and finance, simple dirt lawyers defending homeowners started actually reading these contracts. We ask lots of questions about just what all those fancy words in their big shot contracts mean. Invariably, the big shot lawyers and the foreclosure mills tell us, “Don’t you worry about all them words you scraggly, simple dirt lawyer. Those words aren’t important to you.”

But increasingly judges recognize that the words really do mean something. Take note of the following statements from the recent Ibanez Ruling:

I concur fully in the opinion of the court, and write separately only to underscore that what is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets.

The type of sophisticated transactions leading up to the accumulation of the notes and mortgages in question in these cases and their securitization, and, ultimately the sale of mortgaged-backed securities, are not barred nor even burdened by the requirements of Massachusetts law. The plaintiff banks, who brought these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the under-lying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments.

The Ibanez decision underscores the fact that it is important for all of us to know and understand how the pooling and servicing agreements directly impact what is occurring in the courtroom. And for assistance with understanding the PSA and how to find it, more commentary from Michael Olenick at Legalprise:

Overview of PSA’s

Securitized loans are built into securities, which happen to look and function virtually identically to bonds but are categorized and called securities because of some legal restrictions on bonds that nobody seems to know about.

The securities start with one or more investment banks, called the Underwriter (should be called the Undertaker), that seems to disappear right after cashing in lots of fees. They create a prospectus that has different parts of the security that they are proposing. Each of these parts is called a tranche. There are anywhere from a half-dozen to a couple dozen tranches. Each one is considered riskier.

Each tranche is actually a separate sub-security, that can and is traded differently, but governed by the same PSA, listed in the Prospectus. Similar tranches from multiple loans were often bundled together into something called a Collateralized Debt Obligation, or CDO. So besides the MBS there might also be one or more CDO’s made up of, say, one middle tranche of each MBS. Each tranche is considered riskier, usually based a combination of the credit-scores of the people in the tranche and the type of loans (ex: full/partial/no doc, traditional/interest-only/neg am, first or secondary lien, etc…).

CDO’s were eligible for a type of “insurance” in case their price went down called a Credit Default Swap, or CDS (also known as “synthetic CDO’s”). There was actually no need to own the CDO to buy the
insurance and many companies purchased the insurance, that paid out handsomely. [That’s what the AIG bailout was for, because they didn’t keep adequate reserves to pay out the insurance policies.]

Later, investors could also purchase securities made up of multiple CDO’s, much the same way that CDO’s were made up of tranches of multiple MBS’s. These were called “CDO’s squared.” Not surprisingly,
there were also a few “CDO’s cubed,” CDO’s of CDO’s squared. CDO’s were virtually all written offshore so little is known about who owns them, except that they were premised on the idea that since there was
collateralized mortgage debt at their base they could not collapse. Their purpose was to spread the various of risks of mortgages which, back then, meant prepayment of high interest debt and default.

Investors were actually way more obsessed with prepayment because they thought the whole country could not default; to make sure of that MBS’s and all their gobbly gook were spread around the country; you
can see where in the prospectus. They were almost more concerned with geographic dispersion than credit dispersion.

After that it’s the servicers/trustee/document custodian scheme we’re all familiar with. OK .. with that too-strange-to-make-up explanation means let’s dive into how to find one’s loan:

1. Find the security name: it will be a year (usually the year of origination), a dash, two letters, then a number. It will be somewhere in one of your filings. For this we’ll use a random First Franklin loan, 2005-FF1. [Note; they would just sequentially number them, so the first security First Franklin floated in 2005 would be FF1, then FF2, etc…]
2. Go to the SEC’s new search engine: http://www.sec.gov/edgar/searchedgar/companysearch.html
3. Click the first link, Company or fund name…
4. Choose the radio button marked “contains” and type in the ticker; that is 2005-FF1
5. There will be multiple filings but one of them will be marked 424B5. Click that, it’s the prospectus.

If you really want to have fun, and want to know what happened after 2008 when these all disappeared, type the ticker (again, 2005-FF1) into the full text link from the first search page. There you’ll see lots and lots of filings as pieces and parts of the security are blasted everywhere. To track yours you have to find which tranche you ended up in. Sometimes it’s in the filing but, if not, you can usually figure it out from the prospectus if you know basic origination info (credit-score, type of loan, where the house is, etc…); some even list loan amounts.

One warning on those secondary filings, servicers and trusts both break them out as assets. How one loan can be reported as an asset in two places is a mystery, but considering this doesn’t even cover the CDO’s and CDS’s dual reporting doesn’t seem to strange. You’ll see your loan keep wandering through the financial system, with one exception (next paragraph), right up to the present day. You can even see how much the investment banks thinks that its worth over time since they report out both original amount and fair market value.

The exception — when your loan really does disappear — is when it was eaten up by the Federal Reserve’s Toxic Loan Asset Facility, TALF. But you can look that up to and see how the government purchased your
loan for full-price, when investors on the open market were only willing to pay a few cents on the dollar. If your loan went to TALF you can find it in the spreadsheet here: http://www.federalreserve.gov/newsevents/reform_talf.htm Your loan will be in the top spreadsheet and the genuine lender in the bottom.

The Scandal of Foreclosure Mill Law Firms Continues

It has been well known for some time that many of the foreclosure mill law firms are not truly law firms.  Rather, they are just paperwork processors for the massive banks masquerading as lawyers.  One aspect of this, while well known but unpunished, is the fact that these firms flaunt the rules prohibiting law firms from splitting legal fees with non-lawyers or having non-lawyer shareholders.  Why the state ethics boards that govern lawyers are not cracking down is beyond me.  One thing that might crack down on them is the marketplace.  In today’s New York Times, it is reported that a scheme to spin off the “backoffice” operations of one of the most notorious of these law firms, that of David J. Stern in Florida is a disaster for investors. It does not help these investors that Mr. Stern’s “law firm” has essentially been fired by all of its major clients since the robosigning scandal first came out.

insider mers memo foreclosure procedures all states

State-by-State
MERS Recommended
Foreclosure Procedures
Updated 2002
Corporate Offices
1818 Library Street, Suite 300
Reston, VA 20190
tel (800) 646-6377
fax (703) 748-0183
http://www.mersinc.org
TABLE OF CONTENTS
INTRODUCTION__________________________________________________________3
RECOMMENDED FORECLOSURE PROCEDURES:
Alabama___________________________________________________________________________8
Alaska____________________________________________________________________________10
Arizona___________________________________________________________________________12
Arkansas__________________________________________________________________________14
California__________________________________________________________________________16
Colorado__________________________________________________________________________18
Connecticut________________________________________________________________________20
Delaware__________________________________________________________________________22
District of Columbia_________________________________________________________________24
Florida____________________________________________________________________________26
Georgia___________________________________________________________________________28
Hawaii____________________________________________________________________________30
Idaho_____________________________________________________________________________32
Illinois____________________________________________________________________________34
Indiana____________________________________________________________________________36
Iowa______________________________________________________________________________38
Kansas____________________________________________________________________________40
Kentucky__________________________________________________________________________42
Louisiana__________________________________________________________________________44
Maine_____________________________________________________________________________46
Maryland__________________________________________________________________________48
Massachusetts______________________________________________________________________50
Michigan__________________________________________________________________________52
Minnesota_________________________________________________________________________54
Mississippi_________________________________________________________________________56
Missouri___________________________________________________________________________58
Montana___________________________________________________________________________60
Nebraska__________________________________________________________________________62
Nevada___________________________________________________________________________64
New Hampshire_____________________________________________________________________66
New Jersey________________________________________________________________________68
New Mexico_______________________________________________________________________70
New York_________________________________________________________________________72
North Carolina______________________________________________________________________74
North Dakota_______________________________________________________________________76
Ohio______________________________________________________________________________78
Oklahoma_________________________________________________________________________80
Oregon____________________________________________________________________________83
Pennsylvania_______________________________________________________________________85
Rhode Island_______________________________________________________________________87
South Carolina______________________________________________________________________89
South Dakota_______________________________________________________________________91
Tennessee_________________________________________________________________________93
Texas_____________________________________________________________________________95
Utah______________________________________________________________________________97
Vermont___________________________________________________________________________99
Virginia__________________________________________________________________________102
Washington_______________________________________________________________________104
West Virginia_____________________________________________________________________106
Wisconsin________________________________________________________________________108
Wyoming_________________________________________________________________________110
Introduction
MERS has put together this Foreclosure Manual to provide a state by state guideline for our Members to follow when foreclosing a mortgage loan in the name of MERS. Each state’s procedure was developed jointly with local counsel in that respective state. There may be future versions of this Manual if needed. If you have any questions about this Foreclosure Manual, please contact MERS.
Sharon McGann Horstkamp
Corporate Counsel
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What is MERS?
MERS serves two purposes. First, it is a national electronic registry for tracking servicing rights and beneficial ownership interests in mortgage loans. Second, MERS acts as nominee (a form of agent) for the servicer and beneficial owner of a mortgage loan in the public land records. MERS is designed to operate within the existing legal framework in all U.S. jurisdictions and did not require any changes to existing laws.
How is this made possible? Its members appoint MERS as the mortgagee of record on all loans that they register on the MERS System. This appointment eliminates the need for any future assignments when servicing rights are sold from one MERS Member to another. Instead of preparing a paper assignment to track the change in the county land records, all subsequent transfers are tracked electronically on the MERS System.
MERS does not create or transfer beneficial interests in mortgage loans or create electronic assignments of the mortgage. What MERS does do is eliminate the need for subsequent recorded assignments altogether. The transfer process of the beneficial ownership of mortgage loans does not change with the arrival of MERS. Promissory notes still require an endorsement and delivery from the current owner to the next owner in order to change the beneficial ownership of a mortgage loan.
MERS is a Delaware corporation with a broad base of ownership from the mortgage industry. American Land Title Association is among our owners and has a seat on the MERS Board of Directors. Other owners with substantial investments in MERS include the Mortgage Bankers Association of America (MBA), Fannie Mae, and Freddie Mac. These parties, along with Ginnie Mae, decided several years ago that MERS would be a major benefit to the mortgage industry and worked together to create the MERS of today.
How does MERS become the Mortgagee of Record?
MERS is put in this position in one of two ways: the first is by an assignment from a lender or servicer to MERS. This method is usually associated with bulk transfers of servicing. The second way is with the lender naming MERS as the mortgagee of record as nominee for itself (and its successors and assigns) in the original security instrument at the time the loan is closed. We call this second option “MOM”, which stands for MERS as Original Mortgagee.
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“MOM” was a significant milestone for MERS and the mortgage industry. Fannie Mae, Freddie Mac, and Ginnie Mae have each approved the use of MERS as original mortgagee as nominee for a lender on the security instrument for loans sold to them and registered on the MERS System.
In order to make MOM work, changes were made by Fannie Mae and Freddie Mac to their uniform security instruments allowing MERS to be named as the mortgagee in a nominee capacity for the lender. First, to reflect the interrelationship of the promissory note and mortgage and to ensure these two instruments are tied together properly, the recital paragraph names MERS, solely as nominee for Lender, as beneficiary. Second, it is made clear that the originating lender rather than MERS is defined as the “Lender”. This change was made so that everyone understands that MERS is not involved in the loan administration process. Third, as mortgagee of record, MERS needs to have the authority to release the lien of security instrument, or if necessary, foreclose on the collateral on behalf of the lender. Such authority is provided by adding a paragraph to the security instrument informing the borrower that MERS holds only legal title to the interests granted by the borrower. It also informs the borrower that, if necessary to comply with law or custom, MERS may exercise the right to foreclose and sell the property and may take any action required of the Lender to release or cancel the security instrument.
Once MERS is named in the original security instrument or by way of an assignment, the document is then recorded in the appropriate public land records. From this point on, no subsequent assignments of the mortgage to a MERS member needs to be recorded. MERS remains in the land records, as mortgagee, throughout the life of the loan so long as servicing is not sold to a non-MERS member. All subsequent transfers of ownership in mortgage loans and servicing rights for that loan are tracked electronically between MERS members through the MERS System. This process eliminates the opportunity for a break in the chain of title.
Moreover, unless a MERS member transfers servicing rights to a loan registered on the MERS System to a non-MERS member, the loan stays on the system until it is paid off. The process to transfer servicing rights between MERS members requires an electronic confirmation from the buyer. It begins with the seller entering loan transfer information into the system, including the Mortgage Identification Number (explained below), the new servicer organizational identification number, the sale date, and the transfer effective date. The buyer then must submit a confirmation acknowledgment to the system. The old servicer and the new servicer are still required to notify the homeowner in writing when loan servicing is traded as required under the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq. A loan is de-registered from the system only if its servicing rights to a loan are transferred to a non-MERS member.
With every new loan that is registered on the MERS System, it becomes more likely that you will come in contact with a mortgage loan having MERS as the mortgage holder in the chain of title. MERS is put in this position in one of two ways: the first is by an assignment from a lender or servicer to MERS. This method is usually associated with bulk transfers of servicing. The second way is with the lender naming MERS as the mortgagee of record as
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nominee for itself (and its successors and assigns) in the original security instrument at the time the loan is closed. We call this second option “MOM”, which stands for MERS as Original Mortgagee.
“MOM” was a significant milestone for MERS and the mortgage industry. Fannie Mae, Freddie Mac, and Ginnie Mae have each approved the use of MERS as original mortgagee as nominee for a lender on the security instrument for loans sold to them and registered on the MERS System.
In order to make MOM work, changes were made by Fannie Mae and Freddie Mac to their uniform security instruments allowing MERS to be named as the mortgagee in a nominee capacity for the lender. First, to reflect the interrelationship of the promissory note and mortgage and to ensure these two instruments are tied together properly, the recital paragraph names MERS, solely as nominee for Lender, as beneficiary. Second, it is made clear that the originating lender rather than MERS is defined as the “Lender”. This change was made so that everyone understands that MERS is not involved in the loan administration process. Third, as mortgagee of record, MERS needs to have the authority to release the lien of security instrument, or if necessary, foreclose on the collateral on behalf of the lender. Such authority is provided by adding a paragraph to the security instrument informing the borrower that MERS holds only legal title to the interests granted by the borrower. It also informs the borrower that, if necessary to comply with law or custom, MERS may exercise the right to foreclose and sell the property and may take any action required of the Lender to release or cancel the security instrument.
Once MERS is named in the original security instrument or by way of an assignment, the document is then recorded in the appropriate public land records. From this point on, no subsequent assignments of the mortgage to a MERS member needs to be recorded. MERS remains in the land records, as mortgagee, throughout the life of the loan so long as servicing is not sold to a non-MERS member. All subsequent transfers of ownership in mortgage loans and servicing rights for that loan are tracked electronically between MERS members through the MERS System. This process eliminates the opportunity for a break in the chain of title.
Moreover, unless a MERS member transfers servicing rights to a loan registered on the MERS System to a non-MERS member, the loan stays on the system until it is paid off. The process to transfer servicing rights between MERS members requires an electronic confirmation from the buyer. It begins with the seller entering loan transfer information into the system, including the Mortgage Identification Number (explained below), the new servicer organizational identification number, the sale date, and the transfer effective date. The buyer then must submit a confirmation acknowledgment to the system. The old servicer and the new servicer are still required to notify the homeowner in writing when loan servicing is traded as required under the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq. A loan is de-registered from the system only if its servicing rights to a loan are transferred to a non-MERS member.
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Why Foreclose in the Name of MERS
The mortgage establishes the remedy to foreclose and sell the property if the borrower does not pay back the amount loaned to the borrower according to schedule. Typically, the loan servicer, as the mortgagee of record, is the party that initiates the foreclosure proceedings on behalf of the investor. When MERS is the mortgagee of record, the foreclosure can be commenced in the name of MERS in place of the loan servicer. For another entity to foreclose, an assignment is required from MERS to the other entity.
Establishing MERS as mortgagee of record will not cause any significant changes to current foreclosure practices in any state when the beneficial owner wants to proceed with foreclosures in the name of MERS. Just take a look at the recommended procedures.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ALABAMA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are foreclosed non-judicially under power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. Notice of the foreclosure sale is published with Mortgage Electronic Registration Systems, Inc. (MERS) named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require the promissory note be endorsed in blank when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that sometimes there is an endorsement of the promissory note to the servicer prior to foreclosure. We recommend that the agencies’ policies be followed.
At the foreclosure sale, the certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then the auctioneer will be instructed to deed the property directly to the investor. We have been advised that this is the same procedure followed when foreclosing in the name of the servicer. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Version 1.1
November 1999
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the auctioneer deed can be issued to the servicer. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
Version 1.1
November 1999
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ALASKA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are typically used and are foreclosed non-judicially by the power of sale contained therein. MERS local counsel advises that a foreclosure can be done in the name of MERS. Local counsel confirmed with First American Title Insurance Company that with a few minor caveats, foreclosing in the name of MERS should not present any problems.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the substitution of trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies’ policy is that the promissory note is endorsed in blank when the seller/servicer sells the loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes the Note is endorsed to the servicer prior to the foreclosure, but unless it is legally required, the Note should remain endorsed in blank. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The trustee, who is typically a title company, commences the foreclosure by executing and recording the Notice of Default. The Notice of Default is filed and published the same way with the same required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing
Version 1.1
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entity. At the foreclosure sale, an “offset bid” is entered on behalf of MERS who is acting in the capacity as “agent” for the servicer. Local counsel advises that the Beneficiary’s Declaration of Default can be modified to describe the relationship of MERS and the Servicer. This should enable the servicer, instead of MERS, to be the named grantee of the Trustee’s Deed. The servicer can then issue a deed to the investor. This procedure is consistent with the current two-deed foreclosure practice.
While initially there may be some hesitation to accept an “offset bid” by the servicer, MERS local counsel states that usually a title company is willing to recognize the substance of who actually owns the loan rather than the form of the record ownership.1 In that instance, if the servicer is successful at the foreclosure sale, the trustee’s deed will be issued directly to the servicer.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer, by being the grantee of the trustee’s deed, is able to commence the eviction. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
1 If the “offset bid” is not accepted, then the trustee’s deed may need to be granted to MERS. If MERS takes title to the property, a subsequent deed should be executed to the investor as soon as possible.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ARIZONA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the deed of trust that gives the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially under a power of sale in the security instrument. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Trustee’s Sale is filed and published the same way it is when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity. It is important to note that the same procedures and state requirements that are required when foreclosing in the servicer’s name still must be followed when foreclosing in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS. The substituted trustee is typically the foreclosing attorney.
The agencies (Fannie Mae, Freddie Mae and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells the loan to them. The note is to remain endorsed in the blank when a servicer commences foreclosure. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS for the investor. This is the same process that is used today when foreclosing in the servicer’s name. We have been advised that the
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current foreclosure procedure is a one-deed process with the investor directly taking title from the Trustee’s Deed. Therefore, the MERS recommended procedure is the same as when foreclosing in the name of the servicer. The bid is made on behalf of the investor so that the Trustee’s deed will be issued directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan, then the trustee’s deed is not recorded to the investor until after the eviction is completed. The eviction is conducted the same way it would be conducted if the servicer foreclosures.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ARKANSAS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like a servicer , will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially under a power of sale in the security instrument. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Default is filed and published the same way it is when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS. The substituted trustee is typically the foreclosing attorney.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. The Trustee’s deed will be issued directly to the assignee of the bid. We have been advised that the current foreclosure procedure is a two-deed process with the servicer taking title and then executing a subsequent deed to the investor. Therefore, the MERS recommended procedure is the same as the current practice of assigning the bid to the servicer. Because the MERS recommended procedure follows the same procedure that is used when the servicer
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forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer, by being the grantee of the trustee’s deed, can commence the eviction. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR CALIFORNIA
A deed of trust in which the Mortgage Electronic Registration Systems, Inc. (MERS) is named as beneficiary requires special non-judicial foreclosure procedures. MERS was created to avoid the cost and delays caused by assignments of mortgages and deeds of trust. To avoid the need to prepare and record an assignment with the County Recorder’s office, MERS holds title as nominee for the true mortgagee/beneficiary of the mortgage/deed of trust and as transfers occur, they are recorded on the MERS computer in a book entry systems similar to the transfer of stocks.
The MERS procedure for tracking the ownership of mortgages has a direct effect on the foreclosure process. On MERS loans, MERS is shown as the record beneficiary and therefore a MERS foreclosure is brought in the name of MERS. However, at the time of sale the true beneficiary is determined by MERS and the Trustee’s Deed Upon Sale is recorded in the name of that true beneficiary. There are no assignments, additional taxes or costs when foreclosing under the MERS’ foreclosure procedures.
To achieve this result, the following non-judicial foreclosure guidelines are recommended:
On MERS loans, MERS will show as the beneficiary of record. Foreclosures should be commenced in the name of MERS. To effectuate this process, MERS has allowed each servicer to choose a select number of its own employees to act as officers for MERS. Through this process, appropriate documents may be executed at the servicer’s site on behalf of MERS by the same servicing employee that signs foreclosure documents for non-MERS loans.
Until the time of sale, the foreclosure is handled in same manner as non-MERS foreclosures. At the time of sale, if the property reverts, the Trustee’s Deed Upon Sale will follow a different procedure. Since MERS acts as nominee for the true beneficiary, it is important that the Trustee’s Deed Upon Sale be made in the name of the true beneficiary and not MERS. Your title company or MERS officer can easily determine the true beneficiary. Title companies have indicated that they will insure subsequent title when these procedures are followed.
Normally, where the name of the grantee under the Trustee’s Deed Upon Sale is different than the name of the foreclosing entity, the Trustee’s Deed Upon Sale states that the “Grantee was not the foreclosing beneficiary.” This designation triggers the imposition of transfer taxes on the sale. It is important to note that in a MERS foreclosure sale, even where the property reverts, the name of the grantee will be different than the name of the entity foreclosing. Nonetheless, the Trustee’s
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Deed Upon Sale should state that “The Grantee was the foreclosing beneficiary.” This is because MERS merely holds title as nominee for the true beneficiary; it is the true beneficiary that has actually foreclosed and acquired title.
Finally, should a bankruptcy be filed, servicers should use the same procedures they use for other investor loans. Motions for Relief from Stay should be brought by the real party in interest, namely “Mortgage Electronic Registration Systems, Inc. as record holder and nominee for the true beneficiary _________.” On Proofs of Claim, both the servicer and Mortgage Electronic Registration Systems, Inc. should be jointly named. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR COLORADO
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc.
(MERS) has been around since 1998. The reason why it works is because when the role
of MERS is examined, it becomes clear that MERS stands in the same position to
foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It
is the Deed of Trust that gives MERS the authority to foreclose. However, because
Colorado differs from other states in that the Promissory Note controls, and MERS is not
the beneficial note holder, we recommend foreclosing in the servicer’s name by
endorsing the Note to the servicer.
We are amending our prior recommended Procedure to foreclose in MERS name due to
recent changes in the Colorado Foreclosure Statute. This revision was developed in
conjunction with experienced foreclosure counsel. The goal of the recommended
procedures is to avoid adding any extra steps or incurring any additional taxes or costs.
MERS will continually review the guidelines and, if necessary, will issue revisions.
The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially pursuant to a power
of sale. In Colorado, the deed of trust names a Colorado public trustee rather than a
private trustee. Local counsel advises that a foreclosure can be brought in the name of
MERS. However, because the endorsement on the Note controls, and MERS holds the
mortgage lien on behalf of the Note Holder, it is a better practice to foreclose in the Note
Holder’s name. That may be the servicer of the loan.. This does not impact MERS
position as the mortgagee and no assignment from MERS to the servicer is necessary to initiate the foreclosure and the mortgage loan should remain registered on the MERS® System.
Keep in mind that the agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a
blank endorsement of the promissory note when the seller/servicer sells a mortgage
loan to them. However, in Colorado, the requirement is that the promissory note
needs to be endorsed to the foreclosing entity, which is usually the servicer. Therefore, the note should be endorsed to servicer.
This switch in our recommendation is also predicated on the change in the Colorado Foreclosure Statute that now allows for a copy of the Note rather than the original
Note to be produced together with a Certificate that can be filed by certain entities of which MERS does not fit into in its current corporate structure. The certificate states
that the foreclosing entity is the owner of the Note/debt and is a qualified entity
under the Statute to use a copy of the Note. Please consult with your own counselon
how this change impacts your current foreclose procedure.
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If the debtor declares bankruptcy, the proof of claim should be filed jointly in the
name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of
MERS and the servicer. The address to be used is the servicer’s address so that all
trustee payments go directly to the servicer, not to MERS. The Motion for Relief
from Stay may be filed either solely in the name of MERS or jointly with the
servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
MERS Local Counsel:
Caren Castle, Esq.
Castle & Castle, P.C.
Denver Place Plaza Tower
1099 18th Street, Suite 2300
Denver, CO 80202
Tel: (303) 299-1800
Fax: (303) 299-1808
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR CONNECTICUT
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. When the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that the authority is given to MERS to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially either by strict foreclosure or by a power of sale. MERS local counsel advises that a loan can be foreclosed in the name of MERS. It up to the judge to decide which method will be used. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity, and not just the preferred method.3 If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the
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3 Local Counsel advises us that certain judges take the position that the note and mortgage must be held by the same entity. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
same individual that signs the documents today for the servicer will continue to sign the documents, but now as an officer of MERS.
In a strict foreclosure, once the Judgement of Strict Foreclosure is entered, and the applicable redemption period has expired, a certificate of Foreclosure is filed on the land records that will reflect MERS as the property owner. MERS should remain in the land records for as short a time as possible. A subsequent deed should be prepared from MERS to the investor.4 Alternatively, at the time of the entering of the judgment, if an assignment of judgment is executed by MERS, judgment could automatically be entered into the investor’s name.
In a foreclosure by sale, a motion should be submitted to the judge requesting the judge that the servicer be allowed to bid at the auction. If it is the highest bid, then after approval of the sale by the Court, a closing will be scheduled whereby title should vest in the servicer.5
Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name for the investor, no additional taxes or recording fees are incurred.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the title holder. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the name of the title holder. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
4 Some Connecticut Revenue Officers have taken the position that a state conveyance tax is due on the subsequent deed from the servicer to the investor. MERS local counsel is currently appealing this issue.
5 If a judge will not allow the servicer to “credit” bid, then a bid may be entered on behalf of MERS. Title will then vest with MERS momentarily until the deed to the investor is executed and recorded.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR DELAWARE
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The same procedures and requirements that are followed when foreclosing in the name of the servicer are still followed when foreclosing in the name of Mortgage Electronic Registration Systems, Inc. The major difference is that the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.6
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method.7
6 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
7 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If it is the successful bid, the sheriff will be instructed to execute a deed directly to the investor. This is the same method that is used when the servicer forecloses in its name. The sheriff then issues a sheriff’s deed directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR DISTRICT OF COLUMBIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Sale is sent, filed and published the same way it is when foreclosing in the name of the servicer with the same required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. This is the same requirement when foreclosing a loan in the name of the servicer. We have found that it is not legally required to have the note endorsed to MERS prior to the foreclosure.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then an unrecorded assignment of the deed of trust to the investor is given to the trustee prior to the sale. This assignment allows the Trustee’s Deed to be issued directly to the investor. We have been advised that this is the procedure used when foreclosing in the name of the servicer. Because the MERS recommended procedure follows the same Version 1.1
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procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the eviction can be brought in the name of MERS. At this point, MERS holds only equitable title. Once the eviction is completed, then the investor can be substituted in as the party to receive the Trustee’s Deed. Again, the same procedures should be followed as you do when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR FLORIDA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the mortgagee of record. It is the mortgage that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will be the ultimate owner of the note.8
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS. However, we have not found it a requirement in Florida that the Note needs to be endorsed to the foreclosing entity.9
8 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
9 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of Version 1.1
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a foreclosure judgment to MERS is entered, a public sale is held. The Plaintiff (MERS) has the option of assigning the foreclosure bid either prior to the foreclosure sale or in the ten (10) day period between the sale and the issuance of the Certificate of Title. The assignment is done with a motion filed with the court, and a court order is entered. If the bid is assigned, the certificate of title is issued directly to the assignee. This is the same method that is used when the servicer forecloses in its own name. Because the MERS recommended procedure follows the same procedure that is used when the servicer foreclosures in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, then proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR GEORGIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Security Deeds are used and are generally foreclosed non-judicially pursuant to a power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. It is important to note that the same procedures and state requirements that are required to be followed when foreclosing in the servicer’s name still must be followed when foreclosing in the name of MERS. The foreclosure proceeding is commenced by advertising the foreclosure in the official county newspaper once a week for four consecutive weeks prior to the date of the foreclosure sale. A notice is mailed to the debtor’s residence at least 15 days prior to the sale date. You will continue to do everything that you normally do when foreclosing a mortgage in the servicer’s name. The only difference is that the foreclosing entity is Mortgage Electronic Registration Systems, Inc.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents today for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the sale, the certifying officer will instruct the foreclosing attorney to enter a bid on behalf of the servicer. This is the same process that is used today when
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foreclosing in the servicer’s name. If it is the successful bid, then the attorney will be instructed to execute the deed under power directly to the servicer. We have been advised that the current foreclosure procedure is a two-deed process with the servicer taking title and then executing a special warranty deed to the investor. Therefore, the MERS recommended procedure would conform to the current practice. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. The servicer is issued the deed under power and therefore commences the eviction in the servicer’s name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of Mortgage Electronic Registration Systems, Inc. or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR HAWAII
Foreclosing a loan in the name of MERS is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially10. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The same procedures and state requirements that are followed when foreclosing in the name of the servicer are still followed when foreclosing in the name of Mortgage Electronic Registration Systems, Inc. The major difference is that the caption of the complaint will state Mortgage Electronic Registration Systems, Inc. in place of the servicer’s name.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. A secondary market investor will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
10 Freddie Mac has initiated a non-judicial program in Hawaii effective January 1, 1998.
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After a foreclosure judgment to MERS is entered, a public auction is held. A bid is entered on behalf of MERS, and if the successful bid, then the Commissioner will be instructed that MERS has selected a nominee to be the ultimate purchaser of the property. (The nominee can be the servicer or the investor).
After the hearing to confirm the sale and the confirmation order, a deed is executed directly to the nominee. This is the same method that is used today when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording fees or taxes are incurred by foreclosing in the name of MERS. A conveyance tax and recording fee is paid on the transfer of the property from the commissioner to the nominee of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure had been filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR IDAHO
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Trust Deeds are used and are generally foreclosed non-judicially pursuant to a power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. It is important to note that the same procedures and requirements that are followed when foreclosing in the servicer’s name must still be followed when foreclosing in the name of MERS. The Trustee must still file and record the Notice of Default and provide the grantor with a Notice of Sale. The Notice of Sale is published the same way is it when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. The note should remain endorsed in blank when the servicer commences foreclosure. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have not found that it is legally required that the note be endorsed to the foreclosing entity.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If it is the highest bid, then the trustee will be instructed by an instruction letter to execute the Trustee’s Deed directly to the
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investor. We have been advised that the current foreclosure procedure is a one-deed process with the trustee executing the Trustee’s Deed directly to the investor. The MERS recommended procedure is the same procedure followed when foreclosing in the name of the servicer. Therefore, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan, then the Trustee’s Deed may be issued to the servicer in order for the servicer to commence the eviction. Another option may be that the trustee’s deed is not recorded to the investor until after the eviction is completed. The eviction should be conducted the same way it would be conducted if the servicer commenced the foreclosure.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ILLINOIS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer.
MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.11
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend the agencies’ policies be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying
11 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having its employees become certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered and the applicable redemption period expires, a foreclosure sale is held. A bid is entered on behalf of MERS, and if the successful bid, then the Certificate of Sale would be assigned to the investor. This assignment is not normally recorded. A confirmation hearing will be held confirming the sale. This is the same method that is used when the servicer forecloses in its name for the investor. After the entry of the Order of Confirmation, the holder of the Certificate of Sale is entitled to a deed. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the deed is not recorded until after the eviction is completed. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR INDIANA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note.12 An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
12 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having its employees become certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a foreclosure judgment to MERS is entered, MERS will assign the judgment and the right to bid to the servicer. This assignment of the judgment is filed with the Clerk of the Court in which the judgment is pending. A sheriff’s sale is scheduled as a result of the filing of a praecipe for sale. The servicer will enter a bid as the bid assignee and if the highest bidder, the Return of Sale will reflect this. The assignment of the judgment allows the servicer to bid so that title can be taken directly by the servicer. The servicer can then convey a subsequent deed to the investor. Because the MERS recommended procedure closely follows the same procedure that is used when the servicer forecloses in its name, no additional transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. Because the foreclosure judgment is assigned to the servicer, the eviction can be brought in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR IOWA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Generally, mortgages are used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption of the petition of foreclosure should name Mortgage Electronic Registration Systems, Inc. (MERS) as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement when a seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the substitution of trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After the foreclosure judgment to MERS is entered, there is a sheriff’s foreclosure sale. At the sale, a bid would be entered on behalf of MERS, and if the bid is successful, MERS will receive a certificate of purchase which it will assign to the
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servicer or the investor.13 The sheriff’s deed is then issued directly to the servicer or investor. Because the MERS recommended procedure follows the procedures used when foreclosing in the name of the servicer, no additional transfer taxes are incurred.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
13 On a foreclosure without the right of redemption, there is no Certificate of Purchase issued. Instead, the foreclosure judgment should be assigned to the servicer or investor. To whom the judgment is issued will depend upon the instructions given from the servicer or investor. If the judgment is not assigned from MERS, this may cause title to be issued directly to MERS if a bid is entered on the behalf of MERS at the sheriff’s sale. If title is then subsequently passed to a private investor, revenue stamps may be incurred.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR KANSAS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require that the promissory note be endorsed in blank when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend that the agencies’ requirements be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
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If the successful bid, the sheriff will issue a certificate of purchase to MERS. This certificate will then be assigned from MERS to the investor. This is the same method that is used when the servicer forecloses in its name. After the applicable redemption period, a deed will be issued directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR KENTUCKY
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a foreclosure sale is held. The certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If it is the successful bid, it will be assigned to the investor by simple documentation that is signed by the foreclosing attorney. The bid assignment does
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not need to be recorded. This is the same method that is used today when the servicer forecloses in its name.
The Motion to Confirm the sale is filed, and after the sale is confirmed, a deed will be prepared by the Master Commissioner to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording fees or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR LOUISIANA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are employed in Louisiana in real estate transactions and must be foreclosed judicially, usually by a proceeding known as “Executory Process.” MERS local counsel advises that Louisiana law does not prohibit a loan from being foreclosed in the name of MERS.14 When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender, its successors and assigns. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS becomes the mortgage holder.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.15
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them.16 Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, it seems to be the standard practice that the blank endorsement is cancelled and the note is endorsed to the servicer to
14 Please Note: Fannie Mae’s foreclosure regulations require an assignment from MERS to Fannie Mae in the Parish of Orleans. This means that Fannie Mae will be the foreclosing entity. This is the same requirement that exists when the servicer is the record mortgage holder.
15 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
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possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
foreclose. If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After the Petition is filed and the judge signs an order of executory process, the writ of seizure and sale is issued by the clerk and is served by the sheriff upon the mortgagor. After the foreclosure is published for the required amount of time, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If it is the successful bid, then the sheriff will issue a deed to MERS. MERS will then issue a subsequent deed to the investor.17 This is the same method that is used when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
17 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of
17 MERS should remain as the titleholder for as short of time as possible.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MAINE
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS.18 The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.19
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend adhering to the agencies’ policies.
18 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
19 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered and the redemption period has expired, a public auction is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If the successful bid, then MERS will assign its bid and any deficiency judgment to the investor. This is the same method that is used when the servicer forecloses in its name. The foreclosure deed will issue directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MARYLAND
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the mortgagee of record. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The foreclosure is filed and placed on the docket of the applicable circuit court with the same required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be the named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that there is sometimes an endorsement to the servicer in order to foreclose. We have not found this to be a legal requirement, and therefore, the agencies’ policies should be followed.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then before ratification, a motion to substitute interests will be filed so that the deed is issued directly to the investor. We have been advised that this is the procedure used when foreclosing in the name of the servicer. Because the MERS recommended procedure follows the
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same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be substituted as the interested party. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MASSACHUSETTS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are foreclosed using the mortgage power of sale together with a Land Court Judgment. MERS local counsel advises that a loan can be foreclosed in the name of Mortgage Electronic Registration Systems, Inc. Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes the Note is endorsed to the servicer prior to the foreclosure. However, we recommend that the agencies’ policies be followed.
MERS stands in the same position as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.20
At the foreclosure auction, MERS can waive the requirement of a deposit as to the investor. This way, the servicer can enter a bid on behalf of the investor without the
20 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights of the promissory note.
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investor needing to produce any funds. If it is the highest bid, the foreclosure deed can be issued directly to the investor. We have been advised that this procedure is the same procedure used when Freddie Mac or Ginnie Mae are the investors. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MICHIGAN
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are foreclosed non-judicially usually by a power of sale contained in the mortgage. Local counsel advises that a foreclosure can be brought in the name of MERS. The foreclosure is advertised by publishing the notice for four (4) consecutive weeks. The attorney should follow the same procedure followed when foreclosing in the name of the servicer except that the foreclosing entity is Mortgage Electronic Registration Systems, Inc. (MERS).
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. The endorsement is to remain in blank even if the servicer commences foreclosure. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that sometimes there is an endorsement of the promissory notes to the servicer to foreclose. However, we recommend that the agencies’ policies be followed. We have not found an endorsement to the foreclosure entity to be a legal requirement, and therefore, the note should not be endorsed to MERS prior to the foreclosure.
At the auction, the certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then a deed may be issued to MERS. However, when the role of MERS, the servicer and the
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investor is explained and understood, the servicer may be allowed to bid on its own behalf without having to produce any funds at the sale. This would be the preferred method to use if at all possible. This way, the deed is executed directly to the servicer. If this is not possible, and MERS must take title, then title should be held by MERS for as short of time as possible. A subsequent deed from MERS to the investor should be executed immediately so that MERS remains in the chain of title only for an instant. We have been advised that the current practice used when foreclosing in the name of the servicer, is for the servicer to take title and then execute a subsequent deed to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MINNESOTA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are typically foreclosed non-judicially. MERS local counsel advises that a loan can be foreclosed in the name of Mortgage Electronic Registration Systems, Inc. Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the power of attorney to foreclose the mortgage, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that currently sign the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
At the foreclosure sale, the certifying officer will instruct the foreclosing attorney to enter a bid on behalf of MERS. A sheriff’s certificate is issued to the highest bidder. If MERS is the highest bidder, then the Sheriff’s certificate will be issued to MERS. The sheriff’s certificate operates as the conveyance of title. The certificate is executed and recorded during the redemption period. At the end of the redemption period, a deed will be issued from MERS to the investor.21 However, not every
21 During the redemption period, MERS will be considered to be titleholder. However, at the end of the redemption period, a deed to the investor should be executed as soon as possible so that MERS remains in the chain of title for as short a time as possible.
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foreclosure counsel follows this procedure currently when foreclosing mortgage loans in the name of the servicer. If your current practice is to assign the sheriff’s certificate to the investor, then this is also an acceptable option.22
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the eviction can be brought in the name of MERS if MERS is the sheriff’s certificate holder. However, if you use the option of assigning the sheriff’s certificate, then the certificate is assigned to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
22 The difference between the two options is that some counsels prefer a one-deed process implementing an assignment of the sheriff’s certificate to the investor. Other counsels use a two-deed process with the servicer first taking title, and then executing a subsequent deed to the investor. Counsel should continue to follow the instructions given to them by the servicer of the mortgage loan.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MISSISSIPPI
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The foreclosure is advertised with the same required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Deed of Appointment substituting Trustees, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is a blank note endorsement to the servicer prior to foreclosure. We have not found this to be a legal requirement, and therefore, the note should not be endorsed to MERS prior to the foreclosure.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then MERS can assign the bid to the investor. This assignment is simply a paragraph incorporated in the substitution of trustee document authorizing the substituted trustee to convey the property directly to the investor in the Substituted Trustee’s Deed. We have been
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advised that this procedure is the same procedure used when foreclosing in the name of the servicer. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be assigned the bid. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MISSOURI
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially under a power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. A notice of sale is published and the borrower is notified along with all parties entitled to notice under state laws. A sale is then held. The same requirements continue to be followed except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require that the promissory note be endorsed in blank when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend that the agencies’ requirements be followed.
At the trustee sale, the certifying officer will instruct the trustee by a written bid letter that the bid is being assigned to the investor and that title should vest with the investor. We have been advised that this procedure is the same procedure used when foreclosing in the name of the servicer. Therefore, no additional fees are incurred by foreclosing in the name of MERS.
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be the assignee of the bid. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MONTANA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Sale includes the same required information as when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer. The Notice of Sale is recorded in the county where the property is located and is published in a newspaper of general circulation.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells the loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then a trustee’s deed will be issued to MERS. Title should only remain with MERS for as short of time as possible. A certifying officer of MERS will subsequently execute a Grant Deed to the investor. We have been advised that this procedure is the same procedure used when foreclosing in the name of the servicer. Because the MERS recommended
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procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEBRASKA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
If a mortgage is used, it is foreclosed judicially. If a deed of trust is used, it can be foreclosed non-judicially under power of sale. Regardless of the type of security instrument used, MERS local counsel advises that a loan can be foreclosed in the name of MERS.
In a judicial foreclosure, when MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer].23 The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. However, it is advised that a paragraph be inserted that explains that the servicer is the entity that is servicing the loan. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
In a non-judicial foreclosure, a notice of default is filed and recorded with the register of deeds in the county in which the property is located. The same procedures that are followed when foreclosing in the name of the servicer should continue to be followed except that Mortgage Electronic Registration Systems, Inc. will be named as the foreclosing entity.
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23 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the owner and holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having its employees become certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan. Therefore, MERS is both the mortgage holder and the note holder as nominee for the current servicer.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method.24
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents today on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered in a judicial foreclosure, a foreclosure sale is held. The certifying officer enters a bid on behalf of MERS. If it is the successful bid, then the bid will be assigned to the investor. The sheriff’s deed will be issued directly to the investor. This is the same method that is used when the servicer forecloses in its name. Because the MERS recommended procedure is the same as when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commenced the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship between MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
24 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEVADA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially pursuant to a power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. It is important to note that the same procedures and state requirements that are required to be followed when foreclosing in the servicer’s name must still be followed when foreclosing in the name of MERS. The Trustee must still record the Notice of Default and Election to Sell the Property. After the expiration of the three-month period, the Notice of Trustee’s Sale is filed and published the same way it is when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS. The substituted trustee is typically the foreclosing attorney.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. The note should remain endorsed in blank when the servicer commences the foreclosure. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS for the investor. This is the same process that is used
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when foreclosing in the servicer’s name. If it is the successful bid, then the trustee will be instructed to execute the Trustee’s Deed directly to the investor. Therefore, the MERS recommended procedure is the same as the current practice of bidding on behalf of the investor so that the Trustee’s Deed is issued directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS. Furthermore, there will not be a transfer tax when the trustee’s deed is issued directly to Fannie Mae, Freddie Mac, VA or HUD.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan, then the deed is not recorded to the investor until after the eviction is completed. The eviction is conducted the same way it is conducted when the foreclosure is brought in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEW HAMPSHIRE
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. (MERS) is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are generally foreclosed non-judicially under a power of sale in the security instrument. Local counsel advises that a foreclosure can be brought in the name of MERS.25 The Notice of Sales must be published with all required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies’ (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the foreclosure auction, the certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, MERS will assign the bid to the investor so that the foreclosure deed is issued directly to the investor. We have been advised that the current foreclosure procedure is a one-deed process with the investor taking title. Therefore, the MERS
25 Please Note: Fannie Mae’s foreclosure regulations require an assignment from MERS to Fannie Mae in New Hampshire. This means that Fannie Mae will be the foreclosing entity. This is the same requirement that exists when the servicer is the record mortgage holder.
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recommended procedure is same the as the current practice with an assignment of the bid to the investor. Therefore, no additional taxes are incurred by foreclosing in the name of MERS in place of the servicer.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer may be assigned the bid so that the servicer is the grantee of the foreclosure deed. This way, the servicer is able to commence the eviction. The servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name. After the eviction is completed, the servicer will then issue a deed to HUD.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEW JERSEY
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS become the mortgage holder.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.26
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend following the agencies’ policies.
26 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If it is the highest bid, then the sheriff would be instructed that MERS has assigned its bid to the investor. This is the same method that is used when the servicer forecloses in its name. The sheriff would issue a sheriff’s deed directly to the investor. Local counsel advises that only VA and HUD are exempt from transfer taxes on the sheriff’s deed. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEW MEXICO
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same position as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.27
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.28 We have not found it to be a requirement in New Mexico that the Note be endorsed to the foreclosing entity.
27 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights of the promissory note.
28 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a foreclosure judgment to MERS is entered, a Notice of Sale is published. The certifying officer will instruct the attorney regarding the bid to be entered on behalf of MERS. After the sale, a Report of Special Master is filed and an Order approving Sale and Special Master’s Report is filed. If MERS bid is the highest bid, then the Special Master’s Deed is recorded conveying the title to MERS. The title should only be held by MERS momentarily. A second deed should be prepared as soon as possible conveying the property from MERS to the investor. This is the same method that is used when the servicer forecloses in its own name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEW YORK
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender, its successors and assigns. In that case, the caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how did MERS become the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
Employees of the servicer will be authorized to sign any necessary documents as a certifying officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. This typically will be the same individual that signs the documents for the servicer, but now will be signing as an officer of MERS.
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A foreclosure judgment to MERS would be entered. At the foreclosure sale the certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If it is the successful bid, MERS will assign the bid to the investor. The assignment of the bid is a simple one-sentence reference that is submitted to the referee that states MERS assigns the bid to investor. The referee’s deed would be directly issued to the investor. This is the same method that is used when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is for the servicer so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NORTH CAROLINA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially under power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. Notices are sent to all interested parties, and a hearing is scheduled with the Clerk of Superior Court. The same process followed when foreclosing in the name of the servicer continues to be followed except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that sometimes there is an endorsement of the note to the servicer prior to the commencement of the foreclosure. We have not found this to be a legal requirement, and therefore, the agencies’ requirements should be followed.
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procedure followed when foreclosing in the name of the servicer. Because it is the same procedure, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid can be assigned to the servicer. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship between MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NORTH DAKOTA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through this instrument that the authority is given to MERS to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS.29 When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. However, it is advised that a paragraph be inserted that explains that the servicer is the entity that is servicing the loan. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.30
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to
29 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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30 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS. However, we have not found it a requirement in North Dakota that the Note be endorsed to the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents today on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. A bid is entered on behalf of MERS, and if the successful bid, then the certificate of sale can be issued to MERS. At the sale, only the party who conducted the foreclosure is entitled to “credit.” At this point, one of two options can be followed. One is to assign the certificate of sale to the servicer or the investor. This way, the sheriff’s deed will be issued directly to the assignee. The other is the sheriff’s deed can be issued to MERS, and a Grant Deed will be subsequently issued to the investor. The latter option is the same method that is used when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is for the servicer so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR OHIO
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If it is the successful bid, then MERS will assign its bid to the investor. The deed will then be issued directly to the investor. This is the same method that is used
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when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer foreclosures in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR OKLAHOMA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS, so long as MERS is the record mortgage holder and the holder of the promissory note (even if not the beneficial owner of the promissory note). The caption should reflect Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note.31 An investor, typically a secondary market investor, will still be the beneficial owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them.32 Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
31 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
32 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a Special Execution and Order of Sale is issued. The party instituting a foreclosure action must send a notice of the sheriff’s sale date to the borrower and all other persons that have a recorded interest or other known interest in the property that will be extinguished by the sale. This would include any junior lienholders, current owners or tenants and the holders of any other encumbrances on the property. The notice must be executed by the county sheriff and must contain a legal description of the property, as well as the date, time and place of sale. This notice must be sent at least 10 days prior to the date of sale. The attorney for the foreclosing party must execute and file an affidavit of compliance with these notice rules.
In addition, the party instituting a foreclosure action must publish notice of public sale for two successive weeks in the newspaper of the county in which the property is situated. The notice must also be executed by the sheriff and must state the names of persons having an interest in the property that will be extinguished by the sale. If the county does not have a newspaper, then a notice must be published on the court house, in 5 other public places in the county, as well as in any general circulation paper distributed in the county. If the county has a population of 110,000 as of the latest federal census, then the notice of sale must be published in a newspaper in the city or township in which the property is situated, or if no such paper exists, then the notice must be published in some newspaper published in the county. Okla. Stat. Tit. 12, section 764 (1995).
The sale is conducted by the county sheriff and must be held not less than 30 days after the date of the first publication or posting of the sale notice. Okla. Stat. Tit. 12, section 764 (1995). The sale is conducted through a public auction and the property is awarded to the highest bidder.
The certifying officer will instruct the foreclosing attorney to enter a bid on behalf of MERS. If it is the highest bid, then in the motion to confirm sale, MERS will request that the sheriff’s deed be issued to the investor. Upon the entering of the order confirming sale, the sheriff’s deed will be executed in favor of the investor. The MERS recommended procedures do not cause any additional taxes to be incurred.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to
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disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR OREGON
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are foreclosed non-judicially by conferring a power of sale on the trustee in the event of default by the borrower. MERS local counsel advises that a loan can be foreclosed in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the substitution of trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The only change to the foreclosure procedure is to name Mortgage Electronic Registration Systems, Inc. in the foreclosure notices as the beneficiary instead of to name the servicer. At the trustee’s sale, a bid will be entered on behalf of MERS. The bid is entered the same way it is entered for the servicer when foreclosing in the servicer’s name. If the bid is the highest bid, then the trustee’s deed can be issued directly to the investor. The Trustee’s deed will identify the investor as the grantee under the trustee’s deed and will recite that MERS, as nominee, successfully bid for the property at the trustee’s sale. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR PENNSYLVANIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS will be the record mortgage holder. It is through the mortgage that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer or the investor to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer or investor. A paragraph should be added that MERS, is or will be, the owner of legal title to the mortgage that is the subject of this action, and nominee for the [insert name of investor, or name of current servicer, if investor is Fannie Mae or Freddie Mac], which is the owner of the entire beneficial interest in the mortgage.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
After the foreclosure judgment is entered in favor of MERS, the sheriff’s sale is scheduled. The servicer provides bidding instructions to the foreclosure attorney. After the sale, assuming that the foreclosure attorney was the successful bidder, the
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attorney instructs the sheriff, in writing, to assign the bid to the investor and to name the investor as grantee on the sheriff’s deed.33
The name of MERS must not appear on any post-sale documents, including sheriff’s deeds and complaints in ejectment. For FHA-insured loans that require evictions, the attorney must instruct the sheriff, in writing, to assign the bid to the investor, instead of to HUD, and to name the investor as grantee on the sheriff’s deed. The servicer, on behalf of the investor, proceeds with the eviction and deeds the property to HUD once the eviction is completed.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
33 MERS local counsel has contacted and received a letter from the Department of Revenue of the Commonwealth of Pennsylvania that indicates the investor can use the foreclosing mortgagee transfer tax exemption by showing that MERS participated in the sheriff’s sale merely as an agent of the investor.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR RHODE ISLAND
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are foreclosed non-judicially. MERS local counsel advises a loan can be foreclosed in the name of Mortgage Electronic Registration Systems, Inc.34 The foreclosure is advertised with Mortgage Electronic Registration Systems, Inc. as the named foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the Note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
34 Please Note: Fannie Mae’s foreclosure regulations require an assignment from MERS to Fannie Mae in Rhode Island. This means that Fannie Mae will be the foreclosing entity. This is the same requirement that exists when the servicer is the record mortgage holder.
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MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.35
At the foreclosure auction, MERS can waive the requirement of a deposit as to the investor. This way, the servicer can enter a bid on behalf of the investor without the investor needing to produce any funds. If it is the highest bid, the foreclosure deed can be issued directly to the investor. We have been advised that this procedure is the same procedure used when Freddie Mac or Ginnie Mae are the investors. Because the MERS recommended procedure follows the same procedure that is used when the servicer foreclosures in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
35 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial right to the promissory note.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR SOUTH CAROLINA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS.36 When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender, its successors and assigns. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. However, it is advised that a paragraph be inserted that explains that the servicer is the entity that is servicing the loan. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note. 37
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require that the promissory note be endorsed in blank when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure
36 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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37 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend that the agencies’ requirements be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a foreclosure sale is held. A bid is entered on behalf of MERS, and if the successful bid, then the bid will be assigned to the investor by using a one-page form instructing the sheriff of the assignment of bid. This is the same method that is used when the servicer forecloses in its name. The master in equity or the special referee would issue a deed directly to the investor. Local counsel advises that Fannie Mae, Freddie Mac, VA and HUD are exempt from transfer taxes on the sheriff’s deed. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR SOUTH DAKOTA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS become the mortgage holder.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer in relation to not being the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.38
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the
38 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial right to the promissory note.
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same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If it is the successful bid, then one of two options can be followed39. The first is that the Certificate of Sale may be assigned from MERS to the investor. This way, upon expiration of the redemption period, the sheriff’s deed will issue directly to the investor. There is a recording cost for the Certificate of Sale. The second option is that upon the expiration of the redemption period, MERS is issued the sheriff’s deed by virtue of being the holder of the Certificate of Sale. If this option is followed, MERS should only remain in the chain of title for as short of time as possible. A subsequent deed will then be executed from MERS to the investor. We have been advised that this latter option is the method that is used when the servicer forecloses in its name. Typically the servicer is issued the sheriff’s deed, and then issues a subsequent deed to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
39 MERS prefers to not take title to the property, so the Certificate of Sale should be assigned if possible. However, either option is acceptable.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR TENNESSEE
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, in place of the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially under a power of sale in the security instrument. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Default is filed and published the same way it is when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Appointment of Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. In the Trustee’s Deed, the bid will be assigned to the investor, unless the certifying officer instructs the trustee to assign the bid to the servicer. We have been advised that the current foreclosure procedure is a one-deed process with the investor directly taking title upon the conclusion of the trustee’s sale. Therefore, the MERS recommended procedure is the same as the current practice of assigning the bid to the investor. Because the MERS recommended
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procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan, the eviction may need to be brought in the name of MERS. Therefore, MERS may need to be the grantee of the trustee’s deed. After the eviction is completed, MERS will then issue a deed to HUD.40
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
40 MERS should only be in the chain of title for as short of a time as possible. As soon as the eviction is completed, the deed to HUD should be recorded.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR TEXAS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the mortgagee or beneficiary of record in the chain of title. It is through the power of sale in the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The foreclosure is commenced the same way as if it were being brought in the servicer’s name except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named the foreclosing entity as the mortgagee or beneficiary of record as the nominee for the current servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Appointment of Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS as the mortgagee of record. If the bid is the highest bid, then the trustee’s deed is issued to MERS as the mortgagee of record and as the nominee for the current servicer. The servicer, as a duly appointed officer of MERS, can then convey the property by deed to the investor which is the same as the current practice that is used when foreclosing in the name of the servicer as mortgagee or
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beneficiary of record. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR UTAH
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Default and Election to Sell is filed with the county recorder. Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
After the reinstatement period expires, the Notice of Sale is published for the required length of time. Once this is completed, the foreclosure sale is held. The certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, the certifying officer will instruct the trustee to deed the property directly to the investor. We have been advised that this procedure is the same procedure used when foreclosing in the name of the servicer. Therefore, no additional taxes are incurred by foreclosing in the name of MERS in place of the servicer.
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be substituted as the interested party.41 This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
41 MERS local counsel advises that an eviction is brought in the name of the party that takes title to the property following the foreclosure sale.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR VERMONT
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. When the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. Over 90% of the foreclosures are by strict foreclosures. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender, its successors and assigns. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.42
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the
42 The servicer usually has physical custody of the note at the time of the foreclosure with a blank endorsement. This makes the servicer the noteholder for the purposes of foreclosing. However, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
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foreclosing entity. If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS. Local counsel has advised that it is essential that the Promissory Note be held in the name of the mortgage holder.43
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
Because the majority of the foreclosures are by strict foreclosure, title will vest in MERS momentarily.44 The certifying officer will submit an affidavit of amounts due to the Clerk of Court, after which a default or summary judgment will be issued by the Court. The Clerk will prepare an accounting. Once the accounting is received, a judgment is prepared and served. The judgment is then signed by the Court. After the redemption period expires, a Certificate of Non-Redemption and Writ of Possession will be issued by the Court to MERS. The property will then be deeded from MERS to the investor. This is the same process that occurs when the servicer of the mortgage loan forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
An alternative option is to file a Motion for Substitution of Parties after the judgment to MERS is entered. At this time, an unrecorded assignment of the mortgage needs to be shown to the judge. It should be noted that certain courts are not staffed with full time judges and there may be a slight increase in time before this Motion can be decided. It is recommended that this Motion be filed as soon as possible after the judgment is entered so that it is completed prior to the expiration of the redemption period. At the end of the redemption period, a Certificate of Non-Redemption is recorded which transfers the title. Prior to the Certificate being issued, the assignment of the mortgage is recorded.
Local counsel advises that Fannie Mae, Freddie Mac, VA and HUD are exempt from transfer taxes on the sheriff’s deed.
43 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR VIRGINIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially by a power of sale given to the Trustee upon default. Local counsel advises that a foreclosure can be brought in the name of MERS.45 The same procedure that is followed when foreclosing in the name of the servicer is followed when foreclosing in the name of MERS except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Because the original note is required to be shown to the Commissioner at the time of the final accounting, the note is usually endorsed to the servicer when foreclosing in the name of the servicer. Therefore, local counsel advises that the note may need to be endorsed to MERS as the foreclosing entity. The endorsement of the note to the servicer is the same procedure that is followed when foreclosing in the name of the servicer.
45 Local Counsel advises that the promissory note is endorsed to the servicer prior to commencing a foreclosure so that the servicer becomes the noteholder. In order for a foreclosure to be brought in the name of MERS, the note should be endorsed to MERS so that MERS is the noteholder.
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At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then the trustee will be instructed to deed the property directly to the investor. We have been advised that this procedure is the same used when foreclosing in the name of the servicer. Therefore, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be deeded the property so that the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR WASHINGTON
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are foreclosed non-judicially by conferring a power of sale on the trustee in the event of default by the borrower. MERS local counsel advises that a loan can be foreclosed in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the substitution of trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
The only change to the foreclosure procedure is to name Mortgage Electronic Registration Systems, Inc. as the foreclosing entity. The Notice of Default and Notice of Trustee’s Sale is still required to be sent and published and all requirements related to these Notices must be followed. At the trustee’s sale, a bid will be entered on behalf of MERS. The bid is entered the same way it is entered for the servicer when foreclosing in the servicer’s name. If the bid is the highest bid, then the trustee’s deed can be issued directly to the investor. This is the same procedure that is followed when commencing a foreclosure in the name of the servicer. The Trustee’s deed will identify the investor as the grantee under the trustee’s deed and will recite that MERS, as nominee, successfully bid for the
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property at the trustee’s sale. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR WEST VIRGINIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The notice of sale is served on the grantor of the Deed of Trust by certified mail. The foreclosure sale is published according to the same requirements followed when foreclosing in the name of the servicer. Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee auction, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then the certifying officer will instruct the trustee on how to deed the property. A three-party deed can be used with the trustee transferring the property to the investor. MERS simply signs the deed and states that it has assigned its right in its bid to the investor. We have been advised that this procedure is the same procedure used when foreclosing
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in the name of the servicer. Therefore, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the property can be deeded to the servicer. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR WISCONSIN
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like a servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. The caption of the complaint should name Mortgage Electronic Registration Systems, Inc. (MERS) as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. A secondary market investor will still be the owner of the promissory note. A paragraph can be added to the complaint to explain the role of MERS as being the mortgagee of record with the authority to foreclose.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when a seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a foreclosure judgment in favor of MERS is entered and after expiration of the redemption period, a foreclosure sale is held. The certifying officer will provide local counsel with bid instructions. A bid will be entered on behalf of MERS, and if it is the highest bid, MERS will assign its bid to the investor and the investor can appear as the grantee on the Sheriff’s Deed. The Sheriff’s deed is then issued
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directly to the investor. The assignment of the bid is the method that is being used when the servicer forecloses in its name. The sheriff’s deed is exempt from transfer tax as are sheriff’s deeds following an assignment of bid. Certain other transfers, as between “principal and agent for no consideration may also be exempt from transfer tax. Because the MERS recommended procedure follows the procedure used when foreclosing in the servicer’s name, no additional taxes are incurred.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to the investor (HUD). This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR WYOMING
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are foreclosed non-judicially by a power of sale contained in the mortgage. Local counsel advises that a foreclosure can be brought in the name of MERS. Notice of the sale is recorded in the real estate records and mailed by certified mail to all interested parties. The same procedures followed when foreclosing a mortgage loan in the name of the servicer is followed when foreclosing in the name of MERS except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer. Publication of the sale occurs ten (10) days after the recording and mailing of the Notice.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the sheriff’s sale, the certifying officer will instruct the sheriff regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then MERS will be issued a Certificate of Purchase. The Certificate of Purchase will be assigned to the investor. We have been advised that this is the same procedure used when foreclosing in the name of the servicer. Because the MERS recommended procedure
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follows the same procedure that is used when the servicer forecloses in its name, no additional recording costs are incurred by foreclosing in the name of MERS. Wyoming does not have transfer taxes.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be assigned the Certificate. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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A Homeowners’ Rebellion: Could 62 Million Homes be Foreclosure-Proof?

62 MILLION HOMES ARE LEGALLY FORECLOSURE -PROOF

Posted 7 hours ago by Neil Garfield on Livinglies’s Weblog

EDITOR’S NOTE: YES IT MEANS WHAT IT SAYS — WHICH IS WHAT I HAVE BEEN SAYING FOR THREE YEARS. BUT JUST BECAUSE SOME JUDGES REALIZE THAT THIS IS THE ONLY CORRECT LEGAL INTERPRETATION DOESN’T MEAN ALL OF THEM WILL ABIDE BY THAT. QUITE THE REVERSE. MOST JUDGES REFUSE TO ACCEPT AND CAN’T WRAP THEIR BRAINS AROUND THE FACT THAT THE FINANCIAL INDUSTRY THAT SET THE LEGAL STANDARDS FOR PERFECTING A SECURITY INTEREST IN RESIDENTIAL HOME MORTGAGES COULD HAVE SCREWED UP LIKE THIS.

THE ANSWER OF COURSE IS THAT THEY DIDN’T — WALL STREET DID IT. I KNOW FOR A FACT AND HAVE SEEN THE INTERNAL MEMORANDUM WRITTEN IN 2003-2006 THAT LAWYERS WHO WERE PREPARING THE SECURITIZATION DOCUMENTS KNEW AND INFORMED THEIR CLIENTS THAT THIS COULD NOT WORK.

THIS DOES NOT MEAN YOU GET A FREE HOUSE. BUT IT DOES MEAN THAT AT THE MOMENT ANY HOUSE IN WHICH MERS WAS INVOLVED DOES NOT HAVE A PERFECTED SECURITY INTEREST AS AN ENCUMBRANCE. AND THAT MEANS THAT ANY FORECLOSURE BASED UPON DOCUMENTS OR PRESUMPTIONS REGARDING MERS ARE VOID. AND THAT MEANS THAT IF YOU FALL INTO THIS CLASS OF PEOPLE — AND MOST PEOPLE DO — IT IS POSSIBLE AND EVEN PROBABLE THAT YOU COULD BE AWARDED QUIET TITLE ON A HOME THAT WAS FORECLOSED AND SOLD EVEN YEARS AGO.

BUT BEWARE: JUST BECAUSE THEY SCREWED UP THE PAPERWORK AND THEY DON’T HAVE THE REMEDY OF FORECLOSURE IMMEDIATELY AVAILABLE DOESN’T MEAN THAT NOBODY LENT YOU MONEY NOR DOES IT MEAN THAT YOU DON’T OWE ANY MONEY NOR DOES IT MEAN THAT THEY COULD NOT CREATE AN EQUITABLE LIEN ON YOUR PROPERTY THAT COULD AMOUNT TO A MORTGAGE THAT COULD BE FORECLOSED. BUT THAT IS STRICTLY A JUDICIAL PROCESS EVEN IN SO-CALLED NON-JUDICIAL STATES.

WE ARE NOW CLOSING IN ON THE REALITY. THE INEVITABLE OUTCOME IS PRINCIPAL REDUCTION WHETHER THE BANKS LIKE IT OR NOT. EVEN IF THEIR LIEN WAS PERFECTED AND ENFORCEABLE THEY STILL CANNOT GET ANY MORE MONEY THAN THE HOUSE IS WORTH. WITHOUT THE ENCUMBRANCE, THEY ARE FORCED TO NEGOTIATE A WHOLE NEW PATH WITH ONLY THE PARTIES THAT ARE NOW LEFT HOLDING THE BAG ON THE LOSS ASSOCIATED WITH THE ORIGINAL LOAN ON YOUR PROPERTY, AFTER ADJUSTMENTS FOR PAYMENTS RECEIVED BUT NOT RECORDED OR ALLOCATED.

IN ORDER TO HOLD THEIR FEET TO THE FIRE, YOU HAVE TO KNOW THE ORIGINAL SECURITIZATION SCHEME AND INSIST ON PROOF OF WHAT HAPPENED AFTER THE INITIAL SECURITIZATION PLAN WAS PUT IN PLACE. REMEMBER THAT THIS IS NOT A FIXED EVENT. THIS IS SINGLE TRANSACTION BETWEEN THE BORROWER AND AN ONGOING PROCESSION OF SUCCESSORS EACH OF WHOM HAS QUESTIONABLE RIGHTS TO THE NOTE, MORTGAGE OR EVEN THE OBLIGATION SINCE THEY WERE ONLY ASSIGNED A RECEIVABLE FROM A PARTY WHO WAS NEITHER THE BORROWER NOR THE ORIGINATING LENDER.

A Homeowners’ Rebellion: Could 62 Million Homes be Foreclosure-Proof?

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Ellen Brown
Web of Debt
August 20, 2010

Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles—and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.

Victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”—an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

California Precedent

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E–11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:

Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.

The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:

This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee’s Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS’ technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

An August 2010 article in Mother Jones titled “Fannie and Freddie’s Foreclosure Barons” exposes a widespread practice of “foreclosure mills” in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders’ case in 2004. Five years later, she says, some of the homeowners she’s helped are still in their homes. According to a Huffington Post article titled “‘Produce the Note’ Movement Helps Stall Foreclosures”:

Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action ‘quiets’ all other claims). Charney says she’s helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.

Criminal Charges?

Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used “the artifice of MERS to sabotage the judicial process to the detriment of borrowers;” that “to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;” that the scheme depended on “the MERS artifice and the ability to generate any necessary ‘assignment’ which flowed from it;” and that “by engaging in a pattern of racketeering activity, specifically ‘mail or wire fraud,’ the Defendants . . . participated in a criminal enterprise affecting interstate commerce.”

Local governments deprived of filing fees may also be getting into the act, at least through representatives suing on their behalf. Qui tam actions allow for a private party or “whistle blower” to bring suit on behalf of the government for a past or present fraud on it. In State of California ex rel. Barrett R. Bates, filed May 10, 2010, the plaintiff qui tam sued on behalf of a long list of local governments in California against MERS and a number of lenders, including Bank of America, JPMorgan Chase and Wells Fargo, for “wrongfully bypass[ing] the counties’ recording requirements; divest[ing] the borrowers of the right to know who owned the promissory note . . .; and record[ing] false documents to initiate and pursue non-judicial foreclosures, and to otherwise decrease or avoid payment of fees to the Counties and the Cities where the real estate is located.” The complaint notes that “MERS claims to have ‘saved’ at least $2.4 billion dollars in recording costs,” meaning it has helped avoid billions of dollars in fees otherwise accruing to local governments. The plaintiff sues for treble damages for all recording fees not paid during the past ten years, and for civil penalties of between $5,000 and $10,000 for each unpaid or underpaid recording fee and each false document recorded during that period, potentially a hefty sum. Similar suits have been filed by the same plaintiff qui tam in Nevada and Tennessee.

By Their Own Sword: MERS’ Role in the Financial Crisis

MERS is, according to its website, “an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.” Or as Karl Denninger puts it, “MERS’ own website claims that it exists for the purpose of circumventing assignments and documenting ownership!”

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MERS was developed in the early 1990s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans. That did not actually happen, but what MERS did allow was the securitization and shuffling around of mortgages behind a veil of anonymity. The result was not only to cheat local governments out of their recording fees but to defeat the purpose of the recording laws, which was to guarantee purchasers clean title. Worse, MERS facilitated an explosion of predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages. As alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al.:

Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder’s office where documents reflecting any ownership interest in real property are kept….

After MERS, . . . the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible …. The servicer was interested in only one thing – making a profit from the foreclosure of the borrower’s residence – so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the ‘beneficiary’ under millions of deeds of trust in Nevada and other states.

Axing the Bankers’ Money Tree

If courts overwhelmed with foreclosures decide to take up the cause, the result could be millions of struggling homeowners with the banks off their backs, and millions of homes no longer on the books of some too-big-to-fail banks. Without those assets, the banks could again be looking at bankruptcy. As was pointed out in a San Francisco Chronicle article by attorney Sean Olender following the October 2007 Boyko [pdf] decision:

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

. . . The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail . . . .

Nationalization of these giant banks might be the next logical step—a step that some commentators said should have been taken in the first place. When the banking system of Sweden collapsed following a housing bubble in the 1990s, nationalization of the banks worked out very well for that country.

The Swedish banks were largely privatized again when they got back on their feet, but it might be a good idea to keep some banks as publicly-owned entities, on the model of the Commonwealth Bank of Australia. For most of the 20th century it served as a “people’s bank,” making low interest loans to consumers and businesses through branches all over the country.

With the strengthened position of Wall Street following the 2008 bailout and the tepid 2010 banking reform bill, the U.S. is far from nationalizing its mega-banks now. But a committed homeowner movement to tear off the predatory mask called MERS could yet turn the tide. While courts are not likely to let 62 million homeowners off scot free, the defect in title created by MERS could give them significant new leverage at the bargaining table.

Countrywide settlement pays fraction to investors – Shell Game Continues

Countrywide settlement pays fraction to investors – Shell Game Continues
Posted on August 16, 2010 by Neil Garfield

EDITOR’S NOTE: The shell game continues. While the media picks up stories about “settlements” giving rise to the presumption that Countrywide Home Loans and Bank of America and the rest of the securitization players committed various violations of statutes, duties, rules and regulations, the main point gets lost. Where is this money going and WHY? What is the tacit or express admission in paying that money and what effect does it have on the average homeowner sitting with a loan whose obligation is being paid in these settlements?
Think about it. If Bank of America, which now owns Countrywide, is paying “fractions” to investors who purchased mortgage bonds then who is it that owns the underlying mortgages and loans? Did Bank of America pay the investors do it under a reservation of rights (subrogation) to enforce the underlying loans? If not, then why are they foreclosing? All evidence is to the contrary. There is no subrogation under these purchases, insurance, credit default swaps or any other contract — not that I ever saw and not that my sources in the industry tell me was ever even contemplated much less executed. The same holds true for all those bonds the Federal Reserve is holding.

If Bank of America is paying “fractions” to investors who purchased mortgage bonds, why was it a fraction? Is it because the value of the bond was much lower than the price paid by the investor? Is it just a convenient settlement? Or is it because the investors have also received funds from other sources?

This is what I am referring to when I address “factual constipation.” How are these payments being allocated? Did the owners of the bonds actually have any definable interest in the underlying mortgage loans? If they did, why are these payments not being allocated to the obligations or payments due under those underlying mortgage loans? If they didn’t, why did they get paid anything? How will we ever know without getting a full accounting from all the parties that claim some stake or ownership interest or receivable interest in me is underlying mortgage loans?

It is black letter law as well as common law dating back centuries that nobody can collect the same debt more than once. If they do collect more than once there is a clear right of action by the borrower to collect the excess payment through a lawsuit for unjust enrichment, breach of contract and other causes of action. Here we have an intentional act designed to collect the same debt multiple times. In my opinion this does not merely indicate the presence of an action for fraud, it clearly shows an interstate pattern of racketeering that at one time in our history had the Department of Justice and the FBI busy putting people in jail.

Only in America where the news has turned into an entertainment blitz used by those with the most power and the most money to get their message across, even if it is a total lie. Somehow many if not most people have the impression that the borrowers and the securitized mortgages executed between 2001 and 2009 are not entitled to the relief that any other debtor is entitled to receive––that is the obligation has been reduced for any reason, the borrowers should get credit and if any party receives money in excess of the net amount due after credits, the creditor becomes the debtor owing money to the former borrower.

The bullet point that is being used to distort the perception of our citizens and policymakers is that these borrowers should not get a “free house.” Without getting a full accounting from all parties that advanced funds to and from the original investors who purchased mortgage bonds or collateralized debt obligations and related hedge products, there is no way of knowing the amount of the credit which is due to the borrower. Yes, it is possible that the amount received by the various intermediaries in the securitization chain exceeded the original obligation due from the borrower.

In that case, the borrower owes nothing to the originating lender or the successors to that lender. But if there is still a class of investor or institution that can prove a loss resulting from the nonpayment of the obligation by the borrower (as opposed to non-payment from other parties in the securitization chain) then the law allows that party to recover the loss from those that caused it. That probably includes the borrower, which means that we are not seeking a free house, we are seeking a truthful accounting.

BUT the fact that this obligation theoretically exists does not mean and never did mean under any legal decision in existence that the obligation should be paid to anybody who claims it. By all substantive and procedural law, the obligation is payable to one who proves the obligation and to one who proves it is owed to them and nobody else.
Yet in the view of many judges the challenge by the borrower is viewed as a delay tactic or an attempt to use technical deficiencies to a gain a free house on a lawn that the borrower sought but could not pay. No doubt this is true in some cases. But in nearly all the cases, armies of salespeople using names like “loan expert” pounded on doors and rang the phones of people who had no thought of borrowing money on homes, in many cases, that were debt-free and had been in the family for generations. Now many of those homes are bank owned property.
The simple question that needs to be posed to anyone who looks at the borrower as anything other than a victim is which is more likely? Did the owners of 20 million homes enter into a conspiracy to defraud the financial system, half society and our taxpayers? Did these people have the sophistication, education, knowledge, experience or training to pull off such a caper? Or is it more likely that the Wall Street titans stepped over the line and instead of increasing liquidity for the benefit of consumers and small businesses, used their position to deplete the resources of unsuspecting citizens, pension funds, financial institutions and governmental units from the top federal levels down to the smallest local geographical areas?

Countrywide settlement pays fraction to investors

By ALAN ZIBEL (AP) – Aug 3, 2010

WASHINGTON — Former shareholders of fallen mortgage giant Countrywide Financial Corp. are in line to recoup a fraction of their investments now that a Los Angeles judge has approved a settlement worth more than $600 million settlement.

The payoff doesn’t come close to compensating for the money lost by investors. But it could prompt more lenders to settle legal disputes at the center of the housing bust.

Bank of America, which bought Countrywide two years ago, agreed to pay $600 million to end a class-action case filed against the company. KPMG, Countrywide’s accounting firm, will pay $24 million.

Several New York pension funds who served as lead plaintiffs alleged that Countrywide hid how risky its business had become during the housing market’s boom years. Calabasas, Calif.-based Countrywide was once the nation’s largest mortgage lender.

The agreement stands to return about 40 cents per share of Countrywide’s common stock, before legal fees and expenses. Consider that the stock peaked at $45 a share in February 2007, before the financial crisis. So an investor who held 100 shares could bank on receiving $40 for an investment that was once worth $4,500.

Shareholders did receive 0.1822 shares of Bank of America’s stock for each share of Countrywide they owned when Bank of America acquired Countrywide. That worked out to about one share for every 5.5 shares of Countrywide stock. Shares of Bank of America closed at $14.34 on Tuesday. So that same 100 shares of Countrywide would be worth about $261 today in Bank of America stock.

Add the $40 from the settlement and those shares are now worth little more than $300.

Lawyers for the pension funds are requesting $56 million, or 4 cents per share, for fees and other costs.

Investors “will be compensated for a significant portion of the legal damages that they suffered as a result of what we believe was a violation of the securities laws,” said Joel Bernstein, a lawyer for the pension funds. “They won’t be compensated for every penny of that.”

Bank of America has been trying to put Countrywide’s legal problems behind it. In June, the Charlotte, N.C.-based company agreed to pay $108 million to settle the Federal Trade Commission’s charges that Countrywide collected outsized fees from about 200,000 borrowers facing foreclosure.

It reached a settlement Monday primarily to keep legal fees from escalating, a bank spokeswoman said.

“Countrywide denies all allegations of wrongdoing and any liability under the federal securities laws,” said Shirley Norton, a spokeswoman for Bank of America. “We agreed to the settlement to avoid the additional expense and uncertainty associated with continued litigation.”

Plaintiffs attorneys have pursed lawsuits against numerous lenders and investment banks in the wake of the housing market’s devastating downturn, and the Countrywide settlement could encourage even more such cases, said Paul Hodgson, a senior research associate at The Corporate Library, an independent corporate governance research firm.

“There are a lot of suits out there waiting to get launched,” Hodgson said. “I think this is the opening of the floodgates.”

Former Countrywide CEO Angelo Mozilo, former President David Sambol, former CFO Eric Sieracki and former board members were named in the litigation but are not contributing to the settlement.

But it does not end their legal problems. More than a year ago the Securities and Exchange Commission brought civil fraud charges against Mozilo and the two other former executives. Mozilo, the most high-profile individual to face charges from the government in the aftermath of the financial crisis, has denied any wrongdoing.

For Countrywide, “This is only a chapter and not the end of the book,” said John Coffee, a securities law professor at Columbia University.

Filed under: CASES, CDO, CORRUPTION, GTC | Honor, HERS, Investor, MODIFICATION, Mortgage, Servicer, bubble, education, evidence, expert witness, foreclosure, foreclosure mill, foreign relations, investment banking, trustee | Tagged: KPMG, countrywide, Bank of America, ALAN ZIBEL, AP, New York pension funds, Joel Bernstein | 3 Comments »

MERS to big to punish

The issue before the court boils down to whether MERS qualifies for certain exemptions from corporate tax registration required under section 23305 of the California Revenue and Tax Code. If it does not qualify for exemption, then MERS’ contracts are voidable under White Dragon Productions, Inc. vs. Performance Guarantees, Inc. (1987)
196 Cal.App.3d 163, and MERS may not appear to defend itself in this matter. (While Defendant presents a contrary 9th circuit decision on the issue of voidability of contract, the doctrine of stare decisis prevents the court from choosing to elect to follow that advisory opinion over California’s own precedent. Auto Equity Sales, Inc. v. Superior Court, 57 Cal. 2d 450 (1962). In Auto Equity Sales, the Court explained:
Under the doctrine of stare decisis, all tribunals exercising inferior jurisdiction are required to follow decisions of courts exercising superior jurisdiction. Otherwise, the doctrine of stare decisis makes no sense. The decisions of this court are binding upon and must be followed by all the state courts of California. Decisions of every division of the District Courts of Appeal are binding upon all the justice and municipal courts and upon all the superior courts of this state, and this is so whether or not the superior court is acting as a trial or appellate court. Courts exercising inferior jurisdiction must accept the law declared by courts of superior jurisdiction. It is not their function to attempt to overrule decisions of a higher court.” Therefore, White Dragon controls.)

With regard to the matter instantly before the court, MERS’ claimed exemptions are laid out at Corporations Code sections 191(c)(7) and 191(d)(3). Each of these statutory provisions provides narrow grounds for a foreign corporation to gain exemption from registration with our Secretary of State and payment of taxes so long as that corporation meets certain requirements and only conducts certain limited activities.
To rule on the question of MERS’ exemption under Corp. Code section 191(c)(7), the court must make three determinations: first, the court must make a legal determination as to the meaning of the language “creating evidences” in the statute; second and third, the court must make factual determinations to what activities MERS has been alleged in the FAC to have been conducting, and whether those activities are “creating evidences” and thereby exempted.
To answer the question of MERS’ exemption under Corp. Code section 191(d)(3), the court need make only two factual determinations, which are: is MERS a foreign lending institution, and if so, does it own the instant note, or any note in any of the thousands of MERS foreclosures in this state?
Finally, the court must decide whether, under either section, the operation of a database, selling memberships, and providing access to a database constitute exempted activities, and whether the acting as an agent of an exempt institution extends the exemption to MERS?

II. ARGUMENT
A. MERS DOES NOT QUALIFY FOR EXEMPTION UNDER CORPORATIONS
CODE SECTION 191(c)(7) BECAUSE 1) THE RULES OF STATUTORY
INTERPRETATION FORBID RENDERING SUBSECTION (d)(3) TO BE DEAD
LETTER; 2) ALL OF MERS’ ACTIVITIES GO BEYOND THE PLAIN MEANING
OF THE TERM, AND 3) NONE OF MERS’ ACTIVITIES COMPRISE THE PLAIN
MEANING OF THE TERM.
1. A Finding That MERS’ Foreclosure Activities Constitute Merely “Creating Evidences” Of Mortgages Would Render Subsection (d)(3) Dead Letter.

California Corporations Code section 191 (c)(7) provides an exemption to tax registration for foreign corporations engaged in “[c]reating evidences of debt or mortgages, liens or security interests on real or personal property.” Id. The statute does not expressly define “creating evidences,” and so the court is called upon to apply the rules of statutory construction to interpret the code prior to applying it. This is a matter of first impression, as there is no California precedent on this issue. (However, both parties have submitted federal court opinions on both sides of the issue).

California courts do not favor constructions of statutes that render them advisory only, or a dead letter. Petropoulos v. Department of Real Estate (2006) 142 Cal.App.4th 554, 567; People v. Stringham (1988) 206 Cal.App.3d 184, 197. Because Corp Code section 191(d)(7) expressly reserves the activities of assigning mortgages, conducting foreclosures, and substituting trustees for foreign lending institutions, these activities must, by definition, go beyond what is intended by “creating evidences” of transactions, or else, the gateway consideration of being a foreign lending institution required at section 191(d) would be dead letter, because such activities would already apply to ALL foreign corporations, who are exempted at (c)(7) for “creating evidences.” If the legislature included these foreclosurerelated activities in a new subsection expressly reserved for a certain type of foreign entity, then it clearly did not intend for them to be included by the term “creating evidences” which is provided to all foreign corporations.

2. All of MERS’ Activities Go Beyond The Plain Meaning Of The Term “Creating Evidences.”
Because there is no express definition of “creating evidences” provided in the Corporations Code, this phrase should be given its common meaning. “Creation” is defined by Mirriam Webster’s Dictionary as “the act of making, inventing or producing.”
“Evidence” is defined by the California Code of Evidence as “testimony, writings, material objects, or other things presented to the senses that are offered to prove the existence or nonexistence of a fact.” Evidence Code 140.
The evidences referred to in Corp. Code section 191(c)(7) are “of debt or mortgages, liens or security interest on real or personal property.”

Hence, when the words are taken together, the statute exempts: “making, inventing, or producing testimony, writings, material objects, or other things presented to the senses that are offered to prove the existence or nonexistence of debt or mortgages, liens or security interest on real or personal property.”

MERS’s California activities go far beyond these activities. In contrast to MERS, a foreign corporation who might qualify for exemption for “making, inventing, or producing testimony, writings, material objects, or other things presented to the senses that are offered to prove the existence or nonexistence of debt, mortgages, liens or security interest on real or personal property” is Socrates Legal Media, LLC, 227 West Monroe Suite 500 Chicago, IL 60606.

The business of Socrates Legal Media includes selling pre-packaged contract forms at Office Depot for people who conduct routine real estate transactions, such as taking liens on real property to secure debts. If a dispute arose between two parties to such an agreement within our state, and Socrates was brought in by the Plaintiff and alleged as being an unregistered foreign corporation who does not to have capacity to defend, Socrates could point out that it merely CREATES EVIDENCES of transactions, and seek exemption from the registration requirement to defend itself in the case. MERS, on the other hand, does not merely provide forms for agreements, or “create evidences” of them; MERS participates in California transactions.

Therefore, MERS’ activities go beyond what “creating evidences” could possibly mean. However, the trouble with MERS’s argument does not end with that.

3. None of MERS’ Activities Meet The Definition of “Creating Evidences.”

The real trouble with MERS’ argument is that it clearly did not even create these evidences to begin with, nor does it claim to. To wit, the evidences of debt, liens on property, or mortgages at issue in this case – the Note and the Deed of Trust – are “made, invented, and produced” respectively by the Lender and by federal government bodies known as “Fannie Mae” (short for the Federal National Mortgage Agency) and “Freddie Mac” (short for the Federal Home Loan Mortgage Corporation).

The court may take judicial notice of the fact that these uniform instruments, used more commonly than any other to evidence the fact of a real estate mortgage transaction in our state, may be downloaded at http://www.freddiemac.com/uniform/. The mortgages at issue in this and every other MERS related case are not MERS’ forms. MERS did not “create” these “evidences.”

Rather, MERS’ involvement in the transaction was wholly participatory. MERS was named beneficiary on the deeds of trust. MERS participated in the foreclosure activities, though it was never entitled to collect a single penny under the notes. Characteristically, MERS only participated in the transaction for the sole purpose of avoiding paying California taxes. See: MERS’ admission in MERS v. Nebraska, that its purpose for being a phantom beneficiary on these deeds of trust is to avoid state real property transfer taxes at Plaintiff’s RJN in Support of Supplemental Briefing Exh. A (For the Nebraska Supreme Court’s finding that ” Mortgage lenders hire MERS to act as their nominee for mortgages, which allows the lenders to trade the mortgage note and servicing rights on the market without recording subsequent trades with the various register of deeds throughout Nebraska.”). See also: the admission of Bill Hultman at Plaintiffs RJN in Support of Supplemental Briefing Exh. B at Paragraph 8 (for MERS’ admission that “MERS is not a party to or obligee under the terms of the Promissory Note, and MERS does not appear on the Promissory Note.”).

Nor was the execution of the documents at closing MERS’ doing; that was conducted at a title company or by mobile notary. MERS does not claim that any person from MERS was present at a single mortgage closing in this state. Nor does MERS claim that any agent or representative of MERS even so much as signed the Fannie/Freddie uniform instruments.

The record in this case clearly establishes that only the Plaintiffs signed the Deed of Trust. Therefore, MERS’ activities do not render it exempt from tax registration under Corp Code 191(c)(7) because its activities go beyond “creating evidences” and do not include “creating evidences” in the first instance.

B. MERS DOES NOT QUALIFY UNDER SECTION 191(d)(3) BECAUSE IT IS NOT
A FOREIGN LENDING INSTITUTION AND BECAUSE IT DOES NOT OWN THE
NOTE.

1. As a Gateway Consideration, The Court Must Find That MERS Is A Foreign Lending Institution (Or Wholly Owned By One) to Qualify for ANY of the Exemptions at Corp. Code Section 191(d).

Under Corporations Code Section 191(d)(3), MERS must both 1) be the right type of entity (the gateway consideration to the exemptions), and 2) own the note to qualify for exemption.

Corporations Code Section 191(d) provides exemption solely for any:
“…foreign lending institution, including, but not limited to: any foreign banking corporation, any foreign corporation all of the capital stock of which is owned by one or more foreign banking corporations, any foreign savings and loan association, any foreign insurance company or any foreign corporation or association authorized by its charter to invest in loans secured by real and personal property, whether organized under the laws of the United States or of any other state, district or territory of the United States, shall not be considered to be doing, transacting or engaging in business in this state solely by reason of engaging in any or all of the following activities either on its own behalf or as a trustee of a pension plan, employee profit sharing or retirement plan, testamentary or inter vivos trust, or in any other fiduciary capacity…”

Firstly, MERS does not argue that it is a foreign lending institution in this case. In its Demurrer, Reply, oral argument, or anywhere on this record, there is NO factual averment that MERS is a foreign lending institution or wholly owned by one, or is an investor in mortgage notes.

Secondly, MERS has not submitted any evidence which would support such a finding.

Thirdly, in MERS v. Nebraska, MERS judicially admitted to the Supreme Court of Nebraska that it has never lent a dollar in any state, and is also not the holder of the note on any of its Deeds of Trust. Plaintiff’s Supplemental RJN Exh. A. In that case, MERS appealed a finding of the trial court that MERS was a foreign banking institution and therefore had to register as one in Nebraska. While the legal issue in the instant case is distinguishable, the factual problem before the court is identical to that case: is MERS a bank?.
Whereas there, MERS did everything it could to prove it was NOT a foreign lending institution, here MERS attempts the opposite. Where in Nebraska, MERS sought to avoid registration as a financial institution by swearing to God that it does not ever own the note, here MERS seeks to avail itself of an exemption reserved for foreign lending institutions, asserting the bald-faced conclusion that it should not have to register as a foreign corporation and pay California state taxes under a statute which clearly requires both status as a financial institution, AND ownership of the note, which it also disclaims.

B. MERS DOES NOT OWN THE NOTES AS REQUIRED BY 191(d)(3).

At Corporations Code Section 191(d)(3) the legislature expressly states MERS’claimed exemption:

“The ownership of any loans and the enforcement of any loans by trustee’s sale, judicial process or deed in lieu of foreclosure or otherwise.” Id. [Emphasis Added].

Corp. Code section 191(d)(3) is written in the conjunctive: “own and enforce.” MERS’ averments to its ability to participate in trustee sales without registration by way of this statute is therefore patently unfounded.

There is no averment in this case that MERS owns the note. In fact, by judicial admission, there is the opposite: MERS submits in its own joint Request for Judicial Notice in Support of Demurrer, an Assignment of the Deed of Trust to Wells Fargo. Consistent with MERS’ practice of hiding the true noteholder from the borrower to facilitate foreclosure fraud, the transfer to Wells Fargo suggests that it was Wells Fargo who had been the holder of the note entitled to enforce the Deed of Trust all along, never MERS.

C. MERS ACTIVITIES GO BEYOND THE SCOPE OF BOTH STATUTES; EVEN
IF MERS WERE EXEMPT UNDER EITHER STATUTE, ITS ACTIVITIES
INCLUDING OPERATING A MEMBERSHIP DATABASE GO BEYOND THE
SCOPE OF ANY OF THE ACTIVITIES INCLUDED IN EITHER EXEMPTION.

1. MERS’ Foreclosure Agent Activities Are Not Exempt Under Either Statute at Issue.

In reality, MERS operates as more of an agent than as a beneficiary on any given Deed of Trust (using the dubious title “nominee”). In support, MERS claims that Civil Code section 2924 allows “agents” to begin the non-judicial foreclosure process in California, and therefore, its agency activities should enjoy exemption from taxation. This is a non-sequitur.

The statutory exemption provided at Corp. Code section 191(d)(3) does not extend to companies in the business of “acting as foreclosure agents,” nor is any such interpretation of the statute even possible. While the Civil Code does allow agents to perform certain foreclosure functions, such allowance has no impact on the operation of the Tax Code.

MERS’ exemption argument leaps from one unfounded conclusion to the next. Nowhere in either statute does it aver that agents of the true noteholders are subject to the same exemptions simply by reason of agents being allowed to act on behalf of the noteholder.

Finally, and perhaps most telling, if you “follow the money” the distinction is clear: MERS profits by posing as the beneficiary to the deed of trust and generating foreclosure paperwork; a foreign lending institution profits by lending, and, when that doesn’t work out, by selling its security to collect on an unpaid debt. The business activities, or “profit generating activities”, of MERS are quite distinct from those of its principals, and there is no indication in any of the statutes that the legislature intended for the two to be interchangeable.

2. MERS’ Database Maintenance and Subscription Activities Are Not Exempt.

In their FAC, the Plaintiffs allege a set of activities which is neither included nor discussed above or by MERS at all in any of its arguments in favor of exemption: MERS operates a subscription-based information database for profit within the state of California.
MERS sells memberships to the database, provides access to records, and charges its customers accordingly. Similar to Westlaw, LexisNexis, or any other database provider, this activity is no more “creation of” the information contained therein, than is Westlaw the Creator of judicial opinion in any jurisdiction in this state or country.

Thus, regardless of the applicability to either claimed exemption to MERS’ other activities, MERS’ subscription-based activities exceed what the legislature intended a foreign corporation to do in this state without paying taxes to support the courts, schools, infrastructure, and other benefits of which it avails itself.

Therefore, MERS does not qualify for exemption from Revenue and Tax Code 23305 by way of either Corporations Code section 191(c)(7) or section 191(d)(3).

D. PUBLIC POLICY WEIGHS IN FAVOR OF MAKING MERS PAY ITS TAXES.

There is an argument that because MERS has embroiled itself in so many California mortgages, that it would be detrimental to industry to enforce our laws against it. However, because of the fact that the potential detriment to MERS pales in comparison to the impact MERS has had on this state, and will continue to have if allowed to be above our law, it would not be sound judicial policy to disregard the laws of California solely because of the sheer volume in which the defendant has violated them. It should be the opposite.

To enforce compliance with California’s tax code against MERS would not be any detriment to the mortgage industry, because the mortgage industry has already profited far beyond what was legal or fair in the first place due to these unlawful activities, as has MERS. To now disregard that those monies were ill-gotten based on the idea that it was just so much money that we’ll hurt the industry, truly, is to incentivize wholesale violation of California laws, as long as the issue stays under the radar long enough for the wrongful
conduct to become “too big to punish.”

Indeed, the mortgage industry has already received $700 billion in TARP funds, which came from taxpayer dollars, MERS itself as saved hundreds of millions of tax dollars by refusing to register in this state, and MERS’ customers have saved hundreds of millions by abusing the recording system and the unsupervised nonjudicial foreclosure statute.

It should be noted that secondary market mortgage holders have a remedy to all this: judicial foreclosure. The California codes are not set up without some recourse for those who are RIGHTFULLY owed a debt and RIGHTFULLY entitled to collect on it. Indeed, judicial foreclosure is the due process right of every California citizen whose mortgagee is not entitled to foreclose under Civil Code section 2924. (While Civil Code 2924 was not found to be a violation of due process by the California Supreme Court, a judicial seal of approval on abuse of that statute by those without any right title or interest most certainly is.)

On the flip side of this coin is the already felt crushing impact of these activities on the state of California. The courts are closed the third Wednesday of every month, and clerk staff has been cut to the bones. Public schools and universities are cutting both staff and course options as well as increasing tuition. The roads and bridges are in disrepair. Record foreclosures have caused record joblessness and record inflation. And meanwhile, MERS’ participation in the subprime securitized mortgage scheme was essential to the volume of bad loans being made, to the alacrity with which Wall Street was jamming these pools down our throats, and to the vigor with which mortgage brokers working for yield spread premiums were cold calling and loan flipping.

Clearly MERS was and is conducting business in this state, without paying a dollar on its own tax-free profits, and while aiding its customers in the avoidance of essential property transfer taxes. Its activities not only cost the state in the sheer loss of income, but also in the expense that will go into correcting thousands of real property records which have been deranged by MERS’ wholesale disregard for California law.

Gretchen “Gets It” but misses the mark

Posted on July 25, 2010 by Neil Garfield

It’s no secret that I admire Gretchen Morgenson of the New York Times. Her articles have penetrated deeper and deeper into the realities and logistics of the Great Financial Meltdown. But she continues to drag myth alongside of reality. True, it is difficult to get your mind around the idea that Wall Street managers WANTED bad mortgages, but that simple piece of truth is unavoidable. In the article below she draws ever nearer to this truth, saying that the real question is “what did they know and when did they know it?”
She even spots the extremely important fact that the worse the loan the more money was made by Wall Street. My objection is why not ask the next obvious question, to wit: “If Wall Street’s profits went up as the quality of mortgages went down, isn’t the obvious incentive to create increasingly bad paper?” And in what world has Wall Street ever done anything to diminish profits on moral grounds?
But her spotting is defective. She sees a 5 point spread (Yield Spread Premium) between what was paid for the loans and the price charged to investors. She correctly points out that the most Wall Street usually gets on trades like this is around 2 points. But think about it. Could such a small spread actually account for the ensuing mayhem that resulted?
What she fails to point out is the actual logistics. Investors, and for that matter, even the rating agencies, were never given the actual loans to look at and kick the tires. They were given descriptions of the loans which were incorporated into a narrative that portrayed the loans in a much better light than anything a loan underwriter would agree with. The final description of the loans was so loaded with misrepresentations that even a small amount of due diligence would have revealed major discrepancies that would have stopped this money machine from operating, for good.
Gretchen’s error is reflected in most articles by journalists and government officials. They all miss a major part of the transaction. Do the math. How could a five point spread account for the actual 8-10 point spread that was used to massage the description of the pool? There is a whole other SIV transaction that everyone is ignoring. The size of it will astonish you.

If for the purpose of one extreme example we isolate a single loan transaction, you can see how it works.
John Smith, an unemployed, homeless migrant worker with a gross income of $500 per month is pulled off the street by a “loan adviser.” The salesman gets John to sign a bunch of papers and tells him to go move into a $500,000 house. The interest rate on the loan is 18%, which is $90,000 per year. John doesn’t have to pay anything for the first 3 months and then only $100 per month for the first year, when he must pay a higher amount, still not as much as the monthly interest of $7,500 per month, let alone amortization, taxes, and insurance.
Now go to the investor who has been promised, for this example 9% annual return. The investor gives the investment banker $1,000,000 dollars believing that the investment banker is taking a 2% fee ($20,000). In other words, the investor is expecting $980,000 of his money to be invested. But that is NOT what happened — not ever, in ANY example. The investor, expecting a 9% annual return on his $1 million is therefore expecting $90,000 per year in income.
So in our over-simplified example the investment banker goes to the mortgage aggregator, and says give me the crappiest mortgage you have that says the interest is $90,000 per year. The aggregator (Countrywide, for example) sells the John Smith Mortgage to a structured investment vehicle off-shore for $500,000. The SIV sells the John Smith Mortgage to another entity (Seller) created by the investment bank for $980,000. The Seller sells the John Smith Mortgage to an “investment pool” for $1 million.
Watch Carefully! What just happened is that the John Smith mortgage was created that would never be paid. The interest rate on that mortgage was 18% and the principal was $500,000. So the annual interest to be paid by borrower was $90,000. The investor gave $1 million to the investment banker and thus “bought” the $90,000 in “income” from John Smith.
The surface transaction that Gretchen and others are looking at is that last transaction where the investment banker appears to pick up a few points as a fee. The underlying transaction, the substance of the real deal, is that the investment banker took $1 million from the investor and funded a $500,000 mortgage, thus creating a yield spread premium total of $500,000. In other words, the investment banker, in our oversimplified example, made a profit EQUAL TO THE MORTGAGE PRINCIPAL.
Not all the borrowers were John Smith. They ranged from him to people with the ability to pay anything. But the Mary Jones Mortgage where she had a credit score of 815 and assets of over $10 million was a key ingredient to this fraud. May Jones Mortgage was put in the top level of the “pool.” She was the gold plating covering dog poop underneath.
The identity of Mary Jones and her credit score HAD to be there, HAD to be used without her permission in order to sell the John Smith Mortgage. I think that is called identity theft. I think it was interstate commerce and I think it was a pattern of conduct. I think that is racketeering, breach of the the Truth in Lending Act and Securities Fraud, based upon appraisal (ratings) fraud at both ends (borrower and investor) of the transaction.
And let’s not forget that all these sales and transfers were undocumented. The only thing that moved was the money. And of course there are all those third party insurance and bailout payments that were never credited to the investor or the borrower. The investment banker kept those too.
——————————————————————————————–
July 24, 2010
Seeing vs. Doing
By GRETCHEN MORGENSON

“WHAT did they know, and when did they know it?” Those are questions investigators invariably ask when trying to determine who’s responsible for an offense or a misdeed.

But for the Wall Street banks whose financing of the subprime mortgage machine placed them at the center of the credit crisis, it’s becoming clear that a third, equally important question must be asked: “What did they do once they knew what they knew?”

As investigators delve deeper into the mortgage mess, they are finding in too many cases that Wall Street firms did nothing when they learned about problem loans or improprieties in lending. Rather than stopping practices of profligate originators like New Century, Fremont and Ameriquest, Wall Street financiers, which held the purse strings for these companies, apparently decided to simply look the other way.

Recent cases have provided glimpses of this conduct. Last week, the Financial Industry Regulatory Authority accused Deutsche Bank Securities, a unit of the huge German bank, of misleading investors about how many delinquent loans went into six mortgage securities worth $2.2 billion that the firm underwrote. Deutsche Bank underreported the delinquency rates among loans when it created the securities in 2006, Finra contends, and then sold them to investors.

Deutsche Bank also understated historical delinquency rates in 16 subprime securities it packaged in 2007, Finra said. Even after it discovered the errors, the authority added, Deutsche Bank continued to report the misstated figures on its Web site, where investors checked the performance of past mortgage pools.

Deutsche Bank settled without admitting or denying the allegations; it paid $7.5 million. The firm said Friday that it had cooperated and was pleased to have the matter behind it.

James S. Shorris, acting chief of enforcement at Finra, said that this was just the first of such cases and that he oversees a team of more than a dozen people investigating firms involved in mortgage securities.

While the Finra case showed Deutsche Bank failing to report problem loans in its securities, investigators in other matters are learning that some firms used information about lending misconduct to increase their profits from the securitization game — without telling investors, of course.

Here is what investigators have learned, according to two people briefed on the inquiries who spoke anonymously because they were not authorized to discuss them publicly. The large banks that provided money to mortgage originators during the mania hired outside analytics firms to conduct due diligence on the loans that Wall Street bought, bundled into securities and sold to investors.

These analysts looked for loans that failed to meet underwriting standards. Among the flagged loans were those in which appraisals seemed fishy or the mortgages went to borrowers with credit scores far below acceptable levels. Loans on vacation properties erroneously identified as primary residences were also highlighted.

The analysts would take their findings back to the Wall Street firms packaging the securities; the reports were not made available to investors.

In 2006-07, amid the mortgage craze, more loans didn’t meet the criteria. But instead of requiring lenders to replace these funky mortgages with proper loans, Wall Street firms kept funneling the junk into securities and selling them to investors, investigators have found.

Cases brought against Wall Street firms by Martha Coakley, attorney general of Massachusetts, have brought some of these practices to light. “Our focus has been on the borrower,” she said in an interview last week, “but as we’ve peeled back the onion we’ve gotten the picture of the role Wall Street played through the financing of these loans.”

But some on Wall Street went further than simply peddling loans they knew were bad, according to the people briefed on some investigators’ findings. They say the firms used these so-called scratch-and-dent loans to increase their profits in the securitization process.

When due-diligence reports turned up large numbers of defective loans — known as exceptions — the banks used this information to negotiate a lower price on the mortgages they bought from the original lenders.

So, instead of paying 99 cents on the dollar for the problem loans, the firm would force the lender to accept 97 cents or perhaps less. But the firm would still sell the mortgage pool to investors at 102 cents or higher, as was typical on high-quality loan pools.

Wall Street enjoyed the profits these practices generated. And because lenders were financed by the Wall Street firms bundling the mortgages into securities, they were hesitant to reject too many dubious loans because doing so would slow the securitization machine.

FOR their part, Wall Street loan packagers were loath to imperil their relationship with lenders like New Century; as long as Wall Street’s lucrative mortgage factories were humming, it needed loans to stoke them. Forcing New Century to eat its bad loans might prompt it to take its business elsewhere.

The bottom line: the more problematic the loans, the better the bargaining power and the higher the profits for Wall Street.

To be sure, the securities’ offering statements noted, in legalese, that the deals might contain “underwriting exceptions” and those exceptions could be “material.” But as investigators get closer to understanding how Wall Street used these exceptions to jack up its earnings, that disclosure defense may ring hollow.

Filed under:

Securitized Mortgage: A Basic Roadmap

The Parties and Their Roles

The first issue in reviewing a structured residential mortgage transaction is to differentiate between a private-label deal and an “Agency” (or “GSE”) deal. An Agency (or GSE) deal is one involving Fannie Mae, Freddie Mac, or Ginnie Mae, the three Government Sponsored Enterprises (also known as the GSEs). This paper will review the parties, documents, and laws involved in a typical private-label securitization. We also address frequently-occurring practical considerations for counsel dealing with securitized mortgage loans that are applicable across-the-board to mortgages into both private-label and Agency securitizations.

The parties, in the order of their appearance are:

Originator. The “originator” is the lender that provided the funds to the borrower at the loan closing or close of escrow. Usually the originator is the lender named as “Lender” in the mortgage Note. Many originators securitize loans; many do not. The decision not to securitize loans may be due to lack of access to Wall Street capital markets, or this may simply reflect a business decision not to run the risks associated with future performance that necessarily go with sponsoring a securitization, or the originator obtains better return through another loan disposition strategy such as whole loan sales for cash.

Warehouse Lender. The Originator probably borrowed the funds on a line of credit from a short-term revolving warehouse credit facility (commonly referred to as a “warehouse lender”); nevertheless the money used to close the loan were technically and legally the Originator’s funds. Warehouse lenders are either “wet” funders or “dry” funders. A wet funder will advance the funds to close the loan upon the receipt of an electronic request from the originator. A dry funder, on the other hand, will not advance funds until it actually receives the original loan documents duly executed by the borrower.

Responsible Party. Sometimes you may see another intermediate entity called a “Responsible Party,” often a sister company to the lender. Loans appear to be transferred to this entity, typically named XXX Asset Corporation.

Sponsor. The Sponsor is the lender that securitizes the pool of mortgage loans. This means that it was the final aggregator of the loan pool and then sold the loans directly to the Depositor, which it turn sold them to the securitization Trust. In order to obtain the desired ratings from the ratings agencies such as Moody’s, Fitch and S&P, the Sponsor normally is required to retain some exposure to the future value and performance of the loans in the form of purchase of the most deeply subordinated classes of the securities issued by the Trust, i.e. the classes last in line for distributions and first in line to absorb losses (commonly referred to as the “first loss pieces” of the deal).

Depositor. The Depositor exists for the sole purpose of enabling the transaction to have the key elements that make it a securitization in the first place: a “true sale” of the mortgage loans to a “bankruptcy-remote” and “FDIC-remote” purchaser. The Depositor purchases the loans from the Sponsor, sells the loans to the Trustee of the securitization Trust, and uses the proceeds received from the Trust to pay the Sponsor for the Depositor’s own purchase of the loans. It all happens simultaneously, or as nearly so as theoretically possible. The length of time that the Depositor owns the loans has been described as “one nanosecond.”

The Depositor has no other functions, so it needs no more than a handful of employees and officers. Nevertheless, it is essential for the “true sale” and “bankruptcy-remote”/“FDIC-remote” analysis that the Depositor maintains its own corporate existence separate from the Sponsor and the Trust and observes the formalities of this corporate separateness at all times. The “Elephant in the Room” in all structured financial transactions is the mandatory requirement to create at least two “true sales” of the notes and mortgages between the Originator and the Trustee for the Trust so as to make the assets of the Trust both “bankruptcy” and “FDIC” remote from the originator. And, these “true sales” will be documented by representations and attestations signed by the parties; by attorney opinion letters; by asset purchase and sale agreements; by proof of adequate and reasonably equivalent consideration for each purchase; by “true sale” reports from the three major “ratings agencies” (Standard & Poors, Moody’s, and Fitch) and by transfer and delivery receipts for mortgage notes endorsed in blank.

Trustee. The Trustee is the owner of the loans on behalf of the certificate holders at the end of the securitization transaction. Like any trust, the Trustee’s powers, rights, and duties are defined by the terms of the transactional documents that create the trust, and are subject to the terms of the trust laws of some particular state, as specified by the “Governing Law” provisions of the transaction document that created the trust. The vast majority of the residential mortgage backed securitized trusts are subject to the applicable trust laws of Delaware or New York. The “Pooling and Servicing Agreement” (or, in “Owner Trust” transactions as described below, the “Trust Indenture”) is the legal document that creates these common law trusts and the rights and legal authority granted to the Trustee is no greater than the rights and duties specified in this Agreement. The Trustee is paid based on the terms of each structure. For example, the Trustee may be paid out of interest collections at a specified rate based on the outstanding balance of mortgage loans in the securitized pool; the Master Servicer may pay the Trustee out of funds designated for the Master Servicer; the Trustee may receive some on the interest earned on collections invested each month before the investor remittance date; or the Securities Administrator may pay the Trustee out of their fee with no charges assessed against the Trust earnings. Fee amounts ranger for as low as .0025% to as high as .009%.

Indenture Trustee and Owner Trustee. Most private-label securitizations are structured to meet the Internal Revenue Code requirements for tax treatment as a “Real Estate Mortgage Investment Conduit (“REMIC”). However some securitizations (both private-label and GSE) have a different, non-REMIC structure usually called an “Owner Trust.” In an Owner Trust structure the Trustee roles are divided between an Owner Trustee and an Indenture Trustee. As the names suggest, the Owner Trustee owns the loans; the Indenture Trustee has the responsibility of making sure that all of the funds received by the Trust are properly disbursed to the investors (bond holders) and all other parties who have a financial interest in the securitized structure. These are usually Delaware statutory trusts, in which case the Owner Trustee must be domiciled in Delaware.

Primary Servicer. The Primary Servicer services the loans on behalf of the Trust. Its rights and obligations are defined by a loan servicing contract, usually located in the Pooling and Servicing Agreement in a private-label (non-GSE) deal. The trust may have more than one servicer servicing portions of the total pool, or there may be “Secondary Servicers,” “Default Servicers,” and/or “Sub-Servicers” that service loans in particular categories (e.g., loans in default). Any or all of the Primary, Secondary, or Sub-Servicers may be a division or affiliate of the Sponsor; however under the servicing contract the Servicer is solely responsible to the Trust and the Master Servicer (see next paragraph). The Servicers are the legal entities that do all the day-to-day “heavy lifting” for the Trustee such as sending monthly bills to borrowers, collecting payments, keeping records of payments, liquidating assets for the Trustee, and remitting net payments to the Trustee.

The Servicers are normally paid based on the type of loans in the Trust. For example, a typical annual servicing fee structure may be: .25% annually for a prime mortgage; .375% for an Alt-A or Option ARM; and .5% for a subprime loan. In this example, a subprime loan with an average balance over a given year of $120,000 would generate a servicing fee of $600.00 for that year. The Servicers are normally permitted to retain all “ancillary fees” such as late charges, check by phone fees, and the interest earned from investing all funds on hand in overnight US Treasury certificates (sometimes called “interest earned on the float”).

Master Servicer. The Master Servicer is the Trustee’s representative for assuring that the Servicer(s) abide by the terms of the servicing contracts. For trusts with more than one servicer, the Master Servicer has an important administrative role in consolidating the monthly reports and remittances of funds from the individual servicers into a single data package for the Trustee. If a Servicer fails to perform or goes out of business or suffers a major downgrade in its servicer rating, then the Master Servicer must step in, find a replacement and assure that no interruption of essential servicing functions occurs. Like all servicers, the Master Servicer may be a division or affiliate of the Sponsor but is solely responsible to the Trustee. The Master Servicer receives a fee, small compared to the Primary Servicer’s fee, based on the average balance of all loans in the Trust.

Custodian. The Master Document Custodian takes and maintains physical possession of the original hard-copy Mortgage Notes, Mortgages, Deeds of Trust and certain other “key loan documents” that the parties deem essential for the enforcement of the mortgage loan in the event of default.

• This is done for safekeeping and also to accomplish the transfer and due negotiation of possession of the Notes that is essential under the Uniform Commercial Code for a valid transfer to the Trustee to occur.
• Like the Master Servicer, the Master Document Custodian is responsible by contract solely to the Trustee (e.g., the Master Document Custodial Agreement). However unlike the Master Servicer, the Master Document Custodian is an institution wholly independent from the Servicer and the Sponsor.
• There are exceptions to this rule in the world of Fannie Mae/Freddie Mac (“GSE”) securitizations. The GSE’s may allow selected large originators with great secure storage capabilities (in other words, large banks) to act as their own Master Document Custodians. But even in those cases, contracts make clear that the GSE Trustee, not the originator, is the owner of the Note and the mortgage loan.
• The Master Document Custodian must review all original documents submitted into its custody for strict compliance with the specifications set forth in the Custodial Agreement, and deliver exception reports to the Trustee and/or Master Servicer as to any required documents that are missing or fail to comply with those specifications.
• In so doing the Custodian must in effect confirm that for each loan in the Trust there is a “complete and unbroken chain of transfers and assignments of the Notes and Mortgages.”
• This does not necessarily require the Custodian to find assignments or endorsements naming the Depositor or the Trustee. The wording in the Master Document Custodial Agreement must be read closely. Defined terms such as “Last Endorsee” may technically allow the Custodian to approve files in which the last endorsement is from the Sponsor in blank, and no assignment to either the Depositor or the Trustee has been recorded in the local land records.
• In many private-label securitizations a single institution fulfills all of the functions related to document custody for the entire pool of loans. In these cases, the institution might be referred to simply as the “Custodian” and the governing document as the “Custodial Agreement.”

Typical transaction steps and documents (in private-label, non-GSE securitizations)

1. The Originator sells loans (one-by-one or in bundles) to the Securitizer (a/k/a the Sponsor) pursuant to a Mortgage Loan Purchase and Sale Agreement (MLPSA) or similarly-named document. The purpose of the MLPSA is to sell all right, title, claims, legal, equitable and any and all other interest in the loans to the Securitizer-Sponsor. For Notes endorsed in “blank” which are bearer instruments under the UCC, the MLPSA normally requires acceptance and delivery receipts for all such Notes in order to fully document the “true sale.” Frequently a form is prescribed for the acceptance and delivery receipt and attached as an exhibit to the MLPSA.

The MLPSA will contain representations, attestations and warranties as to the enforceability and marketability of each loan, and specify the purchaser’s remedies for a breach of any “rep” or “warrant.” The primary remedy is the purchaser’s right to require the seller to repurchase any loan materially and adversely affected by a breach. Among the defects and events covered by “reps” and “warrants” are “Early Payment Defaults,” commonly referred to as “EPD’s.” An EDP occurs if a loan becomes seriously (usually, 60 or more days) delinquent within a specified period of time after it has been sold to the Trust. The EDP covenants are always limited in time and normally only cover EDPs that occur within 12 to 18 months of the original sale. If an EDP occurs, then the Trust can force the originator to repurchase the EPD note and replace it with a note of similar static qualities (amount, term, type, etc.)

2. The Securitizer-Sponsor sells the loans to the Depositor. This takes place in another MLPSA very similar to the first one and the same documents are created and exchange with the same or similar terms. These are typically included as exhibits to the PSA.

3. Depositor, Trustee, Master Servicer and Servicer enter into a Pooling and Servicing Agreement (“PSA”) in which:

— the Depositor sells all right, title, legal, equitable and any other interest in the mortgage loans to the Trustee, with requirements for acceptance and delivery receipts, often including the prescribed form as an exhibit, in similar fashion to the MLPSA’s;

— the PSA creates the trust, appoints the Trustee, and defines the classes of securities (often called “Certificates”) that the trust will issue to investors and establishes the order of priority between classes of Certificates as to distributions of cash collected and losses realized with respect to the underlying loans (the highest rated Certificates are paid first and the lowest rated Certificates suffer the first losses-thus the basis for the term “structured finance”); and

— the Servicer, Master Servicer and Trustee establish the Servicer’s rights and duties, including limits and extent of a Servicer’s right to deal with default, foreclosure, and Note modifications. Some PSA’s include detailed loss mitigation or modification rules, and others limit any substantive modifications (such as changing the interest rate, reducing the principal debt, waiving default debt, extending the repayment term, etc.)

4. All parties including the Custodian enter into the Custodial Agreement in which:

• the Depositor agrees to cause the Notes and other specified key loan documents (usually including an unrecorded, recordable Assignment “in blank”)(NB that several recent courts have raised serious legal questions about the assignment of a real estate instrument in blank under such theories as the statute of frauds and whether or not an assignment in blank is in fact a “recordable” legal real estate document) to be delivered to the Custodian (with the Securitizer to do the actual physical shipment);
• the Custodian agrees to inspect the Notes and other documents and to certify in designated written documents to the Trustee that the documents meet the required specifications and are in the Custodian’s possession; and
• establishes a (supposedly exclusive) procedure and specified forms whereby the Servicer can obtain possession of any Note, Mortgage, Deed of Trust or other custodial document for foreclosure or payoff purposes.

Finding Documents on the S.E.C.’s website (the EDGAR filing system):

• If you know the name of the Depositor and the name of the Trust (e.g. “Time Bomb Mortgage Trust 2006-2”) that contains the loan in question, then the PSA and Custodial Agreement probably can be found on the SEC’s website (www.sec.gov):
• On the SEC home page look for a link to “Search for Company Filings” and then choose to search by “Company Name,” using the name of the Depositor. (Alternatively, click on the “Contains” button on the search page and then search by the series, i.e. 2006-2 in the above example.)
• Hopefully, this will enable you to find the Trust in question. If so, the PSA and the Custodial Agreement should be available as attachments to one or more of the earliest-filed forms (normally the 8-K) shown on the list of available documents. Sometimes the PSA is listed as a named document but other times you just look for the largest document in terms of megabytes filed with the 8-K form.
• The available documents also should include the Prospectus and/or Prospectus Supplement (Form 424B5) and the Free Writing Prospectus (“FWP”). The latter documents (at least the sections written in English, as opposed to the many tables of financial data) can be very helpful in providing a concise and straightforward description of the parties, documents, and transaction steps and detailed transactional graphs and charts in the particular deal. And because these are SEC documents, the information serves as highly credible evidence on these points, and the Court can take judicial notice of any document filed with the SEC.
• For securitizations created after January 1, 2006, SEC “Regulation AB” requires the parties to file a considerable amount of detailed information about the individual loans included in the Trust. This information may be filed as an Exhibit to the PSA or to a Form 8-K. This loan-level data typically includes loan numbers, interest rates, principal amount of loan, origination date and (sometimes) property addresses and thus can be very useful in proving that a particular loan is in a particular Trust.

Dealing with Notes and Assignments:

There are two basic documents involved in a residential mortgage loan: the promissory note and the mortgage (or deed of trust). For brevity’s sake these are referred to simply as the Note and the Mortgage.

A Note is: a contract to repay borrowed money. It is a negotiable instrument governed by Article 3 of the Uniform Commercial Code (UCC). The Note, by itself, is an unsecured debt. Notes are personal property. Notes are negotiated by endorsement or by transfer and delivery as provided for by the UCC. Notes are separate legal documents from the real estate instruments that secure the loans evidenced by the Notes by liens on real property.

A Mortgage is: a lien on, and an interest in, real estate. It is a security agreement. It creates a lien on the real estate as collateral for a debt, but it does not create the debt itself. The rights created by a Mortgage are classified as real property and these instruments are governed by local real estate law in each jurisdiction. The UCC has nothing to do with the creation, drafting, recording or assignment of these real estate instruments.

A Note can only be transferred by: an “Endorsement” if the Note is payable to a particular party; or by transfer of possession of the Note, if the Note is endorsed “in blank.” Endorsements must be written or stamped on the face of the Note or on a piece of paper physically attached to the Note (the Allonge). See UCC §3-210 through §3-205. The UCC does not recognize an Assignment as a valid means of transferring a Note such that the transferee becomes a “holder”, which is what the owners of securitized mortgage notes universally claim to be.

In most states, an Allonge cannot be used to endorse a note if there is sufficient room at the “foot of the note” for such endorsements. The “foot of the note” refers to the space immediately below the signatures of the borrowers. Also, if an Allonge is properly used, then it must describe the terms of the note and most importantly must be “permanently affixed” to the Note. Most jurisdictions hold that “staples” and “tape” do not constitute a “permanent” attachment. And, the Master Document Custodial Agreement may specify when an Allonge can be used and how it must be attached to the original Note.

Mortgage rights can only be transferred by: an Assignment recorded in the local land records. Mortgage rights are “estates in land” and therefore governed by the state’s real property laws. These vary from state to state but in general Mortgage rights can only be transferred by a recorded instrument (the Assignment) in order to be effective against third parties without notice.

In discussions of exactly what documents are required to transfer a “mortgage loan” confusion often arises between Notes versus Mortgages and the respective documents necessary to accomplish transfers of each. The issue often arises from the standpoint of proof: Has Party A proven that a transfer has occurred to it from Party B? Does Party A need to have an Assignment? The answer often depends on exactly what Party A is trying to prove.

Scenario 1: Party A is trying to prove that the Trustee “owns the loan.” Here the likely questions are, did the transaction steps actually occur as required by the PSA and as represented in the Prospectus Supplement, and are the Trustee’s ownership rights subject to challenge in a bankruptcy case?

The answers lie in the UCC and in documents such as:

• the MLPSA’s;
• conveyancing rules of the PSA (normally Section 2.01);
• transfer and delivery receipts (look for these to be described in the “Conditions to Closing” or similarly named section of MLPSA’s and the PSA);
• funds transfer records (canceled checks, wire transfers, etc);
• compliance and exception reports provided by the Custodian pursuant to the Master Document Custodial Agreement; and
• the “true sale” legal opinions.

Some of these documents may or may not be available on the SEC’s EDGAR system; some may be obtainable only through discovery in litigation. The primary inquiry is whether or not the documents, money and records that were required to have been produced and change hands actually do so as required, and at the times required, by the terms of the transaction documents.

Another question sometimes asked when examining the “validity” of a securitization (or in other words, the rights of a securitization Trustee versus a bankruptcy trustee) is, must the Note be endorsed to the Trustee at the time of the securitization? Here are some points to consider:

• Frequently the only endorsement on the Note is from the Securitizer-Sponsor “in blank” and the only Assignment that exists, pre-foreclosure, is from the Securitizer-Sponsor “in blank” (in other words, the name of the transferee is not inserted in the instrument and this space is blank).
• The concept widely accepted in the securitization world (the issuers and ratings agencies, and the law firms advising them) is that this form of documentation was sufficient for a valid and unbroken chain of transfers of the Notes and assignments of the Mortgages as long as everything was done consistently with the terms of the securitization documents. This article is not intended to validate or defend either this concept or this practice, nor is it intended to represent in any way that the terms of the securitization documents were actually followed to the letter in every real-world case. In fact, and unfortunately for the certificate holders and the securitized mortgage markets, there are many instances in many reported cases where these mandatory rules of the securitization documents have not been followed but in fact, completely ignored.
• Often shortly before foreclosure (or in some cases afterwards) a mortgage assignment is produced from the Originator to the Trustee years after the Trust has closed out for the receipt of all mortgage loans. Such assignments are inconsistent with the mandatory conveyancing rules of the Trust Documents and are also inconsistent with the special tax rules that apply to these special trust structures. Most state law requires the chain of title not to include any mortgage assignments in blank, but assignments from A to B to C to D. Under most state statutes, an assignment in blank would be deemed an “incomplete real estate instrument.” Even more frequent than A to D assignments are MERS to D assignments, which suffer from the same transfer problems noted herein plus what is commonly referred to as the “MERS problem.”

Scenario 2: Party B seeks to prove standing to foreclose or to appear in court with the rights of a secured creditor under the Bankruptcy Code. OK, granted the UCC (§3-301) does provide that a negotiable instrument can be enforced either by “(i) the holder of the instrument, or (ii) a non-holder in possession of the instrument who has the rights of a holder.”

• Servicers and foreclosure counsel have been known to contend that this is the end of the story and that the servicer can therefore do anything that the holder of the Note could do, anywhere, anytime.

• The Fannie Mae and Freddie Mac Guides contain many sections that appear to lend superficial support to this contention and frequently will be cited by Servicers and foreclosure counsel as though the Guides have the force of law, which of course they do not.

• There are many serious problems with this legal position, as recognized by an increasing number of reported court decisions.

Authors’ General Conclusions and Observations:

• Servicers and foreclosure firms are either wrong, or at least not being cautious, if they attempt to foreclose, or appear in court, without having a valid pre-complaint or pre-motion Assignment of the Mortgage. Yet at the same time, Servicers and note holders place themselves at risk of preference and avoidable transfer issues in bankruptcy cases if, for example, endorsements and Assignments that they rely upon to support claims to secured status occur or are recorded after or soon before bankruptcy filing.

• In addition any Servicer, Lender, or Securitization Trustee is either wrong, or at least not being cautious, if it ever: (1) claims in any communications to a consumer or to the Court in a judicial proceeding that it is the Note holder unless they are, at the relevant point in time, actually the holder and owner of the Note as determined under UCC law; or (2) undertakes to enforce rights under a Mortgage without having and recording a valid Assignment.
• The UCC deals only with enforcing the Note. Enforcing the Mortgage on the other hand is governed by the state’s real property and foreclosure laws, which generally contain crucial provisions regarding actions required to be taken by the “note holder” or “beneficiary.” State law may or may not authorize particular actions to be taken by servicers or agents of the holder of the Note.

• For the Servicer to have “the rights of the holder” under the UCC it must be acting in accordance with its contract. For example, if the Servicer claims to have possession of the Note, did it follow the procedures contained in the “Release of Documents” section of the Custodial Agreement in obtaining possession? Does the Servicer really have “constitutional” standing under either Federal or State law to enforce the Note even if it is a “holder” if it does not have any “pecuniary” or economic interest in the Note? In short, the concept of constitutional standing involves some injury in fact and it is hard to see how a mere “place-holder” or “Nominee” could ever over-come such a hurdle unless it actually owned the Note or some real interest in the same.

• The Servicer should have the burden of explaining the legal reasons supporting its standing and authority to act. Sometimes Servicers have difficulty maintaining a consistent story in this regard. Is the Servicer claiming to be the actual holder, or the holder and the owner, or merely an authorized agent of the true holder? If it is claiming some agency, what proof does it have to support such a claim? What proof is required? Sometimes this is just academic legal hair-splitting but many times it involves serious issues of fact. For example, what if the attorney for the Servicer asserts to the court that his or her client actually owns the Note, but the Fannie Mae website reports that Fannie is the owner? What if the MERS website reports that the Plaintiff is just the “Servicer?” What if the pre-complaint correspondence to the borrower names some entirely different party as the holder and indicated that the current plaintiff is only the Servicer?

• Finally, the Servicer always has an obligation to be factually accurate in borrower communications and legal proceedings, and to supervise employees and vendors and attorneys to assure that Note endorsements, Assignments of Mortgage, and affidavits are executed by persons with valid corporate authority, and not falsified nor offered for any improper purpose.

The focus of the default servicing industry must move from “how fast we can get things done” to “how honestly and accurately can we be in presenting the proper documentation to the courts and to the borrowers”. Judicial proceedings are not like NASCAR races where the fastest lawyer always wins. Judicial proceedings are all about finding the truth no matter how long it takes and regardless of the time and difficulties involved.

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

The Long-Term Cost of the Mortgage Fraud Meltdown — The Real Legacy of Wall Street

This is a re-post by Niel Garfield

Posted 21 hours ago by livinglies on Livinglies’s Weblog

Editor’s Note: Why do I do this? Because we are delivering a message to future generations about how the world works contrary to our constitution and contrary to American values and ideals. Conservatives conserve nothing except the wealth of the fantastic few while the liberals liberate nobody from the yoke of economic slavery. Maybe it’s all a game. I won’t play and if you care about this country and wish to avoid a societal collapse, you should stop playing too.

History has shown us with grim clarity what happens to any country or empire when the power and the wealth gets so concentrated in just a few people while the rest of the population can’t keep a roof over their head and can’t eat food and can’t get medical care, all hell breaks loose. Galbraith, IMF economists, World Bank economists, all know what is going to happen do to our failure to police our own, our failure to make it right and our failure to make amends to our allies or would-be allies.

Children are learning an important lesson: in their world, Mom and Dad are powerless to prevent the worst things from happening and there is nobody else they can depend upon. A whole generation is growing up with the notion that the American Dream is an unknown, unknowable fantasy. Every time the far right asserts personal responsibility in the face of a wretched fraud committed on most of the country, they close the gate a little more, waiting for the final slaughter. Every time the far left wimps out on their own paltform, the one the people elected them on for CHANGE NOW, they deceive and abandon our citizens.

And so we are a Prozac nation because everyone is depressed. We are a Xanax nation because everyone is so stressed out we can’t think straight. And those of us who are entering our twilight years see a future where our children and grandchildren and their children will lead bleak lives of quiet desperation in a country which proclaims free speech and assembly but has surrendered that basic right to about 100 institutions that control the lobbyists who control the flow of money in Washington and state houses.

In April, 2007 stocks were up, confidence was high and everyone had been convinced that all was well without questioning anything. Meanwhile in the inner recesses of the Federal Reserve and halls of power of the executive branch and the U.S. Department of Treasury in particular, they knew the collapse was coming and the only reason they did nothing was political — they didn’t want to admit that the free market was not working, that it wasn’t free, that it was controlled by monopoly and oligopoly, and that the government wasn’t working either because we the people had allowed people to get re-elected despite their sell-out of our countries and our lives.

In I did some very simple calculations and determined that the DJIA was not actually worth 14,000, it was worth 8,000. As it came down, more stumps revealed themselves as the high water receded. The equities market is overpriced by about 25%-30%. Housing is still inflated by 15%-20%. Nobody wants to hear this. The dollar is in a swan dive because everyone in the world knows the reality except the citizens of the United States of America where we have a “free press” that would rather entertain us than actually tell us the news.

I’m doing my part. What are you doing to end this catastrophe?

Job Woes Exacting a Toll on Family Life
By MICHAEL LUO

THE WOODLANDS, Tex. — Paul Bachmuth’s 9-year-old daughter, Rebecca, began pulling out strands of her hair over the summer. His older child, Hannah, 12, has become noticeably angrier, more prone to throwing tantrums.

Initially, Mr. Bachmuth, 45, did not think his children were terribly affected when he lost his job nearly a year ago. But now he cannot ignore the mounting evidence.

“I’m starting to think it’s all my fault,” Mr. Bachmuth said.

As the months have worn on, his job search travails have consumed the family, even though the Bachmuths were outwardly holding up on unemployment benefits, their savings and the income from the part-time job held by Mr. Bachmuth’s wife, Amanda. But beneath the surface, they have been a family on the brink. They have watched their children struggle with behavioral issues and a stress-induced disorder. He finally got a job offer last week, but not before the couple began seeing a therapist to save their marriage.

For many families across the country, the greatest damage inflicted by this recession has not necessarily been financial, but emotional and psychological. Children, especially, have become hidden casualties, often absorbing more than their parents are fully aware of. Several academic studies have linked parental job loss — especially that of fathers — to adverse impacts in areas like school performance and self-esteem.

“I’ve heard a lot of people who are out of work say it’s kind of been a blessing, that you have more time to spend with your family,” Mr. Bachmuth said. “I love my family and my family comes first, and my family means more than anything to me, but it hasn’t been that way for me.”

A recent study at the University of California, Davis, found that children in families where the head of the household had lost a job were 15 percent more likely to repeat a grade. Ariel Kalil, a University of Chicago professor of public policy, and Kathleen M. Ziol-Guest, of the Institute for Children and Poverty in New York, found in an earlier study that adolescent children of low-income single mothers who endured unemployment had an increased chance of dropping out of school and showed declines in emotional well-being.

In the long term, children whose parents were laid off have been found to have lower annual earnings as adults than those whose parents remained employed, a phenomenon Peter R. Orszag, director of the White House Office of Management and Budget, mentioned in a speech last week at New York University.

A variety of studies have tied drops in family income to negative effects on children’s development. But Dr. Kalil, a developmental psychologist and director of the university’s Center for Human Potential and Public Policy, said the more important factor, especially in middle-class households, appeared to be changes in family dynamics from job loss.

“The extent that job losers are stressed and emotionally disengaged or withdrawn, this really matters for kids,” she said. “The other thing that matters is parental conflict. That has been shown repeatedly in psychological studies to be a bad family dynamic.”

Dr. Kalil said her research indicated that the repercussions were more pronounced in children when fathers experience unemployment, rather than mothers.

She theorized that the reasons have to do with the importance of working to the male self-image, or the extra time that unemployed female breadwinners seem to spend with their children, mitigating the impact on them.

Certainly, some of the more than a dozen families interviewed that were dealing with long-term unemployment said the period had been helpful in certain ways for their families.

Denise Stoll, 39, and her husband, Larry, 47, both lost their positions at a bank in San Antonio in October 2008 when it changed hands. Mrs. Stoll, a vice president who managed a technology group, earned significantly more than her husband, who worked as a district loan origination manager.

Nevertheless, Mr. Stoll took unemployment much harder than she did and struggled to keep his spirits up, before he landed a new job within several months in the Kansas City area, where the family had moved to be closer to relatives. He had to take a sizable pay cut but was grateful to be working again.

Mrs. Stoll is still looking but has also tried to make the most of the additional time with the couple’s 5-year-old triplets, seeking to instill new lessons on the importance of thrift.

“Being a corporate mom, you work a lot of hours, you feed them dinner — maybe,” she said. “This morning, we baked cookies together. I have time to help them with homework. I’m attending church. The house is managed by me. Just a lot more homemaker-type stuff, which I think is more nurturing to them.”

Other families, however, reported unmistakable ill effects.

Robert Syck, 42, of Fishers, Ind., lost his job as a call-center manager in March. He has been around his 11-year-old stepson, Kody, more than ever before. Lately, however, their relationship has become increasingly strained, Mr. Syck said, with even little incidents setting off blowups. His stepson’s grades have slipped and the boy has been talking back to his parents more.

“It’s only been particularly in the last few months that it’s gotten really bad, to where we’re verbally chewing each other out,” said Mr. Syck, who admitted he had been more irritable around the house. “A lot of that is due to the pressures of unemployment.”

When Mr. Bachmuth was first laid off in December from his $120,000 job at an energy consulting firm, he could not even bring himself to tell his family. For several days, he got dressed in the morning and left the house as usual at 6 a.m., but spent the day in coffee shops, the library or just walking around.

Mr. Bachmuth had started the job, working on finance and business development for electric utilities, eight months earlier, moving his family from Austin. They bought something of a dream home, complete with a backyard pool and spa.

Although she knew the economy was ultimately to blame, Mrs. Bachmuth could not help feeling angry at her husband, both said later in interviews.

“She kind of had something in the back of her mind that it was partly my fault I was laid off,” Mr. Bachmuth said. “Maybe you’re not a good enough worker.”

Counseling improved matters significantly, but Mrs. Bachmuth still occasionally dissolved into tears at home.

Besides quarrels over money, the reversal in the couple’s roles also produced friction. Mrs. Bachmuth took on a part-time job at a preschool to earn extra money. But she still did most, if not all, of the cooking, cleaning and laundry.

Dr. Kalil, of the University of Chicago, said a recent study of how people spend their time showed unemployed fathers devote significantly less time to household chores than even mothers who are employed full-time, and do not work as hard in caring for children.

Mr. Bachmuth’s time with his girls, however, did increase. He was the one dropping off Rebecca at school and usually the one who picked her up. He began helping her more with homework. He and Hannah played soccer and chatted more.

But the additional time brought more opportunities for squabbling. The rest of the family had to get used to Mr. Bachmuth being around, sometimes focused on his search for a job, but other times lounging around depressed, watching television or surfing soccer sites on the Internet.

“My dad’s around a lot more, so it’s a little strange because he gets frustrated he’s not at work, and he’s not being challenged,” Hannah said. “So I think me and my dad are a lot closer now because we can spend a lot more time together, but we fight a lot more maybe because he’s around 24-7.”

When Rebecca began pulling her hair out in late summer in what was diagnosed as a stress-induced disorder, she insisted it was because she was bored. But her parents and her therapist — the same one seeing her parents — believed it was clearly related to the job situation.

The hair pulling has since stopped, but she continues to fidget with her brown locks.

The other day, she suddenly asked her mother whether she thought she would be able to find a “good job” when she grew up.

Hannah said her father’s unemployment had made it harder for her to focus on schoolwork. She also conceded she had been more easily annoyed with her parents and her sister.

At night, she said, she has taken to stowing her worries away in an imaginary box.

“I take all the stress and bad things that happen over the day, and I lock them in a box,” she said.

Then, she tries to sleep.

Your tags: Eviction, foreclosure

Other Tags: conservatives, DJIA, IMF, Prozac, U.S Department of Treasury, World Bank, Xanax, bubble, CDO, CORRUPTION, currency, GTC | Honor, Investor, Mortgage, securities fraud

Published: November 12, 2009 6:04 pm
Livinglies’s Weblog, Eviction, foreclosure

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“Officials” Who Sign for MERS: False, Fraudulent, Fabricated, Forged and Void Documents in the Chain

Posted 3 days ago by livinglies on Livinglies’s Weblog

all we have left is the obligation, unsecured and subject to counterclaims etc. MOST IMPORTANT procedurally, it requires a lawsuit by the would-be forecloser in order to establish the terms of the obligation and the security, if any. This means they must make allegations as to ownership of the receivable and prove it — the kiss of death for all would be lenders except investors who funded these transactions.

sirrowan
sirrowan@peoplepc.com

“I just thought of something. I was reading what was posted a few above me regarding MERS own rules. They claim that their “officers” tend to act without authority from MERS and they do not use any records held by MERS etc.

How can this be? How can they be officers then? They aren’t if you ask me. Now wonder all these judges are telling them they are nothing but agents if even that, lol.

But if they were officers, wouldn’t MERS be liable for the actions of their “officers” on behalf of MERS?”

ANSWER from Neil

Sirrowan: GREAT POINT! The answer is that if they have a user ID and password ANYONE can become a “limited signing officer” for MERS.

Sometimes they say they are vice-president, sometimes they use some other official title. But the fact remains that they have no connection with MERS, no employment with MERS, no access to MERS records, and definitely no direct grant of a POA (Power of attorney). It’s a game.

This is why I have repeatedly say that in every securitized chain, particularly in the case of a MERS chain, there are one or more documents that are fabricated, forged or voidable. Whether this rises the level of criminality is up to future courts to determine.

One thing is sure — a party who signs a document that has no authority to sign it in the capacity they are representing has just committed violations of federal and state statute and common law. And the Notary who knew the party was not authorized as represented has committed a violation as well. Most states have statutes that say a bad notarization renders the document void, even if it was recorded. This breaks the chain of title and reverts back to the originating lender (at best) or voids the documents in the originating transaction (at worst).

In either event, the distinction I draw between the obligation (the substance of the transaction caused by the funding of a “loan product”) and the note (which by law is ONLY EVIDENCE of the obligation and the mortgage which is ONLY incident to the note, becomes very important. If the documents (note and mortgage) are void then all we have left is the obligation, unsecured and subject to counterclaims etc. MOST IMPORTANT procedurally, it requires a lawsuit by the would-be forecloser in order to establish the terms of the obligation and the security, if any. This means they must make allegations as to ownership of the receivable and prove it — the kiss of death for all would be lenders except investors who funded these transactions.

Your tags: Eviction, foreclosure

Other Tags: chain of title, disclosure, evidence, foreclosure defense, foreclosure offense, fraud, investors, lenders, MERS, Obligation, securitization, Signatures, trustee, bubble, CDO, CORRUPTION, currency, GTC | Honor, Investor, Mortgage, securities fraud

Published: November 10, 2009 3:10 pm
Livinglies’s Weblog, Eviction, foreclosure

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What to Look For and Demand Through QWR or Discovery Part II

Posted 4 days ago by livinglies on Livinglies’s Weblog

Dan Edstrom, you are great!

OK I found the loan level details for my deal. It shows my loan in foreclosure and my last payment in 6/2008 (which is accurate). What it doesn’t say (among other things) is what advances were made on the account. Very interesting. This report is generated monthly but they are only reporting the current month. It also shows which pool my loan is in (originally their were approx. 4 pools, now there are 2). This means I can use all of this information to possibly calculate the advances reported – except that two months before I missed my first payment they stopped reporting SUB-servicer advances. [Editor’s Note: Those who are computer savvy will recognize that these are field names, which is something that should be included in your demand and in your QWR. You will also wanat the record data and metadata that is attached to each record. ]

DIST_DATE
SERIES_NAME
LOAN_NUM
POOL_NUM
DEAL_NUM LTV_DISCLOSED_PCT CLTV_PCT CREDIT_SCORE_NBR BACK_END_DTI_PCT
JUNIOR_RATIO LOAN_DOC_TYPE_DSCR LOAN_PURPOSE_TYPE_DSCR OCCUPANCY_TYPE PROPERTY_TYPE_DSCR LIEN_PRIORITY_DSCR STANDALONE_IND SILENT_SECOND_IND PROPERTY_STATE CONFORMING_BAL_IND INT_RATE_TYPE_DSCR MARGIN_GROSS_PCT
PMT_1ST_DATE INT_CHG_FREQ_MTH_QTY INT_CHG_PRD_INCR_CEIL_RATE INT_LIFE_CEIL_RATE INT_LIFE_FLOOR_RATE INT_ONLY_TERM_MTH_QTY INT_CHG_1ST_MTH INT_CHG_FREQ_DSCR INT_CHG_MTH_DIFF_QTY MORTAGE_INSURANCE_PROVIDER MORTAGE_INSURANCE_TYPE_DSCR MATURITY_DATE
NOTE_DATE
PRIN_ORIG_BAL
SOLD_BAL
TERM_ORIG_MTH_QTY PREPMT_PENALTY_TERM_MTH_QTY BORROWER_RESIDUAL_INCOME_AMT RFC_GRADE_CODE PRODUCT_GROUP_FALLOUT_DSCR MI_TYPE_DSCR INDEX_TYPE_CODE INDEX_TYPE_DSCR MLY_CURTAILMENT_AMT MLY_DRAW_GROSS_AMT MLY_COUPON_NET_RATE MLY_COUPON_GROSS_RATE MLY_PRIN_UNPAID_BAL MLY_PRIN_SCHED_BAL LOAN_AGE MLY_TERM_REMAIN_MTH_QTY MLY_UTILIZATION_PCT MLY_DELQ_REPORT_METHOD MLY_LOAN_STATUS_CODE MLY_LOAN_STATUS_DSCR MLY_PREPMT_TYPE_DSCR MLY_PAID_TO_DATE

If anyone wants this file or any of the servicing reports so they can see the actual data shoot me an email.

Thanks,
Dan Edstrom
dmedstrom@hotmail.com

Your tags: Eviction, foreclosure

Other Tags: accounting, disclosure, discovery, Edstrom, foreclosure defense, foreclosure offense, fraud, lost note, Mortgage, quiet title, QWR, TILA audit, trustee, bubble, CDO, CORRUPTION, currency, GTC | Honor, Investor, securities fraud

Published: November 9, 2009 6:24 pm
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TENT CITY, California While Vacant Houses Deteriorate

Posted 4 days ago by livinglies on Livinglies’s Weblog

TENT CITY, California While Vacant Houses Deteriorate

From watergatesummer.blogspot.com we have this post on the moronic ideology that misuses our natural and creative resources. It can be said that conservatives do not conserve and liberals do not liberate. I coined that because it is obvious that politics in this country is degrading even while some try to revive it.

Out of pure ideology and ignorance, people are being ejected from homes they own on the pretense that they don’t own the home. This sleight of hand is accomplished by “bridge to nowhere” logic — the pretender lender merely pretends to be authorized to initiate foreclosure proceedings. They come into court with a pile of inconsistent documents with little or no REAL connection with the originating papers and zero connection with the REAL lender.

So we end up with hundreds of thousands of homes that are empty, subject to vandalism and decay from lack of mainteance and lack of anyone living in them, combined with nobody paying utility bills etc that would help take the edge off the crisis. Instead, we choose to allow TENT CITY where there are no decent facilities, where people are living in tents literally, resulting in a greater drain on social services, police, fire, health, schools etc.

Why because some ideologue and people who mindlessly subscribe to such ideology has already played Judge and Jury and convicted these victims of Wall Street fraud. They are certain that these are deadbeats that don’t pay thier bills and won’t listen when someone points out that many of these people had nearly perfect credit scores before tragedy hit. That means the victims were generally considered to have been better credit risks based upon an excellent record of paying their bills, than their ideological detractors.

Someone of this ideology will tell us or anyone who will listen that the victims should have read what they were signing. The is fact that NOBODY reads those closing documents, not even lawyers, not even the ideological (don’t confuse me with the facts) conservatives. So the same people who say you should have read those documents, didn’t read their own.

And now everyone who is NOT in foreclosure or who has already lost possession of their home and who signed a securitized loan package is “underwater” an average of 25% , which means that they are, on average around $70,000 in debt that will never be covered by equity in their lifetime — so they can’t move without coming to the table with the shortfall.

Such ideologues fall short of helping their fellow citizens to be sure. What is astonishing is that they fall short of helping themselves, which means they subject their life partners, spouses, children and other dependents to the same mindless mind-numbing shoot myself in the foot political theology. And somehow it is THESE people who are controlling the pace of the recovery, controlling the correction in housing and social services who are claiming to be angry about their country being taken away from them!

Your tags: Eviction, foreclosure

Other Tags: bailout, housing, lender, POLICY, securitization, tent city, CDO, CORRUPTION, GTC | Honor, Mortgage, securities fraud

Published: November 9, 2009 6:15 pm
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U.S. STANDS FIRM IN SUPPORT OF WALL STREET WHILE THE REST OF THE WORLD TAKES THE ECONOMIC CRISIS SERIOUSLY

Posted 5 days ago by livinglies on Livinglies’s Weblog

MR. GEITNER, MR. SUMMERS AND OTHERS WHO ARE ON THE ECONOMIC TEAM DESERVE some CREDIT FOR BRINGING US BACK FROM AN ECONOMIC PRECIPICE THAT WOULD HAVE RESULTED IN A DEPRESSION FAR DEEPER AND LONGER THAN THE GREAT DEPRESSION. AND THEY SHOULD BE CUT SOME SLACK BECAUSE THEY WERE HANDED A PLATE ON WHICH THE ECONOMY WAS BASED LARGELY ON VAPOR — THE CONTRACTION OF WHICH WILL SPELL DISASTER IN MORE WAYS THAN ONE.
THAT SAID, THEY ARE GOING TOO FAR IN PROTECTING INVESTMENT BANKS AND DEPOSITORY BANKS FROM THEIR OWN STUPIDITY AND ENCOURAGING BEHAVIOR THAT THE TAXPAYERS WILL ABSORB — AT LEAST THEY THINK THE TAXPAYERS WILL DO IT.
As the following article demonstrates, the model currently used in this country and dozens of other countries is “pay to play” — and if there is a crash it is the fees the banks paid over the years that bails them out instead of the taxpayers.
For reasons that I don’t think are very good, the economic team is marginalizing Volcker and headed down the same brainless path we were on when Bush was in office, which was only an expansion of what happened when Clinton was in office, which was a “me too” based upon Bush #1 and Reagan. The end result is no longer subject to conjecture — endless crashes, each worse than the one before.
The intransigence of Wall Street and the economic team toward any meaningful financial reform adds salt to the wound we created in the first palce. We were fortunate that the rest of the world did not view the economic meltdown as an act of war by the United States. They are inviting us to be part of the solution and we insist on being part of the problem.
Sooner or later, the world’s patience is going to wear thin. Has anyone actually digested the fact that there is buyer’s run on gold now? Does anyone care that the value of the dollar is going down which means that those countries, companies and individuals who keep their wealth in dollars are dumping those dollars in favor of diversifying into other units of storage?
The short-term “advantage” will be more than offset by the continuing joblessness and homelessness unless we take these things seriously. Culturally, we are looking increasingly barbaric to dozens of countries that take their role of protecting the common welfare seriously.
Bottom Line on these pages is that it shouldn’t be so hard to get a judge to realize that just because the would-be forecloser has a big expensive brand name doesn’t mean they are anything better than common thieves. But like all theft in this country, the bigger you are the more wiggle room you get when you rob the homeless or a bank or the government or the taxpayers. Marcy Kaptur is right. She calls for a change of “generals” (likening Obama’s situation to Lincoln), since their skills were perhaps valuable when Obama first tackled the economic crisis — but now are counterproductive. We need new generals on the economic team that will steer us clear from the NEXT crisis not the LAST crisis.

November 8, 2009
Britain and U.S. Clash at G-20 on Tax to Insure Against Crises
By JULIA WERDIGIER

ST. ANDREWS, Scotland — The United States and Britain voiced disagreement Saturday over a proposal that would impose a new tax on financial transactions to support future bank rescues.

Prime Minister Gordon Brown of Britain, leading a meeting here of finance ministers from the Group of 20 rich and developing countries, said such a tax on banks should be considered as a way to take the burden off taxpayers during periods of financial crisis. His comments pre-empted the International Monetary Fund, which is set to present a range of options next spring to ensure financial stability.

But the proposal was met with little enthusiasm by the United States Treasury secretary, Timothy F. Geithner, who told Sky News in an interview that he would not support a tax on everyday financial transactions. Later he seemed to soften his position, saying it would be up to the I.M.F. to present a range of possible measures.

“We want to make sure that we don’t put the taxpayer in a position of having to absorb the costs of a crisis in the future,” Mr. Geithner said after the Sky News interview. “I’m sure the I.M.F. will come up with some proposals.”

The Russian finance minister, Alexei Kudrin, also said he was skeptical of such a tax. Similar fees had been proposed by Germany and France but rejected by Mr. Brown’s government in the past as too difficult to manage. But Mr. Brown is now suggesting “an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global financial transaction levy.”

Supporters of a tax had argued that it would reduce the volatility of markets; opponents said it would be too complex to enact across borders and could create huge imbalances. Mr. Brown said any such tax would have to be applied universally.

“It cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us,” Mr. Brown said at the summit. “There must be a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards.”

At the meeting at the Scottish golf resort, the last to be hosted by Britain during its turn leading the group, the ministers agreed on a detailed timetable to achieve balanced economic growth and reiterated a pledge not to withdraw any economic stimulus until a recovery was certain.

They also committed to enact limits on bonuses and force banks to hold more cash reserves. But they failed to reach an agreement on how to finance a new climate change deal ahead of a crucial meeting in Copenhagen next month.

The finance ministers agreed that economic and financial conditions had improved but that the recovery was “uneven and remains dependent on policy support,” according to a statement released by the group. The weak condition of the economy was illustrated Friday by new data showing the unemployment rate in the United States rising to 10.2 percent in October, the highest level in 26 years.

The finance ministers also acknowledged that withdrawing stimulus packages required a balancing act to avoid stifling the economic recovery that has just begun.

“If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater,” Mr. Geithner said. “It is too early to start to lean against recovery.”

As part of the group’s global recovery plan, the United States would aim to increase its savings rate and reduce its trade deficit while countries like China and Germany would reduce their dependence on exports. Economic imbalances were widely faulted as helping to bring about the global economic downturn.

Mr. Geithner acknowledged on Saturday that the changes would take time but that “what we are seeing so far has been encouraging.”

Your tags: Eviction, foreclosure

Other Tags: bailout, credit, economic team, financial reform, foreclosures, Geitner, Summers, Volker, bubble, CDO, CORRUPTION, currency, GTC | Honor, Investor, Mortgage, securities fraud

Published: November 8, 2009 6:55 pm
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I’m OK. Thanks for asking

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FOLLOWING THE MONEY — WHAT TO ASK FOR AND LOOK FOR

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Why “too big to fail” has to be dealt with this time

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AIG Reports Profits Increase — More Smoke and Mirrors

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Foreclosure Defense: New York Judge Gets It HSBC v Valentin N.Y. Sup., 2008

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Another Bad case for MERS Mortgage Electronic Ripoff System !

Kansas Landmark Decision Annotated 1

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1st Annotation of Landmark v. Kesler:
IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 98,489
LANDMARK NATIONAL BANK,
Plaintiff/Appellee,
v.
BOYD A. KESLER
Appellee/Cross-appellant
MILLENNIA MORTGAGE CORPORATION,
Defendant,
(MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC. AND SOVEREIGN BANK),
Appellants/Cross-appellees,
and
DENNIS BRISTOW AND TONY WOYDZIAK,
Intervenors/Appellees.
filed August 28, 2009

“The second mortgage lies at the core of this appeal. That mortgage document stated that the mortgage was made between Kesler–the “Mortgagor” and “Borrower”–and MERS, which was acting “solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns.” The document then identified Millennia as the “Lender.” At some subsequent time, the mortgage may have been assigned to Sovereign and Sovereign may have taken physical possession of the note, but that assignment was not registered in Ford County.”
Editor’s Note: At the very start, the Court correctly sets the stage pointing out that the lender was Millenia but MERS was named on the mortgage, thus splitting the note from the mortgage. The Court later points out:

“What meaning is this court to attach to MERS’s designation as nominee for Millennia? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant–their description depended on which part they were touching at any given time…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….

“The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. [Citation omitted.] Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. [Citation omitted.] The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.” Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009).

“it was incumbent on the trial court, when ruling on the motion to set aside default judgment, to consider whether MERS would have had a meritorious defense if it had been named as a defendant and whether there was some reasonable possibility MERS would have enjoyed a different outcome from the trial if its participation had precluded default judgment….A person is contingently necessary if (1) complete relief cannot be accorded in his absence among those already parties, or (2) he claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action in his absence may (i) as a practical matter substantially impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest…..MERS is a private corporation that administers the MERS System, a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans. Through the MERS System, MERS becomes the mortgagee of record for participating members through assignment of the members’ interests to MERS. MERS is listed as the grantee in the official records maintained at county register of deeds offices. The lenders retain the promissory notes, as well as the servicing rights to the mortgages. The lenders can then sell these interests to investors without having to record the transaction in the public record. MERS is compensated for its services through fees charged to participating MERS members.” Mortgage Elec. Reg. Sys., Inc. v. Nebraska Depart. of Banking, 270 Neb. 529, 530, 704 N.W.2d 784 (2005)….”

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.

A ‘Little Judge’ Who Rejects Foreclosures, Brooklyn Style

By Michael Powell – NY Times – 8/30/09

The judge waves you into his chambers in the State Supreme Court building in Brooklyn, past the caveat taped to his wall — “Be sure brain in gear before engaging mouth” — and into his inner office, where foreclosure motions are piled high enough to form a minor Alpine chain.

“I don’t want to put a family on the street unless it’s legitimate,” Justice Arthur M. Schack said.

Every week, the nation’s mightiest banks come to his court seeking to take the homes of New Yorkers who cannot pay their mortgages. And nearly as often, the judge says, they file foreclosure papers speckled with errors.

He plucks out one motion and leafs through: a Deutsche Bank representative signed an affidavit claiming to be the vice president of two different banks. His office was in Kansas City, Mo., but the signature was notarized in Texas. And the bank did not even own the mortgage when it began to foreclose on the homeowner.

The judge’s lips pucker as if he had inhaled a pickle; he rejected this one. “I’m a little guy in Brooklyn who doesn’t belong to their country clubs, what can I tell you?” he says, adding a shrug for punctuation. “I won’t accept their comedy of errors.”

The judge, Arthur M. Schack, 64, fashions himself a judicial Don Quixote, tilting at the phalanxes of bankers, foreclosure facilitators and lawyers who file motions by the bale. While national debate focuses on bank bailouts and federal aid for homeowners that has been slow in coming, the hard reckonings of the foreclosure crisis are being made in courts like his, and Justice Schack’s sympathies are clear. He has tossed out 46 of the 102 foreclosure motions that have come before him in the last two years. And his often scathing decisions, peppered with allusions to the Croesus-like wealth of bank presidents, have attracted the respectful attention of judges and lawyers from Florida to Ohio to California. At recent judicial conferences in Chicago and Arizona, several panelists praised his rulings as a possible national model.

His opinions, too, have been greeted by a cry of affront from a bank official or two, who say this judge stands in the way of what is rightfully theirs. HSBC bank appealed a recent ruling, saying he had set a “dangerous precedent” by acting as “both judge and jury,” throwing out cases even when homeowners had not responded to foreclosure motions. Justice Schack, like a handful of state and federal judges, has taken a magnifying glass to the mortgage industry. In the gilded haste of the past decade, bankers handed out millions of mortgages — with terms good, bad and exotically ugly — then repackaged those loans for sale to investors from Connecticut to Singapore. Sloppiness reigned. So many papers have been lost, signatures misplaced and documents dated inaccurately that it is often not clear which bank owns the mortgage.

Justice Schack’s take is straightforward, and sends a tremor through some bank suites: If a bank cannot prove ownership, it cannot foreclose. “If you are going to take away someone’s house, everything should be legal and correct,” he said. “I’m a strange guy — I don’t want to put a family on the street unless it’s legitimate.”

Justice Schack has small jowls and big black glasses, a thin mustache and not so many hairs combed across his scalp. He has the impish eyes of the high school social studies teacher he once was, aware that something untoward is probably going on at the back of his classroom. He is Brooklyn born and bred, with a master’s degree in history and an office loaded with autographed baseballs and photographs of the Brooklyn Dodgers. His written decisions are a free-associative trip through popular, legal and literary culture, with a sideways glance at the business pages.

Confronted with a case in which Deutsche Bank and Goldman Sachs passed a defaulted mortgage back and forth and lost track of the documents, the judge made reference to the film classic “It’s a Wonderful Life” and the evil banker played by Lionel Barrymore. “Lenders should not lose sight,” Justice Schack wrote in that 2007 case, “that they are dealing with humanity, not with Mr. Potter’s ‘rabble’ and ‘cattle.’ Multibillion-dollar corporations must follow the same rules in the foreclosure actions as the local banks, savings and loan associations or credit unions, or else they have become the Mr. Potters of the 21st century.”

Last year, he chastised Wells Fargo for filing error-filled papers. “The court,” the judge wrote, “reminds Wells Fargo of Cassius’s advice to Brutus in Act 1, Scene 2 of William Shakespeare’s ‘Julius Caesar’: ‘The fault, dear Brutus, is not in our stars, but in ourselves.’ ”

Then there is a Deutsche Bank case from 2008, the juicy part of which he reads aloud:

“The court wonders if the instant foreclosure action is a corporate ‘Kansas City Shuffle,’ a complex confidence game,” he reads. “In the 2006 film ‘Lucky Number Slevin,’ Mr. Goodkat, a hit man played by Bruce Willis, explains: ‘A Kansas City Shuffle is when everybody looks right, you go left.’ ”The banks’ reaction? Justice Schack shrugs. “They probably curse at me,” he says, “but no one is interested in some little judge.”

Little drama attends the release of his decisions. Beaten-down homeowners rarely show up to contest foreclosure actions, and the judge scrutinizes the banks’ papers in his chambers. But at legal conferences, judges and lawyers have wondered aloud why more judges do not hold banks to tougher standards.

“To the extent that judges examine these papers, they find exactly the same errors that Judge Schack does,” said Katherine M. Porter, a visiting professor at the School of Law at the University of California, Berkeley, and a national expert in consumer credit law. “His rulings are hardly revolutionary; it’s unusual only because we so rarely hold large corporations to the rules.”

Banks and the cottage industry of mortgage service companies and foreclosure lawyers also pay rather close attention. A spokeswoman for OneWest Bank acknowledged that an official, confronted with a ream of foreclosure papers, had mistakenly signed for two different banks — just as the Deutsche Bank official did. Deutsche Bank, which declined to let an attorney speak on the record about any of its cases before Justice Schack, e-mailed a PDF of a three-page pamphlet in which it claimed little responsibility for foreclosures, even though the bank’s name is affixed to tens of thousands of such motions. The bank described itself as simply a trustee for investors.

Justice Schack came to his recent prominence by a circuitous path, having worked for 14 years as public school teacher in Brooklyn. He was a union representative and once walked a picket line with his wife, Dilia, who was a teacher, too. All was well until the fiscal crisis of the 1970s.

“Why’d I go to law school?” he said. “Thank Mayor Abe Beame, who froze teacher salaries.”

He was counsel for the Major League Baseball Players Association in the 1980s and ’90s, when it was on a long winning streak against team owners. “It was the millionaires versus the billionaires,” he says. “After a while, I’m sitting there thinking, ‘He’s making $4 million, he’s making $5 million, and I’m worth about $1.98.’ ”

So he dived into a judicial race. He was elected to the Civil Court in 1998 and to the Supreme Court for Brooklyn and Staten Island in 2003. His wife is a Democratic district leader; their daughter, Elaine, is a lawyer and their son, Douglas, a police officer.Justice Schack’s duels with the banks started in 2007 as foreclosures spiked sharply. He saw a plague falling on Brooklyn, particularly its working-class black precincts. “Banks had given out loans structured to fail,” he said.

The judge burrowed into property record databases. He found banks without clear title, and a giant foreclosure law firm, Steven J. Baum, representing two sides in a dispute. He noted that Wells Fargo’s chief executive, John G. Stumpf, made more than $11 million in 2007 while the company’s total returns fell 12 percent. “Maybe,” he advised the bank, “counsel should wonder, like the court, if Mr. Stumpf was unjustly enriched at the expense of W.F.’s stockholders.”

He was, how to say it, mildly appalled. “I’m a guy from the streets of Brooklyn who happens to become a judge,” he said. “I see a bank giving a $500,000 mortgage on a building worth $300,000 and the interest rate is 20 percent and I ask questions, what can I tell you?”