We have talked alot both on our radio show (“Vondran legal hour”) and on our blogs about our NO ADVANCE FEE wachovia and world savings loan modification program. Some people have wanted to see proof and we can certainly appreciate skepticism especially when there are so many foreclosure rescue scams out there.
We have provided proof of some of our results on our website CONTINGENCYMODS.COM.
Here is a recent loan modification we were able to obtain for a California homeowner which ushers in a great Easter with a mortgage payment just over $700 a month and a 2% interest rate (start rate). The modification also offers a chance to earn principal reduction for timely payments. Not a bad deal at all. If you have a note that was originated by World Savings or Wachovia (both of which are now owned by Wells Fargo, and your loan may therefore be serviced and owned by Wells Fargo) and if your loan is a “pick-a-payment” loan which gave you multiple payment obligations when you first got it, and, assuming you have a hardship and can afford a reasonable monthly loan payment, please give us a call to see what we can do for you. We have had people that want to litigate these loans (which we do not presently do) and we have watched them lose their houses when we may have had a chance to get them something through our proven channel. It is a true shame, but some people just don’t get it. While these results are nice, we cannot and do not guarantee any specific results, and each case is determined on its own basis.
We also cannot guarantee timeframes but I would say typically we can results within 1-3 months and sometimes faster if there is a sale date approaching. At any rate, no guarantees are made, but with nothing out of pocket, what do you have to lose? Contact us at (877) 276-5084. PS – this is the ONLY lender or loan servicer we submit loan modifications for.
Well, we have talked about the 25 billion dollar settlement between the various state attorney generals and the five big banks (citi, ally financial, wells fargo, bank of america, and jp morgan chase), but now we have something concrete. The 25 billion dollar attorney general settlement agreements have appeared on the internet for review. You can click on the settlement agreements with the various lenders.
There are some basic categories such as new servicing standards, consumer relief sections, monitoring and enforecement provisions, and liability releases. I am not going to go into everything in this blog post, we have discussed this on another post. The big questions are:
1. How will this help you, the individual borrower?
2. Who will get what? There don’t seem to be any guidelines for who will get the help (i.e. no guarantees to anyone in particular – remember, this was the same problem with HAMP)
3. Will this help the overall economy?
4. Is this a fair settlement given the types of abuses outlined in the settlement agreements (which literally run the gamut, and which the lenders basically denied in every court case I have ever seen or heard of). Typical abuses we have been talking about for the past five years which are documented in these settlement agreements (as this song goes, it was NOT “just may imagination, running away with me” as we were trying to explain to the judges). Sample lending and loan servicer abuses outlined in these settlement agreements include:
a. Violations of False Claims Act
b. Bankruptcy abuses including filing bogus proof of claims. We have talked about this on our website (http://www.UltimateBK.com)
c. Problems with originating loans
d. Problems with servicing loans
e. HAMP – telling people not to make payments then denying loan modifications We have talked about this on our website (http://www.TrialPLanFraud.com)
f. Wrongful conduct relating to foreclosure (ex. robosigning). We have talked about this on our website (http://www.RobosignerAudits.com)
Basically, everything we said was going on that was wrong, is confirmed by this settlement agreement.
We have also talked about the potential shortcomings of this settlement agreement – no principle reduction for fannie and freddie loans for example.
I came across this today from the California Attorney General website. Just a quick post for you to review that discusses a California homeowner bill of rights which is “designed to protect homeowners from unfair practices by banks and mortgage companies and to help consumers and communities cope with the state’s urgent mortgage and foreclosure crisis.”
The memo states:
“California communities and families are being devastated by the mortgage and foreclosure crisis. We must ensure the deceptive practices that caused it never happen again,” said Attorney General Harris. “The California Homeowner Bill of Rights will provide basic fairness and transparency for homeowners, and improve the mortgage process for everyone.”
The legislation builds on the California commitment announced by Attorney General Harris earlier this month, which is expected to result in $18 billion of benefits for California homeowners. That agreement included reforms for mortgages owned by the five banks that were signing parties. The California Homeowner Bill of Rights will strengthen those protections, make them permanent, and apply them to all mortgages in the state.
“When I secured the California commitment, I made clear it was only one of many steps I am taking to comprehensively address the mortgage and foreclosure crisis,” Attorney General Harris continued. “I want to thank Senate President pro Tem Steinberg, Assembly Speaker Pérez and all the other lawmakers who are supporting this urgent package of legislation for homeowners.”
“I want to congratulate the Attorney General on the victory she won on behalf of the people of California,” said Speaker John A. Pérez. “Our state has suffered greatly as the result of bad actors in the banking and financial industries, and this settlement holds them accountable as we continue the difficult work of recovering the housing market and stemming the tide of foreclosures, evictions and auctions.”
“Millions of Californians have already lost their homes to foreclosure and the mortgage crisis is far from over,” said Senate President pro Tem Darrell Steinberg. “This landmark settlement negotiated by Attorney General Harris helps thousands of Californians but thousands more need the same help. We need to put these protections into law so that more people can save their homes.”
The press release also goes on to discuss some new bills that would hopefully be passed and states what they might do to help the California homeowner:
If passed, the following bills would:
ASSEMBLY BILL 1602 / SENATE BILL 1470- THE FORECLOSURE REDUCTION ACT OF 2012
Authors: Assemblymen Mike Eng and Mike Feuer; Senators Mark Leno, Fran Pavley, and Senate President pro Tem Darrell Steinberg
-Require creditors to provide documentation to a borrower that establishes the creditor’s right to foreclose on real property prior to recording a notice of default.
-Require creditors to provide documentary evidence of ownership, the chain of title to real property, and the right to foreclose, at the time of the filing of a notice of default.
-Prohibit creditors from recording a notice of default when a timely-filed application for a loan modification or other loss mitigation measure is pending.
-Prohibit creditors from recording a notice of sale when a timely-filed application for a loan modification or other loss mitigation measure is pending.
-Prohibit creditors from recording a notice of sale while a borrower is in compliance with the terms of a trial loan modification or after another loss mitigation measure has been approved.
-Require creditors to disclose why an application for a loan modification or other loss mitigation measure has been denied.
-Require that notices of foreclosure sales be personally served, including notices of foreclosure sale postponement.
-Provide homeowners with a private right of action in instances in which the requirements set forth in the legislation are not followed
ASSEMBLY BILL 2425 / SENATE BILL 1471 – DUE PROCESS REFORM LEGISLATION
Authors: Assemblywoman Holly Mitchell; Senators Mark DeSaulnier and Fran Pavley
-Require creditors to provide a single point of contact to borrowers in the foreclosure process who will be responsible for providing accurate account and other information related to the foreclosure process and loss mitigation efforts.
-Require creditors to provide a dedicated electronic mail address, facsimile number and mailing address for borrowers to submit information requested as part of a loan modification, short sale or other loss mitigation option.
-Authorize borrowers to challenge the unlawful commencement of a foreclosure process in court.
-Impose a $10,000 civil penalty on the recordation or filing of “robosigned” documents, defined as documents that contain information that was not verified for accuracy by the person or persons signing or swearing to the accuracy of the document or statement.
-Require that certain documents be recorded in a county recorder’s office.
ASSEMBLY BILL 2314 / SENATE BILL 1472 – BLIGHT PREVENTION LEGISLATION
Authors: Assemblywoman Wilmer Carter; Senator Fran Pavley
-Prevent blight enforcement actions from being taken against new purchasers of blighted property for 60 days, provided that repairs are being made to the property.
-Require banks that release liens on foreclosed property to inform local code enforcement agencies of the release so that demolition of blighted property can proceed.
-Increase fines against owners of blighted property from $1,000 per day to $5,000 per day, and allow the imposition of the costs of a receivership over blighted property to be imposed directly against the owner of blighted property.
ASSEMBLY BILL 2610/ SENATE BILL 1473 – TENANT PROTECTION LEGISLATION
Authors: Assemblywoman Nancy Skinner; Senator Loni Hancock
-Require purchasers of foreclosed homes to honor the terms of existing leases and give tenants at least 90 days notice before commencing eviction proceedings.
ASSEMBLY BILL 1950 – ENHANCEMENT OF ATTORNEY GENERAL ENFORCEMENT
Author: Assemblyman Mike Davis
-Impose a new $25 fee to be paid by servicers upon the recording of a notice of default. The fee would be deposited into a real estate fraud prosecution trust fund that would support the Attorney General’s efforts to deter, investigate and prosecute real estate fraud crimes, including the work of the Mortgage Fraud Strike Force.
-Extend the statute of limitations from one year to four years from the date of discovery for violations of law commonly occurring in connection with foreclosure-related scams, including acting as a real-estate agent without a license and charging up-front fees for loan modification services.
SENATE BILL 1474 / ASSEMBLY BILL 1763 – ATTORNEY GENERAL SPECIAL GRAND JURY
Authors: Assemblyman Mike Davis; Senator Loni Hancock
-Authorize the Attorney General to impanel a special grand jury for the purposes of investigating and indicting multi-jurisdictional financial crimes against the state.
We applaud any steps that may actually help homeowners. We would still like to see SB 94 repealed at least as to lawyers, so that they can be represented in the homeowners dealings with the banks. But I believe SB94 sunsets in 2013 so that may happen anyway, we will keep you posted.
More and more California Notaries are finding their way into civil foreclosure lawsuits.
We are seeing more and more notary “produce the transaction log” letters being sent out by California lawyers to various notaries in both California and elsewhere. We have talked about California notary duties on our websites, in particular on our Robosisgner website. This phenomena is happening, i think, due to the $25 billion mortgage settlements that were based in part on allegations of robosigning and notary fraud. More California homeowners and their attorneys seems to be filing written demands to notaries to produce their journal books verifying that certain documents (such as a deed of trust) were actually signed. Some homeowners I believe are starting to examine their rights under the settlement to see if they can get a slice of the settlement pie.
Other California property owners (and former owners who have already been foreclosed on) I believe are also demanding to see the notary transaction books as part of making a decision to file a civil lawsuit to either stop a foreclosure sale, or seeking damages against the broker, lender, and notary, for “wrongful foreclosure”, fraud, elder abuse, or other types of legal action. Regardless, the notary demand letters are flying, and some people have asked for more information on the topic. We have prepared this brief overview of California Government Code Section 8620 which talks about the notary duty to keep a notary journal, and the duty to respond to public requests.
As you can see, the law does impose certain duties on a California notary to keep notary records and respond to public demands. If the notary journal is lost, destroyed, etc., the notary has a duty to notify the California Secretary of State “immediately” under Cal. Gov’t Code Section 8602(d).
If you are suing a notary, or being sued as a notary, you might want to investigate our services. We are seeing a rash of civil lawsuits wrongfully naming notaries and joining them as defendants in a civil lawsuit merely because they were the notary on the transaction. This is not to say there is no such thing as notary fraud. It’s just that every case needs to be investigated for its merits immediately upon receiving a summons and complaint alleging wrongful conduct. Contact us at (877) 276-5084 if you have needs in this area.
Here’s one situation that came up recently. The borrower had a first and second mortgage (both were refinance loans – non-purchase money loans). The borrower was not making loan payments and they received a notice of default. Prior to the trustee sale date, the borrower filed for bankruptcy protection (Chapter 7 no asset case). The senior lien holder sought to lift the automatic stay in bankruptcy and the motion was granted. The house was thereafter sold at private foreclosure sale. After the sale, the bankruptcy discharged (eliminating any personal liability on the first and second mortgage). However, the junior mortgagee, believing itself to be a “sold out junior” (one action rule – we have talked about this on other posts) sought to collect on the second mortgage debt. The borrower sought to reopen the bankruptcy case arguing the action to collect the debt violated the bankruptcy discharge. The junior lien holder argued they were not scheduled on the bankruptcy petition so their debt was not discharged. So what happens in this situation? A similar situation arises where an unscheduled (omitted creditor) seeks to file a lawsuit after the chapter 7 no asset bankruptcy case was discharged. Here is one argument to look at and some case law that supports the proposition that the debt was discharged even if it was not listed on the bankruptcy petition.
Here is a general look at two cases that address this point (In re Hicks and Beezley). The following is general legal information only and should not be relied on as legal advice and may not be accurate or up to date. Please consult a bankruptcy attorney to discuss your case. This article is limited to the situation where a creditor seeks to collect on an alleged debt after the debtor receives a discharge in a chapter 7 “no-asset” case.
In re Hicks, 184 B.R. 954, 27 Bankr.Ct.Dec. 676 (Bkrtcy.C.D.Cal., 1995).
This is a case that involved a chapter 7 no-asset bankruptcy case. The debtor filed for bankruptcy protection and the bankruptcy petition omitted an alleged creditor who claimed liability on two promissory notes. Eight months after the bankruptcy was discharged on February 1993, the alleged creditor filed a civil lawsuit seeking to collect on the notes. The Plaintiff’s attorney was sent a copy of the Notice of Discharge, but ignored it and continued to proceed with the case.
The Plaintiff thereafter sought to reopen the bankruptcy to schedule the alleged debt, and then to discharge it. The Court held that although it is permissible to reopen a bankruptcy to afford further relief to the debtor, there was no need to do so in this case as the alleged debt was already discharged. The Court discussed 11 U.S.C. 524(a) discharge injunction which the court stated: “operates as an injunction against any post-discharge enforcement of any discharged claim as a matter of federal law.” The court went on to state that: “reopening this case to permit determination of whether this creditor should be liable for a violation of the discharge injunction is appropriate.”
A similar case in the 9th Circuit Court of Appeals reached a similar conclusion. In the case of Beezley v. California Land Title Co. (In re Beezley), 994 F.2d 1433, 1434 (9th Cir. 1993) (per curiam), the court was faced with another no-asset Chapter 7 bankruptcy case and a subsequent action to collect on a debt following the bankruptcy discharge. In Beezley, the alleged creditor (who had obtained a default judgment prior to the filing of the chapter 7 bankruptcy, but who was omitted on the schedule of creditors), sought to recover from the debtor and enforce the debt following the Chapter 7 discharge order. The debtor raised the defense of discharge. Ultimately the legal issue was whether or not the bankruptcy debt was discharged in the no-asset chapter 7. The Court discussed the difference between debts that are automatically discharged in a chapter 7 no-asset case –whether scheduled or not, (11 U.S.C. 523(a)(3)(A)), from those that are not automatically discharged if unscheduled, (11 U.S.C. 523(a)(3)(B)). Debts covered under Section “A” are automatically discharged whether they are scheduled or not in the no-asset chapter 7 case. Debts that fall under Section “B” (basically debts that result from intentional fraud, willful injury, false statement or embezzlement) may arguably survive the discharge, but it is Plaintiff’s burden to prove such exemption, the failure of which results in a discharge violation.
Section 524 of the bankruptcy code is clear and unambiguous as to what is required to prove a violation of the discharge injunction order under section 727 of the Bankruptcy Code:
“A discharge “operates as an injunction against the commencement or continuation of an action . . . to collect, recover or offset any [discharged] debt as a personal liability of the debtor.” 11 U.S.C. § 524(a)(2). A party who knowingly violates the discharge injunction can be held in contempt under Section 105(a) of the Bankruptcy Code.See Renwick v. Bennett, (In re Bennett), 298 F.3d 1059, 1069 (9th Cir. 2002). The party “seeking contempt sanctions has the burden of proving, by clear and convincing evidence, that the sanctions are justified . . . ‘[T]he movant must prove that the creditor (1) knew the discharge injunction was applicable and (2) intended the actions which violated the injunction.’” ZiLOG, Inc. v. Corning (In re ZiLOG, Inc.), 450 F.3d 996 (9th Cir. 2006) (citations omitted).
This gives you a general idea of the way a California bankruptcy court might review these types of cases where a lawsuit is filed, or collection efforts are taken after the discharge in the no-asset Chapter 7 bankruptcy case. If you are facing an aggressive creditor seeking to collect on a debt following your bankruptcy discharge, consider contacting our firm to discuss. You may have legal rights to assert against the creditor. We can be reached at (877) 276-5084. Ask for “ATTORNEY STEVE” – More bankruptcy information can be found at Ultimate BK.
Okay, here comes the latest window dressing of the day and a settlement that may force what the banks should have done voluntarily and that is give principle reductions to California homeowners. Here is a link to the mortgage settlement with the California Attorney General. Here are a few snippets from the Attorney General on the settlement:
- ”California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,” said Attorney General Harris. “Hundreds of thousands of homeowners will directly benefit from this California commitment.”
- “This outcome is the result of an insistence that California receive a fair deal commensurate with the harm done here. We insisted on homeowner relief for Californians and demanded enforceability so homeowners actually see a benefit that will allow them to stay in their homes, and preserved our ability to investigate banker crime and predatory lending,” continued Harris.
Here is the part of the press release that concerns me:
As part of the separate California guarantee, banks must enact a minimum of $12 billion in principal reductions for California homeowners. Failure to achieve this minimum level of reductions will result in substantial cash payments of up to $800 million that the banks will have to pay to the state.
So apparently 12 billion is earmarked for homeowner principal reduction, but if, just if, the banks don’t give that amount then they pay 800 million (a much small amount) TO THE STATE? Is this a back door way to give California a BAILOUT?? Somebody please talk to me here? Am I missing something? Now I have not seen any draft of the settlement agreement as this settlement just came out, but something seems amiss with a clause like this.
The next issue is WHO GETS THE PRINCIPAL REDUCTION? WHAT IS THE CRITERIA? WILL THE IMPLEMENTATION BE FAIR? HOW WILL THIS WORK?
Well, according to the press release not all counties will be included in the principal reduction program (okay, then who gets it)? Here is what the press release says:
County-specific payments are based on the number of homeowners and the depth of the foreclosure crisis. It is estimated that homeowners in the following counties will accrue the following level of benefits over the three-year life of the commitment.
- Los Angeles: $3.92 billion
- Riverside: $1.59 billion
- San Bernardino: $1.13 billion
- Sacramento: $820 million
- Stanislaus County: $368 million
Here are other details made public (and my comments in bold):
The financial benefits of this historic agreement extend to homeowners whose loans are owned or serviced by one of the five largest mortgage lenders.
HARRIS SAID: ”I will continue to fight for principal reductions for the approximately 60 percent of California homeowners whose loans are owned by Fannie Mae and Freddie Mac,” Attorney General Harris added.
Benefits include:
- More than $12 billion is guaranteed to reduce the principal on loans or offer short sales to approximately 250,000 California homeowners who are underwater on their loans and behind or almost behind in their payments.
Supposedly there will be major relief in the first year of the program.
- $849 million is estimated to be dedicated to refinancing the loans of 28,000 homeowners who are current on their payments but underwater on their loans.
So how will they decide who gets to reap the benefit of an underwater refi? This money would go fast.
- $279 million will be dedicated to offering restitution to approximately 140,000 California homeowners who were foreclosed upon between 2008 and December 31, 2011.
Who qualifies for restitution? What is the criteria? How much will each person get? What type of violations must you have?
- $1.1 billion is estimated to be distributed to homeowners for unemployed payment forbearance and transition assistance as well as to communities to repair the blight and devastation left by waves of foreclosures, targeted at 16,000 recent foreclosures.
- $3.5 billion will be dedicated to relieving 32,000 homeowners of unpaid balances remaining when their homes are foreclosed.
What? 32,000 homeowners will have their mortgages cancelled? Is that what I am hearing? Is this a lottery?
- $430 million in costs, fees and penalty payments.
I suppose this goes to the state and is badly needed.
OH, AND THE SETTLEMENT CREATES 42 MORE JOBS:
California will expand its Mortgage Fraud Strike Force, adding to the more than 42 members already working on the team.
California Foreclosure Case – Lona v. Citibank (scroll to the bottom) Okay, we have been talking about predatory lending for some time now. We have talked about California homeowners being steered into loans that virtually guaranteed their foreclosure sale. We have talked about lenders and real estate brokers that falsely stated income on loan applications, and we have talked about non-judicial foreclosure sales and the challenges involved in trying to set aside the foreclosure sale, including the lender “tender” rule (the rule that the banks argue in almost every foreclosure case basically arguing to the judge that you cannot challenge the foreclosure sale unless you tender the full balance of your loan). Of course very few people have the financial ability to pay the lender off on the loan, much less a borrower in default on a mortgage loan. At any rate, the Lona cases that recently came down from the California Court of Appeals (yes, the decision what thankfully cited for publication) takes an interesting view of stated income loans, the underwriting of these loans, and the tender rule in California (and its exceptions which the court was adept in pointing out). So here goes, here are the facts of Lona v. Citibank. The borrower was Mr. Lona, who apparently was of mexican decent and had an 8th grade education. He also apparently had two pieces of property, both in foreclosure. As to the foreclosure case at issue, Lona originally had a loan in the amount of 1.24 million dollars. In January of 2007 Lona claimed he was responding to an advertisement to refinance his loans. In response to the ads, Lona contacted the loan broker (First net mortgage) and applied for a loan. The loan application was for what we call a “stated income loan” (this is where the borrower states the amount his gross monthly income is and/or sometimes the unscrupulous loan broker will just fill this in themselves). At any rate, the loan application stated that Lona made $20,000 per month ($240,000 per year) when this in fact, apparently was not true (he was a mechanic at a mushroom farm). Lona claimed his annual income was only $40,000 ($3,333 per month). The loan was ultimately approved based on these figures, and both a first and second mortgage were originated. The first mortgage was for 1.125 million and was a 5/1 adjustable rate mortgage (loan was fixed for five years then would adjust). The CAP on the loan was 13.25% and the interest rate was 8.25%. The monthly payment on the first mortgage alone was $12,381.36. The second mortgage was a 15-year fixed mortgage in the amount of $350,000 and had a 12.25% interest rate and $327,000 Balloon Payment. In a nutshell, Lona claimed he could barely read english, did not read his loan documents, and that such were not adequately explained to him. Nevertheless, he signed the loan documents and 5 months later he was in default on the loans (keep in mind the monthly combined payment on the loans was $12,381.36 over 4x’s his monthly income). At some point after the loan was originated, the loan was sold to Citibank (probably part of a securitized loan scheme, but this is not confirmed) and EMC became the loan servicer of the loan. The lender thereafter initiated foreclosure proceedings (filed a notice of default and notice of sale etc.) and sold the house via non-judicial foreclosure sale in August of 2008. The house apparently went back to Citibank who recorded a trustees deed upon sale and thereafter moved to evict Lona from the property. Lona, however, did not go quietly into the foreclosure night. Instead, he filed a civil suit alleging a variety of causes of action, and basically sought to set aside the foreclosure sale (these were the two claims that survived demurrer and which were remaining against Citibank and EMC). The trial court found for Defendants in their motion for summary judgment, basically arguing that Defendant’s could not tender the loan balance, and must be held liable for his own actions in signing the loan. The court also noted that the borrower had been living in his house for free for some time. Further, the trial court ruled there was no evidence of any procedural irregularity or prejudice to the California homeowner Plaintiff. The Plaintiff appealed the grant of summary judgment arguing essentially that there was no requirement to tender the loan balance because the loan itself (and deed of trust) was illegal and unconscionable / unenforceable given that only his income was used to qualify him for the loan and that his credit did not warrant such a loan. He also argued that given this, he did not need to tender the loan balance to try to set aside the foreclosure sale. The unlawful detainer proceeding was consolidated with the Civil Action. The Courts holding in Lona v. Citibank The Court reversed the trial court and sent the case back for a trial on the merits. The court ruled there was no tender requirement because the Plaintiff was attacking the very validity of the debt (which is one of the exception to the tender rule) and that there was a question of material fact as to the unconscionable / illegal nature of the loan contract. In addition, there was a failure of Defendant to meet its burden for summary judgment on these issues, and the tender argument of Plaintiff was not addressed. Here is some key language pulled from the case:
I. Elements of a Cause of Action to Set Aside Trustee’s Sale
After a nonjudicial foreclosure sale has been completed, the traditional method by which the sale is challenged is a suit in equity to set aside the trustee’s sale. (Anderson v. Heart Federal Sav. & Loan Assn. (1989) 208 Cal.App.3d 202, 209-210.) Generally, a challenge to the validity of a trustee’s sale is an attempt to have the sale set aside and to have the title restored. (Onofrio v. Rice (1997) 55 Cal.App.4th 413, 424 (Onofrio), citing 4 Miller & Starr, Cal. Real Estate (2d ed. 1989) Deeds of Trusts & Mortgages, § 9.154, pp. 507-508.) On summary judgment, a “defendant . . . has met his or her burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).) Neither the parties’ briefs nor the papers they filed below on the motion for summary judgment discuss the elements of an equitable cause of action to set aside a foreclosure sale. The parties do not cite any cases that expressly set forth the elements. “ ‘It is the general rule that courts have power to vacate a foreclosure sale where there has been fraud in the procurement of the foreclosure decree or where the sale has been improperly, unfairly or unlawfully conducted, or is tainted by fraud, or where there has been such a mistake that to allow it to stand would be inequitable to purchaser and parties.’ ” (Lo v. Jensen (2001) 88 Cal.App.4th 1093, 1097-1098 (Lo), quoting Bank of America etc. Assn. v. Reidy (1940) 15 Cal.2d 243, 248; see also Angell v. Superior Court (1999) 73 Cal.App.4th 691, 700.) Case law instructs that the elements of an equitable cause of action to set aside a foreclosure sale are: (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering. (Bank of America etc. Assn. v. Reidy, supra, 15 Cal.2d at p. 248; Saterstrom v. Glick Bros. Sash, Door & Mill Co. (1931) 118 Cal.App. 379, 383 (Saterstrom) [trustee’s sale set aside where deed of trust was void because it failed to adequately describe property]; Stockton v. Newman (1957) 148 Cal.App.2d 558, 564 (Stockton) [trustor sought rescission of the contract to purchase the property and the promissory note on grounds of fraud]; Sierra-Bay Fed. Land Bank Ass’n v. Superior Court (1991) 227 Cal.App.3d (1991) 227 Cal.App.3d 318, 337 (Sierra-Bay) [to set aside sale, “debtor must allege such unfairness or irregularity that, when coupled with the inadequacy of price obtained at the sale, it is appropriate to invalidate the sale”; “debtor must offer to do equity by making a tender or otherwise offering to pay his debt”]; Abadallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109 (Abadallah) [tender element]; Munger v. Moore (1970) 11 Cal.App.3d 1, 7 [damages action for wrongful foreclosure]; see also 1 Bernhardt, Mortgages, Deeds of Trust and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2011 supp.) § 7.67, pp. 580-581 and cases cited therein summarizing grounds for setting aside trustee sale.) Justifications for setting aside a trustee’s sale from the reported cases, which satisfy the first element, include the trustee’s or the beneficiary’s failure to comply with the statutory procedural requirements for the notice or conduct of the sale. (Knapp, supra, 123 Cal.App.4th at pp. 96-99 [alleged irregularity in default notice and sale notice]; Sierra-Bay Fed. Land Bank Ass’n v. Superior Court, supra, 227 Cal.App.3d (1991) 227 Cal.App.3d at p. 337 [to set aside sale, “debtor must allege such unfairness or irregularity that, when coupled with the inadequacy of price obtained at the sale, it is appropriate to invalidate the sale”]; 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc. (2001) 85 Cal.App.4th 1279, 1284 [“mere inadequacy of price, absent some procedural irregularity that contributed to the inadequacy of price or otherwise injured the trustor, is insufficient to set aside a nonjudicial foreclosure sale”].) Other grounds include proof that: (1) the trustee did not have the power to foreclose (Bank of America v. La Jolla Group II (2005) 129 Cal.App.4th 706 [trustee’s sale invalid because borrower and lender had entered into agreement to cure default; loan was therefore current and lender did not have right to foreclose]; Dimock v. Emerald Properties (2000) 81 Cal.App.4th 868, 878 (Dimock) [where original trustee completed trustee’s sale after being replaced by new trustee, sale was void because original trustee no longer had power to convey property]); (2) the trustor was not in default, no breach had occurred, or the lender had waived the breach (System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 154 (System) [borrower was not in default because it was excused from performance by lender’s prior breach of contract; bank waived amount allegedly due]; Van Noy v. Goldberg (1929) 98 Cal.App.604 [debt had not matured]); or (3) the deed of trust was void (Saterstrom, supra, 118 Cal.App. at p. 383 [trustee’s sale set aside where deed of trust was void because it failed to adequately describe property]; Stockton, supra, 148 Cal.App.2d at p. 564 [trustor sought rescission of promissory note on grounds of fraud]; see also 1 Bernhardt, Mortgages, Deeds of Trust and Foreclosure Litigation, supra, § 7.67, pp. 580-581. We shall discuss this element further in section V. B. of this opinion.
A. Assertion That Loans Were Not Unconscionable
As a third ground for their motion, Citibank and EMC challenged the allegations of Lona’s second amended complaint that the trustee’s sale was “ ‘improperly held . . . due to the unconscionable and illegal nature of the loan agreement and deed of trust.’ ” The moving parties did not specify which element of the cause of action this part of their motion addressed. Arguably, it implicated both the first and third elements of the cause of action. Lona contends that the trustee’s sale should be set aside on the grounds that the loan was void ab initio because it was unconscionable and that he was excused from the tender requirement because the loan was unconscionable.First, Citibank and EMC argued that a trustee’s sale could not be set aside for unconscionability because the only basis for setting aside a trustee’s sale is irregularity in the foreclosure procedure. We have already rejected that contention. Second, Citibank and EMC argued that Lona failed to establish that the loans were unconscionable. In essence, they asked the court to find, as a matter of law, that the loans and deeds of trust were not unconscionable. Before proceeding further, we review general principles governing the “judicially created doctrine of unconscionability.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113 (Armendariz), abrogated in part on another ground in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __, __ [131 S.CT. 1740, 1746].) “Unconscionability analysis begins with an inquiry into whether the contract is one of adhesion. [Citation.] ‘The term [contract of adhesion] signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.’ ” (Ibid.) The record here suggests that the deeds of trust and the notes were contracts of adhesion. They appear to be standard forms that were drafted by the lender or others and presented to Lona for signature. There was no evidence in the record that Lona had any role in negotiating the terms of the contracts. “If the contract is adhesive, the court must then determine whether ‘other factors are present which, under established legal rules—legislative or judicial—operate to render it [unenforceable].’ [Citation.] ‘Generally speaking, there are two judicially imposed limitations on the enforcement of adhesion contracts or provisions thereof. The first is that such a contract or provision which does not fall within the reasonable expectations of the weaker or “adhering” party will not be enforced against him. [Citations.] The second—a principle of equity applicable to all contracts generally—is that a contract or provision, even if consistent with the reasonable expectations of the parties, will be denied enforcement if, considered in its context, it is unduly oppressive or “unconscionable.” ’ [Citation.] Subsequent cases have referred to both the ‘reasonable expectations’ and the ‘oppressive’ limitations as being aspects of unconscionability.” (Armendariz, supra, 24 Cal.4th at p. 113.) “In 1979, the Legislature enacted Civil Code section 1670.5, which codified the principle that a court can refuse to enforce an unconscionable provision in a contract. [Citation.] As section 1670.5, subdivision (a) states: ‘If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.’ ” (Armendariz, supra, 24 Cal.4th at p. 114.) Subdivision (b) of the statue provides: “When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.” “ ‘[U]nconscionability has both a “procedural” and a “substantive” element,’ the former focusing on ‘ “oppression” ’ or ‘ “surprise” ’ due to unequal bargaining power, the latter on ‘ “overly harsh” ’ or ‘ “one-sided” ’ results. [Citation.] ‘The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’ [Citation.] But they need not be present in the same degree. ‘Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.’ [Citations.] In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Armendariz, supra, 24 Cal.4th at p. 114.) Absent unusual circumstances, evidence that one party has overwhelming bargaining power, drafts the contract, and presents it on a take-it-or-leave-it basis is sufficient to demonstrate procedural unconscionability and require the court to reach the question of substantive unconscionability, even if the other party has market alternatives. (Gatton v. T-Mobile USA (2007) 152 Cal.App.4th 571, 586.) In their motion, Citibank and EMC asserted that Lona voluntarily entered into the loans and received the benefits of the loan and that it was undisputed that he signed the loan documents, which set forth the terms of the loans. The defendants focused on Lona’s allegations that the loans were unconscionable because of the potential increase in the interest rate on the first loan from 8.25 to 13.25 percent and the balloon payment on the second loan. Citibank and EMC argued that these terms “had no impact whatsoever on [Lona’s] inability to make the monthly Loan payments,” because the interest rate on the first loan was fixed at 8.25 percent for the first five years and the balloon payment was not due for 15 years and Lona defaulted within the first year after entering into the loans. We are not persuaded that the increase in the interest rate on the first loan or the amount of the balloon payment on the second loan are sufficient in and of themselves to support the claim that the loans were unconscionable. However, Citibank and EMC’s assertion that these allegedly unconscionable terms of the loan did not cause the default does not necessarily dispose of Lona’s claim that the loans were void ab initio because they were unconscionable. In addition to alleging unconscionability based on the interest rates and balloon payment provision, the second amended complaint alleged that the loans were unconscionable and illegal because they “were made to [Lona] without reasonable consideration of his ability to repay the loans . . . given his income at the time” and that the interest rate “far exceeded what was reasonable given his credit rating at the time of application.” Citibank and EMC’s motion did not address these allegations. The moving parties presented no evidence regarding Lona’s income, credit rating, or credit worthiness. And when Lona raised these factual issues in response to the motion for summary judgment, the moving parties did not respond; they did not discuss Lona’s evidence or provide any legal argument regarding the impact of that evidence. They did not file anything in reply. In our view, the defendants failed to meet their burden on summary judgment because their motion failed to address all of the allegations of the Lona’s second amended complaint regarding the alleged illegality of the loan. On summary judgment, an alternative method by which a defendant may meet its burden of showing that an essential element of the plaintiff’s claim cannot be established is to present evidence that the plaintiff “does not possess and cannot reasonably obtain, needed evidence.” (Aguilar, supra, 25 Cal.4th at p. 854.) But unlike federal law, summary judgment law in California requires the defendant to present evidence, and not simply point out through argument, that the plaintiff does not possess and cannot reasonably obtain the needed evidence. (Aguilar, at p. 854.) Such evidence may consist of the deposition testimony of the plaintiff’s witnesses, the plaintiff’s factually devoid discovery responses, or admissions by the plaintiff in deposition or in response to requests for admission that he or she has not discovered anything that supports an essential element of the cause of action. (See Villa v. McFerren (1995) 35 Cal.App. 4th 733, 749; Leslie G. v. Perry & Associates (1996) 43 Cal.App.4th 472, 482; Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 590.) At the hearing on the summary judgment motion, Citibank and EMC argued that there was no evidence to support Lona’s allegations, that Lona had not alleged any facts that would create triable issues, and that Lona relied on conclusions and not facts, which was not enough to avoid summary judgment. Citibank and EMC’s evidence in support of their motion for summary judgment consisted of the loan documents and documents related to the trustee’s sale, as well as the declaration of an employee of EMC describing and authenticating the documents. They did not submit any discovery responses by Lona. To the extent that their summary judgment motion relied on the claim that Lona had no evidence to support the allegations of his complaint, Citibank and EMC relied solely on argument and did not present the type of evidence necessary to demonstrate that Lona did not possess and could not reasonably obtain, needed evidence. (Aguilar, supra, 25 Cal.4th at p. 854.) Thus, Citibank and EMC failed to meet their burden on summary judgment to show that Lona had no evidence that supported his claims. In addition, with regard to this ground, the record reveals triable issues of material fact. In opposition to the motion for summary judgment, Lona presented evidence that he had only an eighth grade education, his English was limited, no one explained the documents to him, and he did not understand what he was signing. He presented evidence that, while the loan brokers told him what the initial interest rate and monthly payments were, they did not tell him how high the interest rate could increase on the first loan and that no one explained the balloon payment to him. The loan documents appear to be on standard, pre-printed forms in English and there is no evidence Lona had any role in negotiating the terms of the loan. In our view, this was sufficient evidence of unequal bargaining power, oppression or surprise to raise a triable issue regarding procedural unconscionability. In addition, there was uncontradicted evidence that Lona earned only $40,000 per year at the time the loans were approved, that only his income was considered in qualifying for the loan, and that the monthly payments were approximately four times his monthly income.[2] Given the extreme disparity between the amount of the monthly loan payments and Lona’s income, this was sufficient to create a triable issue on the question of whether the loans were overly harsh and one-sided and thus substantivelyunconscionable. And while this evidence may not ultimately be persuasive at trial, in this case, it was sufficient to defeat the motion for summary judgment. Since Citibank and EMC failed to address all of the allegations of the complaint regarding the alleged unconscionability of the loans and failed in their burden to show that Lona did not have any evidence to support his claims, we cannot say that they have met their burden of demonstrating that the loans and deeds of trust were not unconscionable as a matter of law. In addition, Lona submitted sufficient evidence to raise a triable issue with regard to the alleged unconscionable nature of the transaction. Our holding does not mean that a borrower may defeat a motion for summary judgment in an action to set aside a trustee’s sale merely by alleging that he or she did not understand the terms of the loan documents signed or could not afford the loan. In this case, the primary reasons for reversing the summary judgment are the moving parties’ failure to address all of the allegations of the second amended complaint and their failure to properly demonstrate that Lona had no evidence to support his claims. In addition, after Lona’s opposition argued that the loan was void for illegality at the time of signing and submitted evidence that demonstrated an extreme disparity between Loan’s income and the amount of his monthly payments, Citibank and EMC made no effort to address this evidence, with argument or legal authority.
B. Tender Requirement
Because the action is in equity, a defaulted borrower who seeks to set aside a trustee’s sale is required to do equity before the court will exercise its equitable powers. (MCA, Inc. v. Universal Diversified Enterprises Corp. (1972) 27 Cal.App.3d 170, 177 (MCA).) Consequently, as a condition precedent to an action by the borrower to set aside the trustee’s sale on the ground that the sale is voidable because of irregularities in the sale notice or procedure, the borrower must offer to pay the full amount of the debt for which the property was security. (Abadallah, supra, 43 Cal.App.4th at p. 1109; Onofrio, supra, at p. 424 [the borrower must pay, or offer to pay, the secured debt, or at least all of the delinquencies and costs due for redemption, before commencing the action].) “The rationale behind the rule is that if [the borrower] could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the [borrower].” (FPCI RE-HAB 01 v. E & G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1022.)
C. Exceptions to the Tender Requirement
There are, however, exceptions to the tender requirement. Our review of the case law discloses four exceptions. First, 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. (Stockton, supra, (1957) 148 Cal.App.2d at p. 564) [trustor sought rescission of the contract to purchase the property and the promissory note on grounds of fraud]; Onofrio, supra, 55 Cal.App.4th at p. 424.) Second, 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. In such cases, it is deemed that the tender and the counter claim offset one another, and if the offset is equal to or greater than the amount due, a tender is not required. (Hauger, supra, (1954) 42 Cal.2d at p. 755.) Third, a tender may not be required where it would be inequitable to impose such a condition on the party challenging the sale. (Humboldt Savings Bank v. McCleverty (1911) 161 Cal. 285, 291 (Humboldt). In Humboldt, the defendant’s deceased husband borrowed $55,300 from the plaintiff bank secured by two pieces of property. The defendant had a $5,000 homestead on one of the properties. (Id. at p. 287.) When the defendant’s husband defaulted on the debt, the bank foreclosed on both properties. In response to the bank’s argument that the defendant had to tender the entire debt as a condition precedent to having the sale set aside, the court held that it would be inequitable to require the defendant to “pay, or offer to pay, a debt of $57,000, for which she is in no way liable” to attack the sale of her $5,000 homestead.[3](Id. at p. 291.) Fourth, 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. (Dimock, supra, 81 Cal.App.4th at p. 878 [beneficiary substituted trustees; trustee’s sale void where original trustee completed trustee’s sale after being replaced by new trustee because original trustee no longer had power to convey property].) In their motion for summary judgment, Citibank and EMC asserted that Holland v. Pendleton Mtge. Co. (1943) 61 Cal.App.2d 570, 577-578 (Holland) establishes another exception to the tender requirement. Although one treatise interprets the case that way (see 4 Miller & Starr, Cal. Real Estate (3d ed. 2000) Deeds of Trust, § 10:212, p. 686), we do not agree that Holland establishes an exception to the tender rule, since the tender requirement was not at issue in Holland and the court did not discuss the tender requirement. We discuss Holland nonetheless because Citibank and EMC relied on it in their motion. In Holland, the trustee’s sale was continued four times and the property was sold to the beneficiary/lender. (Holland, supra, 61 Cal.App.2d at p. 573.) The court held the sale was void because the trustee had not complied with the statutory requirements for noticing the fifth and actual sale date. (Id. at pp. 575-577.) After the sale, the trustor remained in possession of the property and paid the lender $35 per month. (Id. at p. 577.) The parties disputed whether the payments were rent or were made pursuant to a new agreement with the lender to redeem the property. (Ibid.) In light of the irregularities in the notice of the sale, the appellate court held that the trustor should be allowed to set aside the sale. It also directed the trial court to determine whether the parties had entered into a new agreement and the nature of the monthly payments, and ordered that any amounts due be paid “after judgment.” (Id. at pp. 577-578.) Although the court did not discuss the tender requirement, the treatise authors have interpreted Holland as holding that a court “may permit the trustor to set aside the foreclosure sale on condition that payment be made after entry of judgment.” (4 Miller & Starr, Cal. Real Estate, supra, Deeds of Trust § 10:212, p. 686.) In our view, the appellate court in Hollandwas providing guidance to the trial court on remand regarding the monthly payments and did not establish a fifth exception to the tender requirement.
D. Analysis of Tender Requirement Element
We begin our analysis by reviewing the allegations of Lona’s second amended complaint (hereafter “complaint”). Lona alleged that the trustee’s “sale was improperly conducted due to fraudulent conduct of the foreclosing party and the unconscionable and illegal nature of the loan agreement and deed of trust . . . . The loan agreements were void for illegality from the inception and . . . voidable based on the unconscionable nature of the loans [and] violation of stated Public Policy.” The complaint also alleged that Lona was “excused from tendering the cure amount prior to seeking equitable relief, due to the fraudulent conduct of the foreclosing party, its failure and refusal to comply with statutory pre-requisites to the right to foreclose and the illegal and unconscionable nature of the contract.” Thus, the complaint alleged both irregularity in the foreclosure process and illegality of the underlying contract. In their summary judgment motion, Citibank and EMC attacked the tender requirement element of Lona’s cause of action and argued that his cause of action to set aside the trustee’s sale failed because he did not tender the amounts due on the first loan before filing suit and that none of the exceptions to the tender requirement applied. Citibank and EMC’s arguments regarding the exceptions to the tender requirement cited and distinguished Holland and Humboldt but failed to discuss the exception relating to the legality of the loan and the validity of the debt, which Lona relied on in his complaint. In opposition to the motion, Lona argued that there were other exceptions to the tender rule, including those set forth in Stockton and Hauger. He argued that he was not required to tender to seek equitable remedies or damages because: (1) the deed of trust “was illegal from the time of formation and therefore, unenforceable and non-assignable”; and (2) his “claims would offset any amounts claimed to be due under the void agreements.” Thus, Lona’s opposition relied on two exceptions to the tender requirement that Citibank and EMC had not addressed. Lona also argued that a tender was not required because his claim was based on the illegality of the loan contract, and not any irregularity in noticing or conducting the trustee’s sale. As noted, the issues on summary judgment are framed by the pleadings. (Varni, supra, 35 Cal.App.4th at pp. 866-867.) To prevail on their summary judgment motion, Citibank and EMC had to show that Lona could not establish the tender requirement element of his cause of action by showing both that Lona had not tendered and that the exceptions to the tender requirement that Lona relied on in his complaint did not apply. It was undisputed that Lona did not tender the amounts due before filing suit. Citibank and EMC failed to meet their initial burden on summary judgment because their motion was based on the exception in Humboldt and the holding in Holland, which Lona’s complaint did not rely on, and did not address the exception from Stockton (tender not required when borrower’s action attacks validity of debt), which was the exception that Lona had pleaded in his complaint.[4] We hold that Citibank and EMC did not meet their burden of showing that Lona could not state a cause of action to set aside the trustee’s sale on the ground that he could not establish the tender requirement because their motion did not address the exceptions to that element that Lona relied on in his complaint. A defendant that moves for summary judgment has the burden to show that it is entitled to judgment with respect to all theories of liability asserted by the plaintiff. (Lopez v. Superior Court(1996) 45 Cal.App.4th 705, 717.)
[1] It is important at this juncture to note that Lona did not allege any separate tort claims for fraud or contract claims based on the alleged unconscionability of the loans against Citibank or EMC. The only remaining cause of action against those defendants was Lona’s equitable claim to set aside the trustee’s sale.
[2] At the hearing on the motion, the attorneys seemed to agree that the loan application indicated that Lona made $20,000 per month. However, neither party placed the loan application into evidence and the only evidence in the record relating to Lona’s income was his deposition testimony. Lona’s counsel told the court that there was a factual dispute whether Lona knew what the loan application stated and whether Lona was responsible for the alleged misrepresentation regarding his income in the loan application. Unfortunately, Lona neglected to provide the court with evidence that supported these assertions. Since there is no evidence in the record regarding the entries in the loan application, we do not consider them in evaluating the propriety of granting summary judgment. Even were the application in the record, it appears there would be a factual dispute regarding the amount of Lona’s monthly income–whether it was $240,000 per year ($20,000 per month) as purportedly stated in the loan application or $40,000 per year as Lona testified in deposition.
[3] The Humboldt court stated that the “defendant would be subjected to very evident injustice and hardship if her right to attack the sale were made dependent upon an offer by her to pay the whole debt. The debt was not hers, and she was not liable for any part of it. Her only interest was in the homestead property, which [was worth] $5,000, while the property in which she had no interest was worth over $57,000. The debt amounted to $57,618.30.” (Humboldt, supra, 161 Cal. at p. 291.)
[4] Although Lona’s complaint did not expressly plead the exception in Hauger (tender not required where trustor’s counter claim is greater than the amount due on the loan), he did pray for both compensatory and punitive damages. Arguably, that exception is also encompassed by the pleadings.
Need to learn more about California Short Sale trends for 2012 – Listen in to our real estate radio show free?
We have a great show coming up on the VONDRAN LEGAL HOUR (out internet real estate radio show). Listen in as we invite California short sale realtor Allen Brodetsky of Boutique Realty onto the show to discuss the important foreclosure prevention topic of Short Sales and how they work. Many homes in California cannot be saved via foreclosure, modification , or bankruptcy, in these cases, it is wise to have a working knowledge of how a short sale works, and when you might want to consider going that route.
Here are some of the topics we hope to cover which I believe are the most frequently asked California short sale questions:
1. What are you seeing out there – trends in California short sales?
2. Are lender’s doing short sales?
3. Who is your favorite and least favorite lender/servicer in re to
short sales?
4. What happens when there is a first and second mortgage? (are
lenders still doing these)?
5. How long does it take to get a short sale approved on average?
6. Who pays for a short sale? Are there up front fees?
7. Some people want to hire their “uncle joe” (cousin realtor) to do
a short sale – are there any pitfalls in that approach?
8. Talk to me about “arms length transactions” (this is a problem we
run into from time to time as a law firm) – Do you see lender/
servicers allow family and friends to make short sale deals?
9. What are the benefits of a short sale vs foreclosure?
10. I hear now that there are refinances for underwater homes – do
you know about that program?
11. In your experience, are banks foreclosing faster now or not?
12. Are the servicer/lenders offering any cash incentives (“cash for keys”) to the homeowner in exchange for a short sale?
13. Do you negotiate HAFA short sales?
Allen Brodetsky is a CALIFORNIA SHORT SALE REALTOR with experience in the short sale trenches. There is no cost to listen in to the show. Simply click on the Vondran Legal Hour link above. We look forward to hearing from you.
California Attorney General not real keen on talks of banks settling foreclosure cases. She does not want to allow banks to settle cases that have not been investigated. Read more here.
This group is demanding 5 key things before they would agree that settlement with 5 major banks is proper:
imposing a fairly applied principle reduction;
a narrow release of liability;
an overhaul and reform of the system that would include banning banks from continuing to foreclose on families while they are undergoing loan modification;
requiring banks to give homeowners a single point of contact;
penalties for banks who fail to hold up their part of the agreement;
assurance that homeowners who were kicked out of their homes without due process will receive fair and ample restitution.
It is unlikely (at least to me) that any bank will ever get gung ho about giving principal reduction to troubled and underwater homeowners but we will keep an eye on the story and see where this goes.
We have said all along that notes are getting passed around like a whiskey bottle at a frat party. Fine, the banks are allowed to sell your loans to another party. But you are legally entitled to get notice of this transfer to a new assignee of a consumer loan. Yes, it is a legal right you have, even if you are in default, and even if you are in foreclosure. This is a law passed that amends TILA (reg Z) 15 U.S.C. 1641 – specifically section 131(g), and which states that you are entitled to get this notice. We have seen many a case where there simply is no notice and one day some new financial institution (including securitized loan trusts) literally appear out of thin air and demand payment at the threat of foreclosure. It is your right to ask them who they are and ask when they bought the loan and where the transfer disclosure statement is or where it was sent.
If they fail to provide this statement, you could be entitled to $4,000 statutory damages and can seek your attorney fees. This law is part of the “Helping Families Save their Homes Act” and became effective on 5/19/09 when President Obama signed the law. The law applies to “principal dwellings of a consumer” (won’t apply to commercial loans) whether the loan be a first mortgage or junior mortgage. The law requires the loan assignee (the seller has no obligation) to notify the consumer borrower of the sale or transfer of the loan within 30 days.
Contents of the notice must include:
Identity, address and phone number of the assignee
Date of the transfer of the loan
Contact information of the agent with authority to act on behalf of the assignee
The location of the place where the transfer of the ownership of the debt is recorded
Any other relevant information regarding the assignee
NOTE: Section 130(a)- 15 U.S.C. 1640(a) lays out the civil penalties for a violation of the act, which include $4,000 and attorney fees may be sought.
The federal reserve board (which implements TILA) has not yet appeared willing to clarify any of the section 131 ambiguities, so some of this may shake out in litigation.
Hello everyone. We almost made it to 2012, a year that promises more of the same in the foreclosure and short sale business. We should continue to see a trend with more foreclosures, more short sales, and more problems dealing with the major lenders and loan servicers. This article discusses the problem of liability following foreclosure or short sale in California. This is a very important topic and one that needs to be considered when you are creating a “loss mitigation plan” to deal with your distressed property. Please keep in mind the following is only general information, and is not legal advice, or a substitute for legal advice. We offer paid consultations that can evaluate your situation, every situation is unique and different.
We have talked about many of these issues before, and we have discussed the general rule in California (ccp 58od) which discusses there can be no deficiency liability to the first mortgagee when they foreclose non-judicially. And we have discussed ccp 580b which discussed how “purchase money” is protected from deficiency judgments in California, whether the lender seeks to foreclose judicially, or even non-judicially (the lender may elect their remedy), and we have also discussed ccp 726 the so called “one-action rule” which states that a secured lender must seek to foreclose on the “security first” before seeking to recover their debt in another manner.
But how do all these rules apply where you have a second mortgage that is secured by a deed of trust, but the second mortgage is underwater and technically does not secure any equity in your property (ex. you owe 500k on a first and 100k on a second mortgage. The second mortgage was taken out after the first and is not purchase money – and the property has a fair market value of $300k). In this scenario, if there is a foreclosure sale that sells the property to a third party, the first mortgagee would get 300k and the second mortgage holder (i.e. the junior lien holder) would get nothing. As we discussed, if the second mortgage is purchase money then the second is simply out of luck.
But if the second mortgage was a HELOC, and not purchase money (a topic for another blog) then the second mortgage holder may have options against you. As noted above, the “one action rule” in California (ccp 726) states that the secured lender must exercise on their security first, but what about the second. In the above scenario, the first foreclosed following the default on the loan, and the second stood silently by with no real options. Sure the second could have sought to foreclose using their power of sale, but the first mortgage holder still would have got the sale proceeds.
This is what we call the case of the “sold out junior” lien. After the foreclosure sale occurred, the second lien holder was left holding nothing but an unsecured debt (their lien is stripped following the foreclosure sale so clear title can pass to the purchaser, usually at the trustee sale). Thus, the debt became unsecured and the second lien holder has never had an opportunity to take an “action” for the purpose of the one action rule. So what options do they have? Well, they have the option to then “sue on the note” and come after you for the amount of the debt owed. Will they do this? Who knows. They might just want to sell your debt to a collection agency to let them try to collect from you. We do see this happening (even on protected purchase money loans).
As an example of how this might work is the case of Bank of America National Trust and Savings Association v. Charles Graves, California Court of Appeal, 4th District Court case. In this case, the above scenario basically happened (with the one small exception that the second lien holder started foreclosure proceedings, but then stopped because the first decided to foreclose). At issue was the one action rule and the second lien holders options – whether they could sue the borrower for the deficiency judgment. The Court held the second mortgagee could sue the borrower on the note (a non purchase money loan). Here is what the court said:
Here, the Bank contends it was entitled to proceed directly against the debtors because, through no fault of its own, it was a sold-out junior lienor. Accordingly, it argues that the defenses raised by the debtors, based on the ‘one form of action rule’ (§ 726) and the antideficiency statutes (§§ 580a, 580b, 580d) do not apply. The Graveses contend the Bank was not a sold-out junior lienor because its own action in postponing its trustee’s sale deprived it of that status.
“The term “sold-out junior lienor” refers to the situation in which a senior lienholder forecloses its lien, eliminating the junior lienor’s security interest. “A senior foreclosure sale conveys the property free of all junior [51 Cal. App. 4th 612] liens …. Thus, the junior no longer has a lien on the property, and the security has been entirely destroyed. A sold-out junior thus holds security that has ‘become valueless’ and is permitted to sue directly on the note.” (Bernhardt, Cal. Mortgage and Deed of Trust Practice (Cont.Ed.Bar 2d ed. 1990) § 4.8, pp. 193-194.)”
In the leading case of Roseleaf Corp. v. Chierighino, supra Chief Justice Traynor held, “The ‘one form of action’ rule of section 726 does not apply to a sold-out junior lienor [citations], nor does the three-months limitation of section 580a. [Citations.] There is no reason to compel a junior lienor to go through foreclosure and sale when there is nothing left to sell……….”The prohibition against a deficiency judgment does not apply to the beneficiary of a junior deed of trust whose security has been rendered valueless by a foreclosure sale of the property under a senior encumbrance. After the security has been lost by the foreclosure sale of the senior lien, the junior lienor can sue the debtor directly on the promissory note, which is then considered unsecured.” (4 Miller & Starr, Cal. Real Estate (2d ed. 1989) § 9:156, p. 531; see also 3 Witkin, Summary of Cal. Law (9th ed. 1987) Security Transactions in Real Property, § 159, pp. 658-659.).”
So as you can see, the non-purchase money unsecured lender may have rights to come back after you in California following a foreclosure sale by the first.
At any rate, what happens if the second sues you? Many people will then consider or at least review the potential for:
1. Working it out with the creditor or negotiating the debt down and paying off the second.
2. Some may consider filing bankruptcy. (ex. in a chapter 7 the unsecured debt can be potentially wiped out and discharged)
3. If sued on the note, some will raise the defense of recoupment (TILA), standing, FDCPA, or raise the 726 affirmative defense, etc.
These are just some options.
I hope you found this article helpful as far as understanding some of the basic principles at play. If you need a foreclosure or short sale lawyer to review your options contact us at (877) 276-5084. You can get video information through our Foreclosure Warrior website. This is an advertisement and communication.
Here is an interesting one. My friend brought over a mailer he just received from Bank of America which informs him that he may be entitled to money damages if he was in foreclosure between January 1, 2009 and December 31, 2010 and was “financially injured” by acts of the banks. Some examples they provide of what may constitute “FINANCIALLY INJURED” include:
The mortgage balance at the time of foreclosure was more than you actually owed (they wouldn’t do that now would they)?
You were doing everything the modification agreement required, but the foreclosure still happened (say it ain’t so Joe)
The foreclosure action occurred while you were protected by bankruptcy (you mean a “stay violation”?)
You requested assistance/modification, submitted complete documents on time, and were waiting for a decision when the foreclosure sale occurred (that’s real cool)
Fees charged or mortgage payments were inaccurately calculated, processed, or applied
The foreclosure action occurred on a mortgage that was obtained before active duty military service began and while on active duty, or within 9 months after the active duty ended.
These are the examples provided in their mailer piece – which is referred to in one section as “errors, misrepresentations or other deficiencies in the foreclosure process.” Is this their definition of WRONGFUL FORECLOSURE? We have been wondering for a long time what wrongful foreclosure was. So apparently if one of these acts happened to you, AND IF YOU WERE FINANCIALLY INJURED then you might be entitled to an independent review that could result in a check being sent to you. Just what the maximum amounts available are is unclear, and it is not clear how you will prove you were financially injured. In the lawsuits we have filed, lenders typically argue that THEY WERE THE ONES INJURED NOT YOU. So it will be interesting to see how this plays out.
Noticeably missing from their list of examples of “situations that may have led to financial injury” are:
Foreclosing on your with bogus foreclosure documents
Foreclosing on you while not following the California Foreclosure laws
Foreclosing on you after you rescinded your loan under TILA (and had the clear ability to tender the loan balance)
Foreclosing on elder homeowners who were trapped in an exploding option arm (negam loan)
At any rate, this is at least an attempt to by BofA to reach out (albeit forced by the Federal Regulators / OCC & Federal Reserve) to try to right the wrong so we will have to see how it plays out. If anyone has any stories from the trenches on this program please let us know so we can share the results. The stated deadline to apply is April 30, 2012. We can only wonder if Wells Fargo, Citi, Chase and other lenders are being forced to follow suit.
CALIFORNIA SHORT SALE UPDATE – SB 931 and SB 458 prohibits deficiency judgments following short sales in California!
Well, many of the lenders and servicers were not great about doing loan modifications (even though they got their bailout), what about short sales? Will they do short sales without seeking deficiency judgments from California borrowers? In the past junior lien holders may have required cash contributions or required the borrower to carry a note of they wanted to do a short sale. However, recently California has passed two laws that help California homeowners facing foreclosure:
(1) SB 931 – This bill prohibited deficiency judgments by the first mortgage holder following a short sale transaction (a short sale is when you owe more than your house is worth and the bank allows you to sell it and the bank takes the loss). We will talk about mortgage debt forgiveness in another blog post and whether or not that may trigger any tax liability for forgiven debt. But the point is that SB 931 prevents the senior lien holder from pursuing a deficiency judgment where they agree to allow you to short sale your property. Note: we have seen situations where the defaulting borrower can afford their mortgage payment, but because they are upside down, the lender or loan servicer of the securitized loan refuses to short sale. Sometimes, where there is a second mortgage, the junior lien holder refuses to release the lien and the short sale never goes through. At any rate, SB 931 mererly states that where they DO AGREE to the short sale, they cannot come back after you for a deficiency judgment (which is the difference between what you owed the lender and what they actually got for the property in the short sale).
So, SB 931 was great where all you had was a first mortgage and no second mortgage (also called a junior lien). But what about when you had a first and second and the second wanted to come back at you for the deficiency judgment? SB 931 did not account for that scenario.
(2) SB 458 – This law came in and plugged the hole and basically states that the second or junior lien holder cannot come back at you for a deficiency judgment following a short sale. So this make a short sale a very attractive proposition right now (especially since a short sale is better on your credit score). The real question is whether or not the junior lienholder will still agree to the short sale, or whether they will be more inclined to NOT AGREE to the short sale where a borrower has assets that might be worth going after. There are also questions about whether or not the lender or loan servicer will seek contributions from the buyer of the property, or even commission reductions to the real estate agent. These are some things we will have to wait and see how lenders respond. In the meantime, this is hope for homeowners, and falls in line with HAFA which prohibits deficiency judgments.
So we may see a boom in short sale transactions in the year 2012 given these new laws, and where the mortgage debt forgiveness act may come into play to protect certain borrowers from having a taxable event when it comes to the shortsale. If you are not sure where you stand, or whether a short sale is in your best interest, give us a call. We can consult you in regard to liability in regard to the short sale. We may also be able to negotiate with your junior lien holder if they have sued you for a deficiency judgment arguing these laws and section 580 (e) of the code. A California short sale lawyer can help you look out for your best interest and avoid deficiency liability traps.
CALIFORNIA TRUSTEE SALE AND THE TILA RECOUPMENT DEFENSE
First off, what is recoupment under the Federal Truth in Lending Law?
We have talked on many other blog posts about the Federal Truth in Lending Act (“TILA”) and the one year right to statutory damages (which can be equitably tolled under some circumstances) and we have discussed TILA rescission which provides an “extended three year right to rescind the mortgage loan in a refinance transaction on a primary residence if certain “material violations” are present) – this right generally speaking cannot be extended and some courts require that the TILA lawsuit be FILED within three years. This blog post discusses a different legal right under TILA, which is the right to assert the defense of recoupment when a creditor initiates an action seeking to collect on a debt.
The goal of the defense is to reduce the amount you owe the creditor. In a successful action, the party raising the recoupment defense can seek reasonable attorney fees so there is also an economic incentive to raise the defense where applicable so that it may be easier to find an attorney willing to take the case.
As one California court discussed Recoupment is:
“A defense arising out of some feature of the transaction upon which the plaintiff’s action is grounded.” TILA provides that the one-year statute of limitations on damages claims “does not bar a person from asserting a [TILA] violation in an action to collect the debt … as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law .” 15 U.S.C. § 1640(e) (emphasis added). See also 15 U.S.C. § 1635(i)(3) (“Nothing in this subsection affects a consumer’s right of rescission in recoupment under State law.”). Under California law, a claim for recoupment may be brought as a “defense” to an “action,” notwithstanding that the claim might otherwise be barred by the statute of limitations if brought as an independent action. CAL. CODE CIV. PRO. § 431.70. See the unreported case of Alakozai v. Valley Credit Union, No. C 10–02454 HRL, 2010 WL 5017173, (N.D.Cal. Dec.3, 2010) (quoting Beach v. Ocwen Fed. Bank, 523 U.S. 410, 415, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998)).
So essentially, where you have TILA violations (ex. under-disclosure of the APR, finance charge, total of payments, etc.) these violations must normally be brought within ONE YEAR in order to obtain actual and statutory damages. In limited circumstances, this can be tolled. However, when a debtor is responding to a creditor action (ex. a lawsuit, or a proof of claim in a bankruptcy court) to collect a debt, the one-year statute of limitations does NOT APPLY given the language contained in the underlined section above.
Can you argue the defense of recoupment in California when the lender seeks a non-judicial foreclosure – is that an action that allows the recoupment defense?
Short answer – probably not. Here is one California Federal Case which dismissed the TILA recoupment claim when raised in response to a non-judicial foreclosure action. Amaro v. Option One Mortgage, 2009 WL 103302, U.S. Dist. Ct. (CD Cal 2009):
“Plaintiff argues the doctrine of recoupment allows her to raise the claim, despite bringing it beyond the statute of limitations period. (See Opp’n at 8.) According to Plaintiff, “a party may assert recoupment as a defense after a statute of limitations period has lapsed.” (Id.) Plaintiff argues she may use this defense affirmatively in this case because she brings it in response to Defendant’s non-judicial foreclosure proceeding. (Id.) Plaintiff’s contention lacks merit. A party may bring a claim for recoupment after TILA’s one-year statute of limitations period has expired, but only as a defense in an action to collect a debt. 15 U.S.C. § 1640(a). Here, Plaintiff’s affirmative use of the claim is improper and exceeds the scope of the TILA exception, permitting recoupment as a defensive claim only. See id.; Beach v. Ocwen Fed. Bank, 523 U.S. 410, 415-16, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998). Accordingly, the Court grants Defendant’s Motion with respect to Plaintiff’s first claim, without leave to amend.
Another California Court put it this way:
Recoupment is “a defense arising out of some feature of the transaction upon which the plaintiff’s action is grounded.” Alakozai v. Valley Credit Union, No. C 10–02454 HRL, 2010 WL 5017173, (N.D.Cal. Dec.3, 2010) (quoting Beach v. Ocwen Fed. Bank, 523 U.S. 410, 415, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998)). TILA provides that the one-year statute of limitations on damages claims “does not bar a person from asserting a [TILA] violation in an action to collect the debt … as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law.” 15 U.S.C. § 1640(e) (emphasis added). The Court must, therefore, determine if Defendant’s non-judicial foreclosure is an “action” and, relatedly, whether Plaintiff’s claim properly may be characterized as a “defense” to such “action.”
The general rule is that “[w]hen the debtor hales the creditor into court, the claim by the debtor is affirmative rather than defensive.” See Ortiz v. Accredited Home Lenders, Inc., 639 F.Supp.2d 1159, 1165 (S.D.Cal.2009). Specifically, in non-judicial foreclosure cases, federal district courts in California conclude that “non-judicial foreclosures are not ‘actions’ as contemplated by TILA.”4 Ortiz, 639 F.Supp.2d at 1165 (S.D.Cal.2009); Alakozai, 2010 WL 5017173; Lima v. Wachovia Mortg. Corp., No. C09–4798TEH, 2010 WL 1223234, (N.D.Cal. Mar.25, 2010). Indeed, TILA itself defines an “action” as a court proceeding. Ortiz, 639 F.Supp.2d at 1165 (citing 15 U.S.C. § 1640(e)). Thus, insofar as Plaintiff asserts recoupment in response to Defendant’s non-judicial foreclosure, her claim is not properly deemed a “defense” to an “action” for purposes of avoiding the applicable statute of limitations. (See Harris v. Wells Fargo, 2011 WL 1134216). For another example, see Lima v. Wachovia Mortgage Corp. (unreported). 2010 WL 1223234 (Cal. ND 2010).
NOTE: Keep in mind, in most cases in California, non-judicial foreclosure is the chosen foreclosure remedy (as opposed to judicial foreclosure which is also an option, but which is expensive and allows for these types of TILA recoupment claims) so raising a TILA recoupment claim will not likely save the home for foreclosure or provide any other meaningful remedy.
Are there any circumstances where the Defense of Recoupment may arise in California?
Sure, if any lender seeks to haul you into Court to collect on a mortgage debt, it may be wise to consult a predatory lending attorney and discuss a TILA audit of your loan file. In these circumstances, recoupment may be raised as a defense or to offset the creditors claims.
Another possibility is in a bankruptcy court. This is something your attorney should explore. For example, if you have filed Chapter 13 bankruptcy and the lender has filed a proof of claim (“an action”) you can file an adversary proceeding or take other appropriate measure to raise the defense of recoupment.
Here is one case that discussed recoupment in Chapter 13 bankruptcy (in re Coxson 43 F. 3d 189 (5th Circuit 1995):
“Commonwealth argues that the Coxsons’ TILA claim fails the second step of the test in Bull because the claim was not raised defensively. Commonwealth argues that the Coxsons “hauled” Commonwealth into court and initiated this lawsuit, and therefore the TILA claim is used offensively, rather than defensively. The district court disagreed, holding that the Coxsons filed this suit in response to Commonwealth’s filing of a proof of claim in the bankruptcy court and its foreclosure actions. The district court reasoned that filing a proof of claim is “an action to collect the debt,” and therefore the TILA claim was timely under 15 U.S.C. § 1640(e). We agree with the district court’s analysis. In this case, Commonwealth’s and the Coxsons’ claims arise from the same underlying transaction, the contract for financing the Coxsons’ home. See Plant v. Blazer Financial Services, Inc., 598 F.2d 1357, 1361 (5th Cir.1979); Maddox v. Kentucky Finance Co., 736 F.2d 380, 383 (6th Cir.1984). The mere fact that the Coxsons were the plaintiffs in the case below does not preclude the finding that their TILA claim was raised defensively. See, e.g., In re Jones, 122 B.R. 246 (plaintiff permitted to raise TILA recoupment claim defensively). Furthermore, Texas state courts have held that a TILA claim may be asserted defensively as a recoupment action against a lender attempting to enforce contractual obligations. Garza v. Allied Finance Co., 566 S.W.2d 57, 62-63 (Tex.Civ.App.-Corpus Christi 1978); Cooper v. RepublicBank Garland, 696 S.W.2d 629, 634 (Tex.Civ.App.-Dallas 1985) (holding that recoupment claim was raised defensively in response to creditor’s foreclosure efforts). We find that the TILA claim was not barred by the statute of limitations, and therefore remand the issue for consideration of the merits of the claim.
A similar outcome resulted in Davis v. Wells FargoFinancial, Chapter 13 case (case# 2:11-CV-02766-WMA – Aug. 2011) Northern District of Alabama. In that case, Wells Fargo filed the proof of claim against the debtor in chapter 13 bankruptcy case. The debtor filed an adversary proceeding for violations of TILA (failing to accurately disclose finance charge and APR). Wells Fargo moved to dismiss arguing the claim for damages was not brought within the one year statute of limitations under 1640 (e). The court held that 1640 (e) did not apply to recoupment claims asserted defensively. The Court held that the defense of recoupment DID APPLY as the proof of claim was the affirmative action that the debtor was responding to, and it was proper to seek damages, and attorney fees as permitted under TILA.
This might be important in some cases to help the debt reduce the amount of the debt owed which could make the chapter 13 plan viable (many chapter 13 plans fail and get converted to chapter 7’s). Recall as we have discussed in previous posts that in a chapter 13, you still have to bring your mortgage current and your arrears current over the life of the chapter 13 plan.
For example, if you have a HOEPA violation – which is an egregious form of TILA violation (high cost loans), you could seek actual and statutory damages and special enhanced damages (that might help offset the arrearages) as well as attorney fees.
A couple other notes:
(1) If you are in a chapter 13 consider having a TILA audit performed on your loan. You may have grounds to file an adversary proceeding raising the defense of recoupment following the proof of claim filed by the creditor. If for some reason the creditor does not file a proof of claim, there is some legal authority for filing a proof of claim on behalf of the creditor. See Federal Rules of Bankruptcy Procedure 3004. Note the time restrictions.
(2) In a chapter 7 there is some case law suggesting that a Motion for Relief from the Automatic stay in Bankruptcy is not an “action” to collect the debt and the defense of recoupment could not be raised. As one example, see Chabot v. Washington Mutual – 2007 WL 1412490 (Bankr. D. Mont. May 10, 2007) which held that such an action by the creditor is merely an action to “seek relief from the automatic stay” and not to collect a debt.
(3) Assignees of loans (ex. the securitized loan trust that is normally seeking to foreclose on you) are normally liable under TILA so be prepared to rebut that argument if you are a foreclosure defense attorney reading this.
(4) There is authority for raising a defense of recoupment in a chapter 13 even after the chapter 13 plan is confirmed. One such case is Elliot v. ITT, 150 B.R. 36 (N.D. Ill 1992).
(5) Talk to your bankruptcy attorney about whether you should list the debt as “disputed” on the bankruptcy petition and/or list the debt as “exempt.” Keep in mind, in a chapter 7 bankruptcy case, all pre-petition claims belong to the trustee so this is something you will need to keep it mind. If it is exempt claim, you may be able to bring the claim yourself. If not, the trustee can do what they want with the claim, including pursue it, or abandon it.
Hopefully this has been a helpful overview. To discuss TILA audits, predatory lending, adversary proceedings and the like, contact us at (877) 276-5084. This is an advertisement and communication. Article was written by Steve Vondran, Esq. All copyrights reserved. This is general legal information only and should not be relied on as legal advice.
PREEMPTIVE LAWSUIT TO ENJOIN THREATENED FORECLOSURE AND QUIET TITLE IN CALIFORNIA GETS THE BOOT
In a continuing series of defeats for California homeowners the Robinson case shot down another attempt at preventing a “pretender lender” from foreclosing. (Robinson v. Countrywide Home Loans,
130 Cal.Rptr.3d 811, Court of Appeal, Fourth District, Division 2, California (Sept. 12, 2011).
Some homeowners in California continue to challenge MERS and their role in the foreclosure process and “wrongful initiation of foreclosure.” These types of suits may also seek to quiet title. Here is a recent case that denied the right to pursue that legal theory. Here are the facts of the case as discussed in the opinion
The following facts are alleged in plaintiffs’ complaint:
In October 2007, plaintiffs borrowed $380,000 from lender SBMC Mortgage to finance the purchase of real estate. In connection with that transaction, they executed a promissory note, which was secured by a deed of trust. The deed of trust identifies SBMC Mortgage as the lender and identifies T.D. Service Company as the trustee. It identifies MERS as “acting solely as a nominee for Lender and Lender’s successors and assigns,” and states that “MERS is the beneficiary under this Security Instrument.” The deed of trust further states that “Borrower [i.e., plaintiffs] understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property. In December 2008 and January 2009, Countrywide, identifying itself as a debt collector and the servicer of the loan on the noteholder’s behalf, notified plaintiffs that their loan was delinquent. Plaintiffs’ attorney wrote to Countrywide requesting information concerning the loan, including a copy of the note, documents evidencing any sale, transfer, or assignment of the note, and a beneficiary statement and payoff demand statement pursuant to Civil Code section 2943. Countrywide requested more time to respond but did not provide the requested documents before notifying plaintiffs, on February 27, 2009, that their loan was in default and had been referred to Countrywides foreclosure management committee for review. On February 11, 2009, however, ReconTrust, purporting to act as agent for the beneficiary of the deed of trust, had recorded a notice of default and election to sell the property under the deed of trust, stating that plaintiffs were in default and that the present beneficiary had elected to cause the property to be sold. Despite further requests, Countrywide failed to identify the current beneficiary on the note and deed of trust.
Plaintiffs alleged that their promissory note was “sold and resold” on the secondary mortgage market, and that as a result, it had become difficult or impossible to ascertain the actual owner of the beneficial interest in the note. They alleged that the identity of the person or entity that currently holds an ownership interest is unknown. They alleged that because Countrywide failed to comply with its statutory duty to provide them with the documents they requested, they did not know to whom they owed the obligation to repay the loan. They alleged on information and belief that “a person purporting to be the rightful current beneficiary, by virtue of a purported assignment from MERS,” authorized an agent to cause the notice of default and election to sell to be recorded. They alleged on information and belief that SBMC did not assign the note to MERS and did not authorize MERS or any other person to assign the note to anyone on its behalf. They alleged on information and belief that the person or entity who directed the initiation of the foreclosure process was not the note’s rightful owner and was acting without the rightful owner’s authority.
On or about June 1, 2010, plaintiffs filed a second amended complaint, alleging wrongful initiation of foreclosure (first cause of action), violation of Civil Code section 2943, subdivision (b)(1) (fourth cause of action) and unfair business practices (fifth cause of action). Plaintiffs also sought declaratory relief (second cause of action) and to quiet title (third cause of action).
The California court of Appeals disagreed with Plaintiff and in citing the Gomes case held:
“Plaintiffs allege in their first and second causes of action that the entity which initiated foreclosure proceedings had no legal authority to do so because it was not either the current beneficiary of the deed of trust or the agent of the current beneficiary.Plaintiffs contend that section 2924, subdivision (a)(1)(C) “by necessary implication” provides that a borrower who is subject to foreclosure under a deed of trust may file an action to challenge the foreclosing party’s standing to do so.The balance of their argument is that MERS had no legal authority to initiate a foreclosure. The issues plaintiffs raise concerning MERS and the securitized mortgage market were recently discussed in Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 121 Cal.Rptr.3d 819 (Gomes ), review denied May 18, 2011.There, the court concluded that the plaintiff failed to identify a legal basis for an action to determine whether MERS had authority to initiate a foreclosure proceeding. (Id. at pp. 1154–1157, 121 Cal.Rptr.3d 819.) We agree with the Gomes court that the statutory scheme (§§ 2924–2924k) does not provide for a preemptive suit challenging standing. Consequently, plaintiffs’ claims for damages for wrongful initiation of foreclosure and for declaratory relief based on plaintiffs’ interpretation of section 2924, subdivision (a), do not state a cause of action as a matter of law.(Gomes, supra, at pp. 1152, 1154–1157, 121 Cal.Rptr.3d 819.)
Moreover, even if such a statutory claim were cognizable, the second amended complaint does not state facts upon which such a claim could be based as to MERS and Countrywide. The complaint alleges that foreclosure proceedings were initiated by ReconTrust, not by Countrywide or MERS. It does not allege that ReconTrust purported to act as an agent for MERS or for Countrywide. Rather, it alleges that ReconTrust purported to act as agent for an unnamed beneficiary which purported to have been assigned the note and deed of trust by MERS (i.e., the beneficiary is alleged to be an entity other than MERS). The notice of default is not contained in the record, and the complaint does not state the name of the beneficiary on whose behalf ReconTrust purported to act. Accordingly, even if a statutory action for damages or for declaratory relief were available to challenge the standing of the foreclosing entity, the second amended complaint does not allege any facts upon which such an action could be based with respect to Countrywide or MERS.
FINAL DISPOSITION
The judgment was affirmed. Costs on appeal were awarded to defendants Countrywide Home Loans, Inc. and Mortgage Electronic Registration Systems, Inc. Again, the Courts are not interested in allowing defaulting Plaintiff homeowners to challenge legal standing to foreclose (essentially a variation of the “produce the note“) defense in a civil non-judicial foreclosure setting.
For unbiased legal information for California homeowners facing foreclosure visit our video information website at http://www.ForeclosureWarrior.com. We also have pleadings and video case briefs for California foreclosure lawyers.
This case involves another challenge to a non-judicial foreclosure sale in California. The basic facts of this case are that a borrower initially took out a loan with New Century Mortgage which loan was accompanied by a MERS deed of Trust (MERS was the nominee of the lender and its successors and assigns under the deed of trust and also listed as the beneficiary). The Trustee under the Deed of Trust was First American Title Compamy.
After a default of the $600,000 purchase loan taken out by borrower HYUNH in 2006, the following sequence of recorded documents occurred:
(1) 8/3/07 a Notice of Default was recorded by Quality Loan Service Corporation (QLSC) – Note that the trustee under the Deed of Trust was First American Title;
(2) 8/30/07Assignment of Deed of Trust was recorded (MERS assigned its beneficial interest to Avelo Mortgage) – Note the typical assignment of the Deed of Trust together with “notes therein” (The Fontenot case sees this as proper even though MERS does not, and has never held any note in its possession).
(3) 11/9/07Notice of Sale by QLSC.
(4) 11/9/07 (same day but after the Notice of Sale was recorded) Substitution of Trustee was recorded substituting QLSC for First American Title (note, apparently this document was executed on 8/2/07 prior to the notice of default being recorded by QLSC);
Thereafter, the property was sold at non-judicial foreclosure trustee sale on 7/08. The purchaser at the foreclosure sale was Avelo Mortgage, allegedly paying 400k for the property. Avelo recorded the Trustees Deed upon sale.
After the sale, HYUNH (the original borrower), Quitclaimed his interest to Ferguson (the Plaintiff in this action) on 6/27/09. Ferguson recorded his Quitclaim deed on 7/1/09 and brought suit to Quiet Title against Avelo Mortgage arguing the foreclosure sale was illegal as Avelo received no valid interest from MERS in the Assignment of Deed of Trust since MERS had no note to assign, and thus Avelo had no authority to foreclose. Under this theory, Ferguson argued there was no requirement to tender the full amount of the loan balance to try to set aside the foreclosure sale and claim the property as his own since he was challenging the foreclosure “sale” and not the foreclosure “procedure”. In addition, Ferguson argued there can be no tender rule requirement where Avelo is not the true beneficiary (since they never got the note. Ferguson also sued HYUNH for fraud.
The Court disagreed with the Plaintiff Ferguson, and held that the tender rule applies whether or not Avelo had any note. Here is the relevant language of the case:
(3) The power of sale in a deed of trust allows a beneficiary recourse to the security without the necessity of a judicial action. (See Melendrez v. . . . Investment, Inc. (2005) 127 Cal.App.4th 1238, 1249 [26 Cal.Rptr.3d 413].) Absent any evidence to the contrary, a nonjudicial foreclosure sale is presumed to have been conducted regularly and fairly. (Civ. Code, § 2924.) However, irregularities in a nonjudicial trustee’s sale may be grounds for setting it aside if they are prejudicial to the party challenging the sale. (See Lo v. Jensen (2001) 88 Cal.App.4th 1093, 1097-1098 [106 Cal.Rptr.2d 443]; see also Angell v. Superior Court (1999) 73 Cal.App.4th 691, 700 [86 Cal.Rptr.2d 657] ["`In order to challenge the sale successfully there must be evidence of a failure to comply with the procedural requirements for the foreclosure sale that caused prejudice to the person attacking the sale.'"].) Setting aside a nonjudicial foreclosure sale is an equitable remedy. (Lo v. Jensen, supra, 88 Cal.App.4th at p. 1098 ["A debtor may apply to a court of equity to set aside a trust deed foreclosure on allegations of unfairness or irregularity that, coupled with the inadequacy of price obtained at the sale, mean that it is appropriate to invalidate the sale."].) A court will not grant equitable relief to a plaintiff unless the plaintiff does equity. (See Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575, 578-579 [205 Cal.Rptr. 15]; see also 13 Witkin, Summary of Cal. Law (10th ed. 2005) Equity, § 6, pp. 286-287.) Thus, “[i]t is settled that an action to set aside a trustee’s sale for irregularities in sale notice or procedure should be accompanied by an offer to pay the full amount of the debt for which the property was security.” (Arnolds Management Corp. v. Eischen, supra, 158 Cal.App.3d at p. 578; see also FPCI RE-HAB 01 v. E & G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1022 [255 Cal.Rptr. 157] [rationale behind tender rule is that irregularities in foreclosure sale do not damage plaintiff where plaintiff could not redeem property had sale procedures been proper].)
However, a tender may not be required where it would be inequitable to do so. (See Onofrio v. Rice (1997) 55 Cal.App.4th 413, 424 [64 Cal.Rptr.2d 74]; see also Dimock v. Emerald Properties (2000) 81 Cal.App.4th 868, 876-878 [97 Cal.Rptr.2d 255] [when new trustee has been substituted, subsequent sale by former trustee is void, not merely voidable, and no tender needed to set aside sale].) Specifically, “`if the [plaintiff's] action attacks the validity of the underlying debt, a tender is not required since it would constitute an affirmative of the debt.’” (Onofrio v. Rice, supra, 55 Cal.App.4th at p. 424.)
Appellants contend they are not challenging irregularities in the foreclosure proceeding. Rather, they argue that respondent is not the holder of the underlying promissory note and therefore cannot invoke the tender rule against them. In their complaint, appellants alleged that New Century remains in possession of the promissory note and that appellants owe no obligation to respondent. On appeal, appellants contend that whether respondent holds the promissory note is a factual dispute, and sustaining respondent’s demurrer presupposes that respondent has authority to enforce the loan obligation. They assert that while MERS had the authority to transfer its beneficial interest under the deed of trust, there is no evidence that MERS, which was acting as a nominee of New Century, held the promissory note and was authorized to assign the note itself to respondent.
The role of MERS is central to the issues in this appeal. “`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.’” (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1151 [121 Cal.Rptr.3d 819] (Gomes v. Countrywide), quoting Mortgage Electronic Registration Systems, Inc. v. Nebraska Dept. of Banking & Finance (2005) 270 Neb. 529 [704 N.W.2d 784, 785].)
(4) Appellants cite two federal cases for the proposition that MERS, as the nominee of the lender under a deed of trust, does not possess the underlying promissory note and cannot assign it, absent evidence of an explicit authorization from the original lender. (See Saxon Mortgage Services, Inc. v. Hillery (N.D.Cal., Dec. 9, 2008, No. C-08-4357) 2008 U.S.Dist. Lexis 100056; see also In re Agard (Bankr. E.D.N.Y. 2011) 444 B.R. 231.) Not all courts agree on this issue and appellants do not distinguish nor address other cases that have upheld MERS’s ability to assign a mortgage. (See US Bank, N.A. v. Flynn(N.Y.Sup. 2010) 27 Misc.3d 802 [897 N.Y.S.2d 855, 859] [assignee of MERS has standing to initiate foreclosure proceeding because where "an entity such as MERS is identified in the mortgage indenture as the nominee of the lender and as the mortgagee of record and the mortgage indenture confers upon such nominee all of the powers of such lender, its successors and assigns, a written assignment of the note and mortgage by MERS, in its capacity as nominee, confers good title to the assignee and is not defective for lack of an ownership interest in the note at the time of the assignment"]; see also Crum v. LaSalle Bank, N.A. (Ala.Civ.App. 2009) 55 So.3d 266, 269.) We are not bound by federal district and bankruptcy court decisions, and the cases cited by appellants are in direct conflict with persuasive California case law.
In Gomes v. Countrywide, supra, 192 Cal.App.4th 1149, plaintiff Gomes obtained a loan from KB Home Mortgage Company (KB Home) to finance a real estate purchase. He executed a promissory note secured by a deed of trust naming KB Home as the lender and MERS as KB Home’s nominee and beneficiary under the deed of trust. (Gomes v. Countrywide, supra, 192 Cal.App.4th at p. 1151.) The deed of trust contained a provision granting MERS the power to foreclose and sell the property in the event of a default. (Ibid.) Gomes defaulted on his payments and was mailed a notice of default by ReconTrust, which identified itself as an agent for MERS. Attached was a declaration signed by Countrywide Home Loans, acting as the loan servicer. (Ibid.) Gomes filed suit against Countrywide Home Loans, ReconTrust and MERS for wrongful initiation of foreclosure, alleging MERS did not have authority to initiate the foreclosure because it did not possess the note and was not authorized by its current owner to proceed with foreclosure. (Id. at p. 1152.) Defendants demurred, arguing, among other things, that Gomes was required to plead tender to maintain a cause of action for wrongful foreclosure and that the terms of the deed of trust authorized MERS to initiate a foreclosure proceeding. The trial court sustained the demurrer without leave to amend. (Ibid.)
On appeal, the court affirmed the order, finding that Gomes could not seek judicial intervention in a nonjudicial foreclosure before the foreclosure has been completed. (Gomes v. Countrywide, supra, 192 Cal.App.4th at p. 1154.) Nonetheless, the appellate court reached the merits of Gomes’s claim as an independent ground for affirming the order sustaining the demurrer. The court rejected Gomes’s argument that MERS lacked authority to initiate the foreclosure procedure because the deed of trust explicitly provided MERS with the authority to do so. The court found that the “deed of trust contains no suggestion that the lender or its successors and assigns must provide Gomes with assurances that MERS is authorized to proceed with a foreclosure at the time it is initiated.” (Id. at p. 1157.) Thus, Gomes acknowledged MERS’s authority to foreclose by entering into the deed of trust. (Ibid.)
Just as in Gomes v. Countrywide, the deed of trust in this case specifically states: “Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.”
(5) Appellants concede that MERS had the authority to assign its beneficial interest to respondent.Accordingly, respondent had the same authority to initiate foreclosure proceedings. And while Gomes v. Countrywide did not address the tender issue, it does not follow that a beneficiary may initiate nonjudicial foreclosure proceedings under a deed of trust without the original promissory note, but cannot seek tender from a defaulting borrower attempting to set aside the foreclosure. Although California courts have not resolved this issue (see Miller & Starr, Cal. Real Estate (3d ed. 2010-2011 Supp.) Deeds of Trust and Mortgages, § 10:39:10, p. 4), several federal district courts in this state have upheld a beneficiary’s authority to initiate foreclosure proceedings and invoke the tender rule against a defaulting borrower, even when the beneficiary is not the holder of the original promissory note. Those courts have noted that “California law `does not require possession of the note as a precondition to [nonjudicial] foreclosure under a Deed of Trust.’” (Jensen v. Quality Loan Service Corp. (E.D.Cal. 2010) 702 F.Supp.2d 1183, 1189; see also Odinma v. Aurora Loan Services (N.D.Cal., Mar. 23, 2010, No. C-09-4674 EDL) 2010 U.S. Dist. Lexis 28347; see also Morgera v. Countrywide Home Loans, Inc.(E.D.Cal., Jan. 11, 2010, No. 2:09-cv-01476-MCE-GGH) 2010 U.S.Dist. Lexis 2037, p. *21 [MERS, as nominee of lender, has authority to initiate nonjudicial foreclosure without underlying promissory note].) Moreover, in cases involving an assignment of a deed of trust from MERS to a third party, courts have invoked the tender rule despite arguments that MERS did not have the authority to assign its interest under the deed of trust without the promissory note. (See Lai v. Quality Loan Service Corp.(C.D. Cal., Aug. 26, 2010, No. CV 10-2308 PSG (PLAx)) 2010 U.S. Dist. Lexis 97121.) Appellants offer no authority, state or federal, to support the legal loophole they claim for defaulting borrowers and their successors.
Appellants also argue that respondent was not authorized to substitute Quality as the trustee prior to becoming the beneficiary under the deed of trust. Quality initiated the foreclosure proceedings when it was not the trustee and therefore had no legal right to do so. Under a deed of trust, the trustee may be substituted by a “substitution executed and acknowledged by: (A) all of the beneficiaries under the trust deed, or their successors in interest. . .; or (B) the holders of more than 50 percent of the record beneficial interest of a series of notes secured by the same real property or of undivided interests in a note secured by real property equivalent to a series transaction, exclusive of any notes or interests of a licensed real estate broker that is the issuer or servicer of the notes or interests or of any affiliate of that licensed real estate broker.” (Civ. Code, § 2934a, subd. (a)(1).)
(6) We agree with appellants that respondent did not have the authority to execute a substitution of trustee until MERS assigned the deed of trust to it. Thus, Quality’s August 3, 2007 notice of default was defective. Nonetheless, Huynh had more than three months to satisfy his obligation before Quality executed a notice of sale. The substitution of trustee was effective when respondent became the beneficiary under the deed of trust and when the substitution was recorded on November 9, 2007. (Civ. Code, § 2934a, subd. (a)(4) ["From the time the substitution is filed for record, the new trustee shall succeed to all the powers, duties, authority, and title granted and delegated to the trustee named in the deed of trust."].) Thus, the notice of sale was valid.Quality then completed the foreclosure in July 2008, long after its substitution as trustee took effect. This situation is distinct from other cases that have voided a nonjudicial foreclosure sale when a party other than the trustee initiated the proceeding and completed the sale without having been substituted in as the trustee. (See Pro Value Properties, Inc. v. Quality Loan Service Corp. (2009) 170 Cal.App.4th 579, 583 [88 Cal.Rptr.3d 381]; see also Dimock v. Emerald Properties, supra, 81 Cal.App.4th at pp. 876-878 [foreclosure sale void where original trustee completed foreclosure sale after being replaced by new trustee].) Appellants offer no authority for the proposition that the defective nature of the initial notice of default corrupted all subsequent steps in the nonjudicial foreclosure proceeding such that the sale was void, not merely voidable.
Thus, this ruling seems to leave open a tiny door for situations where the wrong trustee sells the property at foreclosure sale. In those situations, the sale may be VOID with no obligation to tender. So, looking for grounds to challenge the Substitution of Trustee may be one of the few remaining challenges in California to either enjoin or set aside a wrongful foreclosure sale despite courts recognizing the the foreclosure procedure must be valid.
The Court cited Tender statute in California:
(8) A tender is an offer of performance made with the intent to extinguish the obligation. (Civ. Code, § 1485.) It must be unconditional (Civ. Code, § 1494) and offer full performance to be valid (Civ. Code, § 1486). Civil Code section 1512 provides: “If the performance of an obligation be prevented by the creditor, the debtor is entitled to all the benefits which he would have obtained if it had been performed by both parties.”
NOTE: I do not believe the “tender rule” is a hard and fast rule. You have to look at what your facts are. Some cases have held that a tender may not be required where it would be inequitable to do so. (See Onofrio v. Rice (1997) 55 Cal.App.4th 413, 424; see also Dimock v. Emerald Properties (which was actually cited by the Ferguson court) (2000) 81 Cal.App.4th 868, 876-878 [which held that there was no requirement to tender when the wrong trustee sells the property, in these instances, the sale is VOID, not merely VOIDABLE, and no tender was needed to challenge the VOID sale].) There are other cases that talk about VOID vs. VOIDABLE. However, you need to be aware of the rule, and there will be tender challenges raised in almost every case of wrongful foreclosure so there has to be a strategy, and cases to deal with that. Also, where the Plaintiff’s lawsuit challenges the validity of an alleged underlying debt, tender is not required since it would constitute an affirmation of the debt.” See Onofrio v. Rice, supra, 55 Cal.App.4th at p. 424.
NOTE2: This case also discussed the requirements of a Quiet Title lawsuit in California:
(2) Here, appellants sought to quiet title against respondents and set aside the trustee sale at which respondents purchased the property. In order to state a viable cause of action for quiet title, a complaint must include: “(a) A description of the property that is the subject of the action. . . . [¶] (b) The title of the plaintiff as to which a determination under this chapter is sought and the basis of the title. . . . [¶] (c) The adverse claims to the title of the plaintiff against which a determination is sought. [¶] (d) The date as of which the determination is sought. . . . [¶] (e) A prayer for the determination of the title of the plaintiff against the adverse claims.” (Code Civ. Proc., § 761.020.) To bring an action to quiet title a plaintiff must allege he or she has paid any debt owed on the property. Shimpones v. Stickney (1934) 219 Cal. 637, 649 ["[A] mortgagor cannot quiet his title against the mortgagee without paying the debt secured.”].) The complaint must also be verified (sworn under oath).
This is a second blog post dealing with various legal challenges to the MERS registration system and their ability to initiate a foreclosure in California. We previously discussed on our blog the holding in the Fontenot case, which also made it tougher to challenge a wrongful foreclosure sale. In this case, the borrower obtained a loan in 2004 through the “lender” KB Home Mortgage. In the Deed of Trust, MERS was identified as the “nominee for the lender, its successors and assisgns” and the Deed of Trust also stated “MERS is the beneficiary under this security instrument.” This is typical MERS language. When the borrower fell behind on mortgage payments a Notice of Default was recorded by Recontrust Co. on 3/10/09. Prior to the foreclosure sale, Gomes, the Plaintiff, initiated a legal action to try to prevent the sale. The Defendants do what they will normally do – file a demurrer and argue the tender rule. They also said the legal challenge was invalid because “produce the note” may not be used as a legal theory to defend against a non-judicial foreclosure sale. The Court agreed on all counts. The Plaintiff argued MERS had no proof it owned the note, and no proof it had authority from the noteholder to initiate the foreclosure sale. The Court disagreed. In so holding, the Court is basically saying it is not your right to know who is foreclosing on you because you gave MERS authority to do whatever the lender could do when you signed the Deed of Trust.
Here is some language from the case:
1. Gomes Has Not Identified a Legal Basis for an Action to Determine Whether MERS Has Authority to Initiate a Foreclosure Proceeding:
(1) California’s nonjudicial foreclosure scheme is set forth in Civil Code sections 2924 through 2924k, which “provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust.” (Moeller v. Lien (1994), 830 [30 Cal.Rptr.2d 777] (Moeller).) “These provisions cover every aspect of exercise of the power of sale contained in a deed of trust.” (I. E. Associates v. Safeco Title Ins. Co. (1985), 285.) “The purposes of this comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.” (Moeller, at p. 830.) “Because of the exhaustive nature of this scheme, California appellate courts have refused to read any additional requirements into the non-judicial foreclosure statute.” (Lane v. Vitek Real Estate Industries Group (E.D.Cal. 2010), 1098; see alsoMoeller, at p. 834 ["It would be inconsistent with the comprehensive and exhaustive statutory scheme regulating nonjudicial foreclosures to incorporate another unrelated cure provision into statutory nonjudicial foreclosure proceedings."].)
By asserting a right to bring a court action to determine whether the owner of the Note has authorized its nominee to initiate the foreclosure process, Gomes is attempting to interject the courts into this comprehensive nonjudicial scheme. As Defendants correctly point out, Gomes has identified no legal authority for such a lawsuit. Nothing in the statutory provisions establishing the nonjudicial foreclosure process suggests that such a judicial proceeding is permitted or contemplated.
As we have talked about many times on various blog posts “produce the note” will not stop a civil foreclosure, but may rear its head as a standing and real party in interest issue in a bankruptcy setting. The Court continued:
Gomes Agreed in the Deed of Trust That MERS Is Authorized to Initiate a Foreclosure Proceeding
As an independent ground for affirming the order sustaining the demurrer, we conclude that even if there was a legal basis for an action to determine whether MERS has authority to initiate a foreclosure proceeding, the deed of trust—which Gomes has attached to his complaint—establishes as a factual matter that his claims lack merit. As stated in the deed of trust, Gomes agreed by executing that document that MERS has the authority to initiate a foreclosure. Specifically, Gomes agreed that “MERS (as nominee for Lender and lender’s successors and assigns) has . . . the right to foreclose and sell the Property.” The deed of trust contains no suggestion that the lender or its successors and assigns must provide Gomes with assurance that MERS is authorized to proceed with a foreclosure at the time it is initiated. Gomes’s agreement that MERS has the authority to foreclose thus precludes him from pursuing a cause of action premised on the allegation that MERS does not have the authority to do so.
Relying on the terms of the applicable deeds of trust, courts have rejected similar challenges to MERS’s authority to foreclose. In Pantoja v. Countrywide Home Loans, Inc. (N.D.Cal. 2009), the federal district court pointed out that in the deed of trust, the plaintiff “distinctly granted MERS the right to foreclose through the power of sale provision, giving MERS the right to conduct the foreclosure process under [Civil Code s]ection 2924,” and therefore “[s]ince Plaintiff granted MERS the right to foreclose in his contract, his argument that MERS cannot initiate foreclosure proceedings is meritless.” (Id. at pp. 1189, 1190.) Similarly, another court pointed out that “[u]nder the mortgage contract, MERS has the legal right to foreclose on the debtor’s property. . . . MERS is the owner and holder of the note as nominee for the lender, and thus MERS can enforce the note on the lender’s behalf.” (Morgera v. Countrywide Home Loans, Inc. (E.D.Cal., Jan. 12, 2010, No. 2:09-cv-01476-MCE-GGH) 2010 U.S.Dist. Lexis 2037, p. *22, citation omitted.) Following this same approach, we conclude that Gomes’s first and second causes of action lack merit for the independent reason that by entering into the deed of trust, Gomes agreed that MERS had the authority to initiate a foreclosure.
The only real glimmer of hope from the Gomes case is that the Court discussed the Ohlendorf decision (backdating of the Assignment of Deed of Trust) which was not alleged by the Plaintiff:
For instance, in Ohlendorf, the plaintiff alleged wrongful foreclosure on the ground that assignments of the deed of trust had been improperly backdated, and thus the wrong party had initiated the foreclosure process. (Ohlendorf, supra, 2010 U.S.Dist. Lexis 31098 at pp. *22-*23.) No such infirmity is alleged here.
Taking this case, with the Ferguson case, Fontenot and others, it is still a difficult feat to try to stop or overturn a wrongful foreclosure sale in California. Some of the best legal challenges may well exist in a bankruptcy court.
Fontenot v. Wells Fargo Bank, N.A. Court of Appeals of California, First District, Division One (2011).
Well we have been talking about wrongful foreclosure, the role of MERS and irregularities in the foreclosure process for years now. The Fontenot case recently decided by the California Court of Appeals offers good language for lenders, servicers and MERS. This case can be seen as another case in the lender foreclosure toolbox, along with the Gomes case, and the Ferguson case.
A homeowner who was in default, and who was promised a modification, (but ultimately was foreclosed on), brought a lawsuit alleging wrongful foreclosure based on irregularities in the chain of title and challenging MERS in various capacities. The trial court upheld the foreclosure, and so did the court of appeal.
Specifically, the Plaintiff was challenging the Assignment of Deed of Trust from MERS to HSBC (the trustee of the securitized loan trust). The Assignment of Deed of Trust states (as most do) that the Assignment of Deed of Trust is made together with “the notes therein.” Plaintiff argued that MERS had no promissory note to transfer and as such, there was no transfer of the note, and a transfer of the ADOT by itself (without the note) was a meaningless act. Case law was cited for this proposition. As such, Plaintiff argued that HSBC never got the note, and was thus not in the position to foreclose on the property. Also, Plaintiff argued this fact made the Substitution of Trustee (in favor of NDEX West, LLC), improper as only the beneficiary can substitute the trustee. If the substitution of trustee was not proper, it appears Plaintiff was arguing that would also invalidate the Notice of Default. At any rate, based upon this, Plaintiff asserted the eventual non-judicial foreclosure sale was invalid and must be set-aside.
California Court of Appeal Holding
The Court completely disagreed with Plaintiff and essentially stated that the borrower appoints MERS as beneficiary in a nominee capacity in the Deed of Trust. And since the Deed of Trust empowers MERS to take any action the lender can take (when law or custom requires it) that MERS can assign the deed of trust and the “notes therein” even though MERS itself may hold no note at all. This was based on the concept that MERS can transfer the note on behalf of the lender even if it does not have the note. Which is strange because the note was supposed to be in the HSBC early on in the securitization process. At any rate, the Court found nothing improper in this and said:
Second, the complaint alleges MERS lacked the authority to assign the note because it was merely a nominee of the lender and had no interest in the note. Contrary to plaintiff’s claim, the lack of a possessory interest in the note did not necessarily prevent MERS from having the authority to assign the note. While it is true MERS had no power in its own right to assign the note, since it had no interest in the note to assign, MERS did not purport to act for its own interests in assigning the note. Rather, the assignment of deed of trust states that MERS was acting as nominee for the lender, which did possess an assignable interest. A “nominee” is a person or entity designated to act for another in a limited role—in effect, an agent. (Born v. Koop (1962) 528; Cisco v. Van Lew (1943) 60 Cal.App.2d 575, 583-584.) The extent of MERS’s authority as a nominee was defined by its agency agreement with the lender, and whether MERS had the authority to assign the lender’s interest in the note must be determined by reference to that agreement. (See, e.g., van’t Rood v. County of Santa Clara (2003), 571 [agency typically arises by express agreement]; Anderson v. Badger (1948) 84 Cal.App.2d 736, 743 [existence and extent of agent's duties are determined by the agreement between agent and principal]; Civ. Code, § 2315 [agent has such authority as principal confers upon agent].) Accordingly, the allegation that MERS was merely a nominee is insufficient to demonstrate that MERS lacked authority to make a valid assignment of the note on behalf of the original lender.
Plaintiff also argues any purported assignment by MERS was invalid under the common law of secured transactions. Her argument rests on the general principle that because the security for a debt is “a mere incident of the debt or obligation which it is given to secure” (Hayward Lbr. & Inv. Co. v. Naslund(1932) 125 Cal.App. 34, 39), the assignment of an interest in the security for a debt is a nullity in the absence of an assignment of the debt itself. (E.g., Kelley v. Upshaw (1952), 192; 4 Witkin, Summary of Cal. Law (10th ed. 2005) Security Transactions in Real Property, § 105, p. 899.) The assignment of the deed of trust, however, expressly stated that MERS assigned its interest in the deed of trust “[t]ogether with the note or notes therein described or referred to.” Accordingly, to plead a claim on this ground plaintiff was required to allege this assignment to HSBC was invalid. Because, as discussed above, plaintiff failed adequately to plead such invalidity, she failed to state a cause of action for wrongful foreclosure on the ground HSBC did not receive an assignment of both the note and its security.
There is a further, overriding basis for rejecting a claim based solely on the alleged invalidity of the MERS assignment. Plaintiff’s cause of action ultimately seeks to demonstrate that the nonjudicial foreclosure sale was invalid because HSBC lacked authority to foreclose, never having received a proper assignment of the debt. In order to allege such a claim, it was not enough for plaintiff to allege that MERS’s purported assignment of the note in the assignment of deed of trust was ineffective. Instead, plaintiff was required to allege that HSBC did not receive a valid assignment of the debt in any manner. Plaintiff rests her argument on the documents in the public record, but assignments of debt, as opposed to assignments of the security interest incident to the debt, are commonly not recorded. The lender could readily have assigned the promissory note to HSBC in an unrecorded document that was not disclosed to plaintiff.To state a claim, plaintiff was required to allege not only that the purported MERS assignment was invalid, but also that HSBC did not receive an assignment of the debt in any other manner. There is no such allegation.
As you can see, part of the problem may have been insufficient allegations. In addition to this, the Court also discussed a few other potential obstacles to a Plaintiff succeeding in a wrongful foreclosure case in California. Specifically, the court cited to the Ferguson case which held that irregularities in the foreclosure process cannot be made unless the borrower pleads willingness and ability to “tender” the balance of the loan. We have talked about the “tender rule” in many other blog posts. To this point the Court stated:
We also note a plaintiff in a suit for wrongful foreclosure has generally been required to demonstrate the alleged imperfection in the foreclosure process was prejudicial to the plaintiff’s interests. (Melendrez v. D & I Investment, Inc., supra, 127 Cal.App.4th at p. 1258; Knapp v. Doherty, supra, 123 Cal.App.4th at p. 86, fn. 4 ["A nonjudicial foreclosure sale is presumed to have been conducted regularly and fairly; one attacking the sale must overcome this common law presumption `by pleading and proving an improper procedure and the resulting prejudice'"], italics added; Lo v. Jensen (2001), 1097-1098 [collusion resulted in inadequate sale price]; Angell v. Superior Court (1999), 700 [failure to comply with procedural requirements must cause prejudice to plaintiff].) Prejudice is not presumed from “mere irregularities” in the process. (Meux v. Trezevant (1901) 132 Cal. 487, 490.) Even if MERS lacked authority to transfer the note, it is difficult to conceive how plaintiff was prejudiced by MERS’s purported assignment, and there is no allegation to this effect. Because a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor. As to plaintiff, an assignment merely substituted one creditor for another, without changing her obligations under the note. Plaintiff effectively concedes she was in default, and she does not allege that the transfer to HSBC interfered in any manner with her payment of the note (see, e.g., Munger v. Moore (1970) 7-8 [failure by lender to accept timely tender]), nor that the original lender would have refrained from foreclosure under the circumstances presented. If MERS indeed lacked authority to make the assignment, the true victim was not plaintiff but the original lender, which would have suffered the unauthorized loss of a $1 million promissory note.
Again, there were no allegations to help the Plaintiff. Which sends a signal to Plaintiffs challenging a wrongful foreclosure – BE PREPARED TO EXPLAIN HOW YOU WERE PREJUDICED by irregularities in the process. The Court also went on to discuss what Plaintiff argued was an ambiguity in the Deed of Trust in regard to the function MERS assumes – THE COURT DISAGREED:
Finally, plaintiff contends the deed of trust wasambiguous because it designated MERS as both the “`nominee for the beneficiary’ “and as the “beneficiary.” An entity cannot be, plaintiff argues, both an agent and a principal. The record does not support the claimed ambiguity. Contrary to plaintiff’s assertion, the deed of trust did not designate MERS as both beneficiary of the deed of trust and nominee for the beneficiary; rather, it states that MERS is the beneficiary, acting as a nominee for the lender. There is nothing inconsistent in MERS’s being designated both as the beneficiary and as a nominee, i.e., agent, for the lender. The legal implication of the designation is that MERS may exercise the rights and obligations of a beneficiary of the deed of trust, a role ordinarily afforded the lender, but it will exercise those rights and obligations only as an agent for the lender, not for its own interests. Other statements in the deed of trust regarding the role of MERS are consistent with this interpretation, and there is nothing ambiguous or unusual about the legal arrangement. Plaintiff’s argument appears to be premised on the unstated assumption that only the owner of the promissory note can be designated as the beneficiary of a deed of trust, but she cites no legal authority to support that premise.
The Court also discussed how the beneficiary of a loan is normally the “owner of the loan” but that MERS could still use the “beneficiary” designation in the Deed of Trust and act as the beneficiary:
Ordinarily, the owner of a promissory note secured by a deed of trust is designated as the beneficiary of the deed of trust. (11 Thompson on Real Property (2d ed. 1998) § 94.02(b)(7)(i), p. 346.) Under the MERS System, however, MERS is designated as the beneficiary in deeds of trust, acting as “nominee” for the lender, and granted the authority to exercise legal rights of the lender. This aspect of the system has come under attack in a number of state and federal decisions across the country, under a variety of legal theories. The decisions have generally, although by no means universally, found that the use of MERS does not invalidate a foreclosure sale that is otherwise substantively and procedurally proper.
Interesting is the last section of this “sale that is otherwise substantively and procedurally proper.” But under what grounds can someone raise a challenge to the substantive or procedure taken? When you do, you face the “tender rule” which this Court also raised to firm up the opinion (citing the Ferguson case):
A different type of MERS challenge was addressed in Ferguson v. Avelo Mortgage, LLC (2011) (Ferguson ). The Fergusonplaintiffs were tenants in a home sold at a nonjudicial foreclosure sale. Originally, MERS was designated as a nominee and beneficiary in the deed of trust. On August 3, Quality Loan Service Corporation (Quality) recorded a notice of default, although there was no indication in the public record of Quality’s authority to act with respect to the property at the time. The defendant, Avelo Mortgage, LLC (Avelo), had executed a substitution of trustee designating Quality as trustee the prior day, August 2, but that substitution was not recorded until months later, on November 9. Further, at the time Avelo executed the substitution, there was similarly no indication in the public record of its authority to act. Only several weeks later, on August 22, did MERS assign its interest under the deed of trust to Avelo. Notice of the trustee’s sale was delivered on November 4 and recorded the same day as the substitution of trustee designating Quality, November 9. The trustee’s sale occurred in July of the following year. (Id. at p. 1621.)
Affirming the grant of a demurrer, the court initially addressed the issue of tender, concluding that the plaintiffs were required to allege tender of the amount due under the note when bringing an action to void a nonjudicial foreclosure sale. (Ferguson, supra, 195 Cal.App.4th at p. 1624.) It then turned to two arguments concerning MERS’s role: MERS lacked the power to foreclose because it was not the holder of the underlying promissory note, and the sale was invalid because the foreclosing parties did not have authority to proceed as a result of the irregularities in the documentation. Citing a series of federal district court decisions, the court first held that MERS was entitled to initiate foreclosure despite having no ownership interest in the promissory note because it was the beneficiary under the deed of trust. (Id. at pp. 1626-1627.) Turning to the second issue, the court agreed with the plaintiffs that the notice of default was defective because Avelo lacked legal authority to execute a substitution of trustee until it had been assigned MERS’s interest under the deed of trust. The court found the notice of sale valid under Civil Code section 2934a, subdivision (b), however, because the notice of sale was not recorded prior to the substitution of trustee. (Ferguson, at p. 1628 & fn. 5.) Given the three-month cure period between the recording of the notice of default and notice of sale and the long delay after the recordation of the substitution of trustee before the sale was concluded, the court declined to invalidate the foreclosure on the basis of the irregular documentation. (Ibid.).
Taking these internal citations at face value, when can the substance or procedure of a foreclosure be challenged? Only if you can tender the full loan balance, and were prejudiced by the recorded documents appears to be this Court’s answer. If true, what incentive is there for any lender or loan servicer, or MERS to follow any of the non-judicial foreclosure laws if there is no way to challenge bona fide irregularities that may arise (or can we call it failure to strictly follow the California non-judicial foreclosure laws)? In other words, how does this holding square up with other holdings in California?
In Miller v. Cote, 179 Cal.Rptr. 753, (Ct of App. Fourth Dist. Div. 2 1982), the Court, in calling the notice of default fatally defective stated: “The procedure for foreclosing on security by a trustee’s sale pursuant to a deed of trust is set forth in Civil Code section 2924, et seq. The statutory requirements must be strictly complied with, and a trustee’s sale based on a statutorily deficient notice of default is invalid. (System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153, 98 Cal.Rptr. 735; see California Mortgage and Deed of Trust Practice (Cont.Ed. Bar 1979) s 6.40, p. 295; see also Bisno v. Sax (1959) 175 Cal.App.2d 714, 720, 346 P.2d.
At any rate, I understand if you have a borrower in default, with no ability to ever repay the loan, bring it current, etc., and you can never count on a loan modification, but what about those California homeowners who DO have the ability to make their loan payments, but were told to miss their payments if they wanted help in a loan modification, and who were forced into default. If these people want to try to bring their loans current or challenge the foreclosure process they will have a tough time doing so. Of course they can just pay up and bring the loan current, but what happens alot of times is the house is sold when the homeowner is told they are in review. In this case, the house is sold and the tender rule cited in this case can be arguably used against the borrower. This is not far fetched. We get calls all the time from people who were told not to pay and then their house was sold. This case makes it tougher to set these sales aside where irregularities in the sale can be properly alleged. Here, it does not appear the Court was buying the irregularity arguments raised by Plaintiff which focused on the role of MERS. To provide extra emphasis, the Court cited tot he recently decided Gomes case which also validated the role of MERS in that case:
In Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App. 4th(Gomes), the plaintiff sought to prevent foreclosure on his home. He sued MERS, among others, alleging he was unaware of the identity of the owner of his promissory note, but believed the owner had not authorized MERS to proceed with the foreclosure. The plaintiff sought to enjoin foreclosure in the absence of proof that MERS was authorized by the note’s owner to proceed. (Id. at p. 1152.) The court rejected the claim on both procedural and substantive grounds. With respect to the former, the court concluded the “`comprehensive’” statutory framework regulating nonjudicial foreclosure, Civil Code sections 2924 through 2924k, did not require the agent of a beneficial owner, such as MERS, to demonstrate that it was authorized by the owner before proceeding with foreclosure, at least in the absence of a factual allegation suggesting the agent lacked authority. (Gomes, at pp. 1155-1156.) As the court reasoned, Civil Code section 2924, subdivision (a)(1), which states that a trustee, mortgagee or beneficiary, or an agent of any of them, may initiate foreclosure, does not include a requirement that an agent demonstrate authorization by its principal. (Gomes, at pp. 1155-1156.) The court also found no substantive basis for the challenge, noting, as here, the plaintiff had agreed in the deed of trust that MERS could proceed with foreclosure and nonjudicial sale in the event of a default. Because the deed of trust did not require MERS to provide further assurances of its authorization prior to proceeding with foreclosure, the plaintiff was not entitled to demand such assurances. (Id. at p. 1157.)
As you can see, the lender toolbox will have some cases ready for the California homeowner who wishes to challenge a trustee sale on wrongful foreclosure grounds. Fontenot, Gomes, and Ferguson.
California Foreclosure Lawyers Tools, Pleadings, Sample Letter and more to help you fight the good fight!
For those who have not heard, we have launched a foreclosure warrior website that aims to give consumers in California information on foreclosure, short sales, litigation and more. The information is general information and is in video format to make it easier to enjoy. The foreclosure warrior website also contains valuable documents for California foreclosure, bankruptcy and real estate lawyers.
California TRO Injunction Package – $595 - If you have clients seeking to stop the foreclosure sale of their home, and you have valid legal grounds to file a lawsuit, here are the materials you will need to seek to obtain a TRO (temporary restraining order) and preliminary injunction. Complete with intel from the foreclosure trenches from Attorney Steve Vondran. These tips, insights and sample pleadings will save you alot of time if you have never been through the foreclosure TRO process in California. Certain additional local rules may apply, but this is a good collection of documents to assist you.
Here is what you get in this valuable kit:
1. 14 page TRO and Injunction checklist (guide-sheet with tips)
2. Sample Notice of TRO to opposing parties
3. TRO / OSC application (with sample memorandum of points and authorities)
Here is a link to a real estate radio show I was recently on (Mark and Bryan Real Estate Radio Show). You need to scroll down to the September 22, 2011 show.
CALIFORNIA WRONGFUL FORECLOSURE CASE LAW ON FORECLOSURE WARRIOR
For California real estate, bankruptcy and predatory lending lawyers we have sample foreclosure pleadings, TRO applications, lift stay motions and now we have added California case law to put in your homeowner defense toolbox.
You can visit our Foreclosure Defense website where you can access case law ready for you to cut an paste into your complaints, demurers, motions to dimiss and other legal pleadings.
Here is a short snippet of the case law you will get when you sign up:
OTHER GROUNDS TO SET ASIDE FORECLOSURE SALE
(5) In the case of Bank of America National Trust & Savings Association v. Reidy, 15 Cal. 2d. 243, 248 (1940), the Court held:
It is the general rule that courts have power to vacate a foreclosure sale where there has been fraud in the procurement of the foreclosure decree or where the sale has been improperly, unfairly or unlawfully conducted, or is tainted by fraud, or where there has been such a mistake that to allow it to stand would be inequitable to purchaser and parties. Sham bidding and the restriction of competition are condemned, and inadequacy of price when coupled with other circumstances of fraud may also constitute ground for setting aside the sale. (Haley v. Bloomquist, 204 Cal. 253 [268 Pac. 365]; Dealey v. East San Mateo Land Co., 21 Cal. App. 39 [130 Pac. 1066]; Bernheim v. Cerf, 123 Cal. 170 [55 Pac. 759]; Packard v. Bird, 40 Cal. 378; Goodenow v. Ewer, 16 Cal. 461 [76 Am. Dec. 540].).
(6) In re Worcester, 811 F.2d 1224, 1228, (1987) the Court held:
Under California law, “gross inadequacy of price coupled with even slight unfairness or irregularity is a sufficient basis for setting the sale aside.” Whitman v. Transtate Title Co., 165 Cal.App.3d 312, 323, 211 Cal.Rptr. 582, 589 (1985); see also Sargent v. Shumaker, 193 Cal. 122, 129-30, 223 P.2d 464, 467 (1924).
The property here sold well below the published bid, and raises a presumption of irregularity.
REMEMBER, WHENEVER THERE IS A WRONGFUL FORECLOSURE, SEE IF YOU CAN ARGUE MUNGER V. MOORE AND SECTION 3333 DAMAGES (EX. MONEY THEY HAD TO PUT OUT FOR ATTORNEY IN UNLAWFUL DETAINER CASE, AND CURRENT CASE, AND ANY OTHER DAMAGES “WHETHER FORESEEABLE OR NOT”). California Civil Code Section 3333.
ATTORNEY STEVE PLEADING FOR LAWYERS FIGHTING A MOTION TO LIFT THE AUTOMATIC STAY
To our Attorney brothers and sisters who know the “lenders” and loan servicers are often trying to pull fast ones in bankruptcy courts both in filing bogus proofs of claims and in seeking to lift the automatic stay in bankruptcy court when they have no standing and cannot prove they are the real party in interest to file the motion I am offering my lift-stay motion with memorandum of points and authorities available on my Foreclosure Warrior (Foreclosure Defense training for lawyers website).
Here is a sample clip from my motion:
(i) The issue of standing, in the context of a motion to lift the automatic stay in regard to an alleged failure to pay on a promissory note requires analysis of California Commercial Code law.
There are two threshold questions for establishing standing: (1) has movant established an interest in the promissory note; and (2) is the movant entitled to enforce the note? See In re Wilhelm, 407 B.R. at 392; In re Aniel, No.09-30452DM, 2010 WL 1609923 (Bankr. N.D. Cal. April 21, 2010). There is no way to determine whether a moving party is a party in interest, real party in interest, or has standing sufficient to show a colorable claim without consulting the applicable state law that dictates which party has the right to enforce a loan. In California, Commercial Code Section 3301 sets forth those Persons who are Entitled To Enforce a negotiable instrument (hereinafter “PETE”):
“Person entitled to enforce” an instrument means:
(a) the holderof the instrument;
(b) a nonholder in possession of the instrument who has the rights of a holder,
(c) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3309 or subdivision (d) of Section 3418. (ex. lost note)
A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument. (emphasis added). The definition of “holder” can be found in Cal. Commercial Code Section 1201(a)(21):
“Holder,” means the person in possession of a negotiable instrument that is payable either to bearer or, to an identified person that is the person in possession.
California Lift Stay Opposition Motion and Memorandum of Points and Authorities (18 pages): This pleading is “battle tested” in the Central District Bankruptcy Court in California. Loan Servicer (Chase) motion to lift the automatic stay was DENIED. This document has most of the major bankruptcy cases that deal with note ownership up to 2011. In re Hwang; In re Weisband, In re Veal, in re Walker, etc. The focus is on 9th circuit cases, but there are others as well. This document will save you a TON of time in trying to get all the cases together and organize an opposition to a motion to lift the automatic stay. The document flows nicely from real party in interest, to standing, to arguing about assigning a deed of trust without the note (all the major cases on that point of law are included). Simply get your facts in there and you are ready to have a great motion.
TIPS ON ATTACKING THE OFTEN-PREDATORY CALIFORNIA OPTION ARM LOAN
For attorneys fighting the good fight for homeowners stuck trying to modify predatory option arm loans, I have created an 8 page guide that explains the things I look for when trying to decide whether or not to sue the broker and originating lender.
The full version of this document can be purchased at Foreclosure Warrior Attorney Document Store:
Option Arm Lawyer’s Checklist – things to Look for and to allege in regard to challenging predatory negative amortization loans in California.
INTRODUCTION: Just in case you don’t know what an option arm loan is, it is a loan that typically gives the borrower more than one option as far as making a monthly payment is concerned. For example, and what is typical, is that the borrower can make a “minimum” monthly payment that is based on a “teaser rate” (meaning they can make a loan payment based upon a really loan starting interest rate, like 1.25% for example). Meanwhile the “note rate” may be 8%.
So what happens is, when they make the minimum monthly payment (as many California borrowers due – a lot of people are focused on a monthly budget) which is based on the teaser interest rate (and NOT on the 8% note rate), the interest they are not paying gets tagged on to their loan balance, raising the size of the loan balance.
This is all fine and dandy until the loan hits a certain “cap” (usually 115% or 125% of the original loan balance) and then the loan magically “recasts” and the borrower is stripped of their different options for making a monthly payment, and they are REQUIRED to now pay the full loan balance based on the full amount of the loan (including all the negative amortization) and they MUST pay this at the note rate of 8% for example.
The obvious result of this is “payment shock” to most borrowers who then cannot afford the payment (which can often TRIPLE in size) and foreclosure and loss mitigation (an ugly process) is what awaits most borrowers at this time.
The issue for purposes of this article becomes, at what point is all this predatory and to what extent can a broker or lender be held liable for the loan, the surrounding disclosures (which we see there is often a lack of disclosures, confusing disclosures, ambiguous disclosures, and often times no disclosures at all).
The following are the types of things I look for in seeing if there is a valid cause of action that can be leveled against the broker and/or originating lender of these types of loans.
The full version of this document can be purchased at Foreclosure Warrior Attorney Document Store:
FACTORS I LOOK FOR TO SEE IF THERE IS GROUNDS TO SUE A BROKER OR LENDER IN CALIFORNIA FOR PLACING A BORROWER INTO AN OPTION ARM LOAN:
∆ I always start off by saying to potential clients that the option arm loan is NOT necessarily predatory and that it depends who the borrower(s) are that impacts my assessment of whether the loan is predatory or not
California Truth in Lending Lawyer vindicates client’s rights in regard to predatory option arm loan!
We have discussed the nasty negam (option arm loans in other blog posts). See our other website OptionArmLawyer.com. These loans are nasty when given to the average ordinary individual. I have said before, if a person is a real estate investor and has multiple properties, the loan may not be toxic as to that type of investor, who most people will consider to be savvy enough to figure out the actual loan terms and nature of the loan. In those cases, the investor likely used the loan as a cash flow tool, and/or was considering holding the property short term and flipping it. That is what I have seen. To these investors holding negam loans, the jury may have no sympathy.
But as to the large numbers of people who relied on their broker to get the the best loan for their financial circumstances, and those who rely on the guidance of a real estate broker to assist them in identifying the best loan product for their needs, the “option arm loan (sometimes called the “pick-a-pay” – this is what Wachovia called it), is a risk y financial product, and in most cases was not a loan well suited to the borrower.
We could go on an on about the features of the loan, and the recast features, etc., but suffice it to say, when borrowers are “steered” into these types of loans by real estate brokers and lenders who are looking to make big commissions, and high yields, then the loan becomes at issue as does the broker, and the disclosures and counseling the borrower was provided. Another nasty class of predatory lending (which we have seen and vindicated in the past), is senior citizens who have had 30 year fixed loans, and then a broker convinces them the negative amortization loan is in their best interest, often without ever even considering the reverse mortgage.
At any rate as the link shows below, we have recently brought home a nice judgement in a PREDATORY LENDING / TRUTH IN LENDING lawsuit filed against California real estate brokers and their companies in regard to these types of loans, and borrowers who trusted the broker and did not see the hit coming.
The names have been redacted for privacy purposes and for purposes of seeking to collect on the judgement.
Noteworthy in the case was the judges question (prior to issuing the judgement) in regard to why my Client should not be considered the “predatory borrower” (because they took cash out on the loan).
To learn more about our response, and how we took the judgement home with an eventual finding that we “clearly and conspicuously” proved each of our causes of action, go to our Attorney education website Foreclosure Warrior.
We provide a checklist of things we looked at and argued to take down the predatory brokers. The site also contains foreclosure training videos for California lawyers.
Past successes on any case, is no guarantee as to future success on any case. The above is for illustrative purposes only. Every case, lender, judge, jury, legal theory is different and no guarantees of any particular result can ever be given.
More from the “who owns my loan” series. This time, it is the Arizona Supreme Court that is hearing oral arguments regarding whether or not assignments evidencing who owns your loan must be recorded prior to a lender can pursue a non-judicial foreclosure. Here is an article that deals with some of the high points of the debate. The Court will rule on the issues at a later date and we will keep you posted when we hearing something. This comes on the heels of Arizona trying to pass a law (SB 1259) that forces the so-called “lenders” of securitized loans and other loans to record proof of ownership with the County Recorder before they seek to foreclose. The law did not get passed likely due to the financial lobby that of course does not want such a law passed.
http://azstarnet.com/article_64c6ed66-f336-5bfc-972e-65740509e6cd.html We talked on another blog post about Arizona SB 1259 that was trying to require proof of ownership recorded before a lender could foreclose. The debate marches on. As a society, do we care if a bank is allowed to foreclose in a private non-judicial foreclosure sale if it cannot legally produce evidence that it is the owner of the loan, or should be not be concerned with whether or not the true owner of the loan is foreclosing because the borrower is in default of a loan with no way to repay it? As it stands now the “produce the note” or “show me the note” or “who owns my loan” argument does not have much if any traction as far as trying to prevent a non-judicial foreclosure sale. The issue may have more life in a bankruptcy court where issues such as “standing” and who the “real party in interest” is to pursue a motion to lift the automatic stay, or to file a proof of claim in a bankruptcy case. To this extent, we have discussed the in Re Veal case which we will try to thoroughly blog on soon. This is a very interesting case that deals with proof of loan ownership, standing and real party in an Arizona Bankruptcy Case. Stay tuned.
IS YOUR LENDER OR LOAN SERVICER DANGLING THE HAMP PERMANENT MODIFICATION CARROT IN FRONT OF YOUR NOSE?
HAMP TRIAL PLAN SCHEME – Saying they “will” modify the loan if trial payments are made proves crucial.
We have talked about this many times before on our website Trial Plan Fraud. That is, Banks and loan servicers promising to modify your loan if you make your HAMP trial plan payments on time.
We get this scenario over and over. The HAMP modification agreement itself will normally promise the modification if all payments are made (but the contract is subject to a bunch of little trap-holes put in place so the loan servicer can always try to back out of the modification without having to perform). Sometimes this is also buttressed over the phone by statements from some “loss mitigation specialist” or “foreclosure specialist” who promises you that you qualify for the loan modification and if you just make the trial payments “you will be good” or “we won’t foreclose.” This is going on left and right in my honest opinion. After all, it is a “clever” way to get people who may not be making their mortgage payment (potential strategic defaulters) into making some payments and that is with the false promise of loan mod assistance. So yes, trying to get a loan modification can often turn into a game of poker with your lender. You both end up telling each other certain things, some of which may or may not be true. That’s what happens when money is on the line, monthly payments versus the return on investment to investors in mortgage backed securities.
At any rate, in the case of Jackmon v. America’s Servicing Company, Case No. C 11-03884 CRB, (CA Northern District 2011) the Court did not go for this approach. The fact that the servicer refused to return the signed agreement to the borrower was not enough to allow the servicer to get out of the hot water. The borrower made more than the required trial plan payments, and although she faced eviction following the foreclosure sale, the court issued an injunction preventing the eviction from taking place, based on the allegations that the borrower was entitled to, and promised a final HAMP modification. So, when the Servicers are not playing fair, it may just so happen that you have some legal rights.
NOTE: The Court required a bond be posted and required $2,648 monthly protection payments. Something you should always consider before filing a predatory lending lawsuit or wrongful foreclosure lawsuit seeking a TRO and Injunction.
Okay, so it has taken us a little while to get around to discussing this law. We wanted to take a little time to let things develop and see if this law had any real significance to it. Here is what we now know.
This was signed into law by President Obama on May 20, 2009. The law originally contained a provision allowing bankruptcy judges to modify mortgage loans (of course, that is too drastic for the banks, and so the provision, although initially providing some good window dressing for some politicians was eventually dropped).
The act is supposed to help stem the tide of foreclosures. Some of the ways this is supposed to happen is By excluding home mortgage debt from the current Chapter 13 maximum debt limitations (if you have too much secured debt, you cannot file for Chapter 13, and must seek a more expensive Chapter 11); and the Hope for Homeowners program is supposed to be expanded. These are some of the provisions. The one I am going to focus on in this blog is the new requirement to notify homeowners when their mortgage is sold.
This new requirement comes under Section 404:
SEC. 404. NOTIFICATION OF SALE OR TRANSFER OF MORTGAGE LOANS. (a) IN GENERAL.—Section 131 of the Truth in Lending Act (15 U.S.C. 1641) is amended by adding at the end the following:
NOTICE OF NEW CREDITOR.— ‘‘(1) IN GENERAL.—In addition to other disclosures required by this title, not later than 30 days after the date on which a mortgage loan (includes closed end and open end loans) is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including—
(A) the identity, address, telephone number of the new creditor;
(B) the date of transfer;
(C) how to reach an agent or party having authority to act on behalf of the new creditor;
(D) the location of the place where transfer of ownership of the debt is recorded; and
(E) any other relevant information regarding the new creditor.
(2) DEFINITION.—As used in this subsection, the term ‘mortgage loan’ means any consumer credit transaction that is secured by the principal dwelling of a consumer.’’.
(b) PRIVATE RIGHT OF ACTION.—Section 130(a) of the Truth in Lending Act (15 U.S.C. 1640(a)) is amended by inserting ‘‘subsection (f) or (g) of section 131,’’ after ‘‘section 125.
A private right of action exists for failure to comply with the requirements of this new subsection 131(g) of TILA may result in civil liability for actual damages, legal fees and 4k statutory damages under Section 130(a) of TILA.
So what does this mean? This new subsection requires that after May 20, 2009, purchasers or assignees of mortgage loans secured by a mortgagor’s principal dwelling must provide written notice of each sale, transfer, or assignment no later than 30 days after such sale, transfer or assignment occurs. In other words, you are entitled to know if your note is sold, and who it was sold to. If not, you could be entitled to money damages.
MERS has maintained that it tracks loan ownership and servicing rights. They have indicated they can help compliance with this statute by generating notices whenever a “transfer of beneficial rights” occurs on its system, and they will generate a notice. That should make everyone feel comfortable.
If you feel your rights may have been violated under this section, contact a truth in lending lawyer.
The following are general guidelines I consider when filing for a TRO / Injunction in a California Foreclosure civil. This information is for California real estate, foreclosure and bankruptcy attorneys only.
A couple of quick things: First, make sure you have good legal grounds to file the lawsuit that you are basing your TRO on. You cannot file a lawsuit for the sole purpose of delay, and realize it is doubtful you will file a civil suit and get immediate results. So, you need a realistic client that can afford to pay to support and ongoing litigation (often against several named large financial institutions who will usually hire a medium to large law firm to assist them). That firm will likely want to bill a lot of hours, so you have to be cognizant of that. You also need a game plan for settling the case and to me, a realistic client who does not want their house for free. Courts are reluctant to go there and you should probably ask a lot of questions to make sure your client does not have this mindset, or objective in mind.
So, the first thing you might want to do is go to the intake process, ask a lot of questions, and decide if filing a lawsuit is the best course of action. Bankruptcy may be a better option in a good number of cases, assuming there are valid legal debts worth discharging.
THE FOLLOWING ARE THE GENERAL STEPS I LOOK TO. REMEMBER YOU HAVE TO CHECK YOUR LOCAL RULES, AND MAKE SURE THERE ARE NO SPECIAL REQUIREMENTS. WITH TIME OF THE ESSENCE, THERE IS LITTLE ROOM FOR ERRORS.
CALL AND GET A COURT DATE AND FIND OUT IF THEY HAVE ANY SPECIAL PROCEDURES. If you are filing for an ex parte hearing, you need to find out where the lawsuit will be filed, and see whether or not there are certain days the court will hear your ex parte motion. Is there a particular judge? A special process that must be followed (I have seen this vary so it makes sense to call the Court and tell them what you are trying to do and ask for their help in informing you of their times, dates, and procedures).
UCC PRESENTMENT OF THE ORIGINAL PROMISSORY NOTE DEMAND
My Client signed a promissory note that is treated as a negotiable instrument as defined under the Uniform Commercial Code (“UCC”), including under the California Commercial Code. The above entities are and have been purporting to have the legal right to collect on the promissory note signed by my Client. My Client disputes this fact and under California Commercial Code Section 3502 you are required to present for inspection the original promissory note that evidence your legal right to collect on the debt you are claiming is owed to you. In order to verify such claims, and to inspect the note, including its specific terms, conditions and clauses, My client is hereby demanding to inspect the note in regard to the mortgage loan referenced above.
Under California Commercial Code Section 3502(a)(1):
(a) Dishonor of a note is governed by the following rules:
(1) If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment. (emphasis added).
In addition, the Code states: “Upon demand of the person to whom presentment is made, the person making presentment must: (1) exhibit the instrument. (See California Commercial Code Section 3501(B)(2)(a)). This means the original note, with endorsements and allonges (if any) must be presented upon demand of the borrower/obligor, which is hereby made as discussed below.
TRYING TO GET LEGAL PROOF A VALID DEBT IS OWED TO THE PERSON (‘DEBT COLLECTOR”) THAT IS TRYING TO COLLECT YOUR MORTGAGE PAYMENTS?
Here is another issue that comes up in foreclosure defense work. Sometimes the loan servicer obtains your loan after it goes into default. Once that happens, they may send you collection calls or notices, or other communications designed to either directly, or indirectly collect payment on a debt (one court said sending a loan modification/workout letter was an activity designed to collect a debt). At any rate, when you get a collection activity and when the debt collector makes activity to collect a debt, they are required to send you a letter within 5 days verifying various things. They are also supposed to give you a “Miranda” notice that informs you that you have 30 days to dispute the debt and demand verification. This is something that you should do, and you should send a Notice of Dispute / Debt Validation letter within 30 days of being contacted. This is to preserve your legal rights, and it could create liability, perhaps even punitive liability as the court held in the Credigy case listed below. Failure to assert your rights in a timely fashion, normally means loss of the right.
Here is a snippet from our debt validation letter:
Under the Fair Debt Collection Practices Act (15 U.S.C. §1692 et seq. / Section 805 et seq.) (hereinafter “FDCPA”) when a “debt collector” initiates a communication designed to collect a debt, which may include by way of examples: making loss mitigation or collection phone calls to a borrower, mailing demand letters, sending intent to accelerate or foreclose letters, recording notices of default or notices of sale in some jurisdictions, or by making any other communication or demand designed to collect an alleged debt owed, including making offers of modifications, workouts, or trial modifications (See Gburek v. Litton Loan Servicing, LP, 08-3776, 7th Cir. (2010), holding that a loan workout letter designed to help avoid foreclosure was covered by the FDCPA even though not specifically demanding a payment of the debt as this was a letter designed to induce the payment of money to the Servicer).
Where a loan servicer becomes the loan servicer after the borrower is in default, the loan servicer is a “debt collector” and becomes obligated to comply with the Fair Debt Collection Practices Act in all respects. See Santoro v. CTC Foreclosure Serv. Corp., 12 F. App’x. 476, 480 (9th Cir. 2001); Kee v. R-G Crown Bank, 656 F. Supp. 2d 1348, 1354 (D. Utah 2009) (determining “that a loan servicer . . . is only a ‘debt collector’ within the meaning of the FDCPA if it acquires the loan after it is in default”). See also Alibrandri v. Fin. Outsourcing Servs., Inc., 333 F.3d 82 (2d Cir. 2003) (holding that a debt was in “default” and a service provider was a “debt collector”, by virtue of the service providers collection letter declaring the debt in default and informing the debtor that the service provide was, in fact, a debt collector).
My Client has reason to believe that the above referenced loan was obtained by the loan servicer AFTER the loan was in default status, and as such THIS MEANS THE ENTITY LISTED ABOVE HAS A LEGAL OBLIGATION TO COMPLY WITH THIS REQUEST IN A FULL, DETAILED, AND COMPREHENSIVE MANNER.
We then set forth our comprehensive list of demands to validate the debt. If you are an attorney and want a copy of this letter (AND MORE) to assist your clients, please sign up for our Foreclosure Warrior ATTORNEY Training Series that has these forms, pleadings, video case briefs, memorandums of law, foreclosure checklists, and more.
Why is this so important?
You should realize that California courts have also recognized punitive damages for blatant violations of the Act. See Rubin v. Account Control Technology, 865 F. Supp. 1443 (D. Nev. 1994). See also Fausto v. Credigy Services Corp, 598 F. Supp 2d, 1049 (N.D. Cal. 2009). Following a jury trial, the verdict consisted of $100,000 in actual damages and $400,000 in punitive damages.
HAVE YOU TOLD YOUR SERVICER LATELY, THAT YOU LOVE THEM? WHY NOT SEND THEM A QUALIFIED WRITTEN REQUEST SO THEY KNOW YOU ARE ALIVE!
A Qualified Written Request (“QWR”) can be a valuable tool to find out what is going on with your loan servicer. Most people now realize the entity you are trying to get a loan modification from is not really your “lender” as many people used to think. In reality, they are merely a “servicer” of your loan, collecting loan payments and transmitting them to the party entitled to collect your loan payment (or should we say the party that claims to be the owner of your loan). Just a few years back, many of the servicers pretended to be your lender, and would not disclose who they were servicing loans on behalf of (whether that is an “investor”, “creditor” or “beneficiary.”). Nowadays, they seem to admit more clearly than they had before, who they claim “owns your loan” or who “your investor” is.
But there is one thing most foreclosure defense lawyers know, and that is you have to KEEP AN EYE ON YOUR LOAN SERVICER. They make errors, tag on bogus fees, and also they are the party you typically have to work a loan modification and other loss mitigation tactics (such as short sale or deed in lieu of foreclosure) so there may be reasons you want to know what they are doing, and where accounting and billing errors are suspected, you need to hold their feet to the fire and make them justify their actions. Sending in the QWR is the one legal RIGHT you have to make them explain what is going on in the loan servicing back-room.
For our attorney colleagues in California and Arizona, we are offering for the first time a copy of our QWR. It begins like this (and is ready for you to paste onto your letterhead for easy use to assist your clients):
Re: Qualified Written Request under RESPA Section 6 in regard to subject Loan# XXXXXX for borrower(s) XXXXXXX and XXXXXX, for Real Property located at XXXXXXXX, CA 92706 (APN#_________).
THIS IS A LEGAL DEMAND AND A COPY OF THIS LETTER MUST BE FORWARDED TO YOUR LEGAL DEPARTMENT, OFFICE OF THE PRESIDENT, INVESTOR, EXECUTIVE RESOLUTION DEPARTMENT OR OTHER PROPER OFFICE FOR IMMEDIATE REVIEW, COMPLIANCE AND RESOLUTION.
To Whom It May Concern:
Please be advised that my office has been retained by XXXXXXXX to represent her in regard to her real property and loan as set forth above. Specifically, my client has the following concerns over your accounting and billing practices and hereby disputes each of the following:
(1) Monthly payment amount is not warranted by the terms of the note and deed of trust. The amount of the payment should be lower;
(2) The most recent monthly mortgage payment coupon reflects there is “late fees” of $_____ this is not correct, and not warranted.
(3) The most recent monthly mortgage payment coupon reflects there is “escrow shortage” of $_____ this is not correct, and not warranted.
(4) The most recent monthly mortgage payment coupon reflects there is “arrearages” of $_____ this is not correct, and not warranted.
(5) The Notice of Default, recorded with the _______ County Recorder’s Office on or around ______ date reflects arrearages owing of $________ this is not correct and is overstated by $______.
(6) There is evidence that you are not servicing this loan on behalf of the party legally required to enforce the note, and as such, you may be collecting loan payments that you are not legally entitled to, and which may require you to surrender.
[PUT ALL YOUR “BEAN-COUNTING” OR OTHER LOAN SERVICER DISPUTES HERE. MAKE THEM SHOW WHAT THE HECK THEY ARE DOING BEHIND CLOSED DOORS].
GIVEN THESE LEGITIMATE AND BONA FIDE ACCOUNTING AND BILLING CONCERNS OVER THE SERVICING OF MY CLIENT’S LOAN, MY CLIENT HAS INSTRUCTED ME TO SEND YOU THIS QUALIFIED WRITTEN REQUEST WHICH YOU MUST RESPOND TO IMMEDIATELY. YOUR FAILURE TO DO SO MAY RESULT IN LEGAL LIABILITY TO BOTH YOU AND THE ALLEGED OWNER OF MY CLIENTS LOAN.
I. QUALIFIED WRITTEN REQUEST UNDER RESPA SECTION 6 (12 U.S.C. § 2605(e)):
IF YOU ARE NOT USING A QUALIFIED WRITTEN REQUEST TO ASSIST YOUR FORECLOSURE AND BANKRUPTCY CLIENTS, YOU MAY BE MISSING OUT ON HUGE OPPORTUNITIES TO BENEFIT YOUR CLIENT.
SEND IN THE CLOWNS – THERE OUGHT (NOT) TO BE CLOWNS – WELL, MAYBE NEXT YEAR!
Many clients have called our offices asking us to discuss the mass joinder lawsuit. This was a new phenomena that started about a year ago or so. Some lawyers decided to start a service whereby they would charge advance fees to join a “mass joinder lawsuit.” According to the link on this site the mass joinder solicitations were designed to look like official government mail pieces. Many people (at least that I spoke with) told me they were informed they would get to stay in their houses for a long time without making a mortgage payment, and would have a good chance to get their mortgages reduced to market value. This approach works because it is EXACTLY what a homeowner is hoping for. So they request several thousand dollars to have you join the lawsuit and away you go.
Several months ago we told you the California State Bar was investigating these practices, but at the time we mentioned to just be vigilant, as there was no clear proof this was a mortgage rescue scam, or foreclosure rescue scam. Now, the State bar of California has raided the offices in Irvine, California where some of these attorneys and lawyers were operating. Apparently they collected millions of dollars in advance fees for loan modifications. We have highlighted other attorneys on our sites that think they can do whatever they want when it comes to accepting advance fees for loan modifications. These people who prey on California homeowners should be very concerned. It is coming home to roost in a big way.
At any rate, these attorney sent out approximately 2 million mailers, (according the complaint filed by California authorities), and facebook pages were also being used. 19 people were being investigated. Hundreds of thousands of people paid between 5k-10k for these services. Some persons had not even been joined to the lawsuit, and others had their homes foreclosed on after advance fees were paid. What a mess.
For more information you can view our Foreclosure Radio show here which discusses the topic.
Here is a sample of portions of a demand letter we sent to set aside a foreclosure sale that occurred following a promise not to foreclose. The full copy of this letter is available for California Foreclosure and Real Estate Lawyers who subscribe to a platinum account on our Foreclosure Warrior website:
FORECLOSING BANK
LOAN SERVICER
TRUSTEE
PURCHASER AT SALE
VIA FAX AND EMAIL
Re: Demand to Record Notice of Rescission of Trustee’s Deed and to Invalidate the Sale for Trustee Sale#__________ (CLIENT NAME) for real property located at __________________________________________.
Dear Sirs/Madam:
Please be advised my office represents ________________ in regard to a wrongful foreclosure sale that has recently occurred. My Client had received both oral and written assurances and promises, through one of its representatives (NAME), confirming their agreement to postpone the sale date and their assertion that they were working on a modification.
This agreement to cure the default and postpone the sale was relied on by my client and now the foreclosure sale has occurred and a third party has purchased the property with a purported sale price of $____. Apparently there was no credit bid by the lender and the “published bid” was $822,192. This is a grossly inadequate sale price.
I am writing this letter to request that the above non-judicial foreclosure sale be set aside immediately and that any trustee’s deed be hereby cancelled/rescinded and that the status quo be preserved as it existed prior to the sale. All evidence in regard to this situation must be preserved in anticipation of potential litigation.
Under these circumstances, California law is clear that there is no requirement that my client “tender” the loan balance as a prerequisite to challenge this wrongful foreclosure. Legal support buttressing our position is as follows:
California Civil Code Section 2924g(C)(1)(C) states:
(c) (1) There may be a postponement or postponements of the sale Proceedings, including a postponement upon instruction by the Beneficiary to the trustee that the sale proceedings be postponed, at any time prior to the completion of the sale for any period of time not to exceed a total of 365 days from the date set forth in the notice of sale. The trustee shall postpone the sale in accordance with any of the following:
(A) Upon the order of any court of competent jurisdiction.
(B) If stayed by operation of law.
(C) By mutual agreement, whether oral or in writing, of any
trustor and any beneficiary or any mortgagor and any mortgagee.
(D) At the discretion of the trustee.
Here, there was a mutual agreement to postpone the sale, and (LENDER) has written evidence of such. Thus, there was an express written agreement NOT to foreclose as contemplated under 2924g(C)(1)(C).
Moreover:
(1) Whitman v. Translate Title Company, 165 Cal.App.3d 312, 211 Cal. Rptr. 582 (1985) in this case the Court dispensed with a tender requirement where a “substantial statutory right” was violated (namely, the Trustor’s rights pursuant to Cal. Civ. Code Section 2924g – the same code section cited above) and thus the Court essentially treated the sale as “void” requiring no tender.
(2) The Whitman holding is in line with the holding in…………
As discussed above, the remainder of the letter can be obtained by subscribing as a platinum member to the foreclosure warrior website.
If you are a lawyer in California representing California homeowners, undoubtedly you have been sending out demand for beneficiary statements to the lender or loan servicer. The “beneficiary” of the loan is required to respond. These are one of a handful of letters we send out to try to ferret out various information. Yes, even though a borrower may be in default and fighting foreclosure, they still have some legal rights worth exploring, and which answers to the questions may assist you in a future foreclosure lawsuit or bankruptcy adversary proceeding setting.
Here is a snippet of the sample demand letter:
LENDER ADDRESS
LOAN SERVICER ADDRESS
SECURITIZED TRUST ADDRESS
VIA CERTIFIED MAIL
Re: Demand for Beneficiary Statement (Cal. Civ. Code 2943 et seq.) in regard to borrowers ___ and __ for real property located at __________.
THIS LETTER CONTAINS LEGAL DEMANDS THAT YOU MAY BE REQUIRED BY LAW TO COMPLY WITH. PLEASE FORWARD THIS LETTER TO YOUR LEGAL DEPARTMENT OF OTHER APPROPRIATE OFFICE FOR IMMEDIATE RESPONSE.
To whom it may concern:
Please be advised my office has been retained by borrowers __________ and ______ (“entitled persons”) who are the owners of real property located at ________________________________ (“subject property”) and in regard to a loan obligation which is hereby identified by the attached Exhibit “A” as account #_______________ (“subject loan”). The purpose of this letter is to demand that the “beneficiary” of my client’s subject loan respond to the following request, and produce the information requested below.
I. DEMAND FOR BENEFICIARY RESPONSE
The term “beneficiary” is defined under California Civil Code Section 2943 and elsewhere in California law as:
Our letter goes on from there to make several requests to clarify loan balances, escrow accounts, payoff amounts, etc.
If you are not making this written request, it may be worth reading California Civil Code Section 2943 to see if there is anything worthwhile that you can request to help your clients.
If they fail to comply, you are entitled to a whopping $300 in statutory damages.
The entire sample letter is available to Platinum members of our foreclosure warrior website.
Just another tool in the foreclosure attorney toolbox.
Probably one of the first things you learn in foreclosure defense is how the lenders love the word TENDER. Basically tender is a word they throw around to the Courts whenever you say you want to challenge a foreclosure sale. The gist of it is that if you are defaulting borrower and something bad happens that results in foreclosure, and if you want to challenge that, they will argue to the judge (if you file a lawsuit) that you cannot make a valid legal challenge unless you can “tender the balance of the loan” that you owe on. Yeah, if they had their way they would require you to bring a sack of cash to court to make a legal challenge. The principle is based on the fact that the court should not overturn a sale for minor irregularities, if it just puts a borrower right back into a defaulting position and where that result is deemed inequitable.
However, we recently had a sale occur in violation of a promise not to foreclose, and here are a few of the cases we cited for the proposition that no tender was required to make our challenge. You should realize there are a lot of cases discussing tender, and the best I have been able to tell is that it is a fact intensive review, and depends on the facts of the case. So if you are facing this argument, you should seek out real estate or foreclosure counsel. Anyway, here are a couple of cases you can look at that we successfully cited to reverse or set aside a foreclosure sale following a written agreement not to foreclose.
If you are a foreclosure lawyer you can get a complete copy of our legal demand letter at http://www.ForeclosureWarrior.com (Platinum account is required).
(1) Whitman v. Translate Title Company, 165 Cal.App.3d 312, 211 Cal. Rptr. 582 (1985) in this case the Court dispensed with a tender requirement where a “substantial statutory right” was violated (namely, the Trustor’s rights pursuant to Cal. Civ. Code Section 2924g – the same code section cited above) and thus the Court essentially treated the sale as “void” requiring no tender.
(2) The Whitman holding is in line with the holding in the Little v. CFS Service Corp. 233 Cal.Rptr. 923, (1987) which discussed the difference between “substantially defective sales” (which are VOID and of no legal effect, – where no tender rule should apply – versus minor defects and irregularity, which are “voidable” and where arguably the tender rule might apply). There, a Notice of Sale defect was deemed substantial and prejudicial and thus the sale was declared VOID even as to a bona fide purchaser for value.
(3) Bank of America, N.A. v. LoJolla Group II, 129 Cal.App.4th 706 (2005), was another case which held that a foreclosure sale was void and invalid where the borrower had cured the default.
“We seriously doubt that the legislature intended to prevent lenders and borrowers from adjusting delinquencies by mutual consent.”
In addition, LaJolla held that either the Trustee or the beneficiary could record the notice of rescission. To this point the court held:
“The recordation of a notice of rescission is authorized by section 1058.5, subdivision (b):Where a trustee’s deed is invalidated by a pending bankruptcy or otherwise, recordation of a notice of rescission of the trustee’s deed … shall restore the condition of record title to the real property described in the trustee’s deed and the existence and priority of all lien holders to the status quo prior to the recordation of the trustee’s deed upon sale. Only the trustee or beneficiary who caused the trustee’s deed to be recorded, or his or her successor in interest, may record a notice of rescission.”
(4) In Residential Capital v. Cal–Western Reconveyance Corp. (2003) 108 Cal.App.4th 807, 134 Cal.Rptr.2d 162, a foreclosure auction was held mistakenly after the trustor and beneficiary agreed to postpone it but failed to inform the trustee of their agreement. The trustee then learned of the agreement and refused to deliver a deed to the high bidder. (Id. at pp. 811–812, 134 Cal.Rptr.2d 162.) The Court of Appeal affirmed the trial court’s ruling granting summary judgment against the bidder.
(5) In the case of Bank of America National Trust & Savings Association v. Reidy, 15 Cal. 2d. 243, 248 (1940), the Court held:“It is the general rule that courts have power to vacate a foreclosure sale where there has been fraud in the procurement of the foreclosure decree or where the sale has been improperly, unfairly or unlawfully conducted, or is tainted by fraud, or where there has been such a mistake that to allow it to stand would be inequitable to purchaser and parties. Sham bidding and the restriction of competition are condemned, and inadequacy of price when coupled with other circumstances of fraud may also constitute ground for setting aside the sale. (Haley v. Bloomquist, 204 Cal. 253 [268 Pac. 365]; Dealey v. East San Mateo Land Co., 21 Cal. App. 39 [130 Pac. 1066]; Bernheim v. Cerf, 123 Cal. 170 [55 Pac. 759]; Packard v. Bird, 40 Cal. 378; Goodenow v. Ewer, 16 Cal. 461 [76 Am. Dec. 540].).
(6) In re Worcester, 811 F.2d 1224, 1228, (1987) the Court held:
Under California law, “gross inadequacy of price coupled with even slight unfairness or irregularity is a sufficient basis for setting the sale aside.” Whitman v. Transtate Title Co., 165 Cal.App.3d 312, 323, 211 Cal.Rptr. 582, 589 (1985); see also Sargent v. Shumaker, 193 Cal. 122, 129-30, 223 P.2d 464, 467 (1924).
As you can see, there are exceptions to the “tender rule” in California.
The foregoing information is general information only and not specific legal advice. In addition, the cases may not be current or accurate as the law is open to change and interpretation. If you have specific questions about your case please discuss with a real estate or foreclosure lawyer.
The following is general information only and is not intended to serve as legal advice or a substitute for legal advice. These are only my opinions and the case law and theories presented below may not be current or valid. For specific legal advice pertaining to your foreclosure case please consult a real estate or foreclosure lawyer in your area.
SUBSTITUTION OF TRUSTEE LEGAL REQUIREMENTS UNDER CALIFORNIA LAW
In the Deed of Trust a “trustee” is appointed. The trustee has the power of sale under most deeds of trust. Usually your deed of trust will indicate that the “lender” has the authority to substitute the trustee. But what happens if your house is sold and you check the chain of title at your local county recorder’s office and you do not see a “Substitution of Trustee” document recorded prior to the sale? Do you have any rights to set aside the sale? Maybe.
Let’s take a look at these points I would argue if that happened and my client wanted to try to set aside the sale. Note, whether or not the house was sold to a third party (bona fide purchaser for value) or went back to the bank may make a big difference in this situation.
(i)The Foreclosure laws in California must be STRICTLY FOLLOWED or the Foreclosure Sale is Void.
In Miller v. Cote, 179 Cal.Rptr. 753, (Ct of App. Fourth Dist. Div. 2 1982), the Court, in calling the notice of default fatally defective stated:
“The procedure for foreclosing on security by a trustee’s sale pursuant to a deed of trust is set forth in Civil Code section 2924, et seq. The statutory requirements must be strictly complied with, and a trustee’s sale based on a statutorily deficient notice of default is invalid.(System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153, 98 Cal.Rptr. 735; see California Mortgage and Deed of Trust Practice (Cont.Ed. Bar 1979) s 6.40, p. 295; see also Bisno v. Sax (1959) 175 Cal.App.2d 714, 720, 346 P.2d.
(ii) 2934a(1)(A) says “all beneficiaries” must execute the Substitution of Trustee (the applicable California law when a lender seeks to substitute the trustee and pursue a foreclosure sale), and the substitution of trustee document must be RECORDED to be effective, if not, the resulting sale is VOID.
(a) Only the beneficiary can substitute a Trustee under California Civil Code Section 2934a(a)(1), and such document must be recorded:
This section states:
“(a) (1) The trustee under a trust deed upon real property or an estate for years therein given to secure an obligation to pay money and conferring no other duties upon the trustee than those which are incidental to the exercise of the power of sale therein conferred, may be substituted by the recording in the county in which the property is located of a substitution executed and acknowledged by: (A) all of the beneficiaries under the trust deed, or their successors in interest….” (emphasis added).
Thus, it is clear, there can be no valid non-judicial foreclosure where the trustee under the original deed of trust is not properly substituted with a “recorded” document.
(iii) If there is no valid recorded substitution of Trustee, then the resulting foreclosure is VOID, and there is no obligation under California law to “tender” the loan balance to set aside the sale based on this technical violation to failure to strictly comply with 2934a(1)(A).
Again, California courts have spoken loud and clear on this issue. If a Substitution of Trustee is not valid, the resulting sale is VOID with no requirement for “tender”.See Dimrock v. Emerald Properties, 81 Cal.App.4th 868, 878 (2000), which held:
“In particular, contrary to the defendants’ argument, he was not required to tender any of the amounts due under the note” in order to attack a void trustee sale.
The Court in Dimrock further stated:
“To avoid confusion and litigation, there cannot be at any given time more than one person with the power to conduct a sale under a deed of trust” (emphasis added).
See also Pro Value Properties Quality Loan Service Corp., 170 Cal.App.4th 579 (2009).
Other California courts have also been willing to set aside foreclosure sales that violate the law or otherwise have serious irregularities without the requirement of tender. In the case of Whitman v. Translate Title Company, 165 Cal.App.3d 312, 211 Cal. Rptr. 582 (1985) the Court dispensed with a tender requirement where a “substantial statutory right” was violated (the Trustor’s one day right to extend the non-judicial foreclosure one business day pursuant to Cal. Civ. Code Section 2924g(c)(1)) and thus the Court essentially treated the sale as “void” requiring no tender.
This is in line with the holding in the Little v. CFS Service Corp. 233 Cal.Rptr. 923, (1987) which discussed the difference between “substantially defective sales” (which are VOID and of no legal effect, - where no tender rule should apply), versus minor defects and irregularity, which are “voidable” and where arguably the tender rule might apply). There, a Notice of Sale defect was deemed substantial and prejudicial and thus the sale was declared void even as to a bona fide purchaser for value.
Here, failure to execute or record a Substitution of Trustee, is a substantial defect and impacts a right afforded to borrowers to know who the trustee is that will sell their property at a foreclosure sale. As such, the sale is VOID and not merely VOIDABLE, and no tender is required to seek to file a lawsuit to set aside the sale.
(iv.) DAMAGES: where a sale fails to strictly comply with 2934a(1)(A) the sale violates the law and should be deemed an “illegal” sale under Munger v. Moore and all damages flowing from the illegal sale may be properly recovered.
The landmark case in wrongful foreclosure is the case of Munger v. Moore, 89 Cal.Rptr. 323 (1970), in this case the Court held:
“We are inclined however, to believe that with respect to real property the Murphy case was articulating a rule that has been applied in other jurisdictions. That rule is that a trustee or mortgagee may be liable to the trustor or mortgagor for damages sustained where there has been an illegal, fraudulent or willfully oppressive sale of property under a power of sale contained in a mortgage or deed of trust.…..this rule of liability is also applicable in California, we believe, upon the basic principle of tort liability declared in the Civil Code that every person is bound by law not to injure the person or property of another or infringe on any of his rights.”
In assessing damages for the wrongful foreclosure, the Munger Court held:
“Civil Code Section 3333 provides that the measure of damages for a wrong other than breach of contract will be an amount sufficient to compensate the plaintiff for all detriment, foreseeable or otherwise, proximately occasioned by the defendant’s wrong.”
These are just a few cases that come to mind. There are probably other arguments that can be made, but the lenders are required to follow the law just like everybody else. If they don’t properly substitute the trustee, you may have rights. Again, keep in mind that litigation is expensive so you have to consult with an attorney to see if it even makes sense to attack the sale, and if the sale is set aside you have your old loan back and you need to have a plan to deal with that which does not COUNT ON and RELY ON getting a modification. No lender or servicer is required to give a loan modification.
In this situation, some people have discussed setting aside the sale and going in Chapter 13 to bring the loan current over 60 months. Others have looked into bringing the loan current. Remember, sometimes people are only late on their mortgage because the lender or servicer told them “you have to be late if you want to try to get a loan modification.” Where you have a solid game plan, it may be worth looking into whether or not you have technical grounds to try to set aside your foreclosure sale. In another article, we will discuss what it means when it says the “beneficiary” must execute and record the Substitution of Trustee.
We have just launched a new video learning website that seeks to provide unbiased video modules to help California and Arizona consumers understand and learn tips and insights that may help them deal with the foreclosure crisis. The website is called Foreclosure Warrior.
There are times in the life of a foreclosure defense attorney when you just can’t get things your way or get the resolution that you want, or that which you fought for.
This is a tough business and the playing field may not be level. In most cases, there is a default that has to be grappled with in one sense or another.
Sometimes you have really good people, and really good friends as clients, and yet the funds run out and we cannot continue the fight.
Being a lawyer is tougher than most people think. Most people think lawyers are rich arrogant people. Of course some are. Yet, some have hearts and believe in happy endings.
Sometimes law firm economics forces us, as your legal counsel, to exit a case even though we want to continue the fight and find a way to take the ship out of the stormy sea and into the safe harbor.
I guess that is life. Filled with ups and down, good and bad weather and both bountiful and dry days.
As my mom used to say, everything happens for a reason. All we can do is our best and that is expected of us.
For the cases we have had to substitute out of for lack of ability to afford an attorney, I sincerely apologize. I wish I didn’t have student loans, or bills to pay, but I do.
At the end of the day, I hope I have laid the ground work for a successful settlement and kept a roof over your head as long as I could. And ultimately, I hope you achieve a result that keeps a smile on your face and a spirit in your step.
Just know, I have done what I could to build rapport with opposing counsel (who are not always bad people as you might think) and tried to build as much credibility as possible into the case, to support your plight.
Are we always successful? Heck no, I wish I was. But in the final analysis, I just hope I have kept your faith in the rule of law, and in yourself, and led you to believe in the system we live in, as troubling as it seems at times, and given you reason to believe in attorneys that take up your cause, in good faith, with the best of tools they have to offer.
Sometimes, that is all I get out of this business. A good fight against really talented opponents arguing minute details of law that get parsed into tiny segments that can usually be interpreted several different ways, each with credibility, with the reality that no success is ever guaranteed either way, and relying simply on the art of persuasion that we learned best as kids.
Yes, living in the trenches, fighting the good fight, is really all we each have to offer in this world, and that is something I think we can all be proud of.
My mom had a book called, tough times never last….but tough people do. To me, I think that means stay strong, and don’t let clouds get in your way.
As always, keep the faith. Keep in mind the important things. You know what they are.
A Client of mine has a son in law school. He asked his mom to ask me what a day in the life of a foreclosure and bankruptcy lawyer was like. Although this is somewhat amateurish as videos go, here is my response. Hope you enjoy.
First, you start up with some good music, and some good tips about wedding rings (if you are married).
Next, you head on out the door – but gotta get the breakfast of champions first (don’t forget to ask for the egg)!
Then, its headed to the courthouse!
I love downtown Phoenix. A great place!!
More downtown Phoenix (wife points out “even Attorney Steve makes mistakes”).
Looking for parking in downtown Arizona, Attorney Steve ponders whether or not he is “Employee of the Month.”
Attorney Steve gets the documents he was looking for and he leaves the building.
Attorney Steve heads back to the office in Arizona.
Attorney Steve Vondran reaches out to help those in need! Seems he has not heard of Attorney Steve! LOL
Here is the ultimate nightmare for drinking and driving. This time, it hits a Arizona tax lawyer – Christopher R. Perry – who works for one of the big foreclosure firms (that work for the banks) – “Perry & Shapiro.”
You may have seen that name on a few foreclosure notices of substitutions of trustee.
Guy was supposedly having a few cocktails around 2:00 p.m. in the afternoon, when he left and was driving his NEW BMW when he smacked a lady pedestrian throwing her to the ground.
Making matters worse, he stopped his car and got out, took a look at the woman who lay there dying, looking for a minute or two, and then he hits the road.
There is one guy trying to stop him from leaving the scene, but amazingly, he leaves the scene in broad daylight with witnesses onlooking.
To make matters worse, the woman dies.
To make matters worse, it is caught on VIDEO TAPE (see below).
I think that’s what you call having a bad day.
At any rate, this points out the dangers of drinking and driving.
THE CASE OF THE BOGUS WORK ORDER – I had one client where the lender sent a contractor in to “bid on things that need fixing” and “fix the toilet” which by the way WAS NOT BROKE (yes, my client still had lawful possession of the home and was MAKING PROTECTION PAYMENTS). Well the “contractor” snuck into the side door with the dogs barking, and snuck into the house with his camera, as my client’s daughter was just coming out of the shower. The guy races out of the house, and goes back around to the front door and starts knocking on the door. Now you tell me what he heck is going on here. This is not a made up story. This whole system is completely out of control. Our saving grace? I just got past demurrer on wrongful foreclosure. We are doing some plumbing of our own. Just another tale from the foreclosure trenches ………
WOO HOO!!!! WE HAVE REACHED A 100,000 HITS ON OUR FORECLOSURE WEBSITE. THANK TO ALL OF YOU WHO COME TO US TO HEAR “TALES FROM THE FORECLOSURE TRENCHES.”
So if you steal a pack of gum from Target – you go to jail. Drink and Drive, you go to jail. But if you hijack the financial system, the taxpayers bail you out, and now we look to 500 year old laws to try to go after the perpetrators. What the crap is wrong with this country? Last I checked these “routine violations” were acts of fraud and forgery. But no one goes to jail for that. Instead, they get bailed out and get to pay each other fat bonuses and act like loan modification kings casting judgment on homeowners who got caught in the spider web of deceit. Man, this is crazy. And now all we get is “state officials” trying to “wield these routine violations” and turn them into money FOR THE STATE. WTF is going on here. This story means absolutely nothing. Like everything else that has come out over the last 4 years. Nothing but window dressing designed to make people think the banks are busted. THE WIZARD OF OZ!!! AM I RIGHT, OR AM I MAKING IT UP?
If so, please email them to us at steve@vondranlaw.com. We are conducting a foreclosure chain of title analysis and have this notary and signor on the assignment of deed of trust. You may also find them on the substitution of trustee document. Either way, whether you have notarized documents or not, we would appreciate obtaining copies of these known signatures for comparison purposes. All parties are presumed innocent and in compliance with the law.
We are willing to exchange what we have for yours.
If anyone has any signatures of Chris Tulio (signed an affidavit of mailing for a Substitution of Trustee) or J.Rios, who is a California Notary, please contact us at steve@vondranlaw.com.
We are willing to swap the signatures we have.
Thank you
All parties are presumed innocent and in compliance with the law.
Does anyone have a substitution of trustee document, or assignment of deed of trust (or other notarized document) bearing the signatures of Mr. Bryan G. Kusich or Bruce Barron?
We are reviewing a foreclosure case. Thank you.
All parties are presumed innocent and to be in conformance with the law.
The banks will argue almost anything to get past a demurrer in a wrongful foreclosure lawsuit. Some of the typical things we see the big firms saying in their pleadings include:
1. Borrower is just upset over real estate speculation gone wrong
2. The borrower admits they are in default so they have no legal rights
3. Borrower/Plaintiff cannot challenge any irregularities in the foreclosure sale unless he/she can tender the balance of the loan (i.e. have a sack of cash ready)
4. The Plaintiff cannot state any cognizable claim against the lender or loan servicer
5. The lender or loan servicer has done absolutely nothing wrong (robosigners, forgery, and notary fraud should not matter when a person is in default).
These are just some of the things we hear defense counsel state in the typical foreclosure defense legal pleading. A demurrer challenges the sufficiency of the complaint, and basically argues to the judge that “there ain’t no case at all.”
Whenever you file a foreclosure related lawsuit against the major banks or loan servicers, this is the first pleading you will normally go up against. The counsel for the banks and lenders will try to knock-out each cause of action one by one until there is nothing left. As a foreclosure and real estate lawyer, we try to show that each cause of action is sufficiently plead, and that there is legal grounds or merit to the cause of action and seek to move the case forward on those grounds (i.e. go into the discovery phase of the lawsuit).
Recently, after our Second Amended Complaint on a wrongful foreclosure case, we had the banks demurrer overruled on our request for wrongful foreclosure (and two other causes of action). This is what we are fighting for.
About Standing for Something – Or Falling for Anything!
Many people have asked me, how do you do it? Why do you fight for people facing foreclosure?
The cynic says “you are just a rotten lawyer that does everything for money.”
Really? I had an easy retainer tonight. Homeowner facing eviction, looking for hope and some issues worth looking into.
Well, I thoroughly examined the loan file, chain of title, and facts of the case, and at the end of the day, there were no legal challenges to be made.
I informed the client of such, and the client cried her heart out to me on the phone. Is this a easy message to deliver, or easy response to take?
I don’t think so. It hurts.
But I have to be honest. A legal challenge would amount to nothing more than throwing good money after bad.
In fact, I had two of these cases this week alone. It hurts, but at least the homeowners know they investigated their legal rights, and there were none to assert.
For some people, this brings peace of mind and closure.
Some people want to see what rights they have, if any.
On another vein, I also emailed back and forth with another attorney tonight who also practices in the area of foreclosure defense and bankruptcy law.
She asked me how it is I maintain the fight in two states (California and Arizona) who are creditor/bank friendly. She sent me a link as to how Arizona was backing down on their SB 1259 law that sought to force the banks to prove their chain of title before foreclosing. Of course we all know by now the banks have no ability to show a legal right to foreclose with a full endorsed note from the loan originator to the securitized loan trustee that claims to own the loan. Just pure legal fiction. But what can we do?
This attorney had just got done settling a foreclosure case on her end (Kudos – and she is proud of it rightfully so) and yet the settlement agreement
(as always) says the attorney must keep HUSH HUSH on the settlement. Should anyone really be surprised? If a homeowner is SO LUCKY to win their case, this MUST be KEPT A SECRET. The Banks do not want everyone to know HOW they won, what the cases were, or what the problem on their end was. Believe me, if there was no problem, they would not settle. Right?
Anyway, here is what I emailed to her:
I fight so I can truly live…..Just fought a judge 7 days in Paso Robles and finally got the TRO.
The truth is in the trenches….of each business…..behind the scenes…..unreported, just like your settlement.
Your truth is too big for prime time news. Would unsettle the waters.
Welcome to America.
At the end of the day, as one of my broker clients told me a few years back “YOU HAVE TO STAND FOR SOMETHING OR YOU WILL FALL FOR ANYTHING.”
I AM NOT WILLING TO FALL FOR THE FORECLOSURE NONSENSE I SEE ON A DAILY BASIS.
PEACE OUT.
STEVE VONDRAN, ESQ.
ARIZONA AND CALIFORNIA
FORECLOSURE AND BANKRUPTCY LAWYER
In what appears to be another act of federal window dressing to put Americans and foreign investors at ease that our financial system is the best in the world and worthy of your investment dollars, the Federal Regulators (OTS, OCC, and FRB) have concluded their investigation into foreclosure practices of the major banks and loan servicers and have come up with a settlement order that is supposed to make us all feel good.
The basics of the settlement orders (which include banks such as Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, US Bank, One West, Aurora, ALL Y Financial (formerly GMAC), and yes, our good friend MERS (the software company) are as follows:
(1) The banks and servicers neither admit nor deny any liability (hmmm, that’s a good start – I wish DRE audits could end up that way)
(2) The banks are supposed to set up an independent consulting firm to review their individual practices and come up with a compliance game plan in 60 days (hmm, since they have sworn up and donw in court and elsewhere that they have done nothing wrong, not sure what their game plan will consist of)
(3) The game plan is supposed to address certain “unsafe and unsound acts” and “deficiencies” (I guess we can’t call it fraud – that is a bad word) such as:
False assignments of Deeds of Trust and transfer of other mortgage documents
False affidavits to Bankruptcy and Foreclosure Courts
Fix the robosigner problem
Better oversight of outsourced serviced providers and third party law firms who have assisted in foreclosure-gate
Improper notarization of records that have been submitted to courts and the county recorder’s offices across the country
Etc. etc.
Sounds great, but these banks and financial institutions have always claimed to be 100% clean, and have blamed borrowers and their attorneys for everything. We will have to wait and see what their independent investigations reveal and what their self-imposed compliance plan will detail.
Question: What about dealing with RESPA and TILA rights. Banks / Servicers could give a c*** about that either, at least generally speaking.
Also, there is supposed to be a compensation, remediation, and reimbursement for “wrongful foreclosures” committed between 2009-2010 (but no third party beneficiaries of the settlement agreement are allowed). There are no guidelines as to who qualifies, what the standards or criteria is, or what amounts will be paid.
There is also no mention of any private right of action – and third party beneficiary status under these agreements is negated. Just a bunch of self-enforcement back slapping and compliance window-dressing???
Taking this with the 50-States Mortgage Mess Settlement agreement with the state Attorney general’s (See mortgage mess settlement agreement) – which was another measure seeking to bring some fairness into this mess of a foreclosure system – shows the extent of the foreclosure problem in America. The banks, who gave risky loans to virtually anyone with a heartbeat (no document loans, false appraisals, negam loans, option arm loans, stated income loans, etc.) need to step up to the plate and honestly fix this system and compensate people who have been wrongfully foreclosed.
California Lenders, Loan Servicers, MERS and other foreclosing entities should ensure valid legal compliance with California Civil Code Section 2932.5 or risk have the foreclosure sale being declared VOID (with no obligation to tender). The following is Copyrighted 2011 by the Law Offices of Steven C. Vondran, P.C. ALL RIGHTS RESERVED. We can be reached at (877) 276-5084.
Okay, we have been waiting for some good cases to come out that clarify some of the more nebulous concepts in foreclosure defense law. But we just got a real nice decision that confirms what I have been saying al along (and which can be verified in previous posts I have made which go back as far as July 2010 – you can find one clip here on Timothy McCandless website). While everyone was talking about California Civil Code Section 2932.5 applying ONLY to mortgages, the California Southern District bankruptcy Court recently came down and said hogwash – THERE IS NO MEANINGFUL DISTINCTION BETWEEN A MORTGAGE AND A DEED OF TRUST. BOTH ARE NOTHING MORE THAN INSTRUMENTS THAT SECURE A RIGHT TO REPAYMENT OF MONEY. As such, 2932.5 applies to both mortgages and deeds of trusts (which is what most California and Arizona homeowners have – a recorded Deed of Trust in the County Recorder’s Office).
Okay, that is a lot of lawyer talk. But what on earth does it mean? Well, strap on your seat belt because here we g0: (1) First, what does California Civil Code Section 2932.5 actually say? Here is the code pasted in here for you (thankfully this section is short and sweet):
Where a power to sell real property is given to a
mortgagee, or other encumbrancer, in an instrument intended to secure
the payment of money, the power is part of the security and vests in
any person who by assignment becomes entitled to payment of the
money secured by the instrument. The power of sale may be exercised
by the assignee if the assignment is duly acknowledged and recorded.
Now, you have to read this section clearly. To state is as simple as I can, IF A DEED OF TRUST IS ASSIGNED, THE ASSIGNEE HAS THE POWER OF SALE AND THAT ASSIGNEE CAN FORECLOSE NON-JUDICIALLY (BY EXERCISING THE POWER OF SALE CONTAINED IN THE DEED OF TRUST). HOWEVER, IN ORDER TO ACTUALLY EXERCISE THAT POWER OF PRIVATE SALE, THE ASSIGNMENT OF DEED OF TRUST MUST BE “DULY ACKNOWLEDGED AND RECORDED.” To me, “duly” means that the assignment of trust is (a) not backdated with a retroactive effective date (which we see all the time and which the lenders argue is perfectly fine), and (b) not subject to the robosigner/notary fraud phenomena that lenders are trying to sweep under the rug as a mere “mistake” or “irregularity.” As you will see, the lenders have no problem with this code section, it is just that they argue it does not apply to assignments of DEEDS OF TRUST (they argue the section only applies to MORTGAGES given the “mortgagee” language used above. That’s what this Salazar case is mainly about. It should be noted, that if the assignee/beneficiary does not have the private power of sale they would still be entitled to conduct a “judicial foreclosure” in front of the court. Why don’t they do this? 1. Costly 2. Time Consuming, 3. You can raise defense and 4. You can challenge their standing, maybe even force them to show proof that the note was endorsed to their securitized loan trust. This would be a major feat for them and might expose the fraud perpetrated on the SEC, but that is another topic.
Facts of Salazar: The borrower entered into a 2005 loan transaction with Accredited Home Loans (the “lender” under the Deed of Trust). Under the Deed of Trust, you have the traditional nonsense of MERS claiming to be the beneficiary of the loan even though it never held the loan, never lent any money, and collects no payments, etc. MERS was the “nominee” under the Deed of Trust. At some point the borrower fell into default on the loan and MERS substituted the trustee (there was both Quality Loan Service and Litton Loan Service mentioned) on June 2009. After that, a private non-judicial foreclosure sale was conducted on 12/2009. US Bank National Association, as trustee of a securitized loan trust that claimed to be the beneficiary and owner of Plaintiff’s note, executed the trustees deed upon sale indicating US bank was the “foreclosing beneficiary.” Based upon this, and based upon their argument that 2932.5 does not apply to deed of trust, US bank claimed the foreclosure was proper and valid.
The borrower however, when faced with an unlawful detainer (eviction action) shortly following the sale, filed for Chapter 13 bankruptcy protection on 9/2010. This action triggered the automatic stay in bankruptcy court and put a halt to the foreclosure action. The borrower also filed a wrongful foreclosure state court action. While in Chapter 13 bankruptcy, US bank filed a motion for relief from the automatic stay arguing the house had been foreclosed upon lawfully, and that the property was therefore not essential to a chapter 13 reorganization/restructuring plan. The borrower (now referred to as the debtor in the bankruptcy proceeding) sought to oppose the motion for relief from stay and argued US bank had no standing to lift the stay and that the private non-judicial foreclosure sale was invalid and must be set aside so the house could be factored into a chapter 13 payment plan. The basis for arguing wrongful foreclosure was that California Civil Code Section 2932.5 was not complied with as there was NO RECORDED ASSIGNMENT OF DEED OF TRUST TO US BANK THAT COULD BE FOUND IN THE RECORDED CHAIN OF TITLE, AND THEREFORE THE FORECLOSURE SALE FAILED TO BE IN COMPLIANCE WITH THE CALIFORNIA FORECLOSURE LAWS. As usual, the banks argued this was nonsense and the stuff of novels.
Legal Issues for the Salazar Court to Decide:
(1) Whether US Bank could establish its “standing” to bring the motion for relief from the automatic stay?
(2) Whether the debtor retained any equitable interest in the property following the private non-judicial foreclosure sale and if so, whether such property was necessary to an effective chapter 13 reorganization? (if so, it would be proper to continue the automatic stay in effect until the issues and defenses of US Bank were raised/resolved in another proceeding).
(3) Whether it was proper to allow the unlawful detainer case to proceed in light of the facts of the case?
Courts Holding (Decision on the above issues):
(1) Yes, US bank could meet the “standing” requirements which the court described as a “minimal test” and which the Court found that US bank was a “party in interest” mainly because they had a recorded trustees deed and claimed the note was assigned (in blank) to them.
(2) Yes, the debtor retained an equitable interest in the property. The private non-judicial foreclosure sale was wrongful and VOID (no tender required to challenge) for FAILURE TO COMPLY WITH CALIFORNIA FORECLOSURE LAWS, SPECIFICALLY CALIFORNIA CIVIL CODE SECTION 2932.5 FOR FAILURE TO RECORD AN ASSIGNMENT OF DEED OF TRUST PRIOR TO CONDUCTING THE PRIVATE FORECLOSURE SALE. Given this violation, it was proper to deny the motion to lift the automatic stay in bankruptcy and to keep the stay in effect until it was learned whether or not the Debtor could put together a viable chapter 13 repayment plan.
The court rejected arguments that 2932.5 applied only to mortgages, and the court refused to follow the other federal court cases cited by the moving party US Bank (they cited NOthern and Eastern District cases that lent credence to this argument). Instead, the court decided the case as they felt the California Supreme Court would have decided the issue. Rather, citing to a host of secondary legal authorities, the court finds there is no functional distinction between mortgages and deeds of trust as each has the “same effect and economic function” (ex. Witkin Summary of California Law / Miller and Starr California Real Estate).
(3) No, the Court felt that since the foreclosure was probably void, and since the debtor may be able to save her home in a chapter 13 bankruptcy plan, that the stay should remain in effect until US banks defenses could be heard in state court or in an adversary proceeding. The court did mention that challenges to foreclosure sales “are barred if the issue is not raised in the unlawful detainer action.”
Basically, the Court was not buying the MERS as beneficiary argument. The Court said that the MERS private alternative to non-judicial foreclosure is trumped by California foreclosure statutory law to the extent MERS is inconsistent. I know MERS is aching on this decision also. The Court said the assignment of deed of trust must be recorded under 2932.5 despite MERS initial role under the Deed of Trust. Classic!! Just because MERS alleges to know how the owner of a loan is at any given time (which most experts see as pure folly), the court will not allow that to win the day. The court distinguished the recent Gomes v. Countrywide decision where MERS was allowed to foreclosure non-judicially. In Salazar the court said the deed of trust was vague and only allowed MERS to act where “necessary by law or custom” but the court said this does not allow a specific grant to foreclose non-judicially without following California statutory foreclosure procedure. The court simply stated that MERS was not the beneficiary at the time the foreclosure sale occurred as evidenced by the US Bank Trustee’s deed after sale which indicated “US BANK was the foreclosing beneficiary.”
In addition, the Court discussed how 2932.5 creates a “right” for a trustor to know who owns their loan (novel concept I know), whether you are talking about a mortgage or a deed of trust. The court said 2932.5 is to protect trustors (that is the borrower) “from confusion as to ownership of loans” and that borrowers are entitled to know about changes in beneficiary status. Recording the assignment of deed of trust serves this purpose and is therefore a legal requirement before initiating a non-judicial foreclosure. Again, keep in mind, even having an assigned deed of trust is no substitute for owning/holding the original fully endorsed promissory note. As the “security follows the note” the note should be an issue in every case if you can demand proof of such. Cases like In re Walker have discussed how the mere assignment of a deed of trust, without the note, is a legal nullity (but it seems courts don’t love this position since it would tear the mask off these lenders who lied to the SEC) and would probably send our stock market crashing. Note the Judge in Salazar cited In re Gavin (need chain of title of valid endorsements) and In re Wilhelm (lender must have an interest in the relevant note) in order to evidence their standing.
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Food for thought
(1) Although the Courts, and each of them, may disagree on the law when it comes to foreclosure defense, the Salazar case does suggest to me that some courts are getting tired of all the lender, loan servicer, MERS securitized loan nonsense. This may bode well if you are facing foreclosure and need grounds for an injunction to enjoin the private non-judicial foreclosure sale. You may want to have us review your recorded chain of title for irregularities in the chain of title. Any lawyer that has been taking foreclosure cases in the past few years knows these types of violations are real, and not uncommon. As documents such as the ADOT need to be “duly acknowledged and recorded” under 2932.5 it might also be wise to send out notary “produce your transaction log” letters (assuming the state of the notary requires them to keep logs. We have more information about this topic on our website http://www.RobosignerAudits.com.
(2) If your house has been sold, and you think you can potentially catch up with your arrears and make your loan payment in a chapter 13 bankruptcy case, then that is another reason to have your recorded chain of title examined for irregularities in the ADOT. In Salazar the court stated that the debtor “gets prima facie evidence of ownership” of property where a foreclosure sale is void under 2932.5. Note that court was requiring adequate protection payments be made to US Bank while the legal wrangling continued.
(3) By filing a lawsuit (assuming you have valid legal grounds) you won’t likely win a million dollars or get your house for free, but you never know what might happen if your case goes to a jury.
(4) We have been saying all along, only courageous judicial opinions can help lawyers like me fight the foreclosure meltdown. We will be discussing this case on our Foreclosure Defense Radio Show (Google Vondran Foreclosure Meltdown Show).
(5) Although the lenders, and loan servicers always argue you have to “tender the balance of the loan” to challenge irregularities in the foreclosure process, the judge in Salazar disagreed and cited two cases stating no tender is required where a foreclosure sale is VOID (for failing to follow California Foreclosure laws in California Civil Codes Section 2020-2955 which the court referred to an an exhaustive list of California nonjudicial foreclosure law that must be complied with). The cases cited for the no-tender proposition include Bank of America v. LaJolla Group II, 129 Cal.App. 4th 706, 710,717 (5th Dist. 2005); and Dimrock v. Emerald Properties, 81 Cal. App. 4th 868, 874 (4th Dist. 2000). Remember, tender applies to challenging irregularities in the “sale” (2932.5 could be argued to challenge the “process” and compliance with the statutory law).
Here is the scenario, when a foreclosure is about to take place MERS (our friendly neighborhood software company) typically assigns a Deed of Trust to the party that supposedly owns your loan so that they can go ahead with a private non-judicial foreclosure sale. This assignment often takes place after the Notice of Default is filed. So, in order to make things appear nice and pretty and to try to convince everyone that the assignment was made before the Notice of Default was filed they will often indicate on the Assignment of Deed of Trust that it is “effective January 1, 2011″ (for example) although the assignment is notarized on the let’s say April 15, 2011.
If the assignment of deed of trust was “effective” on January 1, 2011 then why wasn’t it signed and notarized on that date? What happened on January 1, 2011 to make the assignment “effective?” Did the trustee of the securitized loan trust call MERS and tell them the assignment is effective, prepare the documents and we will notarize it in a few months? That seems unlikely. Yet this is the game they play. As Plaintiff counsel, this seems like another piece in the bogus scheme to foreclose on people by doing whatever they want, saying whatever they want, and expecting everyone to go quietly into the foreclosure night.
One court recently weighed in on this suspicious backdating of real estate documents, and stated that it may be improper and may taint the Notice of Default. The case of Ohlendorf v. American Home Mortgage Servicing, No. CIV. S092081 LKK/EFB (E.D. Cal.2010, Mar. 31, 2010), discussed this phenomena when MERS made TWO ASSIGNMENTS both with back-dated “effective dates”:
“Nonetheless, plaintiff may have stated a claim against defendants that they are not proper parties to foreclose. Plaintiff and AHMSI, Deutsche, and MERS have requested that the court take judicial notice of the assignment of deeds of trust which purport to assign the interest in the deed of trust first to AHMSI and then to Deutsche. As described above, the deed of trust listed MERS as the beneficiary. On June 23, 2009, T.D. recorded a notice of default that listed Deutsche as the beneficiary and AHMSI as the trustee. Nearly a month later, on July 20, 2009, MERS first recorded an assignment of this mortgage from MERS to AHMSI, which indicated that the assignment was effective June 9, 2009. Eleven seconds later, AHMSI recorded an assignment of the mortgage from AHMSI to Deutsche, which indicated that the assignment was effective June 22, 2009. The court interprets plaintiff’s argument to be that the backdated assignments of plaintiff’s mortgage are not valid, or at least were not valid on June 23, 2009, and therefore, Deutsche did not have the authority to record the notice of default on that date. Essentially, the court assumes plaintiff argues that MERS remained the beneficiary on that date, and therefore was the only party who could enforce the default.
While California law does not require beneficiaries to record assignments, see California Civil Code Section 2934, the process of recording assignments with backdated effective dates may be improper, and thereby taint the notice of default. Defendants have not demonstrated that these assignments are valid or that even if the dates of the assignments are not valid, the notice of default is valid. Accordingly, defendants motion to dismiss plaintiff’s wrongful foreclosure is denied insofar as it is premised on defendants being proper beneficiaries. As discussed below, defendant is invited, but not required, to file a motion addressing the validity of the notice of default given the suspicious dating in the assignments with respect to both their motion to dismiss and their motion to expunge the notice of pendency.”
Interestingly, in Ohlendorf, the Bank made the usual “tender” argument, but the Court did not require a tender and instead stated:
A. Failure to Allege Ability to Make Tender
Defendants AHMSI, ADSI, Deutsche, and MERS argue that all of plaintiff’ claims are barred by plaintiff’s failure to allege his ability to tender the loan proceeds. Defendants assert that Abdallah v. United Savings Bank, 43 Cal. App. 4th 1101, 51 Cal. Rptr. 2d 286 (1996), requires a valid tender of payment to bring any claim that arises from a foreclosure sale. Abdallah, however, merely requires an allegation to tender for “any cause of action for irregularity in the [foreclosure] sale procedure.” Id. at 1109. Here, plaintiff asserts no causes of action that rely on any irregularity in the foreclosure sale itself. Indeed, the only claim addressed by the motions that may concern irregularity in the foreclosure itself is the wrongful foreclosure claim, which the court rejects below. Accordingly, the court concludes that plaintiff need not allege tender, and defendants’ motion is denied on this ground
Other Courts have agreed with this type of analysis in regard to the vailidity of the Notice of Default and whether or not this makes a foreclosure wrongful. For example, in Castillo v. Skoba, Vice President of Aurora Loan Services, LLC 2010 WL 3986953 (N.D.Cal., November 30, 2010), the United States District Court in San Diego held (in granting an injunction to halt a foreclosure sale):
“The Court also concludes that Plaintiff is likely to succeed on the merits of his claim that neither Aurora nor Cal-Western had authority to initiate the foreclosure sale at the time the Notice of Default was entered. Under Cal. Civ.Code § 2924(a)(1), “the trustee, mortgagee, or beneficiary, or any of their authorized agents” are authorized to file a notice of default. Documents do not support a finding that either Cal-Western was the trustee or Aurora was the beneficiary on May 20, 2010 when the Notice of Default was recorded.
On a document dated May 17, 2010, MERS substituted Cal-Western as a trustee under the deed of trust. (Exh. 4) If Cal-Western had been trustee at this time, it would have had authority to conduct the foreclosure process. See Cal. Civ.Code § 2924(a)(1). However, this document was notarized on June 7, 2010, (id.), and thus it appears likely that Plaintiff can succeed on a claim that the substitution occurred no earlier than June 7.
Similarly, on June 8, 2010, MERS, the beneficiary under the deed of trust, executed an assignment of its beneficial interest to Aurora, with a backdated effective date of May 18, 2010. (Exh 6) Based on the face of this document, Plaintiff is likely to prevail on a claim that Aurora did not have authority to record the Notice of Default on May 20, 2010. See Ohlendorf v. Am. Home Mortg. Servicing, No. CIV. S-09-2081, 2010 U.S. Dist. LEXIS 31098 (E.D.Cal. Mar. 30, 2010) (recipient of backdated assignment may not have had authority to record Notice of Default). The power of sale in a nonjudicial foreclosure may only be exercised when a notice of default has first been recorded. See Cal Civ Code § 2924; see also 5-123 California Real Estate Law & Practice § 123.01. Here, the Notice of Default appears to be void ab initio. Therefore, any foreclosure sale based on a void notice of default is also void. Accordingly, the Court GRANTS Plaintiff’s motion and enjoins a foreclosure sale based on Defendants’ noncompliance with prerequisites to engage in a foreclosure sale set forth in Cal. Civ.Code § 2924.
What does all this mean? It means, if MERS is playing games with “effective dates” on your assignment of Deed of Trust that should at least be used to argue that the Notice of Default may be tainted. You really have to look at the recorded chain of title and see what you find. If there is improper backdating this may give rise to a challenge (not to the foreclosure “sale” – which requires tender), but to the foreclosure laws in California which require a valid Notice of Default before foreclosing. For this challenge, the Ohlendorf case says no tender need be alleged. For anyone that has been closely examining Assignments of Deed of Trusts involving securitized loans, this is an every day occurrence. They call it “retroactive effect” I call it complete nonsense. At least a few courts agree.
What is a Deed in Lieu of Foreclosure? Well basically, it is one of the options in the loss mitigation toolbox whereby instead of being foreclosed upon by your lender, loan servicer, or their agents, you can convey title and possession to your real property to the beneficiary in exchange for them not pursuing any deficiency judgment on the debt. Now, these can be hard to get because in many cases a bank will want to just either sell your property with a short sale, or else get clear title following a foreclosure sale (wherein all juniors liens are extinguished). This is one reason the beneficiary will want to insure that you do not have any junior liens on your property before they will accept the deed in lieu (yes, filling out the paperwork is not enough, you actually have to deliver the deed and they have to accept it in order for it to be effective).
What is interesting in regard to the above case where we were able to obtain a DIL is that our Client sought to do a short sale, but despite coming up with a great short sale offer, the bank declined to accept it and they stated they were going to foreclose on the property. In reviewing the chain of title, and the Notice of Sale, we realized Fannie Mae filed the Notice of Sale on the WRONG PROPERTY (they filed it against my clients property that was NOT in foreclosure). After writing a legal demand letter, we were eventually able to negotiate the deed-in-lieu as a compromise.
In accepting the Deed-in-Lieu, the beneficiary is able to avoid the costs of foreclosure and the borrower has the debt cancelled. This is the consideration for the deal. As you can see by viewing the attached Grant Deed, there is an “estoppel affidavit” that must be completed and notarized stating the conveyance is absolute and not intended as a mortgage or security and that all right, title, and interest is conveyed to the grantee. The recording of the grant deed raises a rebuttable presumption of delivery and acceptance by the grantee.
RONALD V. BANK OF AMERICA – MASS JOINDER HAS MASS APPEAL?
Mass joinder lawsuits against banks are circulating around the internet. People have been calling our office wanting to know if they are legitimate. It is hard to say, but there is one case that has seemed to garner the most attention.
That is the case of Ron vs. Bank of America. In this case, apparently there has been some initial success in at least getting past some initial motions to dismiss. There are hundreds of bank of america clients named on the lawsuit, and from what I can tell there are four law firms who have teamed together to represent the various clients.
Just recently, there seems to be some scuffle and rangling amongst the attorneys for the Plaintiffs, and a motion has been filed to remove Mitchell Stein, Esq. (AKA “YOU HOLD THE LEASH”) from the case. I am not sure how the motion resulted, but here is a link to the motion filed by the moving party in this case to remove Mitchell Stein as counsel. You can follow the case in Los Angeles County Superior Court case# 409444.
For now, all I can say is the moral of the story is to do your homework before you fork down 5-6 thousand dollars. We will keep you updated on the status of the case.
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UPDATE – 8/18/2011 (CALIFORNIA STATE BAR MOVES IN ON ATTORNEY MASS JOINDER FIRM)
For more information you can view our Foreclosure Radio show here which discusses the topic.
It is clear that the “Produce the Note” or “Show me the Note” argument has been rejected in Arizona (as is also true in California). As the Arizona District court stated in Dumesnil v. Bank of America, 2010 WL 1408889:
“No Arizona court or any federal appellate court has decided this issue, but many district courts for the District of Arizona have rejected the “show me the note” argument. See Contreras v. U.S. Bank, No. CV09-0137-PHX-NVW, 2009 WL 4827016 (D.Ariz. Dec.15, 2009); Blau v. America’s Servicing Co., No. CV08-0773-PHX-MHM, 2009 WL 3174823 (D.Ariz. Sept.29, 2009); Goodyke v. BNC Mortgage, Inc., No. CV09-0074-PHX-MHM, 2009 WL 2971086 (D.Ariz. Sept.11, 2009); Garcia v. GMAC Mortgage, LLC, No. CV09-0891-PHX-GMS (D.Ariz. Aug. 31, 2009); Diessner v. Mortgage Elec. Registration Sys., 618 F.Supp.2d 1184 (D.Ariz.2009); Mansour v. Cal-Western Reconveyance Corp., 618 F.Supp.2d 1178 (D.Ariz.2009); but see Castro v. Executive Trustee Servs., LLC, No. CV08-2156-PHX-LOA, 2009 WL 438683 (D.Ariz. Feb.23, 2009). “Where the state’s highest court has not decided an issue, the task of the federal courts is to predict how the state high court would resolve it.” Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir.1986), modified at 810 F.2d 1517 (9th Cir.1987).”
The basic idea is the the foreclosure statutes are comprehensive and say exactly what needs to be done to foreclose in a private non-judicial foreclosure sale (ex. record and publish a notice of sale), and so no new requirements (such as produce the original wet ink signature) will be imposed. Result: Any entity can try to foreclose on your non-judicially when you are in default.
But, what happens if you can PROVE that the party seeking to foreclose has no right to do so (ex. what is Wallmart tries to foreclose on you)? Obviously Wallmart is not the owner of your loan, and does not work as a loan servicer on behalf of the owner of your loan, so what if they tried to foreclose on you non-judicially? Well, there is some authority in Arizona that just maybe, you can file a lawsuit for declaratory relief seeking a determination that Wallmart is not the party entitled to enforce your loan.
For example, in the case of Castro v. Executive Trustee Services, 2009 WL 438683 (United States Dist. Ct. of Arizona 2009) the Court eluded that there might be proper grounds to file a lawsuit for declaratory relief under State Law to determine whether or not MERS, or a foreclosure Trustee (Executive Trsutee Services in that case) is the proper party entitled to foreclose on a defaulting borrower. The Court failed to dismiss the borrowers claim on this ground, but stated the proper channel to go through was filing a state court declaratory relief action and showing proof that MERS and ETS (and by analogy anyone trying to foreclose on you) is not the holder of the loan or a non-holder of an instrument with the rights of the holder. Specifically, the Castro Court stated:
“Arizona law, set forth in its version of the Uniform Commercial Code on negotiable instruments, A.R.S. §§ 47-3301 et seq. and 3104, provides that a note qualifying as a negotiable instrument can be enforced by a “holder of the instrument” or a “nonholder in possession of the instrument who has the rights of a holder or a person not in possession of the instrument who is entitled to enforce the instrument ….” A.R.S. § 47-3301. According to the Complaint, neither ETS nor MERS is a holder of the note related to the subject deed of trust. The deed of trust indicates: “The Note means that Borrower [Plaintiffs] owes Lender [Home Loan Corp.] $240,000.00 ….” (Exh. A at 2; docket # 9-2) Based on the documents before the Court and because neither ETS nor MERS is allegedly a lawful holder of the note, it is a prerequisite to enforcing the note that ETS or MERS is a transferee in possession entitled to the rights of a holder. A.R.S. § 47-3301. Thus, in order to enforce the note under Arizona law, ETS or MERS must prove a sufficient transfer from the initial holder (originally Home Loan Corp. to whom the note was made payable by Plaintiffs) to ETS or MERS as a person or entity who is entitled to enforce the instrument. Id. Having elected to proceed via Rule 12(b)(6), rather than Rule 56, this portion of Defendants’ Motion will be denied because the record contains insufficient information to resolve the issue whether ETS or MERS is entitled to enforce the instrument as a matter of law. In an abundance of caution and in fairness to both Plaintiffs and Defendants, the Court will permit Plaintiffs to file an Amended Complaint to include specific facts explaining why Plaintiffs are entitled to a declaration that Defendants may not enforce the deed of trust and foreclose on Plaintiffs’ property based on Plaintiffs’ admitted default on the note. Amendment would allow Plaintiffs to identify Defendants’ conduct which violated Arizona law, include citations to controlling legal authority and directly allege valid claims they have against Intervenor JP Morgan Chase Bank or its predecessor-in-interest.”
This seems to open the door to raising a valid claim that the party seeking to foreclose is not a party entitled to do so. But as the court said, they will look for specific factual allegations, and citation to case law. Other cases (out of Arizona) have also lent support that if you have specific factual allegations you can allege, that show the wrong party is foreclosing, maybe you can get declaratory relief (what happens in that event is not clear). For example, in the case of Gomes v. Countrywide Home Loans, Inc., the Court acknowledged the Arizona Castro case and stated:
“In Castro, supra, 2009 WL 438683, 2009 U.S. Dist. Lexis 14134, the court allowed a claim for declaratory relief to proceed to determine whether the defendants were entitled to enforce a promissory note through nonjudicial foreclosure when the documents before the court indicated that the entities initiating the foreclosure process may not have had the rights of the holder of the note as required by Arizona law. (Id., 2009 WL 438683, 2009 U.S. Dist. Lexis 14134 at *15-16.) It is also significant that in each of these cases, the plaintiff’s complaint identified a specific factual basis for alleging that the foreclosure was not initiated by the correct party. Gomes has not asserted any factual basis to suspect that MERS lacks authority to proceed with the foreclosure. He simply seeks the right to bring a lawsuit to find out whether MERS has such authority. No case law or statute authorizes such a speculative suit.
At any rate, the Castro case at least provides some food for thought. While PRODUCE THE NOTE or SHOW ME THE ORIGINAL NOTE is a dead legal theory in regards to trying to stop a non-judicial foreclosure sale in Arizona, if you have SPECIFIC PROOF OR EVIDENCE THAT THE PARTY SEEKING TO FORECLOSE HAS NO LEGAL RIGHT TO DO SO UNDER THE ARIZONA COMMERCIAL CODE (A.R.S. 47-3301 etc.), then you may be able to file a lawsuit for declaratory relief.
This points out the need to try to obtain evidence that the foreclosing parties do not own the loan or have a right to enforce it. To this end, we send out a series of letters on behalf of Arizona homeowners demanding a few things that might help create a case for wrongful foreclosure. For example, a Qualified Written Request, a Demand for presentment of the original note to view its terms under the UCC, for validation of the debt (debt validation letter), and other things. If the lender or loan servicer fails to respond to these lawful requests, that may be helpful. In addition, if they provide responses that conflict with the recorded chain of title (or with other sites such as the fannie mae or freddie mac loan lookup tools), this also means something. These are just some things to consider if you are facing foreclosure in Arizona.
We serve our Arizona Clients who reside in the following cities:
Mesa
Glendale
Chandler
Scottsdale
Gilbert
Tempe
Peoria
Yuma
Surprise
Avondale
Flagstaff
Lake Havasu City
Goodyear
Sierra Vista
Prescott
Oro Valley
Bullhead City
Apache Junction
Prescott Valley
Casa Grande
El Mirage
Marana
Kingman
Buckeye
Fountain Hills
San Luis
Nogales
Florence
Douglas
Queen Creek
Maricopa
Payson
Sahuarita
Paradise Valley
Chino Valley
Eloy
Sedona
Cottonwood
Camp Verde
Show Low
Winslow
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Coolidge
Globe
Page
Bisbee
Tolleson
Youngtown
Wickenburg
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Guadalupe
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Benson
Thatcher
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Taylor
Colorado City
Dewey-Humboldt
Willcox
St. Johns
Carefree
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Williams
Clifton
Kear
Pima
Springerville
Star Valley
Gila Bend
Wellton
Miami
Huachuca City
Mammoth
Tombstone
Fredonia
Patagoni
Hayden
Dunca
Winkelman
Jerome
Here is the show from 60 minutes. The banks have been telling the judges that there is nothing done wrong here, and that it is just a bunch of defaulting borrowers making things up. Nobody is buying the story anymore. Not even the main stream media. What are we to do about this mess “sweatshops for phony foreclosure documents”?
NOTE, NONE OF HTE MAJOR BANKS CAME ON TO GIVE COMMENTS. THE STATE ATTORNEY GENERALS ARE LOOKING INTO SOME OF THE PRACTICES CITED IN THE VIDEO SO PERHAPS THEY ARE RELUCTANT TO COMMENT.
VERSE 1:
I’M IN WITH AN AMERICAN WHORE
I LAID DOWN WHEN YOU SAID HEY SIR,
YOU COULD HAVE SO MUCH MORE
GOT ME RIGHT TO THE LINE
A GENTLE NUDGE BEGINS THE FALL
HEY, HOW COME YOU NEVER FELL AT ALL
CHORUS 1:
FOOLISH CHILD, I’M FEELING LIKE A FOOLISH CHILD
HOW YOU PUSHED ME ON, OH THE BULLY HAS A BLINDED PAWN
AND I, I I …
I’M SEEING WHY YOU WERE SO FAST AND LOOSE FOR THE CLOSE
LOVE, YOUR BROKEN HOME
VERSE 2:
HEY SIR SO WISE WITH YOUR BIG DEGREE
I HEAR YOU’RE OUT THERE LIVING LARGE IN SOME VELVET ROPE RED CARPET SCENE
WELL I HOPE YOU ARE HAVING A VERY NICE TIME YOU LITTLE SHIT
THEY LOCKED US OUT OF OUR HOUSE WE CAN’T GET IN
CHORUS 2:
FOOLISH CHILD, I’M FEELING LIKE A FOOLISH CHILD
WHERE HAVE YOU GONE, OH THE PAPER MAN WON’T LEAVE US ALONE
AND I, I I …
I’M HERE WITH MY FAMILY WE’RE BARELY AFLOAT
LOVE YOUR BROKEN HOME
BRIDGE:
I GUESS I MISREAD YOUR ROLE
PLEASE LET ME KNOW HOW I SHOULD TELL MY WIFE AND KIDS
IT’S TIME TO GO
CHORUS 3:
FOOLISH CHILD, I’M FEELING LIKE A FOOLISH CHILD
WE’RE ALL ALONE
HEY MISTER IT’S YOUR FAMILY OF PAWNS
AND I, I I …
I AM NOT SURE WHERE YOU THOUGHT WE COULD GO
MY KIDS ARE TRYING TO OPEN UP THEIR FRONT DOOR
HEY FUCK YOU FOR IGNORING MY CALLS
LOVE, YOUR BROKEN HOME
The Dodd-Frank law was passed on July 22, 2010. The idea was to address consumer concerns with a focus on mortgage lending issues and in an effort to avoid future subprime mortgage crises (the band aids always come AFTER the chernobyl incident after everyone has made their money). The stated purpose of the act is “TO PROMOTE THE FINANCIAL STABILITY OF THE UNITED STATES BY IMPROVING ACCOUNTABILITY AND TRANSPARENCY IN THE FINANCIAL SYSTEM, TO END THE “TOO BIG TO FAIL” TO PROTECT THE AMERICAN TAXPAYER BY ENDING BAILOUTS AND TO PROTECT CONSUMERS FROM ABUSIVE FINANCIAL SERVICES PRACTICES”
Great, another reference to “transparency” – does anyone even know what that means anymore?
The following are what I see as the main highlights of the Dodd-Frank Act (Note, these are just the broad strokes – there are many, many details to this law that need to be consulted):
(1) TITLE X: The Act created the Consumer Financial Protection Bureau – “CFPB” (a self-contained until within the Federal Reserve Board). It is stated that the Federal Reserve Board will have no authority over the operating of the CFPB and should not have power to intervene into matters such as reviewing their rules or orders (we will see) but they are supposed to issue implementing guidelines by 1/21/13 (just about the time the financial crises slows down I presume). A Director will be appointed by the President – the same president Obama who bailed out the banks and cashed out the CEO’s (yipee more politics) for a fixed term of 5 years. The Federal Reserve Board will fund the CPFB in an amount determined by the Director appointed. The CFPB will have various functional units such as RESEARCH, CONSUMER AFFAIRS, and CONSUMER OUTREACH and offices that deal with EQUAL OPPORTUNITY, FINANCIAL EDUCATION, AND FINANCIAL PROTECTION OF OLDER AMERICANS.
NOTE: It will be interesting to see what, if anything they do about Robosigners, Notary Fraud, and HAMP scams just to name a few of the foreclosure issues – I am assuming there will be no call for banks to produce the note and I wonder what “financial education” we need since the banks are hardly lending any more money. NOTE: The CFPB is authorized to interpret and implement consumer financial protection laws (ex. TILA and RESPA) including the power to develop model disclosures and they will supposedly supervise companies covered by the act. The CFPB also has the broad authority to enact rules and orders, and initiate investigations (sort of like a Federal Department of Real Estate). Rulings made by the CFPB are superior and preempt “inconsistent” state laws unless the state law provides GREATER PROTECTIONS TO THE CONSUMER. Also, there is a provision that amends the National Bank Act (“NBA”) and the Home Owners Loan Act (“HOLA”) which effectively allow more preemption of state law (that normally hurts consumers when a state law gets preemption – we will be posting a separate blog on the pre-emption argument) when such a state laws is deemed to “discriminate” against federally chartered institutions (now we are worrying about banks being discriminated against?). The decision in Cuomo v. Clearing House Ass’n, LLC, 129 S. Ct. 2710 (2009) was incorporated into the Dodd Frank Act. In essence, the Cuomo case held that the OCC did not have exclusive rights to regulate the banks, that state laws could play a role in regards to fair lending practices.
It should also be noted that under the Dodd-Frank Consumer Protection Act, a majority of states have the power to commence a rule-making proceeding to adopt/change the law.
(2) TILTE XIV: Deals with Reforming the Anti-Predatory Lending Laws (which the banks could give a crap about now anyway) to add different definitions and meanings to TILA and RESPA and which allows the Federal Reserve Board (“FRB”) to adopt regulations that seek to halt unfair and deceptive loan practices (wait, i thought there were no deceptive loans, it was all the borrowers fault?). The following addressed RESPA and TILA:
(a) Truth in Lending Law (“TILA”):
(i) Adds new TILA Section 129B (provides consumers with a private right of action for improper “steering” by a mortgage originator into certain loans including loans with YSP that results in double compensation and/or compensation which varies based on the terms of the loan the consumer is placed in.
(ii) TILA 129C deals with ability to repay a loan (ex. loans that are difficult for a borrower to repay), and requires mortgage originators to (hold on to your shorts) make a “good faith” determination that a borrower has an ability to repay the loan based upon verified and documented information.
Note: the TILA section also specifically authorizes the TILA Defense of Recoupment or Set-off (for steering or ability to repay violations) to come into play regardless of the age of the TILA claim in either judicial or non-judicial foreclosure settings. There is no statute of limitations when a defense is raised in a judicial foreclosure setting, and a three year statute of limitations (starting from the date of the violation) if a Plaintiff raises an affirmative claim in civil court following initiation of a non-judicial foreclosure. There are also limits on placing “pre-payment penalties” into loans other than “qualified mortgages.”
(iii) TILA SECTION 130 - Amends the statute of limitations period for private actions from the current 1 year – to 3 years. This helps a bit. This section also protects creditors and assignees of the loan from lawsuits if the borrower is convicted of fraud in obtaining the loan. Statutory damages are raised to 4,000 plus costs and attorney fees.
Note: Other changes to TILA include (1) ARM loans must get notice of interest rate adjustments six months prior to the adjustment, and (2) New disclosures required for ARM loans that have an escrow account. (3) There are also changes to HOEPA but since there are not many of these loans, I won’t waste the time going into it. (4) Servicers must apply payments made on a consumer’s account as of the date of receipt of such payment and (5) Servicers must respond quickly to requests for payoff.
(b) Real Estate Settlement Procedures Act (“RESPA”): There are a few not worthy changes to RESPA. (1) there is a requirement for the loan servicer to promptly respond (within 10 business days) to requests to identify the holder of your loan under 15 U.S.C. 1641 et seq. (typically the banks have gone to great lengths to conceal this basic fact a borrower should be entitled to know. (2) The servicer of a federally related mortgage may not charge a fee for responding to a Qualified Written Request (“QWR”), (3) Servicer must timely correct errors pointed out to them, and (4) QWR response timeframes are reduced (5) business days to acknowledge receipt of a QWR and 30 days to correct or conduct an investigation. However, there is a provision allowing the Servicer to request an extension of 15 days.
PENALTIES FOR VIOLATING RESPA: A borrower may need to show a pattern and practice of non-compliance and if so they may recover for “each such failure” in an amount of their actual damages, and any additional damages not to exceed $2,000 and fees and costs.
(3) FEDERAL PRE-EMPTION ARGUMENT IS REDUCED: In the past, National Banks (such as Wells Fargo, Chase, Bank of America, etc.) have argued in essence that their banking activities should not be subject to scrutiny and that any state causes of action should not be considered by the judge and should be dismissed on the grounds that the cause of action is “pre-empted” by the 1864 National Banking Act. Yeah, they use a law that is over 140 years old to try to shield them from liability, and the judges for the most part have went along with it as a matter of law. The subsidiaries and affiliates of the National Banks also got to piggyback on the pre-emption argument and immunize themselves for a good deal of liability. Now, the Dodd Frank Act seeks to curtail some of that and eliminates protections for subsidiaries and affiliates of National Banks. Now, state consumer protection laws WILL NOT be pre-empted by federal laws unless the state law directly or indirectly discriminates against the national bank or significantly interferes with the exercise of banking powers. Of course, this will have to be litigated to find out the parameters of this law. Also, if another federal law expressly requires pre-emption (ex. FCRA), then the state law can still be preempted.
(4) NEW HAMP RULES: Basically there is supposed to be a NPV test posted on line so you can see if you qualify. You are also supposed to get a copy of your NPV test results if you are denied. Since I see no mandatory requirements to provide a loan modification to any borrower, I will leave the HAMP sections up to you to review.
ANYWAY, THOSE ARE THE BRAOD STROKES. IT IS ALSO NOT CLEAR WHEN THE ACT GOES INTO EFFECT BUT MANY ARGUE IT IS IN EFFECT NOW. THUS, THIS IS A LAW TO LOOK AT IF YOU ARE FACING FORECLOSURE AND NEED TO KNOW IF YOU HAVE ANY RIGHTS THAT MAY PROTECT YOU WHILE BATTLING IT OUT WITH YOUR LOAN SERVICER.
Copyright 2011 The Law Offices of Steven C. Vondran, P.C. All Rights Reserved. Phone (877) 276-5084.
Show me the money following the private non-judicial foreclosure sale – California Civil Code Section 2924j
The Trustee is the entity that conducts the private trustee sale under the power of sale contained in the Deed of Trust (if you default on your loan payment, you agree to allow the lender or their successors and assigns to conduct a private trustee sale without need to file a judicial foreclosure). But if you owe, let’s say $500,000 on your first mortgage, and do not have a second mortgage, and let’s say the house sells for one million dollars, who gets that extra $500,000? Well naturally it should be the borrower, as this was their equity in the property. That being said, there is a statutory scheme in California which discusses what the trustee must do in such a situation to make sure the surplus funds are handled correctly.
(a) Unless an interpleader action has been filed, within 30
days of the execution of the trustee's deed resulting from a sale in
which there are proceeds remaining after payment of the amounts
required by paragraphs (1) and (2) of subdivision (a) of Section
2924k, the trustee shall send written notice to all persons with
recorded interests in the real property as of the date immediately
prior to the trustee's sale who would be entitled to notice pursuant
to subdivisions (b) and (c) of Section 2924b. The notice shall be
sent by first-class mail in the manner provided in paragraph (1) of
subdivision (c) of Section 2924b and inform each entitled person of
each of the following:
(1) That there has been a trustee's sale of the described real
property.
(2) That the noticed person may have a claim to all or a portion
of the sale proceeds remaining after payment of the amounts required
by paragraphs (1) and (2) of subdivision (a) of Section 2924k.
(3) The noticed person may contact the trustee at the address
provided in the notice to pursue any potential claim.
(4) That before the trustee can act, the noticed person may be
required to present proof that the person holds the beneficial
interest in the obligation and the security interest therefor. In the
case of a promissory note secured by a deed of trust, proof that the
person holds the beneficial interest may include the original
promissory note and assignment of beneficial interests related
thereto. The noticed person shall also submit a written claim to the
trustee, executed under penalty of perjury, stating the following:
(A) The amount of the claim to the date of trustee's sale.
(B) An itemized statement of the principal, interest, and other
charges.
(C) That claims must be received by the trustee at the address
stated in the notice no later than 30 days after the date the trustee
sends notice to the potential claimant.
(b) The trustee shall exercise due diligence to determine the
priority of the written claims received by the trustee to the trustee'
s sale surplus proceeds from those persons to whom notice was sent
pursuant to subdivision (a). In the event there is no dispute as to
the priority of the written claims submitted to the trustee, proceeds
shall be paid within 30 days after the conclusion of the notice
period. If the trustee has failed to determine the priority of
written claims within 90 days following the 30-day notice period,
then within 10 days thereafter the trustee shall deposit the funds
with the clerk of the court pursuant to subdivision (c) or file an
interpleader action pursuant to subdivision (e). Nothing in this
section shall preclude any person from pursuing other remedies or
claims as to surplus proceeds.
(c) If, after due diligence, the trustee is unable to determine
the priority of the written claims received by the trustee to the
trustee's sale surplus of multiple persons or if the trustee
determines there is a conflict between potential claimants, the
trustee may file a declaration of the unresolved claims and deposit
with the clerk of the superior court of the county in which the sale
occurred, that portion of the sales proceeds that cannot be
distributed, less any fees charged by the clerk pursuant to this
subdivision. The declaration shall specify the date of the trustee's
sale, a description of the property, the names and addresses of all
persons sent notice pursuant to subdivision (a), a statement that the
trustee exercised due diligence pursuant to subdivision (b), that
the trustee provided written notice as required by subdivisions (a)
and (d) and the amount of the sales proceeds deposited by the trustee
with the court. Further, the trustee shall submit a copy of the
trustee's sales guarantee and any information relevant to the
identity, location, and priority of the potential claimants with the
court and shall file proof of service of the notice required by
subdivision (d) on all persons described in subdivision (a).
The clerk shall deposit the amount with the county treasurer or,
if a bank account has been established for moneys held in trust under
paragraph (2) of subdivision (a) of Section 77009 of the Government
Code, in that account, subject to order of the court upon the
application of any interested party. The clerk may charge a
reasonable fee for the performance of activities pursuant to this
subdivision equal to the fee for filing an interpleader action
pursuant to Chapter 5.8 (commencing with Section 70600) of Title 8 of
the Government Code. Upon deposit of that portion of the sale
proceeds that cannot be distributed by due diligence, the trustee
shall be discharged of further responsibility for the disbursement of
sale proceeds. A deposit with the clerk of the court pursuant to
this subdivision may be either for the total proceeds of the trustee'
s sale, less any fees charged by the clerk, if a conflict or
conflicts exist with respect to the total proceeds, or that portion
that cannot be distributed after due diligence, less any fees charged
by the clerk.
(d) Before the trustee deposits the funds with the clerk of the
court pursuant to subdivision (c), the trustee shall send written
notice by first-class mail, postage prepaid, to all persons described
in subdivision (a) informing them that the trustee intends to
deposit the funds with the clerk of the court and that a claim for
the funds must be filed with the court within 30 days from the date
of the notice, providing the address of the court in which the funds
were deposited, and a telephone number for obtaining further
information.
Within 90 days after deposit with the clerk, the court shall
consider all claims filed at least 15 days before the date on which
the hearing is scheduled by the court, the clerk shall serve written
notice of the hearing by first-class mail on all claimants identified
in the trustee's declaration at the addresses specified therein.
Where the amount of the deposit is twenty-five thousand dollars
($25,000) or less, a proceeding pursuant to this section is a limited
civil case. The court shall distribute the deposited funds to any
and all claimants entitled thereto.
(e) Nothing in this section restricts the ability of a trustee to
file an interpleader action in order to resolve a dispute about the
proceeds of a trustee's sale. Once an interpleader action has been
filed, thereafter the provisions of this section do not apply.
(f) "Due diligence," for the purposes of this section means that
the trustee researched the written claims submitted or other evidence
of conflicts and determined that a conflict of priorities exists
between two or more claimants which the trustee is unable to resolve.
(g) To the extent required by the Unclaimed Property Law, a
trustee in possession of surplus proceeds not required to be
deposited with the court pursuant to subdivision (b) shall comply
with the Unclaimed Property Law (Chapter 7 (commencing with Section
1500) of Title 10 of Part 3 of the Code of Civil Procedure).
(h) The trustee, beneficiary, or counsel to the trustee or
beneficiary, is not liable for providing to any person who is
entitled to notice pursuant to this section, information set forth
in, or a copy of, subdivision (h) of Section 2945.3.
WHAT IS THE ORDER OF PRIORITY FOR PAYING OUR SURPLUS FUNDS FOLLOWING A FORECLOSURE SALE?
(a) The trustee, or the clerk of the court upon order to the
clerk pursuant to subdivision (d) of Section 2924j, shall distribute
the proceeds, or a portion of the proceeds, as the case may be, of
the trustee's sale conducted pursuant to Section 2924h in the
following order of priority:
(1) To the costs and expenses of exercising the power of sale and
of sale, including the payment of the trustee's fees and attorney's
fees permitted pursuant to subdivision (b) of Section 2924d and
subdivision (b) of this section.
(2) To the payment of the obligations secured by the deed of trust
or mortgage which is the subject of the trustee's sale.
(3) To satisfy the outstanding balance of obligations secured by
any junior liens or encumbrances in the order of their priority.
(4) To the trustor or the trustor's successor in interest. In the
event the property is sold or transferred to another, to the vested
owner of record at the time of the trustee's sale.
(b) A trustee may charge costs and expenses incurred for such
items as mailing and a reasonable fee for services rendered in
connection with the distribution of the proceeds from a trustee's
sale, including, but not limited to, the investigation of priority
and validity of claims and the disbursement of funds. If the fee
charged for services rendered pursuant to this subdivision does not
exceed one hundred dollars ($100), or one hundred twenty-five dollars
($125) where there are obligations specified in paragraph (3) of
subdivision (a), the fee is conclusively presumed to be reasonable.
AS YOU CAN SEE, THE TRUSTOR ONLY GETS WHAT IS LEFT AFTER OTHER PEOPLE ARE PAID. THE TRUSTOR IS NUMBER 4 IN LINE OF PRIORITY.
NOTE HOW THIS CASE POINTS OUT YOU MAY NEED TO ACT FAST TO GET YOUR SURPLUS MONEY. BUT THE CASE DOES MENTION YOU MAY HAVE A RIGHT TO PURSUE YOUR SURPLUS FUNDS IN ANOTHER VENUE USING OTHER LEGAL THEORIES (such as tort and contract). To this point the Court stated:
“BofA‟s reliance on section 2924j, subdivision (b), is also misplaced. This subdivision clearly provides the statutory remedies to recover surplus funds are not exclusive, and it authorizes common law tort and contract actions when appropriate. BofA sued for breach of the trustee‟s statutory duties”
FINALLY, HERE IS A JUDICIAL COUNSEL COURT FORM (MC-095 – PETITION AND DECLARATION REGARDING UNRESOLVED CLAIMS AND DEPOSIT OF UNDISTRIBUTED SURPLUS PROCEEDS OF TRUSTEES SALE)
_________________________________________
The preceding is for the exclusive use of attorneys only. Our firm does not make any representations as to the accuracy of the legal analysis, opinions contained herein, or as to the current state/status of any case cited herein. This is general legal information only. Copyright 2011 The Law Offices of Steven C. Vondran, P.C. – All Rights Reserved. Steve Vondran practices law in California and Arizona where he is licensed to practice. He is a former real estate broker in both states, and has previous experience in originating loans. He currently represents commercial and residential property owners in Foreclosure and Bankruptcy Litigation. He can be heard on BlogTalkRadio (Foreclosure Meltdown Radio Show), and on his two main websites http://www.ForeclosureDefenseResourceCenter.com and http://www.UltimateBK.com. The Law Offices of Steven C. Vondran, P.C., has offices in Newport Beach, Beverly Hills, Fresno, San Francisco, and Phoenix, Arizona. Phone (877) 276-5084. We still handle Wachovia and World Savings Pick-a-pay loans on a contingency fee basis. Certain conditions apply
Another amazing tale of lender arrogance and failure to follow the law. This time, the culprit is PHH Mortgage (DBA Coldwell Banker Mortgage). The story is old, common, typical and simple to understand. Soldier buys a house and gets hooked up on automatic payment system. Payments are kept current. Later, lender claims payments are late, and soldier is forced to clear up his name and to try to contact the servicer to fix the error. Of course, there is little help offered and lots of hold time with customer servicer. Eventually, negative credit is reported against the soldier. Amazing? Yeah.
So after several go-rounds to fix the problem, the guy gets tired of it, hires a lawyer, and files a lawsuit. Lender of course is arrogant, denies all wrongdoing and takes the case to jury trial. End result – Verdict for Plaintiff, and 20 million dollar punitive damage award against Coldwell Banker. When will these companies get it right and start treating people like human beings?
When we take on a new case, we normally send notary demand letters to the notaries who allege to have verified the signatures of those signing the Substitution of Trustee, and Assignment of Deed Of Trust. These are critical foreclosure-related real estate documents that need a valid notary in order to be recordable. What we have been finding, over and over again, when we ask for proof of the notary log (which under California law the notary is REQUIRED to keep) is the following types of responses:
(1) No response
(2) the Notary “lawyer’s up”
(3) We are informed no logs were kept (even by notaries who have been practicing for 20+ years)
(4) We are informed the notaries were “mistaken” and believed that since no fees were being charged (really?), that they thought they did not have to keep a log. Was that taught in notary class?
It is a truly amazing epidemic when you realize (a) the Banks cannot produce the endorsed chain of notes to prove they are legally permitted to enforce your note and (b) the notaries who notarize critical foreclosure documents (that must be duly acknowledged and recorded) cannot keep a notary log making the signature highly suspect. If the signor was not properly identified by the notary, (identification in their presence), or someone signed the name of another person without their authority, then you have issues of fraud and forgery that potential taint the foreclosure process. These things must be looked at because we live in a new day and age where the law was brushed aside in the rush to foreclose in mass, and people who were trained to do a job decide to do it another way “on generals orders.” The generals are of course the mighty financial institutions and loan servicers that decided the law was nothing more than a nuisance.
(a) (1) A notary public shall keep one active sequential
journal at a time, of all official acts performed as a notary public.
The journal shall be kept in a locked and secured area, under the
direct and exclusive control of the notary. Failure to secure the
journal shall be cause for the Secretary of State to take
administrative action against the commission held by the notary
public pursuant to Section 8214.1.
(2) The journal shall be in addition to, and apart from, any
copies of notarized documents that may be in the possession of the
notary public and shall include all of the following:
(A) Date, time, and type of each official act.
(B) Character of every instrument sworn to, affirmed,
acknowledged, or proved before the notary.
(C) The signature of each person whose signature is being
notarized.
(D) A statement as to whether the identity of a person making an
acknowledgment or taking an oath or affirmation was based on
satisfactory evidence. If identity was established by satisfactory
evidence pursuant to Section 1185 of the Civil Code, the journal
shall contain the signature of the credible witness swearing or
affirming to the identity of the individual or the type of
identifying document, the governmental agency issuing the document,
the serial or identifying number of the document, and the date of
issue or expiration of the document.
(E) If the identity of the person making the acknowledgment or
taking the oath or affirmation was established by the oaths or
affirmations of two credible witnesses whose identities are proven to
the notary public by presentation of any document satisfying the
requirements of paragraph (3) or (4) of subdivision (b) of Section
1185 of the Civil Code, the notary public shall record in the journal
the type of documents identifying the witnesses, the identifying
numbers on the documents identifying the witnesses, and the dates of
issuance or expiration of the documents identifying the witnesses.
(F) The fee charged for the notarial service.
(G) If the document to be notarized is a deed, quitclaim deed,
deed of trust affecting real property, or a power of attorney
document, the notary public shall require the party signing the
document to place his or her right thumbprint in the journal. If the
right thumbprint is not available, then the notary shall have the
party use his or her left thumb, or any available finger and shall so
indicate in the journal. If the party signing the document is
physically unable to provide a thumbprint or fingerprint, the notary
shall so indicate in the journal and shall also provide an
explanation of that physical condition. This paragraph shall not
apply to a trustee’s deed resulting from a decree of foreclosure or a
nonjudicial foreclosure pursuant to Section 2924 of the Civil Code,
nor to a deed of reconveyance.
(b) If a sequential journal of official acts performed by a notary
public is stolen, lost, misplaced, destroyed, damaged, or otherwise
rendered unusable as a record of notarial acts and information, the
notary public shall immediately notify the Secretary of State by
certified or registered mail. The notification shall include the
period of the journal entries, the notary public commission number,
and the expiration date of the commission, and when applicable, a
photocopy of any police report that specifies the theft of the
sequential journal of official acts.
(c) Upon written request of any member of the public, which
request shall include the name of the parties, the type of document,
and the month and year in which notarized, the notary shall supply a
photostatic copy of the line item representing the requested
transaction at a cost of not more than thirty cents ($0.30) per page.
Note the time and date of the signing is missing. Also, the Date of the document. Finally, the document claims to be a “jurat” but there are specific requirements for a Jurat to ensure the signor personally appeared, and that an oath was administered to the signor attesting that the document was correct. Here is what a jurat is supposed to look like:
State of California
County of ________________
Subscribed and sworn to (or affirmed) before me on this _____ day of _______, 20__,
by _______________________, proved to me on the basis of satisfactory evidence to be
the person(s) who appeared before me.
Notary Public Signature Notary Public Seal
Hmm, sounds like (maybe) more loss mitigation window dressing coming your way soon. More servicer guidelines and no agreement on penalties for non-compliance, just what we need.
By Steve Vondran, Attorney – Phone (877) 276-5084. http://www.ForeclosureDefenseResourceCenter.com . Copyright – 2011 All Rights reserved. We assist Calfiornia and Arizona Property Owners.
Following the investigation into the fraudulent mortgage practices of loan servicers following the “robosigner” and notary fraud epidemic (which is nothing more than a few “mistakes” or “deficiencies if you ask HSBC according their recent statements) the 50 states attorney generals have been preparing and have recently agreed on a “term sheet” (available here) of loan servicer demands that are supposed to interject more good faith into the loss mitigation, loan servicing and foreclosure marketplace and help in the other following ways:
(1) Servicers would be required to show their math on why you were denied a loan modification and provide the denial in writing to you so you can challenge it if their math is wrong;
(2) Servicers would not be able to close using the “incomplete documentation” defense that they love to use right before foreclosing;
(4) After a borrower makes three trial period payments, they get a permanent modification (this would prevent all the “HAMP scams” we have been ranting and raving about on our other website http://www.TrialPlanFraud.com (hopefully you didn’t think I was making that stuff up).
(5) Borrowers in the loss mitigation process would have a SINGLE POINT OF CONTACT. Which would hopefully reduce the “I am missing documents” nonsense many borrowers hear when working with multiple low-paid loss mitigators.
These are the broad strokes, read the term sheet for full details. We will see how this plays out over the next several months and see if there are any real changes.
The idea is the monitoring compliance of the loan servicers would be up to the state attorney generals and the Consumer Financial Protection Bureau (“CFPB”)
Right now, the Office of the Comptroller of the Currency – “OCC” (which regulates the banks and FDIC) of course does not want any meaningful penalties for violations. The CFPB wants $20 billion for penalties. That is where the rubber hits the road. We will keep you posted. Till then, don’t let your guard down when dealing with loan servicers. Document everything, and if you are facing a sale date, seek legal help before the sale (like pursing an injunction, TRO or filing bankruptcy to stop the sale). I am sure they will continue with many of the same games.
Yet another case regarding a lying Bank (people, please, please, please do not believe a word your bank or loan servicer tells you, they want to make money and they will lie to you). Who should be surprised anymore? Anyway, in the case of Aceves v. U.S. Bank as Ttrustee, etc., a borrower was in a Chapter 7 bankruptcy and was contemplating converting her bankruptcy to a Chapter 13 to try to save her house from foreclosure. AS WE HAVE TALKED ABOUT ON OTHER WEBSITES, FILING FOR CHAPTER 13 BANKRUPTCY PROTECTION GIVES YOU A CHANCE TO SAVE YOUR HOME BY MAKING LOAN PAYMENTS AND CATCHING UP ON ARREARS. The Chapter 7 bankruptcy is a liquidation and is tougher to try to save your home from foreclosure.
At any rate, the borrower was in the Chapter 7 and considering converting the case to a chapter 13. During the Bankruptcy case, the bank informed the debtor that if she refrained from converting the case to a chapter 13, that “we would work with you” (on loss mitigation and loan modification). Based on that statement, the debtor did not fight the motion to lift the automatic stay in bankruptcy court, and the stay was lifted and the house was sold. Thereafter, U.S. Bank as trustee for a securitized loan trust, refused to work with the borrower following the foreclosure sale, and instead followed through with a eviction (unlawful detainer action). Welcome to the friendly face of banking.
The borrower brought suit for quiet title, slander of title, fraud, promissory estoppel, and declaratory relief. U.S. Bank did what all banks do, they filed a demurrer (which basically is there way of saying you have no case and trying to get the judge to dismiss the case without leave to amend).
The Court discussed the Bank’s legal argument:
“U.S. Bank filed a demurrer separately attacking each cause of action and the requested remedies. Aceves filed opposition. At the hearing on the demurrer, Aceves’s attorney argued that Aceves and her husband “could have saved their house through bankruptcy,” but “due to the promises of the bank, they didn’t go those routes to save their house. That’s the whole essence of promissory estoppel. Prior to [American Home's November 12, 2008] letter, there’s numerous phone contacts and conversations with [American Home], which was the agent for U.S. Bank, regarding, ‘Yes, once we get leave, we will work with you, … and they did not work with her at all.’ ” The trial court replied: “The foreclosure took place. There’s no promissory fraud or anything that deluded [Aceves] under the circumstances.” On October 29, 2009, the trial court entered an order sustaining the demurrer without leave to amend and a judgment in favor of U.S. Bank. Aceves filed this appeal.”
At the end of the day, the Court did not go along for the ride agreeing with the Bank’s B.S. Instead, the Court laid down the applicable law of fraud and promissory estoppel as it relates to loan modifications:
A. Promissory Estoppel“ ‘The elements of a promissory estoppel claim are “(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” (Advanced Choices, Inc. v. State Dept. of Health Services (2010) 182 Cal.App.4th 1661, 1672, 107 Cal.Rptr.3d 470.)1. Clear and Unambiguous Promise “ ‘[A] promise is an indispensable element of the doctrine of promissory estoppel. The cases are uniform in holding that this doctrine cannot be invoked and must be held inapplicable in the absence of a showing that a promise had been made upon which the complaining party relied to his prejudice. The promise must, in addition, be ‘clear and unambiguous in its terms.’ ” (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1044, 107 Cal.Rptr.3d 683, citation omitted.) “To be enforceable, a promise need only be ‘ “definite enough that a court can determine the scope of the duty and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages.” ’ … It is only where ‘ “a supposed ‘contract’ does not provide a basis for determining what obligations the parties have agreed to, and hence does not make possible a determination of whether those agreed obligations have been breached, [that] there is no contract.” ‘ ” (Id. at p. 1045, 107 Cal.Rptr.3d 683, citation omitted.) “[T]hat a promise is conditional does not render it unenforceable or ambiguous.” (Ibid.)5 U.S. Bank agreed to “work with [Aceves] on a mortgage reinstatement and loan modification” if she no longer pursued relief in the bankruptcy court. This is a clear and unambiguous promise. It indicates that U.S. Bank would not foreclose on Aceves’s home without first engaging in negotiations with her to reinstate and modify the loan on mutually agreeable terms.U.S. Bank’s discussion of Laks v. Coast Fed. Sav. & Loan Assn. (1976) 60 Cal.App.3d 885, 131 Cal.Rptr. 836 misses the mark.
There, the plaintiffs applied for a loan and relied on promissory estoppel in arguing that the lender was bound to make the loan. The Court of Appeal affirmed the dismissal of the case on demurrer, explaining that the alleged promise to make a loan was unclear and ambiguous because it did not include all of the essential terms of a loan, including the identity of the borrower and the security for the loan. In contrast, Aceves contends U.S. Bank promised but failed to engage in negotiations toward a solution of her loan problems. Thus, the question here is simply whether U.S. Bank made and kept a promise to negotiate with Aceves, not whether, as in Laks, the bank promised to make a loan or, more precisely, to modify a loan. Aceves does not, and could not, assert she relied on the terms of a modified loan agreement in forgoing bankruptcy relief. She acknowledges that the parties never got that far because U.S. Bank broke its promise to negotiate with her in an attempt to reach a mutually agreeable modification. While Laks turned on the sufficiency of the terms of a loan, Aceves’s claim rests on whether U.S. Bank engaged in the promised negotiations. The bank either did or did not negotiate. Further, U.S. Bank asserts that it offered Aceves a loan modification, referring to the offer it made the day before the auction.
That assertion, however, is of no avail. Aceves’s promissory estoppel claim is not based on a promise to make a unilateral offer but on a promise to negotiate in an attempt to reach a mutually agreeable loan modification. And, even assuming this case involved a mere promise to make a unilateral offer, we cannot say the bank’s offer satisfied such a promise in light of the offer’s terms and the circumstances under which it was made. 2. Reliance on the Promise8 Aceves relied on U.S. Bank’s promise by declining to convert her chapter 7 bankruptcy proceeding to a chapter 13 proceeding, by not relying on her husband’s financial assistance in developing a chapter 13 plan, and by not opposing U.S. Bank’s motion to lift the bankruptcy stay. 3. Reasonable and Foreseeable Reliance9 “ ‘Promissory estoppel applies whenever a “promise which the promissor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance” would result in an “injustice” if the promise were not enforced….’ ” (Advanced Choices, Inc. v. State Dept. of Health Services, supra, 182 Cal.App.4th at pp. 1671-1672, 107 Cal.Rptr.3d 470, citation omitted, italics added.) “[A] party plaintiff’s misguided belief or guileless action in relying on a statement on which no reasonable person would rely is not justifiable reliance…. ‘If the conduct of the plaintiff in the light of his own intelligence and information was manifestly unreasonable, … he will be denied a recovery.’ ” (Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 54, 248 Cal.Rptr. 217, citation omitted.) A mere “hopeful expectation cannot be equated with the necessary justifiable reliance.” (Id. at p. 55, 248 Cal.Rptr. 217.) We conclude Aceves reasonably relied on U.S. Bank’s promise; U.S. Bank reasonably expected her to so rely; and it was foreseeable she would do so. U.S. Bank promised to work with Aceves to reinstate and modify the loan. That would have been more beneficial to Aceves than the relief she could have obtained under chapter 13.
The bankruptcy court could have reinstated the loan-permitted Aceves to cure the default, pay the arrearages, and resume regular loan payments-but it could not have modified the terms of the loan, for example, by reducing the amount of the regular monthly payments or extending the life of the loan. (See 11 U.S.C. § 1322(b)(2), (3), (5), (c)(1); 8 Collier on Bankruptcy, supra, 1322.06[1], 1322.07[2], 1322.09 [1]-[6], 1322.16 & fn. 5, pp. 23-24, 31-32, 34-42, 55-56.) By promising to work with Aceves to modify the loan in addition to reinstating it, U.S. Bank presented Aceves with a compelling reason to opt for negotiations with the bank instead of seeking bankruptcy relief. (See Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at pp. 1041-1042, 107 Cal.Rptr.3d 683 [discussing justifiable reliance].)We emphasize that this case involves a long-term loan secured by a deed of trust, one in which the last payment under the loan schedule would be due after the final payment under a bankruptcy plan. (See 11 U.S.C. § 1322(b)(5).) Aceves had more than 28 years left on the loan, and a bankruptcy plan could not have exceeded five years. In contrast, if a case involves a short-term loan, where the last payment under the original loan schedule is due before the final payment under the bankruptcy plan, the bankruptcy court has the authority to modify the terms of the loan. (See 11 U.S.C. § 1322(c)(2); In re Paschen (11th Cir.2002) 296 F.3d 1203, 1205-1209; 8 Collier on Bankruptcy, supra, 1322.17, pp. 57-58; March et al., Cal. Practice Guide: Bankruptcy (The Rutter Group 2010) 13:396, p. 13-45; compare id. 13:385 to 13:419, pp. 13-42 to 13-48 [discussing short-term debts] with id. 13:440 to 13:484, pp. 13-49 to 13-54 [discussing long-term debts].)
The modification of a short-term loan may include “lienstripping,” that is, the bifurcation of the loan into secured and unsecured components based on the value of the home, with the unsecured component subject to a “cramdown.” (See In re Paschen, supra, 296 F.3d at pp. 1205-1209; 8 Collier on Bankruptcy, supra, 1322.17, pp. 57-58; see also March et al., Cal. Practice Guide: Bankruptcy, supra, 13:370 to 13:371.1, p. 13-41 [discussing lienstripping].) If a lien is “stripped down,” the lender is “only assured of receiving full [payment] for the secured portion of the [bankruptcy] claim.” (In re Paschen, supra, 296 F.3d at p. 1206.)4. DetrimentU.S. Bank makes no attempt to hide its disdain for the protections offered homeowners by chapter 13, referring disparagingly to Aceves’s bankruptcy case as “bad faith.” But “Chapter 13′s greatest significance for debtors is its use as a weapon to avoid foreclosure on their homes. Restricting initial … access to Chapter 13 protection will increase foreclosure rates for financially distressed homeowners. Loss of homes hurts not only the individual homeowner but also the family, the neighborhood and the community at large. Preserving access to Chapter 13 will reduce this harm.“Chapter 13 bankruptcies do not result in destruction of the interests of traditional mortgage lenders. Under Chapter 13, a debtor cannot discharge a mortgage debt and keep her home. Rather, a Chapter 13 bankruptcy offers the debtor an opportunity to cure a mortgage delinquency over time-in essence it is a statutorily mandated payment plan-but one that requires the debtor to pay precisely the amount she would have to pay to the lender outside of bankruptcy. Under Chapter 13, the plan must provide the amount necessary to cure the mortgage default, which includes the fees and costs allowed by the mortgage agreement and by state law. Mortgage lenders who are secured only by an interest in the debtor’s residence enjoy even greater protection under 11 U.S.C. § 1322(b)(2)…. Known as the ‘anti-modification provision,’ [section] 1322(b)(2) bars a debtor from modifying any rights of such a lender-including the payment schedule provided for under the loan contract…. [Cf. 11 U.S.C. § 1322(c)(2) [bankruptcy court has authority to modify rights of lender, including payment schedule, in cases involving short-term mortgages]; see pt. II.A.3, ante.]“Even though a debtor must, through reinstatement of her delinquent mortgage by a Chapter 13 repayment plan …, pay her full obligation to the lender, Chapter 13 remains the only viable way for most mortgage debtors to cure defaults and save their homes.
Mortgage lenders are extraordinarily unwilling to accept repayment schedules outside of bankruptcy. There is no history to support any claim that lenders will accommodate the need for *517 extended workouts without the pressure of bankruptcy as an option for consumer debtors. Reducing the availability of [C]hapter 13 protection to mortgage debtors is most likely to result in higher foreclosure rates, not in greater flexibility by lenders.” (DeJarnatt, Once Is Not Enough: Preserving Consumers’ Rights To Bankruptcy Protection (Spring 1999) Ind. L.J. 455, 495-496, fn. omitted.)“It is unrealistic to think mortgage companies will do workouts without the threat of the debtor’s access to Chapter 13 protection. The bankruptcy process is still very protective of the mortgage industry. To the extent that the existence of Chapter 13 protections increases the costs of mortgage financing to all consumers, it can and should be viewed as an essential form of consumer insurance….” (DeJarnatt, Once Is Not Enough: Preserving Consumers’ Rights To Bankruptcy Protection, supra, Ind. L.J. at p. 499 13 We mention just a few of the rights Aceves sacrificed by deciding to forgo a chapter 13 proceeding. First, although Aceves initially filed a chapter 7 proceeding, “a chapter 7 debtor may convert to a case[ ] under chapter 13 at any time without court approval, so long as the debtor is eligible for relief under the new chapter.” (1 Collier on Bankruptcy, supra,1.06, p. 24, italics added; accord, March et al., Cal. Practice Guide: Bankruptcy, supra, 5:1700 to 5:1701, 5:1715 to 5:1731, pp. 5(II)-1, 5(II)-3 to 5(II)-5; see 11 U.S.C. § 706(a).) In addition, Aceves could have “cured” the default, reinstating the loan to predefault conditions. (See In re Frazer (9th Cir. BAP 2007) 377 B.R. 621, 628; In re Taddeo (2d Cir.1982) 685 F.2d 24, 26-28; 11 U.S.C. § 1322(b)(5); March et al., Cal. Practice Guide: Bankruptcy, supra, 13:450, p. 13-50.) She also would have had a “reasonable time”-a maximum of five years-to make up the arrearages. (See 11 U.S.C. § 1322(b)(5), (d); 8 Collier on Bankruptcy, supra, 1322.09[5], pp. 39-40; March et al., Cal. Practice Guide: Bankruptcy, supra,13:443, p. 13-49.) And, by complying with a bankruptcy plan, Aceves could have prevented U.S. Bank from foreclosing on the property. (See 8 Collier on Bankruptcy, supra, 1322.09[1] to 1322.09[3], 1322.16, pp. 34-37, 55-56.).
“Indeed, the bottom line of most Chapter 13 cases is to preserve and avoid foreclosure of the family house. (In re King (Bankr.N.D.Fla.1991) 131 B.R. 207, 211; see also March et al., Cal. Practice Guide: Bankruptcy, supra, 8:1050, 8:1375 to 8:1411, pp. 8(II)-1, 8(II)-42 to 8(II)-47 [discussing automatic stay]; In re Hoggle (11th Cir.1994) 12 F.3d 1008, 1008-1012 [affirming district court order denying lender's motion for relief from automatic stay]; Lamarche v. Miles (E.D.N.Y.2009) 416 B.R. 53, 55-62 [affirming bankruptcy court order denying landlord's motion to set aside automatic stay]; In re Gatlin (Bankr.W.D.Ark.2006) 357 B.R. 519, 520-523 [denying lender's motion for relief from automatic stay].)U.S. Bank maintains that even if Aceves had pursued relief under chapter 13, she could not have afforded the payments under a bankruptcy plan. But the complaint alleged that, with the financial assistance of her husband, Aceves could have saved her home under chapter 13. We accept the truth of Aceves’s allegations over U.S. Bank’s speculation. (See Hensler v. City of Glendale, supra, 8 Cal.4th at p. 8, fn. 3, 32 Cal.Rptr.2d 244, 876 P.2d 1043.)5. Absence of Consideration141516 U.S. Bank argues that an oral promise to postpone either a loan payment or a foreclosure is unenforceable. We have previously addressed that argument, stating: “ ‘[I]n the absence of consideration, a gratuitous oral promise to postpone a sale of property pursuant to the terms of a trust deed ordinarily would be unenforceable under [Civil Code] section 1698.’ (Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 673 [111 Cal.Rptr. 693, 517 P.2d 1157], italics added.) The same holds true for an oral promise to allow the postponement of mortgage payments. (California Securities Co. v. Grosse (1935) 3 Cal.2d 732, 733 [46 P.2d 170] [applying Civil Code section 1698].) However, the doctrine of promissory estoppel is used to provide a substitute for the consideration which ordinarily is required to create an enforceable promise.
“The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange….” ’ (Raedeke, supra, 10 Cal.3d at p. 672 [111 Cal.Rptr. 693, 517 P.2d 1157].) ‘ “Under this doctrine a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement….” ’ ” (Sutherland v. Barclays American/Mortgage Corp. (1997) 53 Cal.App.4th 299, 312, 61 Cal.Rptr.2d 614; accord, Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at pp. 1039-1041, 107 Cal.Rptr.3d 683.) We further commented: “When Raedeke and California Securities Co. were decided, Civil Code section 1698 provided in its entirety: ‘A contract in writing may be altered by a contract in writing, or by an executed oral agreement, and not otherwise.’ … In 1976, a new section 1698 was enacted which states in part: ‘A contract in writing may be modified by a contract in writing … [or] by an oral agreement to the extent that the oral agreement is executed by the parties…. Nothing in this section precludes in an appropriate case the application of rules of law concerning estoppel ….’ ” (Sutherland v. Barclays American/Mortgage Corp., supra, 53 Cal.App.4th at p. 312, fn. 8, 61 Cal.Rptr.2d 614, citations omitted.) Our earlier analysis in Sutherland applies here.1718
Finally, a promissory estoppel claim generally entitles a plaintiff to the damages available on a breach of contract claim. (See Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 692-693, 21 Cal.Rptr.3d 732.) Because this is not a case where the homeowner paid the funds needed to reinstate the loan before the foreclosure, promissory estoppel does not provide a basis for voiding the deed of sale or otherwise invalidating the foreclosure. (See Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at p. 1047, 107 Cal.Rptr.3d 683, distinguishing Bank of America v. La Jolla Group II (2005) 129 Cal.App.4th 706, 711-714, 28 Cal.Rptr.3d 825.)B. Remaining Claims. The elements of fraud are similar to the elements of promissory estoppel, with the additional requirements that a false promise be made and that the promisor know.
TALES OF A FORECLOSURE MILL – ITS ALL ABOUT SPEED AND GREED – OH, AND FALSITIES
Here are some highlights of the David Stern Foreclosure Lawyer Rise and Fall.
(1) David Stern is a Florida Lawyer who handles foreclosure and eviction cases on behalf of many of the largest lenders in the United States (ex. Wells Fargo, Bank of America, Citibank, GMAC) and also handled foreclosure cases for Fannie Mae and Freddie Mac (yes, even the government thought highly of Mr. Stern and his foreclosure law firm). Here is a story CNN did on his “foreclosure factory”. His firm handled thousands upon thousands of foreclosures on behalf of his clients and he has been quoted as saying “we take these loans from the cradle to the grave.” He also apparently owns a luxury yacht which rumor has it he was going to call “Su casa is me casa” (translation – your home is my home). Now there is nothing wrong about being a foreclosure lawyer working for the big banks, but the question is whether or not there is integrity in the foreclosure process, and whether or not the law is being followed. After all, lawyers are agents of the court and have professional duties to act fairly, honestly, and ethically. When they don’t, the lawyer jokes ensue, as do the investigations.
(3) When filing a lawsuit, there needs to be certain documents filed with the court (ex. affidavits), and certain documents recorded in the chain of title (ex. assignment of deed of trust). Many of these documents are notarized (giving the appearance of legitimacy) and some documents are signed under penalty of perjury (perjury is a crime, if anyone ever chooses to pursue it).
(4) There is evidence and deposition testimony that certain managers and secretaries and other persons (who often times who act as Vice Presidents for other companies like MERS) at the Florida law firm of David Stern may have fabricated and falsified documents, and signed documents without have any knowledge of the contents when such was required and used notary stamps without following notary laws. In other words, there was alot of practices going on that may have been illegal at least according to other websites in the blogosphere. Some of these people claim to have signed a thousand or more documents a day without reviewing anything and while just following orders. In fact, the deposition of some of these people, affectionately known as robosigners, have been shown on other websites and on youtube.
(5) Word on the street is that the Florida Attorney General’s offices (civil investigations unit) is investigating whether or not there were any unfair and deceptive business practices going on, while the Florida state bar is also potentiallly reviewing Mr. Stern and his practices. Mr. Stern is also facing his own lawsuits (one for securities fraud for DJSP enterprises), potentially harming his pocketbook as well.
(10) We can assume that there is a Foreclosure Factory firm like DJSP in every state, and one wonders how this ForeclosureGate will unfold in other areas.
(a) There is a probably a David Stern in every state – that’s why we scrutinize foreclosure documents. If they did it wrong they should be forced to do it over instead of being allowed to foreclose based on false documents, forgeries, roosigners, and notary fraud.
(b) The cream always rises to the top, while the sediment sinks to the bottom. As we have been trying to tell the Courts, the law applies to everyone, even big banks and their foreclosure cronies. When the law is not followed, they should have to own up for their legal violations and they must be held accountable to the State Bar, and the Attorney General’s office.
(c) If they move the investigation from civil into criminal, the “foreclosure king” could well become the “jailhouse queen.”
(d) Greed, for lack of a better word, is not always good – to refute the quote from the movie Wall Street.
(e) Irony: Apparently Mr. Stern is now, or has been late on a 12 million dollar line of credit with Citibank and so now he is in default. I wonder if he expects a fair process?
Just an amazing story from the foreclosure trenches. We will be doing a Foreclosure Radio show on him later this month telling the story of how he hit the highest heights, only to be shot down in flames. We will post the link here when the show is archived. Or, you can stay in tune here: ATTORNEY STEVE VONDRAN FORECLOSURE MELTDOWN SHOW.
I have reviewed some of the online materials on the Pacer website and it appears Dykstra filed for Chapter 11 Bankruptcy Protection, but later the case was converted to a Chapter 7 Bankruptcy. The trustee of the bankruptcy assserted that Dykstra failed to appear at the first scheduled 341 Creditor hearing and also sought a TRO to prevent Dykstra from liquidating assets. There are a few adversary proceedings on file, but there is no indication that I was able to find, that Dykstra had actually filed any predatory lending claims or any mortgage fraud lawsuits. If anyone has any information on any lawsuits Mr. Dykstra has filed in any State, Federal or Bankruptcy Court, please let us know as we would like to track the progress of the case.
Update: Dykstra has sued – the case is Dykstra v. JPMorgan, 10-cv-02413, filed in the U.S. District Court, Southern District of New York (Manhattan). You can look the case up on Pacer.gov. It appears Dykstra’s attorney filed the case, and then shortly thereafter, voluntarily dismissed the case without prejudice.
One of the legal requirements when a Defendant is filing a motion, pleading etc. with a Federal Court, is that in their “first appearance” or first motion or pleading to the Court, they have to disclose who they represent, who the owners of the company are and whether or not they have insurance. This is in regard to a California case I am talking about. In a recent case we have a law firm representing ONe West bank, FSB, that we sued as a Defendant to rescind our loan under Truth in Lending Law. When we later learned One West bank was not the owner of the loan (after nine months of the law firm pretending Wells were the owners of the loan), we finally learned the loan was in a HSBC securitized loan trust. So we added HSBC as a Defendant prompting a removal to federal court. In their first pleading filed with the Federal District Court, the included a Corporate disclosure statement (see attached document) under Rule 7.1 of the Federal Rules of Civil Procedure (FRCP). Under the Local Rules for the District Court, additional requirements applied to the disclosure filing (namely including any insurance companies that might be liable for damages, costs, or attorney fees in the case).
We contested their filing which, according to the law “must” be filed (with the required appropriate information) “in their first” pleading addressed to the Court. We pointed out that they failed to list the TRUE OWNER of One West bank, FSB (which is One West bank Group, LLC and their investors), and that they only filed one copy with the Court. Here is what we wrote:
____________________________
“Upon Removal, the Federal Rules of Civil Procedure Apply and govern procedure after removal. See F.R.CivP. 81(c), and Willy v. Coastal Corp., 503 U.S. 131, 135-136, 112 S.Ct. 1076, 1079, L.Ed.2d 280 (1992). This would include the Federal Rules, and their counterpart Local Rules. In fact, Federal Rule of Civil Procedure (Rule 7.1) is quite clear:
“A nongovernmental corporate party must file 2 copies of a disclosure statement that:
(1) identifies any parent corporation and any publicly held corporation owning 10% or more of its stock; or
(2) states that there is no such corporation.
(b) Time to Filing; Supplemental Filing.
A party must:
(1) file the disclosure statement with its first appearance, pleading, petition, motion, response, or other request addressed to the court; and
(2) promptly file a supplemental statement if any required information changes.”
(emphasis added).
The Central District Local Rule 7.1-1 further supplements the federal rule and requires the additional disclosure:
“including any insurance carrier which may be liable in whole or in part (directly or indirectly) for a judgment that may be entered in the action or for cost of defense.” (emphasis added).
Counsel for Defendants have failed to provide two copies of this disclosure in their first appearance, and this prevents this Court from making informed decisions as to recusal.
Plaintiff hereby alleges, on information and belief, that Defendant OneWest Bank, FSB, is “wholly owned” owned by another company (OneWest Bank Group, LLC) that has not been properly disclosed in their first request to this court as required by law. (See attached Exhibit “B” which is a true and correct copy of a printout from the OneWest Bank Website which printout is incorporated herein by reference).
This document admits that “OneWest Bank Group LLC, which wholly owns OneWest Bank, FSB” yet knowing this, Defendants refused to disclose this to the Court. The Attached Exhibit B lists a host of entities that the Court has not properly considered in determining whether recusal may be proper, and Defendant has failed to identify the insurance carriers for any of the owners and entities listed in the corporate press release.
Since it is too late to go back and file such a disclosure, Defendants motion to dismiss and its notice of remand must be overruled, and rejected, and Plaintiff is entitled to judgment on the Pleadings, or in the alternative to remand back to State Court in the Torrance Courthouse. Plaintiffs therefore move the Court to strike Defendant’s Motion and for Judgment on the allegations of Plaintiff’s Complaint for failure of the Defendant to comply with the mandatory disclosure requirements of the Federal Rules of Civil Procedure.
WHEREFORE, the debtors respectfully pray of the Court as follows:
A. That this court strike Defendant’s Motion to Dismiss for failure to comply with the mandatory F.R.Civ.P. 7.1 and Local Court Rule 7.1-1;
B. For Judgment on the Pleadings for allegations contained in Plaintiff’s complaint; and (in the alternative), as to their Motion for Remand;
C. As an alternative to dismissing the case, that this case be remanded back to State Court (Torrance Courthouse);
D. That Plaintiff be awarded reasonable attorney fees in the amount of $1,500 in bringing this motion;
E. That Plaintiff’s have such other and further relief as the Court may deem just and proper.
We will keep you posted as to where we get on this legal challenge. The Bank argues you must make your payments and honor your contract, and they argue all sorts of laws must be followed in Court. But when you call them out for not following the law and the rules, then it is a different story. Then the law is just a technicality that gets in the way. This is what we mean by watching them like a hawk and calling them out when the violate the law. In this case, the judge has not had the proper opportunity to know just who the real interested parties are, who the insurance company is, and whether or not the judge should recuse him/herself.
WHO CAN THAT BE KNOCKING AT MY DOOR? Is MERS trying to foreclose on you?
Gomes v. Countrywide, MERS and Recontrust
MERS is an interesting entity. They call themselves both the “nominee of the lender” (who never lent any money in most cases) and “their successors and assigns” (even though it is not known who the successor or assign of the loan-turned-bond would be). In the same instrument, MERS calls itself a “beneficiary” (which is also completely false and nonsensical because by MERS own admission they do not own the note, hold the note, or have any right to transfer the note, and they do not collect your loan payment, and they do not lose money if your mortgage payment is not made. But yet they argue that by signing the deed of trust, approximately 6o million homeowners across the nation have magically appointed or named MERS to the the agent (nominee) of another party. It is not even clear how you can appoint a second party to the the agent of a third party.
Adding more controversy into the debate, MERS often assigns a deed of trust “and the notes therein” when it assigns your deed of trust (usually at the time the foreclosure is taking place) and usually assigning your DOT and the notes therein to a securitized loan trust that argues it is the holder and owner of your loan (even though this is akin to a bigfoot sighting an in fact, I do not believe anyone has seen a complete and unbroken chain of endorsement of the note from the originator of the loan up to the securitized loan trust. These are things Max Gardner and Neil Garfield, expert lawyers in their respective fields, often teach.
Yet even given this controversy, there is a mix of opinion amongst courts and legal scholars as to just what role MERS is allowed to play in the foreclosure game. We have talked about other MERS cases on our website if you google “Vondran MERS.” So now we have another case, this time out of the California Court of Appeals, 4th District, which says MERS can foreclose on residences in California. Heck, in California Wallmart, Target, and BestBuy can foreclose on your if they wanted to given the Courts view that “produce the note” or “show me the note” (original note) as they call it, has been beaten down by the California and Arizona judiciary. So no proof is required to foreclose on anyone in California. You owe a debt and so it should not be an issue what the financial institutions want to do. You already allowed them to turn your loan into a stock to be sold on Wall Street, and that is all you need to know (if you ask them their opinion).
So let’s talk about the Gomes decision. In Gomes, the defaulting borrower brought a lawsuit to stop MERS from foreclosing arguing the note-holder (securitized loan trust) never authorized MERS to foreclose in their name.
The Court first discussed the role of MERS:
The role of MERS is central to the issues in this appeal. As case law explains,
“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. Registration Sys. v.
“A side effect of the MERS system is that a transfer of an interest in a mortgage loan
between two MERS members is unknown to those outside the MERS system.” (Jackson
v. Mortgage Elec. Registration Sys., Inc. (Minn. 2009) 770 N.W.2d 487, 491.)”
IN OTHER WORDS, THE LOAN SERVICERS PLAY A BIG GAME TO HIDE THE TRUE IDENTITY OF THE ALLEGED OWNER OF YOUR LOAN WHEN THERE IS A MERS LOAN INVOLVED. MERS CLAIMS TO ACCURATELY TRACK LOAN OWNERSHIP AND SERVICING RIGHTS.
GOMES DEED OF TRUST GAVE MERS THE RIGHT TO FORECLOSE ACCORDING TO THE COURT:
“The deed of trust that Gomes signed states that “Borrower [i.e., Gomes]
understands and agrees that MERS holds only legal title to the interests granted by
Borrower in this Security Instrument, but, if necessary to comply with law or custom,
MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to
exercise any or all of those interests, including, but not limited to, the right to foreclose
and sell the Property . . . .”
NEXT, THE COURT DISCUSSED THE CLAIM BEING PURSUED BY GOMES:
“The first cause of action is titled “Wrongful Initiation of Foreclosure.” In that
cause of action, Gomes states that he “does not know the identity of the Note’s beneficial
owner” — as he believes that KB Home Mortgage Company sold it on the secondary
mortgage market. He alleges on information and belief that “the person or entity who
directed the initiation of the foreclosure process, whether through an agent of MERS or
otherwise, was neither the Note’s rightful owner nor acting with the rightful owner’s
authority.” In short, the first cause of action alleges, on information and belief, that
MERS did not have authority to initiate the foreclosure because the current owner of the
Note did not authorize MERS to proceed with the foreclosure.
___________
“The second cause of action seeks declaratory relief on the issue of whether “Civil
Code section 2924, subdivision (a)] allows a borrower, before his or her property is sold,
to bring a civil action in order to test whether the person electing to sell the property is, or
is duly authorized to so by, the owner of a beneficial interest in it.” Although designated
a cause of action for declaratory relief, the second cause of action appears to serve simply
as a legal argument in support of the first cause of action. Specifically, the second cause
of action alleges that section 2924, subdivision (a) provides the legal authority for Gomes
to assert the claim he has made in the first cause of action, namely that MERS lacks the
authority to initiate the foreclosure process because it was not authorized to do so by the
owner of the Note.”
AS YOU CAN SEE, THE PLAINTIFF GOMES APPARENTLY TRIED AN ARGUMENT SIMILAR TO “SHOW ME THE ORIGINAL NOTE SO I KNOW WHO THE LENDER IS.” As we have discussed, California and Arizona courts (the two states where we practice law) have shot down this legal theory although THIS SEEMS TO BE A FAIR QUESTION, YOU ARE THE BANK, DO YOU OWN MY LOAN, AND DO YOU HAVE THE RIGHT TO FORECLOSE ON ME? THE COURTS WILL NOT ENTERTAIN THIS LINE OF QUESTIONING IN THE FORECLOSURE PROCESS (although even a small claims court would demand proof of an IOU or contract in certain cases).
The Defendants in GOMES filed a demurrer raising the typical arguments:
Demurring to the first cause of action, Defendants
argued, among other things, that (1) to maintain a cause of action for wrongful
foreclosure, Gomes must allege that he is able to tender the full amount due under the
every aspect of exercise of the power of sale contained in a deed of trust.” (I. E.
Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 285.) “The purposes of this
comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick,
inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the
debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly
conducted sale is final between the parties and conclusive as to a bona fide purchaser.”
(Moeller, at p. 830.) “Because of the exhaustive nature of this scheme, California
appellate courts have refused to read any additional requirements into the non-judicial
foreclosure statute.” (Lane v. Vitek Real Estate Industries Group (E.D. Cal. 2010) 713
F.Supp.2d 1092, 1098; see also Moeller, at p. 834 ["It would be inconsistent with the
comprehensive and exhaustive statutory scheme regulating nonjudicial foreclosures to
incorporate another unrelated cure provision into statutory nonjudicial foreclosure
proceedings."
AND THEN THE COURT DELIVERED THE PAYLOAD:
"By asserting a right to bring a court action to determine whether the owner of the
Note has authorized its nominee to initiate the foreclosure process, Gomes is attempting
to interject the courts into this comprehensive nonjudicial scheme. As Defendants
correctly point out, Gomes has identified no legal authority for such a lawsuit. Nothing
in the statutory provisions establishing the nonjudicial foreclosure process suggests that
such a judicial proceeding is permitted or contemplated.
In his declaratory relief cause of action, Gomes sets forth the purported legal
authority for his first cause of action, alleging that Civil Code section 2924,
subdivision (a), by "necessary implication," allows for an action to test whether the
person initiating the foreclosure has the authority to do so. We reject this argument.
Section 2924, subdivision (a)(1) states that a "trustee, mortgagee, or beneficiary, or any
of their authorized agents" may initiate the foreclosure process. However, nowhere does
the statute provide for a judicial action to determine whether the person initiating the
foreclosure process is indeed authorized, and we see no ground for implying such an
action. (See Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592, 596 [legislative
intent, if any, to create a private cause of action is revealed through the language of the
statute and its legislative history].) Significantly, “[n]onjudicial foreclosure is less
expensive and more quickly concluded than judicial foreclosure, since there is no
oversight by a court, ‘[n]either appraisal nor judicial determination of fair value is
required,’ and the debtor has no postsale right of redemption.” (Alliance Mortgage Co. v.
Rothwell (1995) 10 Cal.4th 1226, 1236.) The recognition of the right to bring a lawsuit
to determine a nominee’s authorization to proceed with foreclosure on behalf of the
noteholder would fundamentally undermine the nonjudicial nature of the process and
introduce the possibility of lawsuits filed solely for the purpose of delaying valid
foreclosures.
THE COURT THEN POINTED TO GOMES DEED OF TRUST AND THE COURT HELD GOMES HAD SPECIFICALLY AUTHORIZED THE FORECLOSURE SALE:
“Specifically, Gomes agreed that “MERS (as nominee
for Lender and Lender’s successors and assigns) has . . . the right to foreclose and sell the
Property.” The deed of trust contains no suggestion that the lender or its successors and
assigns must provide Gomes with assurances that MERS is authorized to proceed with a
foreclosure at the time it is initiated.”
THE COURT ALSO FOOTNOTED TO THE BOGUS MERS ARGUMENT (ALSO MADE IN THE DEED OF TRUST WHICH IS CONSIDERED TO BE THE OPERATIVE FORECLOSURE DOCUMENT IN THE GOMES CASE) THAT IT IS A “BENEFICIARY” OF THE LOAN.
As the parties discuss, some federal district courts have observed
that although identified as a “beneficiary” in a deed of trust, the role of MERS is not
acting as a beneficiary as that term is commonly used, and that MERS in fact acts as a
nominee, and thus an agent of the beneficiary. (See, e.g., Roybal v. Countrywide Home
Loans, Inc. (D. Nev., Dec. 9, 2010, No. 2:10-CV-750-ECR-PAL) 2010 U.S. Dist. Lexis
131287, *11 ["there is a near consensus among district courts in this circuit that while
MERS does not have standing to foreclose as a beneficiary, because it is not one, it does
have standing as an agent of the beneficiary where it is the nominee of the lender, who is
the true beneficiary"]; Weingartner, supra, 702 F.Supp.2d at p. 1280 ["Calling MERS a
'beneficiary' is both incorrect and unnecessary . . . ," and "[c]ourts often hold that MERS
does not have standing as a beneficiary because it is not one, regardless of what a deed of
trust says, but that it does have standing as an agent of the beneficiary where it is the
nominee of the lender (who is the ‘true’ beneficiary).”
THE COURT DID WHAT SOME OTHER COURTS HAVE DONE WHEN FACED WITH THIS “PART OF WHAT WE SAY IN THE DEED OF TRUST IS TRUE AND PART OF WHAT WE SAY IS FALSE” ARGUMENT AND PERMIT THE NOMINEE LANGUAGE TO BE CONTROLLING WHEN IT COMES TO FORECLOSURE.
Relying on the terms of the applicable deeds of trust, courts have rejected similar
challenges to MERS’s authority to foreclose. In Pantoja v. Countrywide Home Loans,
Inc. (N.D. Cal. 2009) 640 F.Supp.2d 1177, the federal district court pointed out that in the
deed of trust, the plaintiff “distinctly granted MERS the right to foreclose through the
power of sale provision, giving MERS the right to conduct the foreclosure process under
[Civil Code s]ection 2924,” and therefore “[s]ince Plaintiff granted MERS the right to
foreclose in his contract, his argument that MERS cannot initiate foreclosure proceedings
is meritless.” (Id. at pp. 1189, 1190.) Similarly, another court pointed out that “[u]nder
the mortgage contract, MERS has the legal right to foreclose on the debtor’s property. . . .
MERS is the owner and holder of the note as nominee for the lender, and thus MERS can
enforce the note on the lender’s behalf.” (Morgera v. Countrywide Home Loans, Inc.
AND WITH THAT THE GOMES COURT AFFIRMED THE LOWER COURT DECISION AND REFUSED LEAVE TO AMEND.
________________________________
Some thoughts:
(1) Check your Deed of Trust, did you grant MERS the right to foreclose?
(2) Do you have grounds to rescind your loan under TILA? (refinance loan within the last three years and ability to tender)
(3) Keep an eye eye out for other MERS cases as the Courts are not in unanimous agreement about MERS and the scope of their agency authority or whether the scheme actually violates well established principles of agency law.
(4) If you are getting close to a foreclosure date, perhaps you are a chapter 13 bankruptcy candidate. In a bankruptcy setting MERS and the securitized loan trustee that claims to own and hold your note may not have it so easy and you may be able to challenge their legal standing to file a proof of claim in a chapter 13 proceeding, and challenge whether or not they are a real party in interest. I doubt MERS and the securitized trustee will welcome your challenge like they do the “produce the note” foreclosure strategy that they can easily defeat on a demurrer or motion to dismiss.
(5) There are a few letters you can send out to your loan servicer, MERS, and the securitized loan trust before you are foreclosed on that may help set up a chapter 13 attack.
(6) Never wait before its too late to get a foreclosure or bankruptcy game plan. The time to act is before you get a Notice of Sale or Notice of Default.
(7) As always, never trust a word your lender or loan servicer says. They want to foreclose, rather than assist, in most cases.
_______________________
COPYRIGHT 2011 – ALL RIGHTS RESERVED LAW OFFICES OF STEVEN C. VONDRAN
CALIFORNIA GOLF CASE LEAVES DOOR OPEN FOR HOLE IN ONE!
This is the Golf Case – California Golf, L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053. Without going into details on the facts, suffice it to say a party wanted to hold a trustee liable for wrongful foreclosure. The Defendants argue there is no remedy available to the Plaintiff because the non-judicial foreclosure statutes in California do not permit such remedies. To this point the Court stated:
“Respondents rely on statements in three cases which, they argue, indicate that the Legislature intended to occupy the field of nonjudicial foreclosure sales and permit no further remedies. (I. E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 285; Residential Capital v. Cal-Western Reconveyance Corp., supra, 108 Cal.App.4th at p. 821; Moeller v. Lien (1994) 25 Cal.App.4th 822, 834.) Before addressing the cases on which respondents rely, a brief overview of the purposes of the statutes governing nonjudicial foreclosure is appropriate. [163 Cal.App.4th 1070].
This case analysis is just this authors opinion and is not legal advice or a substitute for legal advice. If you are facing foreclosure or bankruptcy you need a competent lawyer who understands foreclosure law.
Civil Code sections 2924 through 2924k provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust.‘ This comprehensive statutory scheme has three purposes: ‘ “(1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.” (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1249-1250.)
The Court then went on to discuss whether this is in fact a comprehensive statutory scheme for non-judicial foreclosure sale in California and whether or not any remedies may exist for a party who is claimed to be injured by a wrongful foreclosure sale (in this case the borrower was seeking certain remedies under the Uniform Commercial Code – UCC).
“In each of the cases on which respondents rely, the court did not conclude that no remedies outside those provided by the nonjudicial foreclosure statutes are available simply because the Legislature intended to occupy the field. Instead, the court also considered the policies advanced by the statutory scheme, and whether those policies would be frustrated by the allowance of the additional remedy. (I. E. Associates v. Safeco Title Ins. Co., supra, 39 Cal.3d at pp. 288-289 concluding that expanding the notice obligations of the trustee would not be supported by policy; Residential Capital v. Cal-Western Reconveyance Corp., supra, 108 Cal.App.4th at pp. 827, 829 declining to “graft a tort remedy onto a comprehensive statutory scheme in the absence of a compelling justification for doing so,” and concluding that the addition of the proposed remedy would not fit within the comprehensive statutory scheme; (Moeller v. Lien, supra, 25 Cal.App.4th at p. 834 (concluding that “it would be inconsistent with the comprehensive and exhaustive statutory scheme regulating nonjudicial foreclosures to incorporate another unrelated cure provision into statutory nonjudicial foreclosure proceedings”). It is clear, then, that the mere existence of a comprehensive statutory scheme does not necessarily eliminate all further remedies without the consideration of the relevant policy concerns. Indeed, California courts have repeatedly allowed parties to pursue additional remedies for misconduct arising out of a nonjudicial foreclosure sale when not inconsistent with the policies behind the statutes. In Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1231, our Supreme Court concluded that a lender who obtained the property with a full credit bid at a foreclosure sale was not precluded from suing a third party who had fraudulently induced it to make the loan. The court concluded that ” ‘the antideficiency laws were not intended to immunize wrongdoers from the consequences of their fraudulent acts’ ” and that, if the court applies a proper measure of damages, ” ‘fraud suits do not frustrate the antideficiency policies because there should be no double recovery for the beneficiary.’ ” (Id. at p. 1238.) In South Bay Building Enterprises, Inc. v. Riviera Lend-Lease, Inc.[163 Cal.App.4th 1071] (1999) 72 Cal.App.4th 1111, 1121, the court held that a junior lienor retains the right to recover damages from the trustee and the beneficiary of the foreclosing lien if there have been material irregularities in the conduct of the foreclosure sale. (See also Melendrez v. D & I Investment, Inc., supra, 127 Cal.App.4th at pp. 1257-1258; Lo v. Jensen (2001) 88 Cal.App.4th 1093, 1095 (a trustee’s sale tainted by fraud may be set aside.)
The Golf case then keeps open the possibility that as long as a Plaintiff is not seeking a remedy inconsistent with the California Foreclosure Laws, that they Court should see fit to permit such a remedy and this case the Court recognized the UCC remedy. The Court said:
“Considering the policy interests advanced by the statutory scheme governing nonjudicial foreclosure sales, and the policy interests advanced by Commercial Code section 3312.”
If you want to have your options reviewed, fill out our loss mitigation form at http://www.AttorneySteve.net (Sorry, California and Arizona properties only). We are once again taking Wachovia and World Savings Pick-a-Pay and Option Arm loans (negative amortization loans) on a CONTINGENCY FEE BASIS. You can check out our profile on ContingencyCase.com.
NOTICE:
The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case you should seek out the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. Law is always changing. The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and former licensed real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).
In California, the state legislature passed SB 1137 in 2008 to try to stem the tide of the unnecessary foreclosures (aka The Perata Mortgage Relief Act). The idea was to force loan servicers (who are servicing loans on behalf of so-called lenders who supposedly own your loan and have the endorsed copy of the note in their physical possessions) to contact defaulting borrowers prior to filing a notice of default and to “assess” and “explore” potential opportunities for loan workouts. There is therefore a “due diligence” requirement that servicers must follow before trying to foreclose on California homeowners. Once they make these required contacts, they can then bring down the guillotine and foreclose. Like everything else in the loan modification business crafted by legislators pretending to provide help to homeowners in distress, the law does not REQUIRE any modifications be given, and we know that many of the pooling and servicing agreements may not even allow for modifications. So it is questionable whether the law is much more than window dressing, but it is a law on the books.
In California, we have seen a slew of homeowners want to turn a non-judicial foreclosure sale into a judicial foreclosure sale by filing suit to enjoin a foreclosure sale based on a violation of 2923.5. Some of the challenges being made under 2923.5 were/are challenges to the mortgagees, trustees, beneficiaries, or their authorized agents (hereafter, “lenders” or “servicers”) alleging the following grounds:
(1) The servicer or lender is simply failing to make the required contacts
(2) The lender servicer is failing to provide the required HUD phone number
(3) The servicer or lender refuses to file the declaration of compliance prior to filing the notice of default or foreclosing
(4) The declaration is false as it is signed by a robosigner
(5) The “declaration” is not made under penalty of perjury
These are the basic grounds that I have seen asserted in various lawsuits. The key case on point dealing with this declaration and what it means is Mabry v. Superior Court of Orange County, 185 Cal. App. 4th 208 (2010). In Mabry, a borrower in default sought to enjoin a private trustee sale by arguing a violation of 2923.5 in that the declaration of compliance did not outline the specific attempts made by the lender/servicer or their agent, and was not made under penalty of perjury. Here are a few snippets from the Court’s decision (Questions asked and answered by the Court):
(A) May section 2923.5 be enforced by a private right of action? “Yes. Otherwise the statute would be a dead letter.”
(B) Must a borrower tender the full amount of the mortgage indebtedness due as a prerequisite to bringing an action under section 2923.5? “No. To hold otherwise would defeat the purpose of the statute.”
(C) Is section 2923.5 preempted by federal law? “No — but, we must emphasize, it is not preempted because the remedy for noncompliance is a simple postponement of the foreclosure sale, nothing more.”
(D) What is the extent of a private right of action under section 2923.5? ”To repeat: The right of action is limited to obtaining a postponement of an impending foreclosure to permit the lender to comply with section 2923.5.”
(E) Must the declaration required of the lender by section 2923.5, subdivision (b) be under penalty of perjury? No. Such a requirement is not only not in the statute, but would be at odds with the way the statute is written.
(F) Does a declaration in a notice of default that tracks the language of section 2923.5, subdivision (b) comply with the statute, even though such language does not on its face delineate precisely which one of the three categories set forth in the declaration applies to the particular case at hand? “Yes. There is no indication that the legislature wanted to saddle lenders with the need to “custom draft” the statement required by the statute in notices of default.”
(G) If a lender did not comply with section 2923.5 and a foreclosure sale has already been held, does that noncompliance affect the title to the foreclosed property obtained by the families or investors who may have bought the property at the foreclosure sale? “No. The Legislature did nothing to affect the rule regarding foreclosure sales as final.”
Okay, let’s take a look at just what this Court might be saying. (1) There is a private right of action for violating 2923.5 (if you are willing to pay an attorney to “postpone” the sale, (2) The lender or their agent need not specify the precise grounds employed in their due diligence efforts to satisfy the statute (i.e. they don’t have to say “we contacted the borrower 4 times at the following phone number”), (3) If the sale has already taken place, arguing a violation of 2923.5 probably won’t do much for your cause, and (4) If you bring a 2923.5 challenge before the sale, you do not have to “tender” the balance of the loan to take on your lender/servicer.
At the end of the day, if you have good grounds to assert a 2923.5 violation then perhaps you can postpone your sale. But the Mabry case does not appear willing to provide damages, and class action lawsuits are not permitted. So, chalk up another win for the lenders/servicers who can basically say they complied, and if they don’t comply, then you get the right to hire a lawyer to merely postpone the sale and make them do it over again. I suppose we should all be pleased that at least the Courts recognized there is a private right to file a lawsuit.
The case was recently appealed to the California Supreme Court, who declined to hear the appeal. For now, the Mabry appelate Court decision reigns as law. Other grounds to consider in challenging your alleged lender is filing for Chapter 13 bankruptcy and challenging the proof of claim in Bankruptcy Court or opposing the so-called lenders effort to lift the automatic stay. If these financial institutions cannot prove their legal standing and that they are the real party in interest to your loan, this may pave the way for an adversary proceeding in the bankruptcy court.
Truth in lending loan rescission lawsuits are also another avenue to investigate if you have a refinanced loan originated in the last three years. Although these loans are declining in numbers, they are still out there. More information about bankruptcy challenges can be found at http://www.UltimateBk.com
WRONGFUL FORECLOSURE IS A FUNGUS THAT IS SPREADING IN CALIFORNIA AND ARIZONA – ARE ROBISGNERS TO BLAME?
In California, the tort of wrongful foreclosure requires: (1) a legally owed duty to the Plaintiff by the foreclosing party (2) a breach of that duty (3) a causal connection between the breach of that duty and the injury the Plaintiff sustained, and (4) damages. California courts have further clarified this cause of action by stating: “We are inclined however, to believe that with respect to real property the Murphy case was articulating a rule that has been applied in other jurisdictions. That rule is that a trustee or mortgagee may be liable to the trustor or mortgagor for damages sustained where there has been 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, 11 Cal. App. 3d 1, 7, 89 Cal. Rptr. 323, 326 (Cal. Ct. App. 1970)
The court in Munger appears to be saying that if the foreclosure was illegal, fraudulent or willfully oppressive then that foreclosure was wrongful and the party foreclosed on may be entitled to damages. According to California statutory and case law several types of damages are available to victims of wrongful foreclosures.
First, damages are measured by the value of the property at the time of the sale in excess of the mortgage lien against the property (i.e the equity in the property). Second, damages are available in the amount that is sufficient to compensate for all detriment proximately caused by the wrongful conduct.California Civil Code Section 3333. Third, the borrower may be able to obtain damages for emotional distress in a wrongful foreclosure action and if the borrower can prove by clear and convincing evidence that the servicer/trustee was guilty of fraud, oppression or malicepunitive damages may be awarded. Where there is a wrongful foreclosure, the borrower may seek punitive damages. In Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 345 [85 Cal.Rptr.3d 532, 554] the Court in acknowledging the right to seek punitive damages said:
“The jury concluded that the nonjudicial foreclosures instituted by the Kachlons were wrongful, and that in pursuing the foreclosure proceedings Mordechai acted “intentionally, fraudulently and in conscious and callous disregard for the rights of the Markowitzes.” These findings are tantamount to the finding of malice….” (emphasis added).
As such, it is clear in California, 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.
However, an action for the tort of wrongful foreclosure will lie if the trustor or mortgagor (borrower) can establish that at the time the power of sale was exercised or the foreclosure occurred, no breach of condition or failure of performance existed on the mortgagor’s or trustor’s part which would have authorized the foreclosure or exercise of the power of sale. See Munger v. Moore, 11 Cal.App.3d 1, 89 Cal.Rptr. 323 (Cal.App.1970). This seems to be an obstacle for many homeowners during this financial crisis. Many borrowers are behind on their payments and have fallen victim to predatory lending schemes or have stopped paying based on instructions from their lenders trying to qualify for loan modifications. But does default always mean the mere fact that you have fallen behind on your payments? This is an interesting issue we have discussed in other blogs the so-called “presentment” defense under the UCC.
First, for a mortgage to be in default, the borrower, or maker of the promissory note, must have dishonored the note. Under UCC §3-502 a promissory note is not dishonored until the maker refuses to pay it when presentment thereof is made. “Presentment” is defined by the UCC as “a demand to pay the instrument made by a person entitled to enforce an instrument.” The UCC also requires that “Upon demand of the person to whom presentment is made, the person making presentment must 1) exhibit the instrument” [emphasis added] (UCC 3-501(B)(2)(a))
Until the proper presentment is made the UCC requires that the “obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply: …2) In the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid.” (UCC 3-310(b) & A.R.S. 47-3310(b)) Therefore, the borrower is not in default until the lender can exhibit the instrument, proving dishonor. Default is not simply missing payments. It also includes refusal to pay after presentment has been made. Default must also include an exhibit of the instrument. Thus, the lender in a wrongful foreclosure suit cannot claim the borrower is in default unless they can produce the original note and deed of trust.
If true, this would produce additional problems for the lender/creditor. In fact, I recently reviewed one loan that has a UCC PRESENTMENT WAIVER (evidencing that this is an issue that at least one lender – in that case a reverse mortgage) has considered and apparently given credence to. According to California case law, the so-called lender would lose the right to foreclose on the security (real estate) if the obligation is unenforceable. Savings Bank v. Asbury (1897) 117 C 96, 48 P 1081; Trowbridge v. Love (1943) 58 CA 2d 746. As the theory goes, if the lender trying to foreclose on a property cannot prove default by producing the original note and deed of trust then they may not have the right to foreclose at all. IN FACT, IN SOME DEEDS OF TRUST (LIKE THIS ONE FOR A REVERSE MORTGAGE) THERE IS A SPECIFIC CLAUSE ASKING THAT THE BORROWER WAIVE THEIR “RIGHT” OF PRESENTMENT.
In fact, a recent Massachusetts court ruling invalidated two foreclosure sales based on a failure to prove proper documentation (unbroken chain of mortgage from the originator to the trust) proving the “lender” (the securitized loan trust) had the legal right to foreclose. See Ibanez v. U.S. Bank a recent landmark case from the Massachusetts Supreme Court.
DISCLAIMER: THIS IS ONLY A GENERAL LEGAL THEORY THAT WAS PRESENTED TO MY FIRM BY A 30 YEAR UCC LAW PROFESSOR FROM A MAJOR LAW SCHOOL. THE THEORY HAS NOT BEEN TESTED BY THIS AUTHOR AND YOU ARE ADVISED TO SEEK THE ADVISE OF COUNSEL BEFORE PURSUING THIS NOVEL THEORY.
In summary, where the Defendants fail to follow statutory law (ex. where you have notary fraud in the chain of title NOTICE OF DEFAULT, NOTICE OF SALE, ASSIGNMENT OF DEED OF TRUST, OR SUBSTITUTION OF TRUSTEE – and where the notary refuses to produce their notary transaction logs for a given transaction following a written request for such proof of valid signatures, etc.) this type of fraud can be argued to violate the duties set by the California foreclosure laws such as Civil Code Section 2924, 2934, and 2932.5 which require duly recorded documents be notarized and recorded with the County Recorder. Where you have false and forged signatures by robosigners, and a notary that does not verify a signing parties credentials, or signatures, and cannot produce a notary log, there may be a legal argument to be made that the resulting foreclosure sale was “fruit of the poisonous tree” as I like to say, and argue the sale was tainted with fraud, oppression, and breach of duties.
Here is a document that shows in the Deed of Trust for this reverse mortgage, the lender wanted the borrower to “waive their right” to demand presentment of the Note. Click on the attached link to see the document. To see our blog post on this topic click here:
HERE IS A LINK TO THE STORY. I COULD NOT RESIST SHARING THIS ONE. Shows that sometimes when you put the pressure on the right way (in the Courts and the “law of the press”) sometimes you might just get someones attention.
CHECK YOUR MERS ASSIGNMENT OF DEED OF TRUST (THE DEED OF TRUST PLACES AN ENCUMBRANCE ON THE PROPERTY) AND SUBSTITUTION OF TRUSTEE DOCUMENTS.
WHO SIGNED IT – SEARCH THE WEB – IS THIS PERSON (EX. SOME BOGUS VICE PRESIDENT FOR MERS) A KNOWN ROBOSIGNER? THERE ARE SOME TELL TALE SIGNS OF ROBOSIGNING THAT WE DISCUSS IN OTHER ARTICLES.
IF YOU HAVE YOUR SUSPICIONS, WHICH YOU SHOULD IN ALMOST EVERY CASE, THEN SEND THE NOTARY A DEMAND LETTER TO “PRODUCE YOUR NOTARY TRANSACTION LOG” FOR THAT PARTICULAR TRANSACTION.
WHEN THE NOTARY REFUSES TO PRODUCE IT – WHICH HAS HAPPENED IN EVERY SINGLE CASE WE HAVE DEALT WITH IN REGARD TO SECURITIZED LOANS, (WHICH ESSENTIALLY ADMITS THEIR WAS NO VALID LOGS KEPT, NO SIGNINGS IN FRONT OF THE NOTARY, AND NO IDENTIFICATION CHECKED, ETC.) YOU HAVE TO ASK YOURSELF, ARE THE NOTARIES AND THE SO-CALLED “LENDER” OR LOAN SERVICER (WHO THESE RECORDED DOCUMENTS ARE SUPPOSED TO BE SENT BACK TO AFTER RECORDING), ARE THEY COMMITTING A CRIME UNDER CALIFORNIA LAW?
YOU HAVE TO ASK YOURSELF WHAT IS GOING ON HERE, AND WHY ANY FORECLOSURE BASED ON THIS TYPE OF KNOWING AND INTENTIONAL ACTS OF NOTARY FRAUD SHOULD BE PERMITTED TO FORM THE FOUNDATION FOR A VALID FORECLOSURE. SHOULD THE COURTS REALLY GIVE ANY WEIGHT TO ANY DOCUMENT (LIKE A SUBSTITUTION OF TRUSTEE OR ASSIGNMENT OF DEED OF TRUST) THAT IS THE PRODUCT OF VERIFIABLE FRAUD?
LET’S TAKE A LOOK AT THE CALIFORNIA PENAL CODE:
115.5. Filing false or forged documents relating to single-family residences;
punishment; false statement to notary public
(a) Every person who files any false or forged document or instrument with the county
recorder which affects title to, places an encumbrance on, or places an interest secured by a
mortgage or deed of trust on, real property consisting of a single-family residence containing
not more than four dwelling units, with knowledge that the document is false or forged, is
punishable, in addition to any other punishment, by a fine not exceeding seventy-five thousand
dollars ($75,000).
(b) Every person who makes a false sworn statement to a notary public, with knowledge
that the statement is false, to induce the notary public to perform an improper notarial act
on an instrument or document affecting title to, or placing an encumbrance on, real property
consisting of a single-family residence containing not more than four dwelling units is guilty
of a felony.
This is real interesting, here is the text of a bill that just passed the Arizona Senate. Not perfect, but trying to get some “truth in lending.”
A. FOR ANY BENEFICIARY WHO IS NOT THE ORIGINATING BENEFICIARY ON THE DEED OF TRUST, THE BENEFICIARY SHALL RECORD A SUMMARY DOCUMENT REGARDING THE BENEFICIARY’S LEGAL INTEREST IN THE DEED OF TRUST THAT CONTAINS THE FOLLOWING INFORMATION IN CHRONOLOGICAL ORDER:
THE FULL NAME AND ADDRESS OF RECORD OF EVERY PRIOR BENEFICIARY ON THE DEED OF TRUST.
THE DATE, RECORDATION NUMBER OR OTHER UNIQUE DESIGNATION OF THE INSTRUMENT, AND A DESCRIPTION OF THE INSTRUMENT THAT CONVEYED THE INTEREST OF EACH BENEFICIARY.
THE SUMMARY DOCUMENT PRESCRIBED BY THIS SECTION SHALL BE RECORDED AT THE SAME TIME AND PLACE THAT THE NOTICE OF TRUSTEE’S SALE IS RECORDED PURSUANT TO SECTION 33-808 AND A COPY OF THE SUMMARY DOCUMENT SHALL BE ATTACHED TO ANY NOTICE OF TRUSTEE’S SALE THAT IS REQUIRED TO BE PROVIDED AS PRESCRIBED IN SECTION 33-809.
C. FAILURE TO PROPERLY RECORD THE SUMMARY DOCUMENT THAT DEMONSTRATES EVIDENCE OF TITLE FOR THE FORECLOSING BENEFICIARY AS OF THE DATE OF THE TRUSTEE’S SALE AS PRESCRIBED BY THIS SECTION RESULTS IN A VOIDABLE SALE.
D. ANY PERSON WITH AN INTEREST IN THE TRUST PROPERTY MAY FILE AN ACTION TO VOID THE TRUSTEE’S SALE FOR FAILURE TO COMPLY WITH THIS SECTION AND IS ENTITLED TO AN AWARD OF ATTORNEY FEES AS WELL AS DAMAGES AS OTHERWISE PROVIDED BY LAW IF THE PERSON SUBSTANTIALLY PREVAILS, INCLUDING AN AWARD OF ATTORNEY FEES FOR ANY INJUNCTION OR OTHER PROVISIONAL REMEDIES RELATED TO THE CLAIM.
If you are an Arizona homeowner, do not be afraid to call your Arizona legislatures asking for support of this bill. We need to bring more truth in lending. When you file lawsuits against these banks (as we do, for example TILA rescission), it takes a while to figure out who owns the loan. They try to keep this a secret from the Plaintiff and the Judge until discovery forces them to disclose this information. As an ARIZONA TRUTH IN LENDING LAWYER I strongly support this bill and others like it. In fact, they should be required to “produce the note” showing a full chain of transfer, endorsement, and consideration from the loan originator up the securitized loan trust. But of course that would probably collapse the securitized loan system and expose it for what it was – “a half-baked idea.”
BANK OF AMERICA – GREETINGS FROM THE VALLEY OF THE SUN!
The Arizona Attorney general’s office entered into a settlement agreement with Bank of America which required Bank of America to help struggling homeowners get answers to loan modification requests and help modify “qualifying mortgages” for “eligible borrowers” and help provide relocation assistance to some homes that have been foreclosed. Of course, the settlement agreement was signed, but now the Attorney General is claiming BofA breached the agreement. Should anyone be surprised?
Specifically, the Attorney General is claiming a breach of the settlement agreement in the following respects:
(1) Foreclosing on eligible Arizona borrowers who have qualifying mortgages
(2) Failure to convert some temporary modifications to permanent modifications
(3) Keeping borrowers in limbo for extended periods of time (6-12 months) in breach of the settlement agreement
(4) Failure to use best efforts to secure investor approval
The Attorney General also calls them out for a violation of the Arizona Consumer Legal Remedies Act (A.R.S. 44-1522(A)). This section reads:
44-1522. Unlawful practices; intended interpretation of provisions
A. The act, use or employment by any person of any deception, deceptive act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice.
B. The violation of chapter 9, article 16 or chapter 19, article 1 of this title is declared to be an unlawful practice and subject to enforcement under this article.
C. It is the intent of the legislature, in construing subsection A, that the courts may use as a guide interpretations given by the federal trade commission and the federal courts to 15 United States Code sections 45, 52 and 55(a)(1).
IT IS AMAZING TO SEE HOW A MAJOR RETAIL LENDER LIKE BANK OF AMERICA (THE BIG RED WHITE AND BLUE) REFUSES TO HELP HOMEOWNERS MODIFY THE CRAPPY COUNTRYWIDE LOANS (THAT THEY PURCHASED) THAT CONTRIBUTED TO THIS FINANCIAL FIASCO. MORE FALSE PROMISES, THIS TIME TO THE ATTORNEY GENERAL’S OFFICE.
ADVERSARY PROCEEDINGS – YES, YOU CAN FILE A LAWSUIT IN THE BANKRUPTCY COURT
The following are some of the typical types of cases that may get filed in a Bankruptcy Adversary Proceeding:
(1) “Lien Strip” of unsecured junior liens
(2) Rescind your Loan under Truth in Lending Law (TILA). Ex. you rescind your loan prior to filing bankruptcy, and then list property as unsecured on your schedules and then filing the adversary proceeding, usually while selling the house and figuring out a new payoff.
(3) Suing for Violation of the Automatic stay (creditors taking illegal actions in violation of the automatic bankruptcy stay)
(5) Violations of Fair Debt Collections Practices Act (FDCPA)
(6) Violations of State Unfair and Deceptive Business Practices Statute (Like pre-filing mortgage rescue scams)
(7) Suing for Tort of Harassment of Debtor (See in re Sipe v. Canseco 2001 WL 35672616)
(8) Pursuing violations stemming from filing false and fraudulent proof of claim (ex. creditor has no proof of secured status yet asserts they are a secured creditor using false affidavits). Note: this could be a systematic problem raising potential for class action.
(9) Filing lawsuit for violation of RESPA (ex. QWR violations seeking attorney fees and actual damages, or damages for unauthorized fees charged)
(10) File lawsuit for creditor’s failure to release a lien as required
(11) Lawsuit for violation of Federal Gramm Leach Bliley Privacy Act (GLB), or other state privacy laws, including identity theft law violations under state laws.
(12) Violations of discharge injunction. Ex. reopening the bankruptcy to file for violation of discharge injunction. Consult your local rules, there may be no charge to reopen and filing fees may be waived under these circumstances.
(13) Lawsuit challenging the extent, validity, or priority of alleged liens (proving your “creditor” is not a legitimate creditor, or is not secured creditor).
These are just a few grounds to consider when filing bankruptcy. In many cases, you may have grounds to assert legal challenges that could either lead to settlement, or to an award of actual damages, costs, attorney fees, and other damages.
The Law Offices of Steven C. Vondran, P.C. is a foreclosure defense and bankruptcy lawfirm. We help people file for bankruptcy protection under the bankruptcy code. We can be reached at (877) 276-5084. Information may also be obtained at http://www.UltimateBK.com and http://www.AdversaryProceeding.com
Robo-Signers: Innocent Paper Pushers or Fraud Factories?
In September 2010, the Washington Post published a story that shed light on a little known “trade secret” lenders have been using to foreclose on families. Check out the story here: Washington Post Robo-Signer Story. What’s the dirty little secret? Robo-Signers.
What’s a Robo-Signer?
Unlike the name suggests, Robo-Signers are not robots hired by lenders and banks to kick homeowners out of their houses. They are however, staff used by lenders and banks to sign off on foreclosure documents needed to foreclose on a home. The nickname comes from the robot-like speed, at which the Robo-Signers are able to review, sign off and get important legal documents notarized.
So far, the Banks that we know of that use Robo-Signers are Wells Fargo, Bank of America, GMAC, OneWest Bank, and JP Morgan Chase. Many employees have made statements in court about the Robo-Signing practices inside of these banks. In fact, a GMAC manager Jefferey Stephan said that he had signed off on legal documents for 10,000 foreclosure papers in a single month without even verifying them. That’s barely a minute per case, assuming he works a normal eight-hour day! See USA Today’s story here:USA Today – Robo Signer Admission. Sounds great right? Wrong!
What’s The Big Deal?
In many states, mortgage servicers must file a motion in court to take someone’s home via a foreclosure. The bank or lender must prove that they have reviewed the supporting documents, checked who owns the mortgage note and had a “notary public” witness the signature. By now you should be thinking of our famous Robo-Signer who admitted to signing off on 10,000 foreclosure papers in one month. You should be thinking how could he really review, check ownership and get so many papers notarized. The answer is simple, HE DIDN”T! Yet, the law requires it.
Robo-Signers are essentially cutting legal corners for the mortgage servicers. Mariah Wag, a journalist for ProPublica, put it another way, “To me what the robo-signer issue shows clearly is that the industry is on this path to foreclose as many cases as they can, as quickly as possible with as little work as possible.” Read her article entitled Putting the Foreclosure Paperwork Scandal in Perspective.
Didn’t these lenders/banks receive taxpayer money to work with homeowners in default and consider loan modifications? Didn’t they promise to take “good-faith” measures to avoid foreclosures in exchange for government money? Why then are these banks skirting the law and sending in fake documents to courts in an effort to foreclose? So what does this mean to the average homeowner?
Doesn’t the Law Prohibit Fraud and Robosigning Documents and Recording them as a precursor to Foreclosure?
Here is some basic case law from just a basic search:
Legal authority in regard to forgery is clear. See 5 Cal. Real Est. § 11:13 (3d ed.), Miller and Starr California Real Estate 3D (effect of a forged Instrument): âA forged document is totally void.â In Trout v. Taylor, 220 Cal. 652, 32 P.2d 968. (1934) the Court stated that ânumerous authorities have established the rule that an instrument wholly void, such as an undelivered deed, a forged instrument, or a deed in blank, cannot be made the foundation of a good title, even under the equitable doctrine of bona fide purchase.”
In Schiavon v. Arnaudo Brothers, 84 Cal.App.4th 374 at 378 (2000), the California appellate court held, âA deed is VOID if the grantor’s signature is forged or if the grantor is unaware of the nature of what he or she is signing.â (emphasis added). In Montgomery v. Bank of America Nat. Trust & Savings Ass’n, 85 Cal.App.2d 559, 193 P.2d 475, Cal.App.2.Dist.(1948) the California appellate court held: ”A void instrument such as an undelivered or a forged deeddoes not convey anything and cannot be made the foundation of a good title. Since the deed is absolutely void and conveyed no title to the grantees plaintiffs may recover the property through an action to quiet title or by an action to rescind upon returning the consideration paid by the Mannings.” In Wutzke v. Bill Reid Painting Service, Inc., 151 Cal.App.3d 36, 198 Cal.Rptr. 418, Cal.App. 3 Dist., 1984 the Court held: Aforgeddocumentisvoidabinitioandconstitutesanullity; assuchitcannotprovidethebasisforasuperiortitleasagainsttheoriginalgrantor.â
If a Substitution of Trustee is not valid, the resulting sale is VOID and no requirement for âtenderâ as Defendant alleges is owed, is required. See Dimrock v. Emerald Properties, 81 Cal.App.4th 868, 97 (2000), which held âIn particular, contrary to the defendants’ argument, he was not required to tender any of the amounts due under the noteâ in order to attack a void trustee sale. See Pro Value Properties Quality Loan Service Corp., 170. Cal.App.4th 579 (2009).
What Does This Mean To Me?
Many popular foreclosure blogs and websites suggest that if you are in foreclosure are have been foreclosed on you should get your mortgage & foreclosure paperwork audited. ForeclosureIndustry.com suggests that when these banks are questioned about these activities, guess what? They start negotiating. The link above will take you to their story. Another popular foreclosure blog, ForeclosureHamlet.com suggests that this robo-signing practice amounts to fraud and homeowners facing foreclosure should talk to an experienced real estate or foreclosure attorney. In response to this robo-signing many of the largest banks have suspended tens of thousands of foreclosures including, Ally Financial Inc.’ GMAC Unit, Bank of America and JP Morgan Chase & CO. Surprisingly, Wells Fargo & Co. has stated that it has no plans to halt foreclosures and that their foreclosure affidavit process is sound. Typical cacaphony they like to spout.
If you have questions about robo-signers or are facing a foreclosure call The Law Offices of Steven C. Vondran. The Law Offices of Steven C. Vondran can help with a robo-signer audit or foreclosure audit. Call us at (877) 276-5084.
The following is an overview of a few cases I was looking at in the area of Truth in Lending (“TILA”) law. We get a lot of questions about when TILA three years begins to run. THIS IS NOT LEGAL ADVICE AND IS NOT TO BE CONSTRUED AS LEGAL ADVICE. RATHER THESE ARE A FEW CASES THAT DISCUSS TILA RESCISSION, AND GIVE YOU SOME IDEAS OF SOME OF THE CASES OUT THERE. PLEASE CONSULT A LITIGATION ATTORNEY BEFORE FILING A CIVIL LAWSUIT FOR TRO OR INJUNCTION.
CAN TILA THREE YEAR RIGHT TO RESCIND BE EXERCISED BEYOND THREE YEARS?
The general rule you will normally see in regard to TILA 3 year right of rescission is the following:
“Section 1635 of TILA allows consumers to rescind “any consumer credit transaction . . . in which a security interest . . .is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended,” so long as such rescission takes place within three days of the consummation of the transaction or the delivery of required disclosures under TILA, whichever occurs later. 15 U.S.C. § 1635. If the lender never submits the required disclosures, the borrower’s right to rescission expires three years after the consummation of the transaction. 15 U.S.C. § 1635(f).” In the seminal case of Beach v., Ocwen, 523 U.S. 410, the United State Supreme Court held: “the right of rescission is completely extinguished after three years from the date of the loan’s consummation.” See also 15 U.S.C. § 1635(f). Equitable tolling does not apply to an action for rescission under TILA. See Mays v. U.S. Bank National Association, 2010 WL 318537 (E.D. Cal.2010).
Under Regulation Z, which specifies a lender’s disclosure obligations, “consummation” of the loan occurs when the borrower is “contractually obligated.” 12 C.F.R, §226.2(a)(13). The point at which a “contractual obligation … is created” is a matter of state law. 12 C.F.R. pt. 226, Supp. 1 (Official Staff Interpretation), cmt. 2(a)(13). Under California law, a contract is formed when there are (1) parties capable of contracting, (2) mutual consent, (3) a lawful object, and (4) sufficient cause or consideration. See California Civil Code Section 1550 and Grimes v. New Century Mortgage Corp., 340 F.3d 1007, 1009 (9th Cir. 2003).
Under TILA, the Courts must look to state law in determining when a borrower becomes contractually obligated on a loan. At the very least, before you can have a contract, there must be specifically identified parties to the contract (meaning an identified lender and a identified borrower) – “parties capable of contracting” as set forth above and sufficient consideration.
Now, in the god old days a borrower and a bank would contract to lend money. The borrower would borrow the money and offer a security interest in its property, and the bank would lend money off its balance sheet and hold both the note and mortgage (deed of trust) in the event you failed to pay. Those days are gone for a lawrge number of “securitized loans” (loans that are bundled into pools and sold off on Wall Street). Nowadays, you have a loan “originator” posing as a “lender” and the loan originator is not loaning you a dime (rather, someone else or some other entity is funding, lending, or table funding the loan). In this scenario, the originating lender, purporting to contract to “lend” you money, is not actually lending you any money. In reality, they are doing nothing more than earning a commission on the money SOMEONE ELSE IS LENDING YOU (i.e. some Wall Street investor in your loan pool who is funding the loan, who is NOT IDENTIFIED AT ANY STAGE OF THE LOAN PROCESS, and who expects a return on their investment). These hidden investors are the true “lender” who is the source of funds for you loan. Strange, but true.
So, when you contract with the “originator” of the loan (as opposed to the lender), has the true lender ever been identified? No, they have not. So shouldn’t the promissory note be between you and the real lender? After all, the “lender” on the note and deed of trust never lent you any money, and this can be verified by looking at their balance sheet. Do you have an enforceable contract to lend money under state law in this scenario? That is an issue to litigate under TILA – in my opinion. The originator is representing that they are lending you money,, when in fact they are not. They are serving as an intermediary for someone else to lend you money. Is there a meeting of the minds under this scenario?
There are a few other cases I have come across in my research that indicate, that under this scenario (usually involving MERS securitized loans, and other hard money loans where undisclosed entities are table funding the loan), the LENDER MUST BE IDENTIFIED BEFORE THE THREE YEARS BEGINS TO RUN, WHICH MEANS, IF YOU DO NOT KNOW WHO THE REAL “LENDER” IS, OR THE TRUE “SOURCE OF FUNDS” FOR YOUR LOAN, THE THREE YEAR CLOCK TO EXERCISE YOUR RESCISSION RIGHTS MAY NOT BEGIN TO RUN.
(1) Ramsey v. Vista Mortgage Corp, 176 BR 183 (TILA RESCISSION IN BANKRUPTCY CHAPTER 13 CASE). In this case, the court laid down the test of when the three year right to rescind begins to run and specifically tackles the concept of when a loan is “consummated.” Several internal citiations also help clarify this point. Here is what the Ramsey Court said:
“When Ramsey signed the loan documents on September 13, 1989, he knew who was going to provide the financing. Courts recognize the date of signing a binding loan contract as the date of consummation when the lender is identifiable.” The Court also cited to the Jackson v. Grant, 890 F.2d case (9th Circuit 1989), a NON-BANKRUPTCY CASE, and said: “the Ninth Circuit held that under California law a loan contract was not consummated when the borrower signed the promissory note and deed of trust because the actual lender was not known at that time. Under these circumstances, the loan is not “consummated” until the actual lender is identified, because until that point there is no legally enforceable contract.”
ANALYSIS: It seems fair to say that the Courts are not willing to find a contractual obligation exists under State Law until a true and actual lender is identified. “Pretender lenders” – as Neil Garfield calls them – and intermediary “originators” who make false representations to the effect that they are “lending money”and are your “lender” should not be sufficient to set the three year TILA rescission clock in motion. Until the real Wall Street entity, or Wall Street Investor, or true source of the table funded loan is identified, the loan should not be deemed “consummated” under TILA and the three year right to rescind should remain open until such disclosure is made. That is TRUTH IN LENDING WHICH IS THE WHOLE POINT OF TILA IN THE FIRST PLACE.
THIS MEANS, IF YOU STILL DO NOT KNOW WHO YOUR LENDER IS AFTER DUE DILIGENCE (AND BELIEVE ME WE TRY WITH DEBT VALIDATION LETTERS, CHAIN OF TITLE REVIEWS, FANNIE AND FREDDIE LOAN LOOKUPS, QUALIFIED WRITTEN REQUESTS, 15 US.C. 1641 LETTERS, UCC PRESENTMENT LETTERS, ETC.) AND IF THE ORIGINATING “LENDER” TRULY NEVER LENT YOU A SINGLE PENNY, PERHAPS THERE IS AN ARGUMENT TO BE MADE, USING THE LAW CITED ABOVE, THAT THE THREE YEARS HAS NOT YET BEGUN TO RUN. NOW, THIS IS A NOVEL THEORY OF LAW THAT I HAVE NOT SEEN ANYONE PUT FORTH AS OF YET. BUT REVIEWING THE CASE LAW, IT SEEMS TO OFFER SOME HOPE TO 4,5 OR EVEN 10 YEAR OLD LOANS. OF COURSE, YOU SHOULD CONSULT WITH FORECLOSURE AND TILA LAWYER BEFORE PROCEEDING ON SUCH A THEORY, BUT WHERE THE BANKS ARE ACTIVELY ENGAGED IN THE “HIDE THE EIGHTBALL” GAME WHERE THEY DO NOT WANT YOU TO KNOW WHO OWNS YOUR LOAN, AND THEY NORMALLY CANNOT EVEN LEGALLY PROVE WHO OWNS YOUR LOAN, IF YOU HAVE NO OTHER OPTIONS THIS MAY BE A THEORY TO BRING TO THE ATTENTION OF YOUR FORECLOSURE, BANKRUPTCY OR LITIGATION COUNSEL. THE FINANCIAL INSTITUTIONS USE EVERY LAW IN THE BOOKS TO TAKE YOUR HOME, THIS MAY BE A POTENTIAL ARGUMENT TO FIGHT BACK.
ALSO NOTE – THERE ARE A STRING OF CASES THAT SAY YOU MUST FILE YOUR TILA LAWSUIT WITHIN 3 YEARS OF CONSUMMATION. SO CONSULT A TRUTH IN LENDING LAWYER IMMEDIATELY TO DISCUSS YOUR CASE.
We have talked about the consequences of TILA rescission in many other posts. Google “Vondran TILA lawyer” (or got http://www.RescindMyLoan.net or http://www.ForeclosureDefenseResourceCenter.com) and you will see more articles. AS WITH EVERYTHING ELSE IN FORECLOSURE DEFENSE, DO NOT WAIT UNTIL THE LAST MINUTE BEFORE SEEKING A FORECLOSURE LAWYER. IF YOU GET A NOTICE OF DEFAULT OR NOTICE OF SALE, DO NOT WAIT, CONTACT A FORECLOSURE AND BANKRUPTCY, TILA LAWYER TO PUT TOGETHER A SOUND LITIGATION PLAN.
PLEASE NOTE, EVEN IF YOU ARE CONSIDERING FILING BANKRUPTCY, YOU CAN RESCIND YOUR LOAN IN AN ADVERSARY PROCEEDING IN BANKRUPTCY COURT AND THIS CAN HAVE POTENTIALLY DRAMATIC IMPLICATIONS AS ONCE YOU RESCIND YOUR LOAN UNDER TILA, THE SECURITY INSTRUMENT IS VOID AS A MATTER OF LAW, AND THE LOAN IS ESSENTIALLY AN UNSECURED DEBT. THESE ARE THINGS YOU WILL OFTEN FIND GO UNNOTICED AND UNCHALLENGED TO THE DEBTORS DETRIMENT.
HUGE FORECLOSURE CASE OUT OF MASSACHUSETTS – JUDGES SAY YOU MUST OWN THE LOAN AND BE ABLE TO PROVE YOU OWN THE LOAN BEFORE FORECLOSING BY A BANK (WHAT A NOVEL CONCEPT).
The web is a-Buzz with people talking about the recent Ibanez decision out of the Massachusetts Supreme Court. Here is a link to the case: http://www.scribd.com/doc/46479709/Us-Bank
Basis Facts of the Case:
This case involved two different borrowers and alleged lenders. Wells Fargo and US Bank, as trustees of a securitized loan trust, sought to uphold two foreclosure sales of the two borrowers property. The two banks each filed the notice of sale and then later foreclosed on the homeowners and purchased the properties at the foreclosure sales. The banks claimed this purchase at the trustee’s sale gave them title to the property free and clear. However, there was no proof that either lender ever owned the mortgage at the time the notice of sale was recorded with the County Recorder’s office since an assignment of Deed of Trust was assigned in Blank and back-dated at a later date. The case made its way up to the Massachusetts Supreme Court, which is a highly respected court.
Here is some important language from the holding of the case (the judges decision):
1. First the court discussed the general right of a mortgagee to foreclose on a property:
“Where a mortgage grants a mortgage holder the power of sale, as did both the Ibanez andLaRace mortgages, it includes by reference the power of sale set out in G.L. c. 183, § 21,and further regulated by G.L. c. 244, §§ 11-17C. Under G.L. c. 183, § 21, after amortgagor defaults in the performance of the underlying note, the mortgage holder maysell the property at a public auction and convey the property to the purchaser in fee simple, “and such sale shall forever bar the mortgagorand all persons claiming under himfrom all right and interest in the mortgaged premises, whether at law or in equity.” Evenwhere there is a dispute as to whether the mortgagor was in default or whether the party claiming to be the mortgage holder is the true mortgage holder, the foreclosure goes forward unless the mortgagor files an action and obtains a court order enjoining the foreclosure.”
2. The Court next addressed how state foreclosure laws must be strictly followed and complied with:
“Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, we adhere to the familiar rule that “one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there isno valid execution of the power, and the sale is wholly void.” Moore v. Dick, 187 Mass.207, 211 (1905). See Roche v. Farnsworth, 106 Mass. 509, 513 (1871) (power of sale contained in mortgage “must be executed in strict compliance with its terms”). See also McGreevey v. Charlestown Five Cents Sav. Bank, 294 Mass. 480, 484 (1936). One of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose. The “statutory power of sale” can be exercised by “the mortgagee or his executors, administrators, successors or assigns.” G.L. c. 183, § 21.Under G.L. c. 244, § 14, “[t]he mortgagee or person having his estate in the land mortgaged, or a person authorized by the power of sale, or the attorney duly authorized by a writing under seal, or the legal guardian or conservator of such mortgagee or personacting in the name of such mortgagee or person” is empowered to exercise the statutory power of sale. Any effort to foreclose by a party lacking “jurisdiction and authority” to carry out a foreclosure under these statutes is void.
3. The Court then discussed the Notice of Sale requirement (part of the foreclosure requirements mortgagees or their successors and assigns must follow) and how only the true owner can prompt the filing of the Notice of Sale:
“A related statutory requirement that must be strictly adhered to in a foreclosure by power of sale is the notice requirement articulated in G.L. c. 244, § 14. That statute provides that”no sale under such power shall be effectual to foreclose a mortgage, unless, previous tosuch sale,” advance notice of the foreclosure sale has been provided to the mortgagee, to other interested parties, and by publication in a newspaper published in the town wherethe mortgaged land lies or of general circulation in that town. “The manner in whichthe notice of the proposed sale shall be given is one of the important terms of the power,and a strict compliance with it is essential to the valid exercise of the power.”
(“where a certain notice is prescribed, a sale without any notice, or upon a notice lacking the essential requirements of the written power, would be void as a proceeding for foreclosure“).
“Because only a present holder of the mortgage is authorized to foreclose on the mortgaged property, and because the mortgagor is entitled to know who is foreclosing and selling the property, the failure to identify the holder of themortgage in the notice of sale may render the notice defective and theforeclosure sale void. (in this case the lender was not properly named in the notice of sale). See Roche v. Farnsworth, Roche v. Farnsworth, supra (mortgage sale void where notice of sale identified original mortgagee but not mortgage holder at time of notice and sale). See also Bottomly v. Kabachnick, 13 Mass.App.Ct. 480, 483-484 (1982)(foreclosure void where holder of mortgage not identified in notice of sale).
NOTE: WE SEE THIS ALOT WHERE ONE PARTY IS IDENTIFIED AS THE “OWNER” OR “BENEFICIARY” OF THE LOAN IN THE NOTICE OF DEFAULT OR NOTICE OF SALE, ONLY TO LATER LEARN ON THE FANNIE MAE OR FREDDIE MAC WEBSITE (OR A RESPONSE TO A QWR) WILL INDICATE THE “LENDER” OR “BENEFICIARY” IDENTIFIED IN THE NOTICE IS NOT THE REAL OWNER OF THE LOAN. HAPPENS ALOT.
4. The Court then discussed how the lender must prove it has the authority to foreclose if it wants clear title to the property purchased at the trustee sale:
“For the plaintiffs to obtain the judicial declaration of clear title that they seek, they had to prove their authority to foreclose under the power of sale and show their compliance withthe requirements on which this authority rests. Here, the plaintiffs were not the original mortgagees to whom the power of sale was granted; rather, they claimed the authority to foreclose as the eventual assignees of the original mortgagees. Under the plain language of G.L. c. 183, § 21, and G.L. c. 244, § 14, the plaintiffs had the authority to exercise thepower of sale contained in the Ibanez and LaRace mortgages only if they were the assignees of the mortgages at the time of the notice of sale and the subsequent foreclosuresale. See In re Schwartz, 366 B.R. 265, 269 (Bankr.D.Mass.2007) (“Acquiring the mortgage after the entry and foreclosure sale does not satisfy the Massachusetts statute”).[FN18] See also Jeff-Ray Corp. v. Jacobson, 566 So.2d 885, 886 (Fla.Dist.Ct.App.1990)(per curiam) (foreclosure action could not be based on assignment of mortgage dated four months after commencement of foreclosure proceeding).
Where a plaintiff files a complaint asking for a declaration of clear title after a mortgageforeclosure, a judge is entitled to ask for proof that the foreclosing entity was the mortgage holder at the time of the notice of sale and foreclosure, or was one of the partiesauthorized to foreclose under G.L. c. 183, § 21, and G.L. c. 244, § 14.
5. The Court next discussed proving ownership at the time of the notice of sale and at the time of the foreclosure in regard to securitized loans (loans that get pooled with other loans and assigned to a securitized loan trust):
“We do not suggest that an assignment must be in recordable form at the time of the notice of sale or the subsequent foreclosure sale, although recording is likely the better practice.Where a pool of mortgages is assigned to a securitized trust, the executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder. However, there must be proof that the assignment was made by a party that itself held the mortgage.
NOTE: We see a lot of assignments of the Deed of Trust from MERS who acts as a nominee of the lender. There is case law indicating an assignment of the deed of trust, without anything more (without the note) is a meaningless act that is null and void. In the Ibanez case there was an assignment of the deed of trust “in blank” to which the court responded: “We have long held that a conveyance of real property, such asa mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment.”
6. Next, the Court addressed the “security follows the note argument” which applies in most states, and the court rejected that theory in Massachusetts:
“Second, the plaintiffs contend that, because they held the mortgage note, they had asufficient financial interest in the mortgage to allow them to foreclose. In Massachusetts,where a note has been assigned but there is no written assignment of the mortgage underlying the note, the assignment of the note does not carry with it the assignment of the mortgage.”
NOTE: As in most cases we see, there is never any proof that the securitized loan trustee ever has the original note properly endorsed and assigned to them. This appears to be the case in Ibanez from what I can tell.
7. There were some additonal arguments made by the two banks that they were the owners of the loans at issue at the time of the notice of sale and foreclosure but the court did not buy it. Instead, the Court reached its conclusion:
“For the reasons stated, we agree with the judge that the plaintiffs did not demonstrate that they were the holders of the Ibanez and LaRace mortgages at the time that they foreclosed these properties, and therefore failed to demonstrate that they acquired fee simple title to these properties by purchasing them at the foreclosure sale.”
NOTE: As such, the Court held the foreclosure sales VOID, and refused to quiet title for the lenders. The lenders have of course appealed this decision.
8. Finally, the court dropped a BOMBSHELL and said the decision applies retroactively to all previously foreclosed homes:
“Finally, we reject the plaintiffs’ request that our ruling be prospective in its application. A prospective ruling is only appropriate, in limited circumstances, when we make asignificant change in the common law. We have not done so here. The legal principles and requirements we set forth are well established in our case law and our statutes. All that has changed is the plaintiffs’ apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.
9. A concurring judge also threw his two cents into the ring criticizing the banks for the mess they have created (which they still refuse to admit):
“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 BOTTOM LINE IS WELLS FARGO AND US BANK COULD NOT PROVE THE ASSIGNMENTS OF THE MORTGAGE WERE EFFECTUATED PRIOR TO THE NOTICE OF SALE OR FORECLOSURE SALE AND THIS BLUNDER RENDERED THE RESULTING FORECLOSURE SALE VOID.
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SOME THINGS TO THINK ABOUT FOR CALIFORNIA AND ARIZONA HOMEOWNERS:
(1) California and Arizona courts have rejected the “produce the note” or “show me the note” argument. In fact there is case-law contradicting this. California needs a ruling from a high court similar to the Massachusetts rule (which would be considered persuasive authority at best). But this case is great because it addresses the problem rather than turning a blind eye, and it sets down the precedent that the rule of law must be followed which is what we are striving so hard for.
(2) In Massachusetts, a retroactive application of the law means some homeowners who have already been foreclosed on will fight to get title back and get their homes back or sue for money damages against the so-called “lender.” Title companies are supposed to know and insure the title and so they face major liability.
(3) Since we never know when and if the next big foreclosure case will come in California or Arizona, homeowners facing foreclosure ought to think about performing a chain of title audit, securitization review and send out qualified written requests and other letters designed to ferret out the true owner of the loan, if one exists, in order to set up a bankruptcy adversary proceeding or other legal challenge to the alleged owner of your loan.
(4) As the court questioned in the Ibanez case, it is not clear what happens to a BFP (bona fide purchaser of value who purchases a property at a foreclosure sale with a defective title). Perhaps they will have to relinquish title and sue the title companies as well?
YES THIS IS TRULY A MESS AND THE LENDERS HATE TO ADMIT THEIR INVOLVEMENT IN THIS MESS. I HAVE SAID ALL ALONG, ONLY THE COURTS CAN SAVE HOMEOWNERS FROM THIS HOUSE OF CARDS SET UP BY THE LENDERS AND WALL STREET. THE IBANEZ CASE SHOULD HELP OTHER JUDGES UNDERSTAND THE LEGAL ISSUES INHERENT IN THE FORECLOSURE OF SECURITIZED LOANS.
Don’t stand for this people. It is time to start filing police reports and complaints with attorney generals. The banks have bought off the notaries who gave up their notary stamps for profits. We are conducting securitization audits, and chain of title audits, and we are finding fraudulent signatures and false notaries. We will shortly be exposing a GIGANTIC scam coming from one of the biggest foreclosure defense law firms in Arizona. We will be posting clear cut proof of false signatures and notary fraud ala David Stern law offices.
What we are finding is a bunch of false signatures, false statements in regard to who the “beneficiary” of your loan is, and other nonsense in the chain of title (assignments of deed of trust, substitution of trustee, notice of default, notice of sale and false affidavits) much of this supported by false notary stamps for sale to the lenders and their foreclosing agents. The problem has reached nationwide and epidemic proportion. Foreclosures are taking place without any real proof of loan ownership and without following foreclosure formalities. As Neil Garfield teaches, the financial house of cards is a “living lie” and as the Ibanez decision in Massachusetts shows, the house of cards will come tumbling down.
TAKE NO MORE – STAND UP FOR YOUR RIGHTS AND STRIKE OUT AGAINST THE FRAUD COMMITTED BY BANKS, LOAN SERVICERS, AND AT TIMES THE LAW FIRMS THAT BACK THEM. Start filing your complaints START RAISING YOUR VOICES.
Here is a California complaint form dealing with notary fraud. Google “Vondran Notary Fraud” we have talked about this unfortunate situation on other posts. It is time to start calling people out. IN TEXAS IT IS A CRIME TO LOSE YOUR NOTARY BOOK – WE ARE CALLING OUT NOTARIES IN TEXAS WHO SEEK TO DEPRIVE ARIZONA AND CALIFORNIA HOMEOWNERS OF THEIR LEGAL RIGHTS AND WHO SEEK TO SKIRT THE SYSTEM OF LAWS/
THESE NOTARIES COULD CARE LESS ABOUT YOU, ABOUT THE LAW, ABOUT THEIR LICENSES, ABOUT ANYTHING. ITS TIME TO STOP THEM IN THEIR TRACKS, STRIP THEIR LICENSES, GO AFTER THEIR NOTARY BOND, AND CHARGE THEM WITH AIDING AND ABETTING THE SECURITIZED “LENDERS” WHO NEVER LENT ANY MONEY AND WHO FORECLOSE ON YOU USING FRAUD TO SUPPORT THEIR ACTIONS.
MORE INFORMATION ABOUT FORECLOSURE DEFENSE CAN BE FOUND AT http://www.ForeclosureDefenseResourceCenter.com. Be sure not to miss our Foreclosure Radio Show on BlogTalkRadio.com (enter “Vondran Financial Meltdown” as a search term).
March 13, 2009 was supposed to be a victory for homeowners in Arizona. Facing allegations of consumer mortgage fraud, Countrywide agreed to develop and implement a loan modification program for Arizona borrowers making it easier for homeowners to keep their homes. Unfortunately, Countrywide, (now Bank of America) has repeatedly violated the agreement.
Attorney General Terry Goddard filed the complaint in Maricopa County Superior Court on December 17, 2010 after being flooded with complaints by Arizona homeowners. The complaint asks the court to hold Bank of America in contempt for violating the agreement and to order them to pay restitution to homeowners. Goddard stated, “Bank of America has been the slowest of all the servicers to ramp up loss mitigation efforts in response to the housing crisis. It has shown callous disregard for the devastating effects its servicing practices have had on individual borrowers and on the economy as a whole.”
Goddard also urged all homeowners who are in or are facing foreclosure to seek assistance as soon as possible. Homeowners can speak with HUD-approved housing counselors by calling the Arizona Foreclosure Prevention Helpline toll-free at 1-877-448-1211. Borrowers who believe they have been the victim of mortgage fraud or other foreclosure scams should contact the Attorney General’s office or contact a real estate attorney.
If you feel that you may be entitled to a relief under this settlement or have questions regarding how this settlement affects your home loan call the Law Offices of Steven C. Vondran. The Law Offices of Steven C. Vondran can offer legal help in the areas of predatory lending litigation, foreclosure defense, real estate, and bankruptcy.
Call The Law Offices of Steven C. Vondran Esq. if you have any questions about your rights during or after foreclosure. (877) 276-5084 or visit www.vondranlaw.com
THE BANKS CLAIM THEY DO NO WRONG – THEN SETTLE WITH VARIOUS STATE ATTORNEY GENERALS. WHAT GIVES?
On December 20, 2010 the California Attorney General reached a settlement agreement with Wells Fargo regarding the pick-a-pay loan program. The settlement requires Wells Fargo to provide loan modifications worth more than $2 billion to thousands of California homeowners with “pick-a-pay” loans and to pay an additional $32 million to thousands of borrowers who lost their homes through foreclosure.
Wells Fargo will offer affordable loan modifications to an estimated 14,900 California borrowers with “pick-a-pay” loans made by World Savings or Wachovia. Many of the modifications will include significant principal forgiveness. The total value of the modifications mandated by the settlement is projected to be more than $2 billion.
According to the California Attorney General, borrowers eligible for loan modifications should get a notice from Wells Fargo within the next two months. Borrowers who suffered foreclosures should be notified during the first six months of 2011. This may be great news for California borrowers who have a “pick-a-pay” loan or who were foreclosed on because they couldn’t afford their “pick-a-pay” mortgages.
If you feel that you may be entitled to a relief under this settlement or have questions regarding how this settlement affects your home loan call the Law Offices of Steven C. Vondran. The Law Offices of Steven C. Vondran can offer legal help in the areas of predatory lending, foreclosure defense, real estate, and bankruptcy law.
Call The Law Offices of Steven C. Vondran Esq. if you have any questions about your rights under this new settlement. (877) 276-5084
LOST IN THE FOREST? NEED A LOSS MITIGATION ROAD MAD?
We have been getting a fair number of people asking us what the general loan modification / loss mitigation review process is.
Although things may vary, here is a general overview:
(1) You will be reviewed for HAMP (Making Home Affordable). Sometimes we refer to this as “making homes disappear” given some of the bad numbers on HAMP. Here is some basic information on HAMP http://www.makinghomeaffordable.com/docs/MHA%20Brochure.pdf
(2) If you are not approved for HAMP (don’t meet the guidelines), you may then be considered for some other type of loan modification internally. This will be contingent upon whether the lender or loan servicer does internal mod programs.
(3) If you do not qualify for either of these two programs, you may be out of luck as far as a loan modification. Of course, there are also MHA UP or proprietary unemployment modifications that may assist you if you are not working at the time of applying for a loan modification. Here is a link to a story on the Unemployment Modification Programs: http://www.articlesbase.com/loans-articles/new-guidelines-for-unemploymnet-under-mha-program-2933888.html
(5) If you cannot qualify for the HAFA short sale (which should eliminate deficiency judgments as well), you will need to look at internal short sales and whether or not they will approve you for that. (This may require “investor” approval in many cases given the large number of securitized loans.
(6) If shorts sales is not an option, or an offer cannot be obtained from a buyer that is acceptable to the bank, you normally end up looking at deed-in-lieu of foreclosure as a last resort to avoid foreclosure.
(7) If deed in lieu of foreclosure (handing over the deed) is not an option (normally only an option where there is a first mortgage only), then you will likely to be referred out to foreclosure.
(8) Note: when you are dealing with non GSE’s (Fannie and Freddie loans), the Hamp Directive 10-02 requires that you be denied for HAMP before kicking you out to foreclosure. Here is a link to the 10-02 HAMP Borrower Outreach Directive: http://www.nacba.org/files/email/Supp_Dir_10-02.pdf
(9) The last step of course if facing foreclosure.
That is a general overview of the loss mitigation process. As I mentioned, these may vary by individual case. Happy New Years and thanks to all our readers and listeners to our Foreclosure Radio Show!
If you want to have your options reviewed, fill out our loss mitigation form at http://www.AttorneySteve.net (Sorry, California and Arizona properties only). We are once again taking Wachovia and World Savings Pick-a-Pay and Option Arm loans (negative amortization loans) on a CONTINGENCY FEE BASIS. You can check out our profile on ContingencyCase.com
WE MAY BE ABLE TO HELP YOU WITH YOUR TOXIC OPTION ARM LOAN (NEGATIVE AMORTIZATION – PICK-A-PAY LOAN). CALIFORNIA AND ARIZONA PROPERTIES ONLY!!
Vondran Law is proud to announce the return of our Wachovia and World Savings Pick-a-Pay (Option Arm / Negative Amortization) Loan CONTINGENCY FEE LOAN MODIFICATION SERVICE. We have previously discussed our Contingency Lawyer Service on our Foreclosure Radio show (you can hear clips at http://www.loanmodradio.com/podcasts). We had a great response and were getting fantastic results, UNTIL, the lender Wells Fargo shut the program down with short notice. Well, it looks like we may be back in business.
Here are the details of the program:
(1) If you have a World Savings or Wachovia Option Arm Loan (also known as a “Pick-a-Pay”) then your loan is an eligible loan.
(2) Simply fill out our form at http://www.AttorneySteve.Net in full and complete detail. I need your gross monthly income, monthly expenses and other information requested on this site. Please fill it out completely, as incomplete forms may not receive return phone calls.
(3) We will call to discuss our Contingency Fee Loan modification program.
(4) Basically the way the program works is you will be first qualified for a HAMP loan modification. We have talked about this loan modification program on other websites. If you qualify for HAMP, you will be given a three month trial plan period, which is required for all HAMP modifications. If you satisfy all three payments, you will be qualified one final time to ensure you still meet the HAMP eligibility requirements. If you do, there is a good chance you will receive a FINAL and PERMANENT HAMP modification.
(5) If you do NOT qualify for HAMP or meet the guidelines, (either initially or after the trial plan payments are made and you have the second HAMP qualification) you will then be reviewed for an Internal loan modification (such as the MAP II or some other internal program). If you meet the guidelines and qualifications for an internal program, you may receive a non-HAMP loan modification. In the past, we have been able to achieve principle loan balance reduction in a good number of files. This is all documented.
(6) If you do not meet the tests for either the HAMP loan modification, or a non-HAMP internal modification, then unfortunately you will be looking at a short sale, (ex. HAFA short sale or other internal short sale program) or Deed in Lieu of Foreclosure might be an option.
SO, IF YOU HAVE A WACHOVIA OR WORLD SAVINGS PICK-A-PAY OPTION ARM LOAN, CONTACT US TO DISCUSS YOUR CASE, AND OUR CONTINGENCY FEE LOAN MODIFICATION PROGRAM. WE DO NOT TAKE ALL LOANS, BUT IF YOU HAVE ONE OF THESE LOANS, YOU STAND A FIGHTING CHANE TO SAVE YOUR HOME FROM FORECLOSURE. NO RESULTS OF ANY KIND, INCLUDING PRINCIPLE LOAN REDUCTION ARE EVER PROMISED, OR GUARANTEED. PAST RESULTS ARE NOT ANY INDICATOR OF RESULTS YOU CAN EXPECT. WE POINT THIS OUT AS A MATTER OF REFERENCE ONLY.
In general, there is all kinds of crazy stuff going on. False declarations, false signatures, false notary stamps, foreclosing when people are in the HAMP plan and being told the sale was on hold, HAMP trial plan SCAMS, bogus Assignments of Deed of Trust purporting to transfer the “notes therein” as well when the transferor clearly doesn’t have the note, filing motions to lift the automatic stay in bankruptcy with only a Deed of Trust as proof of standing and the right to do that, failure to respond to RESPA and TILA demands (yes, legal rights borrowers have), etc. etc. etc. And yet, the big banks will insist they are following the letter of the law (while also settling with State Attorney Generals for millions of dollars), etc. etc. etc., Can this be referred to anything other than FORECLOSUREGATE? Oh and by the way, guess who set this system up in the first place and sold negam and stated income loans, and interest only loans like hot-cakes? Was that the borrowers too. Steve Vondran, Esq.
UNTIL THE LENDERS CAN PLAY FAIR IN REGARD TO LOAN MODIFICATIONS, FOLLOW THE LAW OF FORECLOSURE, AND OTHERWISE BRING INTEGRITY INTO THE SYSTEM, THEY SHOULD “COOL THEIR FORECLOSURE ENGINES”
(1) WHERE IS THE NOTE? The Lender’s cannot show they have the note in most cases where a securitized loan is involved. Without being able to produce an original copy of the note, there can be no right to collect the debt, and no “secured” interest permitting foreclosure. Tiny detail the lenders hope goes unnoticed, and which has gone unnoticed in most non-judicial foreclosure states. What this also means, is that so called “lenders” are filing motions to “lift the automatic stay in bankruptcy” where they cannot legally prove they are entitled to enforce the debt. Often, this goes unchallenged by bankruptcy lawyers.
(2) BOGUS LOANS LEADING TO INCREASED FORECLOSURES. The so-called “lenders” created the foreclosure mess by originating loans to anyone with a pulse who could fog a mirror, now the glut of foreclosures is killing the marketplace and reducing values of homeowners who are paying their mortgage.
(3) BAILOUT ABUSE. The lenders and servicers were bailed out with taxpayer funds and these funds were supposed to be used for loan modification, instead it appears they are using the money to appease loan investors so they do not get their pants sued off for selling worthless mortgages to wall street investors. These financial institutions should be forced to modify where legitimate hardships are shows, and the ability to afford a reasonable mortgage, based on current interest rates, is present.
(4) MERS NONSENSE. MERS is transferring Deeds of Trust and the “notes therein” when MERS has never held any promissory note. The transferring of a Deed of Trust by itself is a legal mullity. If the “lenders” don’t have the note, (as discussed above) or the Deed of trust (the security to foreclose via the power of sale), then there should be no foreclosure.
(5) ROBOSIGNER EPIDEMIC. Where banks have to cheat and have people singing documents without reading them, making declarations when there is no personal knowledge, or having notaries put their notary stamp on documents where the signor of the document did not actually appear before them or present identification, no foreclosure should be allowed to proceed. These large financial institutions need to figure out how to comply with the law before foreclosing on people.
(6) FRAUD IN THE CHAIN OF TITLE. False declarations of compliance with California Foreclosure laws, 2923.5 declarations and robosingers on critical foreclosure documents such as Notice of Default, Notice of Sale, Susbtitution of Trustee, and Assignment of Deed of Trust (often using “Vice Presidents” who never worked for any of the companies they are purporting to sign on behalf of), etc. These shenanigans taint the foreclosure process, and no foreclosure should proceed before the law is followed. We are a nation of laws, not men.
(7) HAMP SCAMS. Lender and Loan servicers engage in HAMP scam and HAMP fraud. Making people believe they qualify for a loan modification, when objectively speaking, they do not. Or, even where borrowers do qualify, they are given the HAMP trial plan (sucking out additional mortgage payments) and then foreclosing anyway.
(8) NOTARY FRAUD. Now, when challenged with the above shenanigans, we are finding notaries that are claiming “we cannot find our transaction log” even though they have an obligation to keep their notary records. To me, some notaries are aiding and abetting in foreclosures that do not comply with the letter of the law.
(9) ATTORNEY GENERAL LAWSUITS. Why should lenders be allowed to proceed in foreclosures when they are settling foreclosure and predatory lending lawsuits with a large number of State Attorney Generals who are calling them out for their lending practices that are crippling the economy of many states? The lenders settles these cases for millions of dollars, and then go right back to cranking up the foreclosure machine and telling everyone else (including judges), that they have done nothing wrong. As longs as they are speaking out both sides of the mouth, and we know they are owning up to wrongdoing, they should not be allowed to continue foreclosing on people who are victims of the mess the lenders created.
(10) INTEGRITY IN THE SYSTEM. Until the above problems get fixed, Americans, and even foreign investors, cannot have realistic confidence in the integrity of our financial markets. Now this is not to say that foreclosures should halt indefinitely, but until such time as the law can be followed, and bailout money be put to legitimate uses, and until the lenders care more about communities than in their own personal financial gain (remember all the big bonuses that they are paying themselves with YOUR tax dollars) they should not be permitted to run around and rape and pillage California and Arizona communities.
TIME FOR COMPLIANCE WITH NEW FTC ADVANCE FEE RULE (FOR LOAN MODIFICATIONS, SHORTS SALES, AND DEED IN LIEU, ETC.) IS DRAWING NEAR. December 29, 2010 (general provisions)and January 31, 2011 (for advance fee rules).
NEW FTC RULE PROHIBITS COLLECTION OF ADVANCE FEES FOR LOAN MODIFICATIONS AND SHORT SALES
We have talked in great deal over the past couple of years about all of the loan modification scams and bogus loan mod companies and fraud artists who made tons of money pretending they were going to modify loans, when in fact, they were not doing much work at all. There was one attorney in particular that was disbarred after having made false statements regarding his firms services (ex. touting principle reductions etc.) and he collected over 11 million dollars before the FTC finally caught up with their dubious practices. Yes, the loan mod business brought out all the sharks, with a lot of false claims made to homeowners who are desperate for the “rescue” and willing to part with their hard earned money when a “sales pitch” says the right things.
We have had people asking us for years what our “success rate” is. We always tell them the same thing….every loan and lender is different and success rates cannot be predicted, and are unreliable and misleading. Many firms touted 99% success rates or something similar with little proof of any real results. Point is, the loan modification business was in shambles. In October of 2009, California state legislature stepped up with SB94 and said NO MORE ADVANCE FEES could be charged, collected, demanded, etc. (by anyone, including attorneys). This stroke of the Governor’s pen effectively stripped a homeowners legal right to contract with a loan modification company to do what the homeowner may not have wanted to do (for example, call their lender Monday through Friday and hang on the phone line for 45 minutes waiting to discuss the status of their loan mod application).
Most loan modification companies (including foreclosure defense lawyers) are not likely to take a loan modification case if they cannot collect advance fees. Why is this? A few main reasons:
(1) Loan modifications are unpredictable, especially with so many securitized loans (estimated to be 60% of all loans), and pooling and servicing agreements can make modifications tough, if not impossible
(2) If we get a loan modification, it is not always certain the borrower will like the terms offered (especially when there is no principle reduction offered), if they don’t like it, it will be tough to collect. We have been stiffed for legal fees several times, resulting in further action being required.
(3) Even if a borrower is happy with the loan modification, they may have other pressing bills and the client may put their other needs (ex. food, medical bills, credits card bills etc.) ahead of paying for the modification.
There are other reasons, but this highlights why most companies may not be willing to perform loan modifications, leaving the homeowner unrepresented against his or her lender or loan servicer.
The end result is that the homeowners generally end up representing themselves against the powerful lenders. It should come as no surprise that this is exactly what the lenders and their powerful lobbys want. You taking everything they say at face value, without legal representation. Our firm, for example, no longer represents California homeowners in loan modification services.
No advance fees may be collected by any loan modification or mortgage rescue firm for the purposes of obtaining a loan modification
Attorneys are exempt from the final rule if they practice law, and take clients only in the state where they are licensed to practice law, and if the out the funds collected in a trust accounting subject to trust account rules. Note, the attorney must also comply with any state law rules related to advance fees (for example, in California this means presently that even California foreclosure lawyers cannot accept an advance fee per SB94)
For companies that do not collect advance fees, they must advise the Client that they have the right to reject any loan modification obtained, and to not have to pay if they reject the modification (yes, this makes it real tough, many times the homeowner is not 100% happy or content with the loan modification they receive and this gives them legal grounds not to have to pay for services rendered)
Loan modification companies must make it clear in advertisements that they aren’t affiliated with the government (there was a problem with a lot of companies pretending to be “Federal Loan Mod Company” which mislead a good deal of consumers.
If advance fees are collected, the fee must be disclosed
The loan modification company cannot inform a borrower/client that they cannot speak to their lender or loan servicer (many scam companies did this so the borrower would not contact the lender for status updates and to see what was being done – or not done should we say – on the client’s loan mod application.
Prohibits material misrepresentations regarding the mortgage relief service company activities
WHO IS COVERED BY THIS LAW (WHO MUST COMPLY)? Generally speaking, any “for-profit” company aiding residential homeowners in a variety of loss mitigation efforts. Here is what the rule says:
B. Section 322.2: Definitions
1. Section 322.2(i): Mortgage Assistance
Relief Service
As discussed above, the Rule is
intended to regulate for-profit providers
of mortgage assistance relief services.
Section 322.2(i) of the Rule adopts,
without substantive modification, the
proposed rule’s definition of ‘‘mortgage
assistance relief service’’ (MARS) as
including ‘‘any service, plan, or
program, offered or provided to the
consumer in exchange for consideration,
that is represented, expressly or by
implication, to assist or attempt to assist
the consumer’’ in negotiating a
modification of a dwelling loan that
reduces the amount of interest,
principal balance, monthly payments, or
fees; stopping, preventing, or
postponing a foreclosure or
repossession; or obtaining one of several
other types of relief to avoid
delinquency or foreclosure. Sections
322.2(i)(3)–(6) define these additional
types of relief to include obtaining: (1)
A forbearance or repayment plan; (2) an
extension of time to cure default,
reinstate a loan, or redeem a
property; 106 (3) a waiver of an
acceleration clause or balloon payment;
and (4) a short sale, deed-in-lieu of
foreclosure, or any other disposition of
the property except a sale to a thirdparty
that is not the loan holder.107 The
Rule covers instances in which a third
party itself works with lenders or
servicers to obtain mortgage relief as
well as instances in which a third party
markets services to aid consumers who
themselves work with lenders or
servicers to obtain relief.108
Accordingly, § 322.2(i) is intended to
apply to every service MARS providers
offer,109 expressly or by implication, for
the purpose of obtaining loan
concessions, avoiding foreclosure, or
saving their homes.
AS WE HAVE BEEN TELLING PEOPLE FOR YEARS: MAKE SURE YOU DO NOT PAY ADVANCE FEES FOR LOAN MODIFICATIONS TO CALIFORNIA LOAN MODIFICATION COMPANIES, OR EVEN CALIFORNIA LOAN MODIFICATION ATTORNEYS AS SUCH IS PROHIBITED BY CALIFORNIA SB94.
IF YOU ARE IN A STATE LIKE ARIZONA WHICH STILL PERMITS ADVANCE FEES TO LOAN MODIFICATION LAWYERS, MAKE SURE THE LAWYER USES A TRUST ACCOUNT AND MAKE SURE YOU DO NOT PAY ADVANCE FEES TO ANY LOAN MODIFICATION COMPANY REGARDLESS OF WHAT STATE THE MORTGAGE RELIEF COMPANY MAY BE LOCATED IN. THE FTC RULE COVERS ALL COMPANIES ACROSS THE UNITED STATES. SO DO YOUR HOMEWORK BEFORE CHOOSING A FORECLOSURE COMPANY.
WHY IS IT THE LENDERS ALWAYS CAVE IN TO THE VARIOUS STATE ATTORNEY GENERALS AND THEN TELL EVERYONE ELSE THEY ARE FOLLOWING THE LETTER OF THE LAW?
On December 20, 2010 the California Attorney General reached a settlement agreement with Wells Fargo regarding the pick-a-pay loan program. The settlement requires Wells Fargo to provide loan modifications worth more than $2 billion to thousands of California homeowners with “pick-a-pay” loans and to pay an additional $32 million to thousands of borrowers who lost their homes through foreclosure.
Wells Fargo will offer affordable loan modifications to an estimated 14,900 California borrowers with pick-a-pay loans made by World Savings or Wachovia. Many of the modifications will include significant principal forgiveness. The total value of the modifications mandated by the settlement is projected to be more than $2 billion.
According to the California Attorney General, California borrowers eligible for loan modifications should get a notice from Wells Fargo within the next two months. Borrowers who suffered foreclosures should be notified during the first six months of 2011. This may be great news for California borrowers who have a pick-a-pay loan or who were foreclosed on because they couldn’t afford their pick-a-pay mortgages.
The Law Offices of Steven C. Vondran can offer legal help in the areas of foreclosures, foreclosure defense, real estate issues and bankruptcy.
Call The Law Offices of Steven C. Vondran Esq. – Happy Holidays!!
(877) 276-5084
HELP – CAN SOMEONE HELP ME FIND MY LOST NOTARY TRANSACTION LOG?
Typically when we are conducting a “robosigner” chain of title audit, we will inspect the signatures of people signing the various documents that you see in a chain of title (Notice of Default, Notice of Sale, Assignment of Deed of Trust, Substitution of Trustee, etc.). The so-called robosigner audit has fueled this problem. Yes, someone will sign a document purporting to be John Doe, only to learn that it was not John doe signing the foreclosure related document. Even so, the Notary will allow their notary stamp to be used to basically falsely verify that the signature is valid and making no requirement that the signed of the document physically appear and have their credentials verified.
For the big lenders, this is simply a “technicality” that doesn’t really matter. To us attorneys, the law is being broker, manipulated, and spit on in the name of “rush to foreclosure.” We talk more about this on http://www.RobosignerAudits.com.
Typically, we will send out “Notary Validation Letters” demanding that the notary provide a copy of the notary transaction log for a particular document. Well, it seems some of the Notaries (who just so happen to be “employees of the bank”) have LOST THEIR NOTARY BOOKS WHICH IS A LEGAL REQUIREMENT FOR THEM TO KEEP.
Here is the California Law on that point (California Government Code Section 8206):
(a) (1) A notary public shall keep one active sequential
journal at a time, of all official acts performed as a notary public.
The journal shall be kept in a locked and secured area, under the
direct and exclusive control of the notary. Failure to secure the
journal shall be cause for the Secretary of State to take
administrative action against the commission held by the notary
public pursuant to Section 8214.1.
(2) The journal shall be in addition to, and apart from, any
copies of notarized documents that may be in the possession of the
notary public and shall include all of the following:
(A) Date, time, and type of each official act.
(B) Character of every instrument sworn to, affirmed,
acknowledged, or proved before the notary.
(C) The signature of each person whose signature is being
notarized.
(D) A statement as to whether the identity of a person making an
acknowledgment or taking an oath or affirmation was based on
satisfactory evidence. If identity was established by satisfactory
evidence pursuant to Section 1185 of the Civil Code, the journal
shall contain the signature of the credible witness swearing or
affirming to the identity of the individual or the type of
identifying document, the governmental agency issuing the document,
the serial or identifying number of the document, and the date of
issue or expiration of the document.
(E) If the identity of the person making the acknowledgment or
taking the oath or affirmation was established by the oaths or
affirmations of two credible witnesses whose identities are proven to
the notary public by presentation of any document satisfying the
requirements of paragraph (3) or (4) of subdivision (b) of Section
1185 of the Civil Code, the notary public shall record in the journal
the type of documents identifying the witnesses, the identifying
numbers on the documents identifying the witnesses, and the dates of
issuance or expiration of the documents identifying the witnesses.
(F) The fee charged for the notarial service.
(G) If the document to be notarized is a deed, quitclaim deed,
deed of trust affecting real property, or a power of attorney
document, the notary public shall require the party signing the
document to place his or her right thumbprint in the journal. If the
right thumbprint is not available, then the notary shall have the
party use his or her left thumb, or any available finger and shall so
indicate in the journal. If the party signing the document is
physically unable to provide a thumbprint or fingerprint, the notary
shall so indicate in the journal and shall also provide an
explanation of that physical condition. This paragraph shall not
apply to a trustee’s deed resulting from a decree of foreclosure or a
nonjudicial foreclosure pursuant to Section 2924 of the Civil Code,
nor to a deed of reconveyance.
NOW, WE HAVE BEEN DISCUSSING THE “PRODUCE THE NOTE” FORECLOSURE DEFENSE FOR SOME TIME NOW AND THE JUDGES RESPONSE TO THAT. NOW WE ARE ARGUING TO “PRODUCE THE NOTARY LOG” AND PROVE THOSE SIGNATURES ARE FROM WHO THEY SAY THEY ARE.
SEEMS THE NEW RESPONSE IS FOR THE BANK TO RESPOND BY SAYING “WE LOST THE NOTARY LOG” (WHICH IS A LETTER WE JUST RECEIVED FROM CAL-WESTERN RECONVEYANCE. WE HAVE HEARD OF “LOST NOTE AFFIDAVITS” NOW WE HAVE “LOST LOG LETTERS.” THE FORECLOSURE SCAM CONTINUES THIS TIME WITH A TWIST.
The letter from the Notary said she lost her notary logs and cannot find them. She also stated she was notifying the Secretary of State that her log book was lost (supposedly because they were “moving offices”). What will they try next?
As required by law the Notary advised us that she would be notifying the California Secretary of State who may, but let’s be honest, probably won’t discipline her or take her license – who knows.
(b) If a sequential journal of official acts performed by a notary
public is stolen, lost, misplaced, destroyed, damaged, or otherwise
rendered unusable as a record of notarial acts and information, the
notary public shall immediately notify the Secretary of State by
certified or registered mail. The notification shall include the
period of the journal entries, the notary public commission number,
and the expiration date of the commission, and when applicable, a
photocopy of any police report that specifies the theft of the
sequential journal of official acts.
The public also has a legal right to request a copy of the log:
(c) Upon written request of any member of the public, which
request shall include the name of the parties, the type of document,
and the month and year in which notarized, the notary shall supply a
photostatic copy of the line item representing the requested
transaction at a cost of not more than thirty cents ($0.30) per page.
The law is clear – it is the NOTARYS BOOK, not the EMPLOYERS.
(d) The journal of notarial acts of a notary public is the
exclusive property of that notary public, and shall not be
surrendered to an employer upon termination of employment, whether or
not the employer paid for the journal, or at any other time.
ANYWAY, WHO SHOULD BE SURPRISED AT ANYTHING ANYMORE ABOUT WHAT THESE GOOFY FINANCIAL INSTITUTIONS ARE WILLING TO DO TO COVER THEIR FRAUD. JUST KEEPING ALL YOU CALIFORNIA AND ARIZONA PROPERTY OWNERS ADVISED AS TO WHAT WE ARE SEEING IN THE TRENCHES OF THIS FRAUDULENT FINANCIAL MELTDOWN.
Jackson v. US Bank Nat’l Ass’n Trustee (In re Jackson), 245 B.R. 23 (E.D. Penn. 2000)
Facts: Pauline M. Jackson, a widow and mother of five dependent children, was contacted by All Star Remodeling Inc. (“All Star”) about possible home improvement work. At the time, Ms. Jackson had no mortgages on her house and was in desperate need for new windows. The representative for “All Star” quoted an estimate over $3,300 for the total cost of supplying and installing seven new windows. Ms. Jackson told the All Star representative that she could not afford the cost and believed that she could not get a loan either. In response, the All Star representative stated that he would get her a loan. Accordingly, they wrote up a signed contract for the seven new windows at a cost of $3,351.
Shortly after signing the contract, MLM (Finance/Mortgage Company) contacted Ms. Jackson about getting her a loan. After several phone conversations she was given an appointment to go to the offices of MLM where should would obtain and sign for the loan. Prior to arriving at the offices of MLM, Ms. Jackson never received any paperwork about the loan and did not know the loan amount or fees associated with the loan.
Per the conditions of the loan, Ms. Jackson ended up obtaining a loan to pay for $3,351 worth of windows (the loan check went directly to All Star) the borrower would have paid over $50,000 over the life of the loan. Which is why they loan was considered to be a HOEPA loan.
On April 1999, almost two years after obtaining the loan from MLM, Ms. Jackson filed for Chapter 13 Bankruptcy. By now, the loan had been sold to U.S. Bank. The defendant bank filed for relief from automatic stay to foreclose the same mortgage for defendant assignee as that apparently held by defendant mortgagor. However, Ms. Jackson filed an adversary proceeding under Truth in Lending Act (TILA), specifically the HOEPA Amendments to TILA.
Legal Issues:
I.Did Defendants (MLM, FCF and subsequently US Bank as assignee of the loan) violate the HOEPA amendments of TILA and if so what damages are appropriate to award Ms. Jackson?
II.Can an assignee of a loan be held liable for damages that flow from TILA violations?
III.What damages are available from TILA violations?
IV.Who bears the burden of proof in a TILA dispute?
Holding: The Bankruptcy Court held that the loan was in essence akin to “equity stripping” and determined that Ms. Jackson had attempted to exercise a valid rescission under TILA. In addition, the Court found that the Defendant’s violated the disclosure requirements under HOEPA/TILA. The Court awarded: (1) termination of the holder’s security interest in the borrower’s residence; (2) statutory damages of $2,000 for failing to properly respond to the rescission demand; (3) a penalty measured by recoupment against the remaining unsecured claim on account of the original disclosure violations ($3,800); (4) elimination of all finance charges; (5) elimination of the debtor’s entire obligation to the creditor; (6) recovery of all payments made; and (7) recovery of reasonable attorney’s fees and costs by the successful borrower’s counsel. In short, she took the lender to the cleaners!!
Rationale: The court held that the assignee of a loan can and will be held liable for all of the damages that flow from the Truth in Lending Act, 15 U.S.C.S. § 1601 et seq., and for ignoring a valid rescission request for a Home Ownership Equity Protection Action (“HOEPA”) loan, but no total of damages greater than these set forth in 15 U.S.C.S. § 1641(d)(2),
Additionally, pursuant to 15 U.S.C.S. § 1635(c), a borrowers written acknowledgment of receipt of any disclosures does no more than create a rebuttable presumption of delivery. This presumption may be rebutted by credible testimony of a debtor that the disclosures were not given or received, even where a disclosure statement is produced. Once a debtor has provided an affidavit or testimony that he or she did not receive certain documents, it is incumbent upon the creditor (burden shifts back) to produce some positive evidence that delivery of the documents occurred.
In this case, the testimony of Ms. Jackson and her fiancée was enough to rebut the presumption created by the signed documents held by the Defendants, which stated that the borrowers received all required documents per TILA. In addition, because this loan was a HOEPA loan the statute of limitations had not run and the Defendant’s only defense would be denial of knowledge that this was a HOEPA loan.
Conclusion: The remedies generally available under the Truth in Lending Act, 15 U.S.C.S. § 1601 et seq., for valid but ignored rescissions of Home Ownership Equity Protection Action loans include: (1) termination of the holder’s security interest in the borrower’s residence; (2) statutory damages for failing to properly respond to the rescission demand; (3) a penalty measured by recoupment against the remaining unsecured claim on account of the original disclosure violations; (4) elimination of all finance charges; (5) where equitable to do so, elimination of the debtor’s entire obligation to the creditor; (6) recovery of all payments made; and (7) recovery of reasonable attorney’s fees and costs by the successful borrower’s counsel.
Analysis: This case represents a strong reason for having your previous loan transaction audited by a foreclosure defense lawyer. You may have valid Truth in Lending (“TILA”) rescission rights, that could greatly benefit in a bankruptcy, or non-bankruptcy setting.
WHAT IS HOEPA?
HOEPA is the Home Ownership Equity Protection Act. It is part of the Truth in Lending Act or TILA. This amendment protects especially vulnerable homeowners from potential predatory lending at the hands of creditors and lenders who may seek to abuse them or engage in predatory lending practices.
Here is a brief summary of the HOEPA amendment.
HOEPA
HOEPA is an amendment to TILA that deals with the substantive abuses of creditors offering alternative, typically high interest rate, home loans to residents in certain geographic areas. The statute was enacted to ensure that consumers most vulnerable to abuse would be afforded a safety net without impeding the flow of credit altogether.
Triggers for HOEPA Coverage
APR more than 10% above comparable Treasury security rate (8% on first-lien loans closing on or after October 1, 2002) on the 15th day of the month before the lender received the loan application. 12 C.F.R. 226.32(a)(1)(i); 66 Fed. Reg. 65,617 (2001). (For Treasury rates, see U.S. Government Securities);
“Points and fees” exceeding 8% of the “total loan amount.” 12 C.F.R. 226.32(a) (1) (ii).
Some examples of Points are:
All prepaid finance charges. 12 C.F.R. 226.32(b) (1) (i);
All compensation paid to mortgage brokers. 12 C.F.R. 226.32(b) (1) (ii);
All items paid to the lender or to a lender affiliate. 12 C.F.R. 226.32(b) (1) (iii);
Disclosure Requirements
A special HOEPA disclosure notice must be delivered to the consumer at least three business days prior to the closing of the loan. 15 U.S.C. § 1639(b); 12 C.F.R. 226.31(c). A signed statement to the effect that the consumer received the HOEPA notice creates a refutable presumption only. 15 U.S.C. § 1635(c). The notice must inform the consumer that he need not enter into the loan, and that if he does enter the loan, he could lose his home and any money he has put in it. 15 U.S.C. § 1639(a); 12 C.F.R. 226.32(c) (1). The notice must also include an accurate statement of APR, monthly payment and balloon payment amount, and maximum payment amount on a variable-rate loan. 15 U.S.C. § 1639(a) (2); 12 C.F.R. 226.32(c) (2)-(4); Official Staff Commentary 12 C.F.R. 226.32(c) (3)-2.
Prohibited Terms
The following terms are prohibited (or limited) by the statute and Regulation Z: prepayment penalties, default interest rate, balloon payments, negative amortization, prepaid payments, improvident lending, and direct payments to home improvement contractors. 15 U.S.C. § 1639(c)-(h); 12 C.F.R. 226.32(d).
Remedies
Failure to deliver the required HOEPA notice or inclusion of a prohibited term triggers an extended (three-year) right of rescission (described above). 15 U.S.C. § 1639(j); 12 C.F.R. 226.23(a) (3) n.48.
In addition to regular TILA monetary damage remedies, HOEPA violations give rise to “enhanced” monetary damages under 15 U.S.C. § 1640(a)(4), namely, all payments made by the borrower.
Tip: Remember that if you have a HOEPA rescission case, this effectively gives you double deduction– you get to deduct all payments made twice before getting to your “HOEPA-adjusted” tender amount (once in calculating the TILA tender amount, and once in calculating HOEPA damages). Also, if you’re beyond three years and can’t rescind, you can still raise a HOEPA claim and deduct all payments made in the nature of defensive recoupment.
As with any TILA violation, the rescission remedy runs against any assignee of the loan. 15 U.S.C. § 1641(c). In addition, where the loan documents demonstrate that the loan is covered by HOEPA coverage, assignees “shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor.” 15 U.S.C. § 1641(d) (1). This provision mirrors the FTC Holder Rule and creates assignee liability for all state and federal claims and defenses. For monetary damages claims under TILA, it provides an exception to general rule that violations must appear on the face of the documents.
Statute of Limitations
1 year for affirmative claims. 15 U.S.C. § 1640(e);
3 years for rescission. Beach v. Owen, 523 U.S. 410 (1998);
Unlimited as a defense to foreclosure in the nature of a recoupment or setoff.
_____________________________________________________________________________________
NOTICE:
The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case you should seek out the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. Law is always changing. The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).
WILL THE REAL ASSIGNEE OF THE LOAN PLEASE STEP FORWARD AND ACCEPT YOUR LIABILITY UNER TILA?
Problem: 60% of loans are said to have been securitized. Meaning, the loan was transferred into a loan pool with 1,000′s of other loans and sold to investors on Wall Street.
Legal Issue: When someone wants to rescind their loan (and get their money back from the lender or loan assigneee, who do you go after?). Who do you name in the lawsuit.
Answer: Generally speaking, the Trustee of the trust should be named in the TILA rescission lawsuit, as should any interim assignee of the loan, and even the loan servicer if the loan servicer was also once the holder of the loan.
Let’s take an example from a TILA lawsuit we are working on. The alleged “investor” (following a QWR) was Wells Fargo and the loan Servicer was OneWest bank. After we sued these companies, they informed us that HSBC was the “trustee” of the securitized loan trust that allegedly contained our clients loan, and they urged us to dismiss Wells and OneWest and to pursue only HSBC. The problem with that approach is, we have no clue who owns the loan or holds the note and this is usually a mystery even these so-called “lenders” cannot figure out. So we dismiss noone and add HSBC to the lawsuit seeking to rescind the loan.
Let’s look at some case law dealing with this interesting situation involving rescinding a securitized loan.
(1) Myers v. Citicorp Mortg. Inc., 878 F.Supp. 1553, (1995). EVEN SHORT TERM INTERIM ASSIGNMENTS LEADS TO TILA LIABILITY.
In this case Citicorp contended that it was not an assignee of Plaitniff’s loan, and should not be held liable under the Truth in Lending Act. They based their argument on the fact that when it contracted to buy the rights to service the Resource mortgages, including the mortgage at issue here, Freddie Mac already owned the notes and mortgages themselves, pursuant to the sale and the unrecorded assignment. Citicorp therefore argued that Resource did not have any ownership rights in the notes and mortgages that it could have transferred to Citicorp. With no ownership interest, the notes and mortgages were at all times after Resource’s assignment to Freddie Mac the property of Freddie Mac. Citicorp contended that all Resource owned was the servicing rights and, therefore, that is all that it could assign.
The Court addressed this argument:
“However, upon careful review of the documents and briefs of the parties, it appears uncontested that at some point following the sale of servicing rights to Citicorp, Resource retrieved the unrecorded assignment from Freddie Mac, in compliance with Freddie Mac’s procedure. At this time, Resource was already the record owner of the note and mortgage. When it retrieved the assignment, however, it also became the actual owner of the mortgage and the debt it secured.”
The Court continued:
“Pursuant to the contracts involved, Resource promptly assigned the mortgages to Citicorp. The language in the document memorializing this transaction is plain. Titled an “Assignment of Mortgage,” it states that “For value received, the undersigned, Resource Bancshares Mortgage Group, Inc. … does hereby grant, bargain, sell, convey and assign unto Citicorp Mortgage, Inc. … that certain mortgage executed by the Myers together with the debt thereby secured, the note therein described and all Interest of the undersigned in and to the lands and property conveyed by said mortgage.” Citicorp recorded this assignment, and promptly reassigned the mortgage to Freddie Mac, using the same language in that document. The assignment from Citicorp to Freddie Mac was, as noted above, not recorded. Based on the documents before the court, it is clear that Citicorp was at one time, if only for an instant, an assignee of a creditor. To hold otherwise would be contrary to the purpose of the Truth in Lending Act.Designed to protect consumers, the Act requires entities that receive assignments of mortgages to be sure that there are no TILA violations on the face of the document. To be sure, assignees are not liable to the same extent as creditors, however, clear violations, those “on the face” of the disclosure statements, will create liability in the assignee. See Meyers v. Clearview Dodge Sales, Inc., 539 F.2d 511, 515 (5th Cir.1976); FN2 cert. den. 431 U.S. 929, 97 S.Ct. 2633, 53 L.Ed.2d 245 (1977).
“Additionally, to hold that Citicorp was not an assignee would mean that the documents that moved from Freddie Mac to Resource, and from Resource to Citicorp, and finally from Citicorp to Freddie Mac, were never intended to have the legal consequences that their language clearly carries. To so hold would essentially label these exchanges as some sort of legal smoke screen without design or purpose. Obviously this is not the case, nor is this argument advanced by either side. The court will therefore presume the documents to have the plain legal ramifications that their language purports to give them.”
“Citicorp argues that it only received the assignment from Resource because it was required by a quirk in Freddie Mac’s operating procedure. It further contends that it never had any intention of owning the loan itself, since it planned to, and did, immediately re-assign the mortgages to Freddie Mac. Citicorp has contended that the reason for this procedure is so that Citicorp appears as record owner of the mortgage and therefore receives notice of subsequent activity, such as liens. A full explanation as to why Freddie Mac requires this circuitous pattern of assignments when there is a sale of servicing rights is not before the court. It seems entirely possible, however, that the reasons might include forcing a servicing agent to come within the provisions for assignee liability under § 1641, thereby requiring a servicing agent in this circumstance to be sure that no violations of the TILA are apparent on the face of the instrument. As stated, that matter is not before the court and the court therefore does not rest its decision on speculation as to Freddie Mac’s purposes.”
The Court wrapped up its analysis with this:
“It is not necessary to speculate, however, as to Citicorp’s status as an assignee. The documentary evidence clearly establishes that Citicorp received an assignment of the Myers’ mortgage, note, and debt from Resource. It therefore is, under the terms of the TILA, an assignee of a creditor. As such, should it be determined that there is a violation of the TILA that appears on the face of the document, Citicorp would be properly held jointly and severally liable for that violation.”
“See Greenlee v. The Sterling Wheel, Inc., 693 F.Supp. 1396, 1398 (D.Ct.1988), which held that liability of assignee for disclosure violation apparent on the face of the instrument is joint and several.”
In re Jackson, 245 B.R. 23, Bkrtcy.E.D.Pa. (2000). CHAPTER 13 TILA LOAN RESCISSION CASE. PLAINTIFF SOUGHT TO RESCIND LOAN IN BANKRUPTCY. ASSIGNEES ARGUED THEY WERE NOT LIABLE. COURT HOLDS USB LIABLE FOR HOEPA VIOLATION.
The Court discussed:
“The Complaint attacks Wilshire’s proof of claim, alleging that the Complaint itself effects a demand for, inter alia, rescission under HOEPA and the TILA, of the underlying loan transaction of March 18, 1997, between the Debtor and MLM, which was initially assigned to Cityscape and ultimately to USB, whose servicing agent is Wilshire. USB does not deny that it knew that the mortgage which it holds arising out of the instant transaction was a HOEPA loan. In such a loan that is the only defense available to an assignee. As we further held in Murray, however, §§ 1641(d)(2) and (3) do limit an assignee’s liability to essentially the greater of (1) the applicable TILA damages or (2) elimination of the loan and recovery of all payments made. Therefore, USB, as the assignee of the loan, can and will be held liable for all of the damages that flow from the statute and for the ignored valid rescission in this HOEPA loan, but no total of damages greater than these set forth in §§ 1641(d)(2) and (3).”
The Court also discussed whether the loan servicer (Wilshire) could be held liable under TILA:
“One issue distinct from any presented in Murray is whether Wilshire, as the servicing agent for USB, has any liability to the Debtor. We find that Wilshire cannot be held liable because the TILA has no provision for liability for servicing agents, as the statute has for original lenders and their assigns. No specific facts or statutory bases for rendering Wilshire liable appears, since there is no evidence that its duties as a servicing agent have anything to do with the facts which render USB and MLM liable to the Debtor.”
This is consistent with 15 U.S.C Section 1641(f) which reads:
A servicer of a consumer obligation arising from a consumer
credit transaction shall not be treated as an assignee of such
obligation for purposes of this section unless the servicer is or
was the owner of the obligation.
(2) Servicer not treated as owner on basis of assignment for
administrative convenience
A servicer of a consumer obligation arising from a consumer
credit transaction shall not be treated as the owner of the
obligation for purposes of this section on the basis of an
assignment of the obligation from the creditor or another
assignee to the servicer solely for the administrative
convenience of the servicer in servicing the obligation. Upon
written request by the obligor, the servicer shall provide the
obligor, to the best knowledge of the servicer, with the name,
address, and telephone number of the owner of the obligation or
the master servicer of the obligation.
(3) “Servicer” defined
For purposes of this subsection, the term “servicer” has the
same meaning as in section 2605(i)(2) of title 12.
Conclusion: So, it appears you need to list everyone who may have been assigned the loan on a TILA rescission lawsuit. This is not legal advice and may not be accurate or up-to-date. For specific legal advice contact a real estate, foreclosure, or truth in lending lawyer in your area.
BANK OF AMERICA SETTLES FOR 137 MILLION DOLLARS – WHAT DOES A HUNDRED MILLION DOLLARS LOOK LIKE IN REAL MONEY? HERE IS A PICTURE OF A DRUG BUST IN MEXICO ESTIMATED AT 207 MILLION DOLLARS
Can anyone act surprised anymore at the stories we are hearing about the major financial institutions in the United States? What is going on here?
Here is the latest story – Bank of America admits to paying kickbacks, settles a lawsuit for 137 million dollars, then spins the story as if they are the good guy.
If your house sells, you are in a tough spot in California and Arizona.
Normally, we would need to see if there was any fraud/robosigner in the sub of trustee. It is tough to reverse a sale where the notice of default and notice of sale and other documents were validly executed. We charge for an initial up-front review of your documents, and chain of title. No guarantees we find anything, and no guarantee we file anything. We need good faith grounds to file a foreclosure lawsuit. Once the house is sold, they (the lender, loan servicer, etc.) normally argues you need to “tender” the full balance of the loan in order to be able to challenge anything. If there is fraud in the substitution of trustee, there is case law saying no tender is required. In the event we do find something worth filing, you have to realize you have a whole lot of legal work that would need to be done including:
(1) Answer unlawful detainer that will likely be filed
(2) File a civil lawsuit
(3) File lis pendens
(4) Seek to consolidate the unlawful detainer case with the Civil case, or else have the UD action stayed/enjoined pending the outcome of the civil case
(5) Appearances at hearings, etc.
So, there is a large up-front filing fee and after that we bill hourly, or in some cases can set a “monthly litigation fee.”
SO AS WE TELL EVERYONE – DO NOT TRUST A WORD YOUR LENDER OR LOAN SERVICER SAYS. ONCE THEY FORECLOSE THEY SERIOUSLY HAVE YOU ON THE DEFENSIVE.
THIS IS JUST A QUICK POST TO HIGHLIGHT A FEW THINGS THAT WE CANNOT EMPHASIZE ENOUGH WHEN DEALING WITH FORECLOSURE ISSUES:
CALIFORNIA FORECLOSURE LAWYER DISCUSSES TOP 10 FORECLOSURE TIPS
(1) IF YOU HAVE A REFINANCE LOAN ORIGINATED WITHIN THE LAST THREE YEARS, MAKE SURE YOU GET A TRUTH IN LENDING (TILA LOAN AUDIT). ESPECIALLY IF YOU HAVE EQUITY IN YOUR PROPERTY OR NOT TOO FAR UPSIDE DOWN. YOU MAY HAVE AN EXTENDED THREE YEAR RIGHT TO RESCIND YOUR LOAN AND THIS CAN BE GROUNDS TO ENJOIN A THREATENED FORECLOSURE SALE.
(2) DO NOT TRUST ANYTHING A LENDER OR LOAN SERVICER TELLS YOU. SOME PEOPLE SAY THE RIGHT HAND DOES NOT KNOW WHAT THE LEFT HAND IS DOING. REALLY? I BELIEVE THEY KNOW EXACTLY WHAT THEY ARE DOING, AND WHAT THEY ARE DOING IS LYING, CHEATING, AND DECEIVING YOU INTO BELIEVING THAT THEY ARE WORKING WITH YOU, ONLY TO FORECLOSE ON YOU. ONCE THEY FORECLOSE, YOU WILL HAVE A VERY TOUGH TIME GETTING YOUR PROPERTY BACK, ESPECIALLY IF THE SALE IS TO A BONA FIDE THIRD PARTY PURCHASER. IF YOU ARE FACING A FORECLOSURE DATE, YOU NEED TO KEEP YOU EYE ON THE CLOCK, MUCH LIKE A BASKETBALL TEAM KEEPS ITS EYES ON THE SHOT CLOCK. IF YOU ARE NOT GETTING WHAT YOU WANT, YOU NEED TO SEE IF YOU HAVE ANY GROUNDS TO ENJOIN THE FORECLOSURE PRIOR TO THE SALE. TOO MANY PEOPLE CALL AND SAY THEIR SERVICER WAS WORKING WITH THEM AND NOW THE HOUSE IS SOLD. HAPPENS ALL THE TIME.
(3) THERE ARE SOME THINGS YOU CAN DO IF YOU ARE CONSIDERING FILING BANKRUPTCY THAT COULD HELP PROTECT YOUR RIGHTS AND/OR SET UP A POTENTIAL ADVERSARY PROCEEDING IN A BANKRUPTCY COURT. YOU CAN SEND OUT DEBT VALIDATION LETTERS, QUALIFIED WRITTEN REQUESTS (QWR) UNDER RESPA, DEMANDS TO IDENTIFY THE HOLDER OF THE LOAN, PRESENTATION LETTERS, ETC. YOU CAN MAKE THEM DO SOME WORK, AND YOU NEVER KNOW WHAT YOU MIGHT GET, OR NOT GET IN RETURN. ALL WRITTEN REQUESTS MUST BE SENT CERTIFIED MAIL AND SENT TO AS MANY DEPARTMENTS AT THE LENDER/LOAN SERVICER AS POSSIBLE.
(4) SEEK LEGAL COUNSEL EARLY IN THE PROCESS IF YOU FEEL YOU NEED TO INVESTIGATE YOUR LEGAL RIGHTS, ADDRESS DEFICIENCY JUDGMENTS, SEND QWR’S ETC. SOMETIMES THE BEST THING YOU CAN DO IS TO FORMULATE A REALISTIC GAME PLAN. NOT ALL FORECLOSURE CAN BE STOPPED. MANY CANNOT. BUT PRUDENT PLANNING ABOUT YOUR RIGHTS AND OPTIONS MAY GIVE YOU THE PEACE OF MIND YOU SEEK.
(5) IF YOU HAVE HAD A NOTICE OF DEFAULT OR NOTICE OF SALE FILED (OR OBTAINED COPIES OF A SUBSTITUTION OF TRUSTEE OR ASSIGNMENT OF DEED OF TRUST, POSSIBLY BY MERS) YOU MAY WANT TO CONSIDER A “ROBOSIGNER AUDIT” LOOKING FOR FRAUD IN THE CHAIN OF TITLE. THIS MAY MAKE A FORECLOSURE SALE THE “FRUIT OF THE POISONOUS TREE” AND YOU MAY BE ABLE TO SEEK AN INJUNCTION TO STOP THE FORECLOSURE SALE, AND AT A MINIMUM, HAVE THE LENDER OR LOAN SERVICER RE-DO THE PROCESS (THIS TIME WITHOUT FRAUD).
(6) REMEMBER, IF YOUR HOUSE IS SOLD, THE LENDER/LOAN SERVICER WILL HIT YOU WITH THE “TENDER RULE.” MEANING, IF YOU WANT TO CHALLENGE IRREGULARITIES IN THE FORECLOSURE PROCESS, THEY WILL ARGUE YOU NEED TO FIRST “TENDER” THE FULL BALANCE OF THE LOAN TO CHALLENGE ANY FRAUD, LEGAL NON-COMPLIANCE OR OTHER IRREGULARITIES IN THE SALE. THIS IS A ROTTEN PROPOSITION AND MOST PEOPLE CANNOT MEET THIS REQUIREMENT THAT IS SUPPORTED BY CASE LAW, AT LEAST IN CALIFORNIA. AGAIN, BEING AWARE OF WHERE YOU ARE IN THE PROCESS AND IDENTIFYING EARLY ON WHETHER OR NOT YOU HAVE ANY LEGAL GROUNDS TO HALT A FORECLOSURE IS IMPERATIVE. IN ARIZONA, THERE IS A LAW 33-811 THAT STATES IF YOU DID NOT GET AN INJUNCTION BEFORE THE SALE, YOU WAIVE YOUR DEFENSES TO THE SALE. THAT CAN BE HARSH IF YOU HAD LEGITIMATE DEFENSES BUT DID NOTHING OTHER THAN TRUST THE LYING LENDER OR LOAN SERVICER.
(7) REALIZE THE HAMP “TRIAL PLAN” MODIFICATION IS NO GUARANTEE OF A FINAL PERMANENT RESULT. THE HAMP MODIFICATION RESULTS IN A FINAL MODIFICATION IN SOME CASES, BUT NOT ALL. SOME PEOPLE ARE SURPRISED WHEN THE LENDER REFUSES TO HONOR THE AGREEMENT.
(8) A QUESTION WE GET ALOT IS WHETHER OR NOT THE LENDERS OR LOAN SERVICERS WILL GIVE YOU A PRINCIPLE LOAN BALANCE REDUCTION. WE CALL THIS A “BIGFOOT SIGHTING,” WE HAVE OBTAINED PRINCIPAL REDUCTIONS WITH WELLS FARGO AND WACHOVIA AND WORLD SAVINGS OPTION ARM LOANS. BUT NOT FOR ANY OTHER LENDERS. WE HAVE ALSO HEARD SOME OF THE OTHER LENDERS LIKE CHASE, HAVE ALSO PROVIDED THESE, SO IT IS A POSSIBILITY, BUT PROBABLY NOT REAL LIKELY AT LEAST AS OF THE TIME OF THIS WRITING.
(9) BE THINKING OF BACK-UP PLANS IF YOUR LOSS MITIGATION EFFORTS DO NOT GO WELL (SHORT SALE / DEED IN LIEU ETC.). ALSO BE SURE NOT TO PAY COMPANIES IN ADVANCE FOR LOAN MODIFICATIONS IN CALIFORNIA. THIS IS AGAINST THE LAW PURSUANT TO CALIFORNIA SB94, YET THERE ARE STILL ATTORNEYS AND BROKERS OUT THERE WILLING TO CONJURE UP SOME SCHEME THEY THINK WILL GO UNDETECTED. JUST BE CAREFUL WITH ANYONE CLAIMING TO GET YOUR HOUSE FOR FREE, ELIMINATE YOUR MORTGAGE, ETC. EVEN FILING A LAWSUIT DOES NOT FORCE THESE MAJOR LENDERS AND LOAN SERVICERS TO BACK DOWN OR SETTLE, OR TO HAND OVER A LOAN MODIFICATION (CONTRARY TO WHAT SOME PEOPLE THINK). I HAVE FILED A GOOD NUMBER OF LAWSUITS AGAINST THE LIKES OF WELLS FARGO, INDYMAC, ONEWEST BANK, FANNIE MAE, MERS, BANK OF AMERICA, ETC., ETC., AND I HAVE YET TO FIND THEM WILLING TO LAY DOWN AND CONCEDE TO SETTLEMENT DEMANDS, AT LEAST EARLY ON IN THE LAWSUIT.
(10) WHEN DEALING WITH BANKS, LENDERS, LOAN SERVICERS, ETC., DOCUMENT EVERYTHING, TRUST NOONE, GET IT IN WRITING, ETC. TAKE COPIOUS NOTES FOR YOUR LAWYER IN THE EVENT LITIGATION OR BANKRUPTCY (INCLUDING ADVERSARY PROCEEDINGS) BECOMES A VIABLE OPTION. ALSO REALIZE, LITIGATION IS NOT CHEAP AND IT MAY BE TOUGH TO FIND A LAWYER TO FILE A PREDATORY LENDING OR CIVIL LAWSUIT ON A CONTINGENCY FEE BASIS. JUST SOMETHING TO KEEP IN MIND.
If you have any information, or MORE IMPORTANTLY SIGNATURES on these people, would really help. I have listed their names and the companies I believe they sign foreclosure documents on behalf of:
(1) Keo Vang (NDEX / Wachovia)
(2) Jeremy Ruacho (NDEX)
(3) Randy Middleton (NDEX)
(4) Deborah Schwartz (Wells / Wachovia)
Thank you. Let’s use the power of the web to sort out the foreclosure mess
Steve Vondran, Arizona and California Foreclosure lawyer.
This is a month or so old, but you may recall ALLY FINANCIAL trying to sneak in as a new “good guy lender” and then after the Ohio State Attorney General called them to task for Robosoginer issues, the lid came off. Of course, the lenders only agreed to clean up their act in the “judicial foreclosure states” where lawsuits must be filed in a Court of law. In California, (a non-judicial foreclosure state where a private trustee sale can occur outside the presence of the Court), the Attorney General sent this letter to ALLY FINANCIAL telling them to prove up their compliance with California law or stop foreclosing.
Seems the commercial painting ALLY FINANCIAL as a new bank bringing something new to the table brings more of the same window dressing. We will keep an eye how this story unfolds.
BAILEY (PRO SE) v. THE BANK OF NEW YORK MELLON, FKA THE BANK OF NEW YORK – WOW!
THE LID HAS COME OFF IN AN ARIZONA BANKRUPTCY CASE (CHAPTER 11) – “PRODUCE THE NOTE IN BANKRUPTCY ADVERSARY PROCEEDING” AS WE HAVE BEEN SAYING ALL ALONG. ITS TIME TO STOP ALL THE LIES. NEIL GARFIELD DECLARATION INVOLVED. ITS TIME TO RIP OFF THE MASK AND TELL THE TRUTH. WHO THE REAL OWNER OF YOUR LOAN IS SHOULD NOT BE CONFIDENTIAL.
CITATION: ADVERSARY PROCEEDING 2:09-ap-01728
ANDREW BAILEY, Chapter 11, Debtor.
ANDREW BAILEY, Plaintiff,
v.
THE BANK OF NEW YORK MELLON, as trustee of the CWALT, Inc. Alternative Loan Trust 2007-HY4 Mortgage Pass-Through Certificates, Series 2007-HY4; BAC HOME LOANS SERVICING LP; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC; John Does 1-20 inclusive; and all persons claiming by, through or under such person, all persons unknown, claiming any legal or equitable right, title, estate, lien, or interest in the property described in the complaint adverse to Plaintiff’s title thereto, Defendants.
Case No. 09-bk-6979-RTBP, Adv. No. 09-ap-01728-SSC.
United States Bankruptcy Court, D. Arizona. (Hon. Judge Curley)
This could be a potentially huge court, once again brought on by “lender” who will literally try to do anything possible to GET YOUR HOUSE and RUSH YOU TO FORECLOSURE. When I say anything, I mean anything. This case highlights PRECISELY what we have been seeing in the foreclosure trenches as litigation counsel.
As we have been saying all along, THESE SO CALLED LENDERS SHOULD BE REQUIRED TO PRODUCE THE ORIGINAL NOTE AND DEED OF TRUST TO PROVE THAT THEY IN FACT ARE THE REAL PARTY IN INTEREST, AND HAVE THE SECURED LIEN IN A BANKRUPTCY COURT. In the case that follows, a Plaintiff (in pro se) knocks out a HUGE win on his Fourth Amended Complaint. But in reviewing the case file, it appears to me the so called “lenders” or “creditors” or “investors” or whatever else you want to call them, were caught pulling what appear to be in my opinion, some shady dealings on the Court, or at least that is what the Plaintiff has accused them of. Specifically, it appears the “lenders” (Plaintiff sued what I call “The Three Amigos – Bank of New York Mellon, BAC (Bank of America formerly Countrywide Home Loans) and our Mortgage Electronic Registration Systems (“MERS”). As usual, one attorney represented all three entities.
It appears this case was originally filed as a Chapter 7, then converted to a Chapter 11 case. The Defendants tried to file a motion to lift the automatic stay. The original motion was denied because the Court said the moving party (Bank of New York Melon – called “BONY”) was not the real party in interest, basically because there was a break in the chain of transfers of the note. BONY could not prove it had proper possession of the note and deed of trust. The Court indicated that it appeared Countrywide Bank, FSB was the owner of the loan.
Not to be deterred, and pursuing what we often see as the “win at all costs” approach, the “lender” (BONY was the trustee of the CWALT securitized loan trust) filed a second motion for relief from the automatic stay. This time a new assignment in blank of the note was produced, and the Deed of Trust had the MERS Min # whited out. ”This is the stuff you will typically see in a foreclosure defense case says Wrongful Foreclosure and Predatory Lending Attorney Steve Vondran.” We do not yet have a copy of the Judges Order, but we have it on information and belief that the Court is ordering that the original promissory note be produced in the Arizona Bankruptcy Court.
It seems to me that only when the judges get really upset at these types of shenanigans will they force the “lender” to prove up their chain of title establishing ownership of the loan. The Plaintiff, acting in pro per, has characterized the defendants as trying to pull a fraud on the Court.
At this time, the Court has ordered the following according to a November 9, 2010 Minute Order:
MR. HIRSCH (COUNSEL FOR BONY) IS DIRECTED TO
GET THE ORIGINAL CUSTODIAL FILE FROM NEW YORK FOR THE COURT TO REVIEW. HE SHOULD ALSO GET AN AFFIDAVIT FROM
THE INDIVIDUAL GETTING THE FILE, THAT THERE HAS NOT BEEN ANY CHANGES SINCE 2006. IT IS ORDERED CONTINUING THIS
HEARING TO JANUARY 13, 2011 AT 10:00 A.M.
The Court at this time feels there is still not a valid cause of action to challenge the validity, extent, and priority of the alleged lien, but producing the Original file should make it easier for the judge to determine what is going on, and if there has been a fraud on the Court, this may blow the wheels right off the proposed foreclosure and motion to lift the automatic stay in Bankruptcy.
KEEP UP THE FIGHT PEOPLE, THE TRUTH IS SLOWLY EMERGING. JUDGES ARE STARTING TO GET THIS MESS FIGURED OUT AND DEMAND SOME AUTHENTIC PROOF HERE.
One Final Note: This Case discussed how Plaintiff sent out a variety of letters to try to establish ownership of the loan: (1) Debt Validation Letter under 15 USC 1692; (2) Qualified Written request under RESPA (12 USC 2605), and (3) TILA demand to identify owner of the loan obligation or master loan servicer (15 USC 1601-1665) and more specifically 15 USC 1641(f). A UCC presentment letter should also be sent and we discuss this on our UCC Foreclosure Defense website. IF YOU ARE EVEN REMOTELY CONTEMPLATING BANKRUPTCY, YOU NEED TO THINK ABOUT SENDING THESE LETTERS OUT, OR HAVING A FORECLOSURE DEFENSE LAWYER SEND THESE OUT ON YOUR BEHALF. YOUR FAILURE TO DO THIS UNTIL THE LAST MINUTE COULD GREATLY CRIPPLE YOUR RIGHTS.
According to their website they serve a critical function. Here is what it says at their website http://www.Sigtarp.com. (My comments are in italics)
ABOUT US
SIGTARP’s mission is to advance economic stability by promoting the efficiency and effectiveness of TARP management, through transparency, through coordinated oversight, and through robust enforcement against those, whether inside or outside of Government, who waste, steal or abuse TARP funds. (I DONT KNOW ABOUT YOU BUT I PUT UP THE BS PROTECTOR WHEN I HEAR THE GOVERNMENT USE WORDS LIKE TRANSPARENCY, ENFORCEMENT AND OVERSIGHT – WHAT DO THESE WORDS EVEN MEAN ANYMORE CAN SOMEONE TELL ME)?
Transparency
Promoting transparency in the management and operation of TARP is one of SIGTARP’s primary roles. Through EESA, the American taxpayer has been asked to fund – to the tune of hundreds of billions of dollars – an unprecedented effort to stabilize the financial system and promote economic recovery; in this context, the public has a right to know how that money is being spent. Transparency is a powerful tool to ensure that all those managing TARP funds will act appropriately, consistent with the law and in the best interests of the country.
Coordinated Oversight
SIGTARP plays a vital role in promoting the economy and efficiency in the management of TARP and views its oversight role both prospectively (by advising TARP managers on issues relating to internal controls and oversight, for example) and retrospectively (by assessing the effectiveness of TARP activities over time and suggesting improvements and making recommendations for positive change). SIGTARP also closely coordinates its oversight activities with the other TARP oversight bodies to ensure maximum oversight coverage and to avoid redundant and unduly burdensome requests.
Robust Enforcement
SIGTARP’s third primary role is to prevent, detect and investigate cases of fraud, waste and abuse of TARP funds and programs. SIGTARP, through its own investigative resources and through partnership with other relevant law enforcement agencies, is committed to robust criminal and civil enforcement against those, whether inside or outside of Government, who waste, steal or abuse TARP funds.
If you are aware of fraud, waste, abuse, mismanagement or misrepresentations affiliated with the Troubled Asset Relief Program, please contact the SIGTARP. (THERE YOU HAVE IT FOLKS, IF YOU SEE A WASTE OR ABUSE OF TRAP FUNDS MAKE SURE YOU GO RIGHT OUT AND LODGE A COMPLAINT SO THEY CAN INVESTIGATE, BE TRANSPARENT, AND ENFORCE THE LAW).
What kinds of things should you report?
Allegations of fraud, including false statements, false claims and misrepresentations affiliated with the TARP. (DO THEY MEAN THE HAMP TRIAL PLAN SCAMS THAT AFFECT SO MANY PEOPLE??)
Any activities that might impact the integrity of the Troubled Asset Relief Program including, but not limited to, allegations of fraud or misconduct by Federal employees and/or entities receiving TARP funds. (THERE YOU GO, WE GOT EM, WHEN TARP RECIPIENTS LIE TO YOU THE SIGTARP COPS WILL ARRIVE ON THE SCENE).
Actions by persons or entities attempting to misrepresent their association with TARP by utilizing deceptive contracts or financial instruments; including, allegations of identity theft or misrepresentations. (YOU MEAN THOSE HAMP TRIAL PLAN CONTRACTS THAT SUGGEST YOU WILL GET A MODIFICATION IF THE LENDER SIGNS AND RETURN THE AGREEMENT TO YOU AND IF YOUR MATERIAL REPRESENTATIONS IN SECTION 1 DON’T CHANGE)?
NOTE: The confidentiality of your contact information is assured when received via phone, mail or in person. Laws protect you from reprisals (any action taken against you because you filed a complaint).
As you will see……they know nothing, sign whatever they are presented, don’t understand the documents they are singing, there are no real witnesses to the thousands of documents they sign each day. Yes, she testifies to thousands of filings each day. Although she is not a Vice President, her signatures reflect that she is. People, when you have to resort to lies, you know there is some funny business going on. More to come.
CLICK ON THIS LINK TO SEE THE ROBOSINGER DEPOSITION!
This is a question we get all the time. We refer to principle loan balance reduction as “a bigfoot sighting” but more and more lenders/servicers are claiming they are forgiving principle loan balance. If you have any legitimate stories, we would love to hear them. We have achieved principal reduction only in cases involving option arm loans with World Savings and Wachovia (now owned by Wells Fargo). Of course, since California passed SB 94, we no longer handle loan modifications for California homeowners. Thank your bank-backed state legislature for that.
We have been saying all along this was the right thing to do to try to save neighborhoods and make up for all the fraud in the system. As the card says:
or “things will get better” as the story goes. Same difference if you asked me, and later TURNS AROUND AND SELLS HIS LETTER FOR 7K AND SAVES HER HOME. Although he bailed out the Banks when he took office (because like all Presidents he is a puppet), his HAMP modification programs have not impressed many people. This homeowner nixed the HAMP and went memorabilia style to save her home from foreclosure. Now that is ingenuity and shows you can often do more for yourself than your government can ever do for you.
Are you facing foreclosure and need to understand your options? Why not consult with a foreclosure and real estate lawyer
TOP TEN REASONS TO DISCUSS YOUR FORECLOSURE CASE WITH A REAL ESTATE AND BANKRUPTCY LAWYER
If you are facing foreclosure, don’t wait until the last minute to decide what you are going to do or to determine what your options are. A simple one hour consultation with a Foreclosure, Bankruptcy and Real Estate Attorney can help you determine:
(1) Whether a loan modification or loan work out will be possible/feasible
(2) Whether a Chapter 7 or Chapter 13 Bankruptcy may be right for you
(3) Whether you should be looking at other loss mitigation solutions like a short sale, or deed-in-lieu of foreclosure.
(4) What impact these will have on your credit / credit repair options
(5) Do you have any deficiency judgment liability? Who do you deal with that?
(6) Do you have a good case for predatory lending or truth in lending rescission / elder abuse? When do you use a lis pendens?
(7) Do you understand the foreclosure timeline (notice of default / notice of sale) and can you get an injunction?
(8) Do you have issues with your chain of title (MERS loans / Assignments of Deed of Trust issues / Substitution of Attorney issues / Robosigners)?
(9) Can you use “produce the note” or UCC presentment defense in Bankruptcy court?
(10) What is “cash for keys” and how can you get it?
These are some of things to think about. DO NOT BE LULLED INTO A FALSE SENSE OF SECURITY TRUSTING EVERYTHING YOUR LENDER OR LOAN SERVICER IS TELLING YOU. THEY WANT YOU TO BELIEVE YOU ARE GETTING A LOAN MODIFICATION OR A TRIAL PLAN MODIFICATION SO THAT YOU WILL KEEP MAKING PAYMENTS TO THEM RIGHT UP TO THE END.
THEY HAVE NO PROBLEM FORECLOSING ON YOU IN THE MIDDLE OF A LOAN WORKOUT PROCESS, AND EVEN THESE SELF-IMPOSED MORATORIUMS ARE NOT TO BE TRUSTED. WE HAVE HEARD THEY WILL SELL YOUR NOTE TO ANOTHER PARTY WHILE THEY FORECLOSE.
SO, FIND OUT YOUR OPTIONS NOW, BEFORE THE HOUSE IS SOLD. ONCE YOUR HOUSE IS SOLD GOOD LUCK GETTING IT BACK. THAT IS A VERY DIFFICULT FEAT, ESPECIALLY IF YOU WERE IN DEFAULT WHEN THE HOUSE WAS SOLD. THIS IS THE LENDER “SUCKER-PUNCH YOU NEED TO BE AWARE OF
“THE BANKS ARE TOO BIG TO FAIL – TOO BIG TO COMPLY. WHEN ALL ELSE FAILS, REOSRT TO WINDOW DRESSING TO BUILD PUBLIC CONFIDENCE!” SAYS BEVERLY HILLS FORECLOSURE DEFENSE LAWYER STEVE VONDRAN.
As we have talked about in other blog posts, the White House issued this press release in the wake of the FORECLOSURE-GATE ROBOSIGNER SCANDAL. Yes it is a scandal and not reported as it should be on the news.
False signatures, forgeries, robosigners, notaries along for the ride. It is all so amazing. And now the White House is flexing its muscle (okay, maybe doing a push up or two) telling the Banks and regulators (such as the FTC, SEC, HUD, Dept. of Justice, FHA, FHFA, FDIC, OCC, FRB and OTS to take a good look at their foreclosure practices and the practices of their loan servicers and servicers for Fannie and Freddie loans.
I bet this is going to be a REAL SERIOUS crackdown (I am being facetious here) and I also bet nobody goes to jail or loses their license (as a real estate broker, securities broker, or even a lawyer would deal with if they perpetrated a fraud). When it is bankers, it is called “business” when it is anyone else, it is called “misconduct.” But those are not words you hear too often when it comes to the nationwide foreclosure scandal that is only being partly-remedied in the NON-JUDICIAL FORECLOSURE STATES (not in California and Arizona where I practice). As such, a bunch of fraud will apparently never be examined, other than this exhaustive call for a review of loan servicer practices. And isn’t it the big banks and financial institutions constantly begging for de-regulation, and to be left alone, and that the invisible hand of the marketplace will work things out?
No, instead, it seems the Banks are TOO BIG TO FAIL and TOO BIG TO COMPLY with law. Such is life I suppose. We will be keeping on eye to see just what kinds of changes are made to the loan servicing practices, which I suspect will be very little. Don’t forget, there is one other SMALL PROBLEM, many securitized “lenders” don’t have the original promissory notes in non-electronic form to prove they have a legal right to enforce the debt. I suppose that window-dressing cleanup will be left for another day.
SO THERE YOU HAVE IT – BANKS ARE ABOVE THE LAW AND THE LAW DOES NOT APPLY TO THEM BECAUSE IF THEY DON’T DO WELL OUR ECONOMY DOESN’T DO WELL. WHAT ON EARTH CAN BE DONE ABOUT THIS? MAYBE THEY SHOULD PASS A LAW SAYING A HOMEOWNER WILL GO TO JAIL IF THEY FILE A LAWSUIT CONTESTING THE SALE OF THEIR HOUSE??
BREAKING NEWS. WELLS FARGO ISSUED A PRESS RELEASE DISCUSSING THAT THEY ARE RE-DOING PAPERWORK WHERE FALSE FORECLOSURE DOCUMENTS WERE SIGNED AND NOTARIES WENT ALONG FOR THE RIDE.
Here is a link to our Blog Radio show discussing Wells Fargo re-doing foreclosure documents: http://tobtr.com/s/1345191
WOW, THIS SHOWS HOW MUCH THEY REALLY CARE ABOUT THE “LETTER OF THE LAW.” OF COURSE, THIS ONLY APPLIES IN JUDICIAL FORECLOSURE STATES (WHERE THE SO-CALLED LENDERS HAVE TO FILE A LAWSUIT TO FORECLOSURE) WHERE THE LENDERS GOT CAUGHT.
WHICH MAKES ME WONDER, WHAT ABOUT ALL THE NONSENSE, FALSE DOCUMENTS, ROBOSIGNERS, AND FORECLOSURES WITHOUT PROOF OF THE NOTE IN THE NON-JUDICIAL FORECLOSURE STATES LIKE CALIFORNIA AND ARIZONA WHERE I PRACTICE. WELL, SEEMS YOU ARE JUST PLAIN OUT OF LUCK. ACCORDING TO WELLS “FORECLOSURE IS THE LAST RESORT” SO I GUESS YOU CAN RELY ON THAT.
HERE IS AN ARIZONA CASE TALKING ABOUT WHETHER OR NOT A DEED OF TRUST IS A “NEGOTIABLE INSTRUMENT” UNDER THE UNIFORM COMMERCIAL CODE (UCC). We also discuss the Produce the Note defense and wrongful foreclosure elements in Arizona. As we know, many so called “lenders” of securitized loans can never show they have your original note and/or the deed of trust giving them the power of sale. In essence, they are trying to get your house for free where they do not have a legal right to foreclose on your loan. Yes, some people would call that fraud and a a crime. Bankers would refer to it as “business.” And therein lies the rub.
Contreras v. US Bank, No. CV09-0137-PHX-NVW. (Dist. Ariz. 2009).
Facts: Mr. and Mrs. Contreras purchased a home located at 8220 West Georgia Avenue, Phoenix, AZ in January 2006. To purchase the property they obtained a mortgage through Act Lending Corporation doing business as “Act Mortgage Capital”(ACT). The loan amount was $488,000. The mortgage Deed of Trust identified ACT as the Lender and the Trustee. It also names MERS as the beneficiary under the Deed of Trust and states, “MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns.
Almost two years later, Mr. and Mrs. Contreras became unable to make timely payments on the property. On the 2nd of September MERS assigned all beneficial interest under the Deed of Trust to U.S. Bank, as Trustee for CSMC Mortgage Backed Pass Through Certificates, Series 2006-5 (U.S. Bank). Also on the same day the Trustee issued a Notice of Trustee’s Sale of the Property for December 3rd, 2008. The Notice of the Trustee Sale identified U.S. Bank as the current beneficiary and ASC for Wells Fargo Home Improvement as the loan servicer.
When the Contreras’ received the Notice of Trustee’s Sale they made a written demand on U.S. Bank and Wells Fargo Bank, N.A. (“Defendants”) to suspend the sale of the Property or to provide proof of the their right to foreclose. The Contreras’ did not believe that U.S. Bank or Wells Fargo had the right to initiate foreclosure or possession of the original Note. Despite several requests for proof of the right to foreclose and documentation of the chain of Deed of Trust the Contreras’ were removed from their property through a forcible detainer action in Maricopa County Superior Court.
The Contreras’ filed a complaint seeking declaratory judgment that the Defendants were not entitled to enforce the Note of Deed of Trust, the Trustee’s Sale was invalid and void, U.S. Bank is not a bona fide purchaser for value of the Property. Contreras’ also sought monetary damages for wrongful foreclosure based on the Defendants’ breach of their duty to act fairly and in good faith specifically: (1) failing to search for proof of the original Note (2) failing to indentify the current beneficiary under the Note and/or Deed of Trust and (3) failing to provide Plaintiff’s requested detailed accounting.
The Defendant’s filed a motion to dismiss the Contreras’ complaint.
Issues: Should the complaint be dismissed as not stating a claim upon which relief can be granted?
Relevant Questions of Law Decided by the Court: Do the Defendants have to possess the original Note in order to exercise their rights under the Deed of Trust to sell the Property upon default? Is the Deed of Trust a ‘negotiable instrument” under Arizona law or an “instrument” under the UCC? What are the Arizona elements of “Wrongful Foreclosure”?
Holding: The court dismissed the complaint holding that the Deed of Trust is NOT a negotiable instrument under Arizona law and that it is not an “instrument” as defined by the UCC. Additionally, the court held that Arizona has adopted the same standard of several other states for “Wrongful Foreclosure” and that the Contreras’ did NOT meet that standard.
Rationale: (1) The Deed of Trust is Not a Negotiable Instrument or an Instrument under the UCC. Note: this does not appear to be the same as saying the NOTE is not a negotiable instrument.
The court reasoned that because a Deed of Trust is not an unconditional promise to pay a fixed amount of money, is not payable to bearer or to order, is not payable on demand or at a definite time, and states numerous acts that the borrower promised to do in addition to paying money it is therefore not a negotiable instrument. See ARS §47-3104(A)&(B). The court also stated that there is no existing authority that a Deed of Trust requires compliance with the Arizona Uniform Commercial Code.
(2) Wrongful Foreclosure Elements Not Met By the Contreras.
The Court reasoned that Arizona has adopted the same standard for wrongful foreclosure as other states including Georgia & Missouri, Texas and California. The elements are: (1) a legal duty owed to the Plaintiff by the foreclosing party (2) a breach of that duty (3) a causal connection between the breach of that duty and the injury the plaintiff sustained, and (4) damages.
In this case, the Court held that there was no duty on the Defendants to make any type of accounting to the Contreras or produce any documentation because the Deed of Trust is not subject to UCC rules. Second, the Plaintiffs were in default and the Plaintiffs do not allege that Defendants’ actions caused their default.
Conclusion: UCC rules do not apply to Deeds of Trust in Arizona. A “Wrongful Foreclosure” suit must meet all the elements set forth above in order to succeed.
This cases cited herein shall not be construed as legal advice or a substitute for legal advice and you are advised to consult a Foreclosure Defense or Real Estate lawyer to confirm the above is still current and good law.
Can you PLEASE click on the Twitter icon below and follow me on Twitter. This is a new project I am undertaking to see the potential power of social media to effectuate a change in ugly corporate behavior related to foreclosure and the housing crises.
IF YOU ARE NOT SIGNED UP WITH A TWITTER ACCOUNT YET, YOU WILL NEED TO SIGN UP. IT IS QUICK AND NO-COST (JUST ENTER A USER NAME, EMAIL, AND LOGIN NAME). YOU SHOULD HAVE A TWITTER ACCOUNT FOR YOUR BUSINESS ANYWAY.
I am trying to get more people to follow me on twitter so I can start discussing the banks and some of the crap I am seeing them pull. If I can get a bunch of people following me maybe I can start getting some clout when I raise issues legitimate issues with them. Pass it on if you will. Help me use social media to send a message. The ‘lame’ stream media is not real concerned with the issues I need to raise.
The following is general information only. Credit scores are subject to many different factors, and the following is not to be relied on. Consult with a Credit Report Lawyer to Discuss your Case.
The recent economic downturn has produced a spike in foreclosures, short sales and bankruptcies. But how exactly does a foreclosure affect your credit score? Have you asked yourself, “How will a short sale impact my credit score? Or maybe you’re worried filing bankruptcy will ruin your credit score forever, even though it may be the smartest solution to your particular situation.
Fortunately foreclosures, short sales and bankruptcies do not ban you from obtaining credit ever again. In fact, despite their negative impact on your credit score, foreclosures, short sales and bankruptcies may damage your credit less than you think!
Foreclosures:
There is no conclusive answer as to how much your credit score with suffer from a foreclosure. Dave Dinkel, author of “32 Ways to Quickly Stop Foreclosure” points out the foreclosure’s immediate impact on an individual’s credit score is “estimated to be about 100 to 140 points.” The Fair Credit Reporting Act allows the foreclosure to be reported for up to 7 years. Fair Isaac, the leader in credit scoring, released a report showing somewhat similar numbers. Fair Isaac says the average points lost for a credit score are as follows: 30 days late: 40 to 110 points, 90 days late: 70 -135 points, Foreclosure: 85-160 points.
As the 7 years pass, your credit score will increase and over time your ability to obtain new mortgage financing will become less difficult. You will be able to buy a new home again but you may have to pay a higher interest rate or pay a considerable down payment. The typical waiting time before you may be able to purchase a new home with reasonable terms is between 24 -72 months according to Fair Isaac.
Foreclosures are complicated and can damage credit scores. If you are facing a foreclosure it is important to speak with an attorney who may be able to find an alternative solution. Call the Law Offices of Steven C. Vondran to see if we may be able to help you avoid foreclosure. 1 877-276-5084
Short Sales:
Short Sales are often preferred over Foreclosures. Short Sales occur when the lender agrees to accept less than what you owe when you sell your home. Not all lenders will allow a short sale and an attorney or realtor who specializes in this type of sale can be an invaluable help.
According to Isaac, the effect on your credit score is almost identical to that of a foreclosure. Isaac predicts a loss of 85-160 points for both a foreclosure and a short sale. However, the benefit is in the length of time you will have to wait to obtain decent terms on a new home loan. According to Fannie Mae guidelines released in 2008, lenders may offer FHA loans to short sale sellers after 24 months. But, if you short sell your home without ever being late on the mortgage, FHA allows immediate qualification for new financing. That’s compared to potentially waiting up to 6 years for a foreclosure!
If you are considering a short sale or need advice regarding your specific financial situation call the Law Offices of Steven C. Vondran. We can help you with your decision. 1 877-276-5084.
Bankruptcy:
According to the Fair Credit Reporting Act (FCRA), a consumer reporting company is officially permitted to list accurate negative information on a consumer’s credit report history for seven years (7) and bankruptcy information for ten (10) years. Notwithstanding the FCRA, the big three credit agencies have adopted policies to report Chapter 7 bankruptcies for 10 years and Chapter 13 bankruptcies for 7 years. Below is the breakdown from each credit agency’s web site:
Experian- Experian indicates that all Chapter 7 filings, whether properly completed and discharged, or whether abruptly dismissed, for a period of 10 years. All Chapter 13 filings, whether discharged or dismissed appear to be reported for seven years (7) from the date of filing.
TransUnion – On its website, TransUnion indicates that the typical retention period for Chapter 13 bankruptcies that have been either dismissed or discharged remain on file for seven (7) years.
Equifax – Equifax states that it keeps in its credit reports all dismissed Chapter 13 filings for ten (10) years from the date filed. Discharged Chapter 13 filings on the other hand are only reported for seven (7) years from the date filed.
It’s important to understand that Bankruptcy will affect your credit for 7 or 10 years. This negative impact will lower your score and make it more difficult to use credit. Fair Isaac estimates the average points lost on a Bankruptcy to be between 130-240 points. Bankruptcy still may be the best option and can offer peace of mind and a fresh financial start. Your credit score will not likely stay low the entire time the bankruptcy is on your credit report and will rise over time. In fact, it is common for people who have recently been discharged from Bankruptcy to receive several offers for credit including credit cards! To find out if Bankruptcy is the best option for you, call us at The Law Offices of Steven C. Vondran. 1 877 276-5084.
ITS ALL ABOUT THE MONEY – THE ANSWER TO 99 OUT OF 100 QUESTIONS IS “MONEY”
We all know the Bankers hate regulations and do not want to comply with any of them (no, I am not joking for the sake of coming up with a blog post, I can verify on a good majority of my files failure to comply with RESPA and TILA – two of the main laws they have to deal with). They routinely snub their noses at these laws and force you into court if you want to do something about. That is big business folks. Now the FHA releases some new guidelines for mortgage servicers for Fannie Freddie Loans. Man, I read it and it sounded great, but then I realized all it basically says is to try to ferret out errors and if their are errors, to fix them. Wow, that is just the kind of regulation with TEETH that will surely make these loan servicers stand up straight. Yeah right. More window dressing. In fact., this business is full of window-dressing (things the bankers say that sound great, but which don’t really mean anything).
(1) Like Bank of America talking about principal reduction
(2) Like foreclosure moratoriums and then they sell the note and let someone else foreclose on you
(3) Like a TARP bailout that funds Wall Street bonuses while telling Main Street this ones for you
(4) Like HAMP trial plan mods that come your way making you think you have accomplished a loan modification
(5) Like the servicer saying “don’t worry, we have extended your sale date” (oops, looks like the trustee sold your house maam)
These are just a few that come to mind………yes, there is alot of WINDOW DRESSING in the loss mitigation business. Anything the Bankers or Politicians can say to appease the masses is what they will do. As far as stopping the fraud in the system, and robosigners, the lies and deceit….I am not sure this can be fixed even if they want to. Without proof of ownership of the loan with right to foreclose (i.e. that they “lender” has the note and deed of trust) the whole system is based on lies and cover-up and yet entities like MERS will defend the system to no end.
Anyway, despite the banker commercials that show the white picket fences, and kids and dogs running around the yard, don’t believe everything you see – that is window dressing too!
I recently read an article on yahoo finance where Realtytrac (a company that tracks foreclosures) says there were almost 300,000 foreclosure sales this year in just the months of July-September 2010. I am putting this here just so you can get a sense of what’s going on in the foreclosure / loss mitigation marketplace. Sort of makes you wonder where all the bailout money is going. One of my shorter blogs, but just something to think about. This month has been as busy as ever with Foreclosure Moratoriums, Robo-Signers, and other FORECLOSURE GATE issues. We thank all of our readers and ask you to please keep coming back for more foreclosure information, stats, updates, and trends.
WE HAD PREVIOUSLY COMMENTED ON MICHAEL PINES AND HIS BREAKING INTO HOMES OF HIS CLIENTS. NOW IT APPEARS HE IS FACING OTHER ISSUES, SUCH AS BANKRUPTCY, THAT ARE MAKING THINGS TOUGH FOR HIM AND HIS CLIENTS. WE WILL POST MORE ONCE WE KNOW MORE ABOUT THE STORY.
A UNIQUE, TWO DAY, WEEKEND SEMINAR FOR ATTORNEYS AND HOMEOWNERS
March 12th and 13th, 2011
HILTON SAN DIEGO – DEL MAR
15575 Jimmy Durante Boulevard
Del Mar, CA 92014
Michael T. Pines
The Leading Expert in Foreclosure Relief
www.precedentlegalsystems.com
SATURDAY, MARCH 12TH FOR ATTORNEYS ONLY: CONTINUING EDUCATION CREDIT AVAILABLE IN CALIFORNIA AND OTHER STATES
SUNDAY, MARCH 13TH TWO SESSIONS FOR HOME OWNERS AND ATTORNEYS
SATURDAY, MARCH 12TH FOR ATTORNEYS ONLY: CONTINUING EDUCATION CREDIT AVAILABLE IN CALIFORNIA AND OTHER STATES
9:00 A.M. – 6:00 P.M.
CONTINENTAL BREAKFAST INCLUDED
$795 Pre-register
$995 At the Door
$1295 V.I.P. Upfront seating and lunch with Michael to Discuss and Answer Questions
SUNDAY, MARCH 13TH TWO SESSIONS FOR HOME OWNERS AND ATTORNEYS
8:30 a.m. to 11:30 a.m. with one hour of questions
Published by Cutting Edge Resources for Successful Foreclosure Relief
www.precedentlegalsystems.com
As the leading expert in foreclosure relief, attorney Michael T. Pines continually monitors the strategies of the banks and the government. His latest methods can only be learned at PRECEDENT Legal Systems™
First publication in 2010 by IngGo Group LLC, 132 N. El Camino Real #327, Encinitas, CA 92024
Michael T. Pines’ is the leading expert in foreclosure relief. His first rate experience combined with his aptitude for cutting edge, case winning strategies have truly made him a maverick in his field. He continually monitors the real estate market, economic climate as well as the strategies of the banks and government to ensure his innovative methods are timely, relevant and highly effective.
Michael has been a lawyer for over 30 years and has had a real estate license for over 20 years. He handled litigation against the Resolution Trust Corporation (“RTC”) during the last real estate savings and loan crisis and has been able to see firsthand how history has repeated itself; proactively positioning himself within the distressed real estate and assets environment, providing resolutions to buyers and asset holders.
He is a successful trial attorney with many victories in front of judges and juries. Michael has argued hundreds of cases at all levels of the courts including the Supreme Court of California. In Barrington v. A.H. Robbins, Michael changed the law in the state of California regarding statutes of limitation. He also successfully argued cases that resulted in published decisions at the Courts of Appeal. Michael handled complex real estate and insurance litigation involving the insolvency of Glacier General Assurance Company, Cal‐Farm Insurance Company, Allied Insurance Company, and others. He recovered tens of millions of dollars for his clients in those cases and established himself as one of the few experts in “financial guarantee bonds” insuring real estate transactions.
Just a few years ago, Michael himself was a fraud victim of EMC Mortgage Corporation. In taking action, Michael discovered he was not alone, and the loan servicer was fined $28 million in early 2008 by the Federal Trade Commission (“FTC”). Most recently, Michael is representing homeowners and real estate investors, obtaining favorable motions in cases of predatory lending and mortgage fraud.
Through his teachings, Michael is facilitating the achievements of many attorneys around the country practicing foreclosure relief law. He is consulting with the top class action law firms in the country, empowering them with his winning techniques.
By constantly broadening his knowledge, Michael is working to find fair solutions regarding this real estate crisis for homeowners, the government, and others.
He has become a nationally recognized public figure:
Michael T. Pines is the Lead Attorney for Precedent Legal Systems.
–
Pines & Associates
Michael T. Pines
701 Palomar Airport Rd., Suite #300
Carlsbad, CA 92011
Office: 760-453-0131
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Okay everybody, the cat is out of the bag. The lenders tried to keep this all bunched under the rug as long as they could, and now the lenders have been exposed for their false and shoddy business practices and foreclosures based on false signings, false notary stamps, and robo-signers. Recently I was on the Willis report (Fox News) and we showcased a RoboSigner who claimed to be a Vice President of MERS and a Vice President of Indymac Federal Bank (of course they guy does not receive any salaries or benefits from these companies, ot attend any business meetings, etc) – yes, it is all a RUSE, part of the structured predatory financing system created by the lenders to make them huge profits. When you have to resort to tactics like making someone a “Vice President” (sure, it looks real official on paper which is one reason they do it), then you know there is lies and deception built into the system.
What we are seeing now is A WHOLE LOTTA BS:
(1) Assignments of Deed of Trust by ROBO SIGNERS (someone is signing someone else’s name and the notary goes along for the ride – after all isn’t someone producing a driver’s license when it comes time to sign?
(2) Substitution of Attorneys by “lenders” who never had the power to substitute.
(3) MERS assigning a Deed of Trust (and also pretending to assign the note which it never held in most cases)
(4) False declarations of compliance with the California Civil Code
(5) Failure to respond to legitimate legal requests to identify the loan holder
(6) Failure to respond to qualified written request (QWR) under RESPA
(7) Failure to rescind loans under TILA (truth in lending law) forcing you to sue them if you want to rescind your loan. They will not so much as call you to discuss your rescission claim.
(8) Trial plan fraud (“here is your trial plan Mr. Smith, after you make your payments we will foreclose on you.”)
(9) Notaries who “lawyer-up” when asked to produce their notary logs – are you kidding me??
(10) Violating the California “security-first” rule (junior lien-holders threatening to sue you on the note so they can try to extract a settlement)
(11) Promises to extend the foreclosure sale date then pulling the chair out from underneath you (like the Sasquatch commercial for the Beef Jerky Company)
(12) Lifting the automatic stay in Bankruptcy without any allegation of who owns the note (usually just a MERS assignment of Deed of Trust).
(13) Passing your note around like a “whiskey bottle at a frat party” when a foreclosure moratorium is supposed to be in effect. Haha, they duped you again.
(14) Trying to obtain a note to pick up the deficiency in a short sale when the loan is protected (anti-deficiency statute) purchase money. Hey, can’t blame them for trying I guess.
(15) Leading Courts to believe they are the owner of the loan (protecting the true investor/owner of the loan) when in fact they are just the loan servicer.
These are just a few things we are seeing. Yes, it is truly a mess out here. And people sometimes ask us why we fight for property owners?
Answer; We believe in the rule of law; fair legal process; fairness and integrity in the system; and some cases are also ripe for legal challenges.
NOBODY WANTS TO BLAME THE BANKS – WHEN ARE WE GOING TO HOLD THEM RESPONSIBLE? THEY ARE TAKING HOME MILLIONS IN BONUSES AND THEY ARE NOT GOING OUT OF BUSINESS ANY TIME SOON. LET’S DEMAND ENFORCEMENT OF THE RULE OF LAW INSTEAD OF SHEDDING TEARS FOR THE BANKS WHO CREATED THIS MESS.
STEVE VONDRAN ON FOX NEWS: TALKING ROBO SIGNERS / FALSE DECLARATIONS / WHO HAS THE NOTE / MERS ASSIGNMENTS – “THESE ARE A FEW OF MY FAVORITE THINGS”
HERE IS THE RECENT CLIP OF ME ON THE TOM SULLIVAN RADIO SHOW ON FOX NEWS (SKIP TO THE END)
(1) FOLLOWING FORECLOSURE LAWS IS NOT A TECHNICALITY – WE ARE A NATION OF LAWS, AND NOT MEN. THIS IS WHAT WE TEACH OUR KIDS. MURDERERS GET LET OF JAIL ON “TECHNICALITIES” SO LET’S NOT PAY LIP SERVICE TO THAT BOGUS ARGUMENT.
(2) THE BANKS CREATED THIS MESS, THEY SHOULD NOT GET A FREE RIDE TO IGNORE THE LAWS AND AUTHORIZE ROBO SIGNERS AND FALSE DECLARATIONS UNDER PENALTY OF PERJURY, ETC.
(3) A MORATORIUM MAKES SENSE UNTIL THEY FIX THEIR MESS. THEY ARE BIG BOY LENDERS, THEY CREATED THIS MESS, THEY CAN FIGURE OUT HOW TO COMPLY WITH THE LAW IN TWO OR THREE WEEKENDS. LET’S GET IT FIGURED OUT GUYS.
(4) FLOODING THE MARKET WITH FORECLOSURES DOES NOTHING IMPRESSIVE TO HELP THE ECONOMY. ONCE FORECLOSURES HIT A NEIGHBORHOOD……OTHER HOMEOWNERS WHO ARE NOT IN DEFAULT, THE WANT TO START WALKING TOO. WHY SHOULD THEY PAY 4,000 PER MONTH ON A MORTGAGE PAYMENT WHEN THE HOUSE IS WORTH 200K THANKS TO ALL THE FORECLOSURES. THERE IS NO GOOD ‘SAVE THE ECONOMY’ RATIONALE FOR ALLOWING A FLOOD OF FORECLOSURES BASED ON FRAUD IN THE SYSTEM. FIX THE PROBLEMS, AND THEN FORECLOSE AS YOU SEE FIT. IF YOU ARE A RICH, WEALTHY BANKER WHO COULD CARE LESS ABOUT NEIGHBORHOODS AND THE PEOPLE AND FAMILIES THAT LIVE THERE, THEN FORECLOSE AS FAST AS YOU WANT, BUT DO IT BY FOLLOWING THE LAW.
MORE TALES FROM THE FORECLOSURE CRYPT – THE FORECLOSURE CARNIVAL (OR SHOULD WE SAY CARNAGE) CONTINUES.
Well the basics of the story are this:
(1) My Client got a loan with Indymac a few years back to buy a house in Southern California. It was a basic loan nothing fancy.
(2) After he bought the property, the county tax assessor incorrectly assessed the value resulting in his property tax being raised unjustifiably.
(3) Being that the client “impounded tax and insurance (meaning paying it through his loan) the lender paid the tax bill and then charged my Client for it.
(4) What they did was to amortize the amounts they paid for taxes over one year so that the net result is my Client’s monthly payment went from 2k (affordable) to 9,100 (completely unaffordable).
(5) My client appealed the tax assessment and tried to work that out over time, but Indymac refused to take anything but the 9k and so they help my client in default and went to foreclose on the loan.
(6) My client challenged the foreclosure process at ever step of the way, and he filed his own lawsuit to protest.
(7) Meanwhile, the sale of the property went through, and the unlawful detainer process started (to evict him from the house).
(8) He lost in the unlawful detainer action and is now appealing that to a higher court in pro per (he is a fighter and we are seeing more and more people fight their own cases when they cannot afford attorneys).
(9) Although he lost in the unlawful detainer court (and should have been kicked out of the house) he managed to get an injunction in his civil case “staying” enforcement of the unlawful detainer action (pretty impressive since he was up against one of the big LA firms).
(10) He had me step into the case because the civil judge asked him to get an attorney as it gets a little more difficult once the case gets going.
(11) After the Unlawful detainer proceeding and his loss there, he started looking into his documents and he uncovered that the guy who was assigning the deed of trust had several different signatures, basically we are alleging the signers name is a forgery and the notaries are going along for the ride (we argue this is fraud and fraud vitiates or invalidates all transactions).
(12) So based on the strength of these charges, we have sued OneWest Bank (who took over for Indymac) and OneWest Bank bought the house at the foreclosure auction. On the MERS website it says Deutsche bank owns the loan (this is the “who owns my loan” game we are seeing). So we named them too.
(13) We have sued to set aside the sale and rescind the trustees deed that OneWest bank got and are seeking to quiet title to the property and also seeking money damages. We will have a hearing coming up probably next month some time.
KEY POINTS
(1) THE FORECLOSURE PROCESS WE ARE SEEING (EVEN IN ONE COUNTY IN THE UNITED STATES, ON ONE SIMPLE LOAN) IS FRAUGHT WITH FRAUD AND FAILURE TO FOLLOW THE LAW. THE LENDERS ARE CLAIMING THIS IS A MERE TECHNICALITY, AND NO ONE IS BEING INJURED (BECAUSE AFTER ALL, THEY ARE IN DEFAULT).
(2) WE ARE SAYING THE RULE OF LAW SHOULD BE FOLLOWED, AND WHERE IT ISNT THE SALE SHOULD BE SET ASIDE AND RE-DONE. IF DAMAGES ARE INCURRED (AS IN MY CLIENTS CASE WHERE HE WAS FORCED TO FIGHT THE FRAUD IN COURT) HE SHOULD BE COMPENSATED.
(3) IF WE ARE NOT A NATION OF LAWS, THEN WHY HAVE THEM? WHY HAVE FORECLOSURE LAWS THAT SAY WHAT MUST BE DONE?
(4) THERE NEEDS TO BE A NATIONWIDE MORATORIUM ON THIS AND A CRIMINAL INVESTIGATION TO ASCERTAIN WHAT IS GOING ON HERE.
(5) THE LENDERS ARE PLAYING GAMES. WE HAVE ON INFORMATION AND BELIEF THAT ALTHOUGH ONE OF THE MAJOR LENDERS PUT A NATIONWIDE MORATORIUM ON FORECLOSURE SALES, THEY ARE TRANSFERRING THE NOTES ON THE SECONDARY LOAN MARKET TO LET SOME OTHER COMPANY FINISH THE FORECLOSURE PROCESS.
(6) THE LENDERS WILL STOP AT NOTHING TO GET WHAT THEY WANT, WHICH IS YOUR HOUSE.
Minor technicality, or major fraud – you decide. We are hoping to get this case to a jury to decide.
Folks, we have been trying to keep you updated on what is going on in the foreclosure circus and financial meltdown. I say circus, (maybe carnival is a better word, I don’t know) because there are clowns everywhere and lots of deception and the guys making the most money are selling corndogs and trying to guess your weight for a fee. We have seen so much bull**** over the last three years in our foreclosure defense practice that I want to vomit every time I see a banking commercial (that and the progressive insurance and GEICO insurance commercials – enough is enough). Wasn’t Ally Financial the last company that hit the airwaves after the TARP nonsense passed trying to brand itself as the next good guy bank you should all be doing business with, and take out a loan for the white picket fence and built in jacuzzi? Yeah, take out the loan if you have not already been raped in the face (to quote Hamlet 2) by the lenders and the bogus predatory lending and predatory structured finance scheme they have created, and the foreclosure aftermath that we all continue to deal with (both defaulting homeowners and non-defaulting homeowners who are now talking about walking away from the home – strategic defaults – because the values in the neighborhood are shot, and houses are being filled with renters and not-homeowners with pride of ownership. Now I am not bagging on renters, but just pointing out things I am hearing. This shit has hit the foreclosure fan and it doesn’t seem like there is any strategy to fix it other than to keep foreclosing and selling homes and see what happens…………”Sell Mortimor, SELL!!! (to quote trading places) as seen in this clip. Just get back in there and SELL IT BABY……
Or as they said in Batman “Let it Burn” (everything burns) as seen in this clip:
(when you mess with the established order, everything is chaos…….how true.
We used to think greed was cool. We watched it on the big screen. Gordon Gecko with his six pound cell phone…….”Hey Bud Fox, Greed is good……greed works, greed is right……….greed cuts through and captures the essence of the evolutionary spirit…….greed will save this malfunctioning corporation called the USA. Well, not exactly Gordon, things are kind of screwed up now with capitalism, and in fact, the capitalists who said “please no government intervention, no government regulation” have changed their minds and said “please help us, we are too big too fail, please.”
Here is one of the classic lines from Wall Street: (I still love the clip don’t get me wrong, it is the modern day hypocrisy I detest).
So, where does this leave us, besides some new world order? I don’t know. Maybe we take it day by day and fix the little pieces we have control to fix, and see what happens. See where things go.
Okay, so I digress, back to the foreclosure moratorium. I have it on good information that lenders are paying lip service the FORECLOSUREGATE ROBOSIGNER SCANDAL. Yes, there are guys and gals willing to sign anything for money, and notarize documents all day long in the name of a paycheck, whether or not the person signing the documents is who they say they are. Why? Because there is someone in default and we have to get these houses moving, and all the foreclosure laws are just a bothersome technicality. I truly think this is the thought process. In light of the moratorium on foreclosure by some lenders, we know the evil that lurks behind the curtain…….we deal with this stuff every day.
At the end of the day, as some of the top bankers are saying……”there is noone harmed here….” and “no big deal these are defaulting homeowners we are talking about…..” “they have no rights, they are focusing on technicalities, they are cockraoches who did not pay their bills on our predatory option arm loans, too bad for them.”
That is the spirit of banking. Cold, and heartless. Don’t be fooled by the banking commercials, in fact do yourself a favor and try to extricate yourself from this credit system that wants you as a prisoner for life.
One of the things we are hearing is that while the moratorium is going on, and while you are focused on what good guys they are for calling a moratorium, they are busy trading your note on the secondary market so some other entity can sell your house and you can pick up your loan modification efforts by restarting with the new owner of your loan. Of course the new TILA amendment requires the new owner of your loan to notify you (we have talked about this on other blogs) but I wouldn’t expect the welcome letter anytime soon. They figure you don’t know your rights, and even if you did, you don’t have the money to hire a foreclosure defense attorrney so “get over it.” “moveon.org.”
Yes, folks, that is the true heart and soul of your banking industry. So trust noone, change the channel when their commercial come on, and try not to borrower money unless you really need it. They need your money (or taxpayer bailouts to survive), why feed the elephant?
As we all know, the so called lenders (who often cannot show the note and deed of trust and prove a legal right to collect on your home mortgage)………….DONT CARE ABOUT YOU, AND DONT CARE ABOUT YOUR NEIGHBORHOOD. They are smarter than you and they teach you through television and the media, that YOU NEED THEM. That is not true, you WANT them. It’s time to stop feeding them peanuts. They are fat enough. Give it some thought.
VONDRAN LAW ANNOUNCES NEW CREDIT REPAIR PROGRAM. If you were forced to short sale your house, or if you were foreclosed on you may be able to challenge your credit report and get these horrendous items removed from your three credit bureaus (Experian, Trans Union, and Equifax). No results are guaranteed but it is worth a try. Here is the situation, you have a legal right under the Fair Credit Reporting Act (FCRA) to challenge disputed debts. One of the things we have been challegning as a foreclosure defense law firm all this time, is that the “lenders” who never really lent any money and the so-called “creditors’ of your loan are actually the investors on Wall Street (hedge funds, insurance companies, foreign investors, etc.). They are the ones who fronted the money for the loan. The originating “lender” was often not lending its own money, but working off some credit line linked to the secondary loan market. Wall Street used lender real estate licenses so they could originate loans and turn them into securities (mortgage backed securities). Thereafter, Wall Street investors “invested” in these loans and should be considered the true owner of your loan.
However, when it comes to short sales and foreclosures, a loan servicer is the one who usually orchestrates the sale of your house, or initiates the foreclosure (they get paid like 5-6 thousand bucks to foreclose on you) and they allege to be working on behalf of the “investor” of the loan (which is supposedly the beneficiary of the loan) except you do not know who the secret investor is. Likely they are referring to working on behalf of the securitized loan trust which “allegedly” your loan was a part of. Often times it is difficult (and very little proof is ever seen) to determine whether or not your loan was even in the loan pool for the particular Trust that claimed to own your loan, and the servicer claiming to be servicing your loan. Now this may sound crazy, but this the is nature of securitized loans and the secondary loan market.
So, after your house is sold via a short sale, or foreclosure sale, you are expected to go quietly into the night. Many times after the house is sold it is difficult, if not impossible, to get the house back. But you may still want to look into challenging the entity that foreclosed on you or who processed the short sale and the ultimate entity that reported negative credit to the three credit bureaus. It is your legal right to challenge any negative credit on your credit report that you do not believe is lawful. In fact, you could challenge this while you are in the middle of your foreclosure process, and are getting late payments (30/60/90 day lates) placed on your credit report.
Some things we can do is to challenge each piece of negative and make them validate that the debt was legitimate and therefore the negative credit reported to the big three credit bureaus was also legitimate. If they do not respond in 30 days you have a legal right to have that credit removed, even if the short sale or foreclosure is completed. How is that for a “fresh-start.”
At any rate, if you are interested in challenging the process, again with no guarantees, but on a “best efforts” basis, give us a call. Attorney Steve Vondran prior to becoming a lawyer, formerly worked at Experian Credit Bureau (in the privacy/compliance department) as a Privacy Consultant. We can be reached to discuss this product at (877) 276-5084.
Here was my original post merely pointing out something that seemed a little odd.
HEY, MERS JUST GAVE ME A LOAN MODIFICATION ON BEHALF OF THE LENDER INDYMAC ON AN INVESTOR LOAN! CONFUSING? YEAH, SEE ATTACHED DOC.
Here is another example of MERS playing big shot in the loan modification setting. Click on the link below to view the document. The “lender” of the loan is stated to by Indymac Mortgage Services. Meanwhile the top of the loan mod agreement states “Investor Loan #” (does this mean there is both a lender and a investor of the loan)? Who knows. The document is signed by MERS (the software company) for some reason. I suppose Indymac was not able to sign it for some reason and had to have MERS sign their loan modification agreement on their behalf for the investor? Confusing, I know.
Residential mortgage loans typically consist of two elements: 1) a note between the lender and the borrower that sets forth the terms of the loan and establishes the obligation to repay the loan to purchase a property; and 2) a security instrument which, depending on the state, may be called a “mortgage” or a “deed of trust.” The security instrument is recorded in the county land records, telling the world that there is a lien on the borrower’s property. This lien allows the property to be foreclosed upon and sold if the borrower defaults on her or his obligation to repay the promissory note.
The homebuyer at the closing table signs the security instrument (“mortgage” or “deed of trust”). By signing this document, the lender and the borrower agree to appoint Mortgage Electronic Registration Systems Inc. (MERS) as the mortgagee as nominee for the lender and the lender’s successors and assigns. By doing so, the borrower grants the mortgage lien to the property to MERS, and the security instrument is recorded in the county land records. As long as the sale of note involves a member of MERS, MERS remains the mortgagee of record, and continues to act as a nominee for the new note-holder.
Here was my response to theirs
Thank you for the lesson on MERS, I understand that is your position that bifurcation of the note and deed of trust is acceptable. Now can you explain to me does MERS ever actually hold the promissory note? Because I see cases where they assign the deed of trust and “promissory notes” or “note therein” but MERS never held a note. How can MERS purport to transfer something it never had? Which raises the next fundamental issue, where is the note? If the MERS member could show the original, non-electronic copy of a note properly endorsed and assigned, there would be much less confusion. After all, if a lender has both the note and the deed of trust, then who could argue they are the lender with the right to enforce the note. That is the problem we are facing. Having just a deed of trust is like having ham without the eggs. Even defaulting borrowers want full meal, not just some scraps that independently doesn’t taste real well. I have briefed some cases involving MERS and although there are some favorable rulings for MERS, can you explain the not-so-favorable cases like the Arkansas and Kansas Supreme Court cases, the Bankruptcy cases involving MERS and why MERS is being sued in California for cheating counties out of recording fees? These are just a few questions my clients are asking that your handy explanation posted here doesn’t seem to answer. Thank you for engaging in a badly needed debate over the validity of home loans and the right to enforce defaulting loans.
Stay tuned, we may have a lively debate brewing here. I know people want some answers.
Apparently there is one guy at a “foreclosure mill” (Jeffrey Stephan) that would literally sign anything they put in front of him. Supposedly he signed like 10,000 documents a month (for 5 years) under penalty of perjury basically testifying to the court that he had personal knowledge of facts he did not have knowledge of. What is that? That is the crime of Perjury. So, there were roughly three quarters of a million homes foreclosed on based upon a false declarations and a failure to follow the law.
How does something like this come to light? By lawyers challenging the system and protect the legal rights of homeowners facing foreclosure. Some people think if you are in default you might as well just leave your home and hand it over to whoever is claiming to own your loan (even though they cannot often prove THEY own the loan). Some people would call all these declarations signed under penalty of perjury a mere “formality” or “technicality” and say why bother.
As foreclosure and real estate lawyers, we think the law matters, and we think the process is important. Now, we are seeking a bunch of major fortune 500 lenders called out and asked to “review their processes.” Amazingly, a vice president for one of the banks said “we doubt any homeowners were injured here.” Really? If his parents house was taken by false declarations that do not comply with legal requirements he would not have a problem with that. This shows the rest of the public the attitude we have been seeing from the major lenders and loan servicers over the past few years. A “we are aboe the law” and “we decide what the law is” attitude. Well now it has come home to roost, at least temporarily.
So this may halt foreclosure for a little while – while the lenders put some more compliant window dressing on their foreclosure practices – but I am sure they will be right back at it in a few weeks saying they have better systems in place now and all foreclosures will be legal. I doubt anything will change. Of course, magically the promissory notes will not appear, so they will have to continue with their false declarations one way or another claiming they have original endorsed copies of the note showing they are owed the money. We will keep an eye on this to see the interesting new talking points they come out with next.
For now, here are the lenders impacted by the OCC ruling (SOME HAVE VOLUNTARILY DECIDED TO HALT THEIR OWN FORECLOSURES WHILE THEY CHECK OUT “GLITCHES IN THE SYSTEM”):
Bank of America
Wells Fargo
HSBC
JP Morgan Chase
GMAC
Citibank
PNC
US Bank
DOWNSIDE: OF COURSE, IT LOOKS LIKE THEY ARE ONLY GOING TO HALT FORECLOSURES IN “JUDICIAL FORECLOSURE STATES” WHERE THE LENDERS MUST FILE A LAWSUIT TO FORECLOSE. In all the non-judicial foreclosure states I suppose they will just keep doing what they are doing since they can get away with it. Here are the non-judicial foreclosure steps where ostensibly ROBOSGINERS can keep doing their thing (singing documents under penalty of perjury with no knowledge of what they are attesting to).
Alabama
Alaska
Arizona
Arkansas
California
Colorado
District of Columbia
Georgia
Hawaii
Idaho
Iowa
Michigan
Minnesota
Mississippi
Missouri
Montana
Nevada
New Hampshire
North Carolina
Oklahoma
Oregon
Rhode Island
South Dakota
Tennessee
Texas
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Here is a list of judicial foreclosure states:
Connecticut
Delaware
Florida
Illinois
Indiana
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Nebraska
New Jersey
New Mexico
New York
North Dakota
Ohio
Pennsylvania
South Carolina
Vermont
At any rate, what we are seeing validates what we have been saying all along – the Banks and Loan servicers will do just about anything when it comes to foreclosing on homes, and thanks to the efforts of foreclosure lawyers these practices are coming to light and the system should be put on trial.
Steve Vondran is a Real Estate, Foreclosure and Bankruptcy Attorney practicing law in Arizona and California. He has appeared on Fox News, and is starting http://www.ForeclosureCollege.net to teach other lawyers how to battle the so-called lenders and loan servicers in the war on foreclosure. More foreclosure resources can be found at http://www.ForeclosureDefenseResourceCenter.com.
This is a question we get all the time. For the most part, it appears trying the “produce the note defense” to a non-judicial foreclosure sale in Arizona (ex. Filing for a temporary restraining order or preliminary injunction in order to stop the non-judicial foreclosure strategy) will not prove to be a valid and viable defense. This outcome would be similar to the outcome a homeowner in California might experience (these are the two states the law offices of steve vondran is licensed to practice in).
How have the Arizona Courts handled the “produce the note question” in regards to non-judicial foreclosure sale? Here are a few cases:
Dumont v. HSBC Mortg. Corp., USA, Slip Copy, 2010 WL 3023885, D.Ariz.,2010. In this case, the Arizona District Court held:
“Plaintiff’s first two claims-Injunctive Relief and Declaratory Relief, respectively-are underpinned by the same legal theory; what this, and other courts, have labeled “show-me-the-note.” Plaintiffs assert that Defendants HSBC and MERS (and, therefore, Bosco) lack the authority to exercise the power of non-judicial foreclosure contained in the deed of trust “without first demonstrating that the person or entity conducting the Trustee’s Sale has authority from the original lender ‘principal’ or from the assignee of record of the original lender to do so.” In other words, Plaintiffs’ contend that Defendants must produce the original note or other entitlement to enforce the note to exercise the power of non-judicial foreclosure, i.e. they want to be shown the note. Accordingly, Plaintiffs want this Court to prevent Defendants from foreclosing on their property and declare that an such foreclosure is unlawful. Their position, however, is incorrect.”
The Court went on to point out that Plaintiff’s attorney knew this defense would not be valid. To this point the Court stated:
“The Court notes that every claim plead in Plaintiffs’ Complaint alleges facts which are related to the show-me-the-note theory. Viewed in its entirety, Plaintiffs Complaint reads primarily as an attack on non-judicial foreclosures and the processes associated with them, especially the fact that a non-judicial foreclosure may be commenced without production of the original note. That Plaintiffs chose this line of attack is curious, as Plaintiffs’ counsel was the counsel of record on Dumesnil v. Bank of America., N.A., in which a nearly identical show-me-the-note claim was rejected. More curious still, Plaintiffs’ counsel failed to cite to any authority which controverted its theory, despite the fact that he must clearly have been aware of such authority. Any future submissions to this Court by Plaintiffs’ attorney that fail to cite relevant authority will result in sanctions.”
Diessner v. Mortgage Electronic Registration Systems, 618 F.Supp.2d 1184, D.Ariz.,2009. In this case, the produce the note defense was also raised by the Plaintiff. Again, the court rejected the legal argument stating:
“Diessner does not cite, nor is the court aware of, any controlling authority providing that the cited UCC section applies in non-judicial foreclosure proceedings in Arizona. To the contrary, district courts “have routinely held that Plaintiff’s ‘show me the note’ argument lacks merit.” Furthermore, Arizona’s non-judicial foreclosure statute does not require presentation of the original note before commencing foreclosure proceedings. Because this action involves the non-judicial foreclosure of a real estate mortgage under an Arizona statute which does not require presentation of the original note before commencing foreclosure proceedings, count one of plaintiff’s complaint fails to state a claim upon which relief may be granted. Moreover, Diessner’s claim for declarative relief is dismissed with prejudice “because the acts complained of cannot constitute a claim for relief.”
Finally, the following case also discusses the PRODUCE THE NOTE FORECLOSURE DEFENSE IN ARIZONA.
Mansour v. Cal-Western Reconveyance Corp., 618 F.Supp.2d 1178, D.Ariz.,2009. In this SHOW ME THE NOTE CASE, the ARIZONA COURT HELD:
Counts One, Two and Three all revolve around Plaintiff’s allegation that because Defendants have not produced the original note securing the mortgage, they have no valid ownership interest and therefore may not foreclose on the property. This argument misapprehends the law. The UCC pertaining to negotiable instruments, as codified in Arizona at title 47, chapter 3, provides that “ ‘persons entitled to enforce’ an instrument [include] the holder of the instrument, a non-holder in possession of the instrument who has the rights of a holder or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to § 47-3309.” A.R.S. 47-3301.
What do these cases suggest? They suggest that filing a lawsuit and seeking a TRO or injunction using the “RODUCE THE NOTE” OR “SHOW ME THE NOTE” foreclosure defense, may not work in Arizona, as it will not apparently work in California. The cases cited for produce the note often arise in “JUDUCIAL FORECLOSURE STATES” where the lenders MUST bring the foreclosure lawsuit in a Court of law and MUST establish their legal standing to bring the suit (i.e. they must prove their right to foreclose by showing the note or giving a reason why the do not have the note – ex. Lost or destroyed).
In Arizona, a non-judicial foreclosure state (where the lender can choose judicial or non-judicial foreclosure) the obligation to produce the note apparently does not exist. Which raises an interesting question, if we know there is tons of fraud going on in judicial foreclosure states, why does the law say “oh well” in Arizona? Seems there is a fast one being pulled in Arizona by the mere fact that foreclosures may be brought non-judicially.
Note: This is not to say that “produce the note” or “show me the note” or “prove you are my creditor” do not have application in the foreclosure setting, for example, we discussed the Weisband case on another blog which talks about proof issues in a bankruptcy setting involving the note.
Here is a defense that may be raised against you if you wait to challenge a foreclosure sale or irregularities in the foreclosure process AFTER your house is sold:
Arizona Revised Statute 33-811(c)
A. The highest bidder at the sale, other than the beneficiary to the extent of the credit bid, shall pay the price bid by no later than 5:00 p.m. mountain standard time of the following day, other than a Saturday or legal holiday. If the highest bidder fails to pay the amount bid for the property struck off to the bidder at the sale, the trustee, in the trustee’s sole discretion, shall either continue the sale to reopen bidding or immediately offer the trust property to the second highest bidder who may purchase the trust property at that bidder’s bid price. The deposit of the highest bidder who fails to pay the amount bid shall be forfeited and shall be treated as additional sale proceeds to be applied in accordance with section 33-812, subsection A. If the second highest bidder does not pay that bidder’s bid price by 5:00 p.m. mountain standard time of the next day excluding Saturdays and legal holidays after the property has been offered to that bidder by the trustee, the trustee shall either continue the sale to reopen bidding or offer the trust property to each of the prior bidders on successive days excluding Saturdays and legal holidays in order of their highest bid, until a bid price is paid, or if there is no other bidder, the sale shall be deemed to be continued to a time and place designated by the trustee, or if not designated, the sale shall be continued to the same place and at the same time twenty-eight days after the last scheduled sale date. If the twenty-eighth day is a Saturday or legal holiday, the sale shall be continued to the next business day. If the sale is continued, the trustee shall provide notice of the continuation of the sale by registered or certified mail, with postage prepaid, to all bidders who provide their names, addresses and telephone numbers in writing to the party conducting the sale. In addition to the forfeit of deposit, a highest bidder who fails to pay the amount bid by that bidder is liable to any person who suffers loss or expenses as a result, including attorney fees. In any subsequent sale of trust property, the trustee may refuse to accept any bid of that person. In any sale that is continued pursuant to this subsection, the trustee shall reject the bid from any previous bidder who elected not to pay that bidder’s bid price.
B. The price bid shall be paid at the office of the trustee or the trustee’s agent, or any other reasonable place designated by the trustee. The payment of the bid price may be made at a later time if agreed upon in writing by the trustee. The trustee shall execute and deliver the trustee’s deed to the purchaser within seven business days after receipt of payment by the trustee or the trustee’s agent made in a form that is satisfactory to the trustee. The recording of the trustee’s deed upon sale may also constitute delivery of the deed to the purchaser. The trustee is not liable for any damages resulting from the failure to record the trustee’s deed upon sale after physical delivery of the deed to the purchaser. The trustee’s deed shall raise the presumption of compliance with the requirements of the deed of trust and this chapter relating to the exercise of the power of sale and the sale of the trust property, including recording, mailing, publishing and posting of notice of sale and the conduct of the sale. A trustee’s deed shall constitute conclusive evidence of the meeting of those requirements in favor of purchasers or encumbrancers for value and without actual notice. Knowledge of the trustee shall not be imputed to the beneficiary.
C. The trustor, its successors or assigns, and all persons to whom the trustee mails a notice of a sale under a trust deed pursuant to section 33-809 shall waive all defenses and objections to the sale not raised in an action that results in the issuance of a court order granting relief pursuant to rule 65, Arizona rules of civil procedure, entered before 5:00 p.m. mountain standard time on the last business day before the scheduled date of the sale. A copy of the order, the application for the order and the complaint shall be delivered to the trustee within twenty-four hours after entering the order.
D. A sale is not complete if the sale violates subsection C of this section because of an undisclosed order entered by the court within the time provided for in subsection C of this section. A sale held in violation of subsection C of this section shall be continued to a date, time and place announced by the trustee at the sale and shall comply with section 33-810, subsection B. If not announced, the sale shall be continued to the same place and at the same time twenty-eight days later. If the twenty-eighth day falls on a Saturday or other legal holiday, the sale shall be continued to the next business day. If the sale is continued because of an unknown or undisclosed order as provided in this subsection, the trustee shall notify by registered or certified mail, with postage prepaid, all bidders who provide names, addresses and telephone numbers in writing to the party conducting the sale of the continuation of the sale.
E. The trustee’s deed shall operate to convey to the purchaser the title, interest and claim of the trustee, the trustor, the beneficiary, their respective successors in interest and all persons claiming the trust property sold by or through them, including all interest or claim in the trust property acquired subsequent to the recording of the deed of trust and prior to delivery of the trustee’s deed. That conveyance shall be absolute without right of redemption and clear of all liens, claims or interests that have a priority subordinate to the deed of trust and shall be subject to all liens, claims or interests that have a priority senior to the deed of trust.
NOTE: Rule 65 is the Arizona Rule for Injunctions. So the bottom line, is do not wait until your house is sold to raise challenges against the foreclosure/process. It may be too late. Now there may be some limited exceptions but it is not always best to try to rely on exceptions.
I am digressing from my usual real estate talk to touch upon an issue that may affect some of you who seek a good logo design. The only reason I am writing this blog post is that I have had the hardest time finding a quality logo and graphics designer for projects I have had. I have been really frustrated in the past and spent time and money getting poor results. For once, I found a designer and a company that I am satisfied with, and for anyone looking for a logo designer, I just wanted to pass along the contact. His name is Chris Prescott. He hails from Wisconsin and his work, in my honest opinion, is top-notch. Turn-around time is fast and quality of the final product should impress you.
In this day and age, when it is hard to find quality people on the web, I just wanted to throw this out there. There are a lot of people moving to start their own businesses now, and if you are doing such, you should consider looking at his portfolio of work at http://www.thelogorocket.com if you like what you see, give him a call and see what he can do for you. Prices are extremely reasonable. Tell him I sent you.
Congressman Alan Grayson of Florida explains the whole MERS epidemic quite succinctly. The cat is out of the bag.
THREE THINGS TO DO IF YOU ARE FACING FORECLOSURE (AS TOLD TO FOX NEWS WILLIS REPORT – ACTUALLY THEY RAN OUT OF TIME BUT HERE IT IS)
(1) CONSULT WITH A FORECLOSURE AND REAL ESTATE ATTORNEY. FIND OUT WHERE YOU STAND (LITIGATION / BANKRUPTCY / SHORT SALE / MODIFICATION / DEFICIENCY JUDGMENT ETC.). YOU NEED TO HAVE A GAME PLAN.
(2) SEND A QUALIFIED WRITTEN REQUEST TO YOUR LOAN SERVICER (QWR). MAKE SURE YOU RAISE A BILLING/ACCOUNTING DISPUTE (PUT THEM ON THE DEFENSIVE)
(3) SEND THEM A DEBT VALIDATION LETTER, MAKE THEM VALIDATE THE DEBT (IF THEY CANNOT DO THIS YOU MAY BE ABLE TO ATTACK THEM LATER IN BANKRUPTCY COURT). ALSO SEND A REQUEST UNDER 15 U.S.C. 1641(F) AND DEMAND THE NAME, ADDRESS, AND PHONE NUMBER OF THE OWNER OF YOUR LOAN. THIS IS A TRUTH IN LENDING REQUIREMENT THAT ALSO MAKE COME IN HANDY LATER IF BANKRUPTCY BECOMES AN OPTION.
ALL DEMAND LETTERS MUST BE SENT CERTIFIED MAIL.
AFTER THAT, MAKE SURE YOU ACT IN A TIMELY MANNER IF THE LENDER IS MOVING TO FORECLOSE AND YOU HAVE A SALE DATE. DO NOT TAKE THEIR WORD FOR IT THAT THEY WILL EXTEND THEIR SALE DATE. IF YOU GET CLOSE TO A SALE DATE, YOU MAY NEED TO PREPARE FOR A CIVIL LAWSUIT/INJUNCTION OR BANKRUPTCY. ONCE THE HOUSE IS SOLD, YOU MAY HAVE A HARD TIME GETTING IT BACK.
MORE TIPS CAN BE FOUND AT WWW.FORECLOSUREDEFENSERESOURCECENTER.COM
Here are a few things to consider if you plan on filing your foreclosure or predatory lending lawsuit in pro per (meaning you represent yourself as your own lawyer). We have been getting alot of calls from people who want us to step into their federal or state lawsuit filed against their lenders, loan servicers, MERS, etc. Here are a few things we end up discussing.
(2) You should know before you go in pro per (or pro se) that in a civil court, such as a state superior court, or a federal district court, you will be expected to know both the substantive and procedural rules, and you will probably not be given much of a break by the judge like you might if you represented yourself in a bankruptcy court. Particularly presenting potential pitfalls is procedural rules such as how to file a complaint, serve a summons, timeframes to respond to a demurrer, how to prepare for a case management conference, etc. These are important procedural issues and there are many more that must be taken into consideration. Some cases are lost on procedural grounds alone, so it would not be good to work so hard only to trip up on a technical rule of procedure and losing your case or having your injunction denied etc. Lawyers are trained on these important issues that affect your case.
(2) When you file a predatory lending lawsuit, you can virtually bet the lender or loan servicer or MERS (often they will be represented by the same attorney) will respond by filing a demurrer. A Demurrer basically argues that even if everything you are saying in your complaint is true, you have not raised, or not properly pled a valid cause of action. Once this is filed, you have to respond to the Demurrer and basically justify your pleading and show legal support for your arguments. There is where I have noticed judges urging the in pro per Plaintiff to contact a lawyer. At this stage, when clients come to me looking to have me take over their foreclosure lawsuit, I have to review the case, the documents, and the complaint filed and determine if the proper causes of action were alleged, and pleaded to a legal sufficiency and to ascertain whether there is legal support for each cause of action. Sometimes valid causes of action might be missing. At any rate, we have to either defend the demurrer or else amend the complaint. Either way, there is a good chance a foreclosure or predatory lending attorney will have to amend your complaint and basically re-do what you already did. If that is the case, perhaps it would be better to just hire a lawyer in the first place.
(3) When you represent yourself, you deal directly with the attorney for the banks, servicers, trustees, etc. Although some might like this direct channel of communication, it is real easy to lose your stack and potentially say things you shouldn’t be saying. A truth in lending lawyer or real estate foreclosure lawyer can act as the buffer and represent your interests in a professional manner. Yes, attorneys can get angry at each other as well, but it may be best to have someone argue your case than do it yourself.
(4) In the event your case moves to the deposition, discovery, or trial stage, you will need to know the rules of evidence (of course you need to understand these rules at all stages of the litigation) and need to know what type of evidence you will need to establish your truth in lending, fraud, misrepresentation, quiet title claim, etc. and you will need to know how to get this all into evidence so the judge or jury can hear the evidence. All evidence and testimony is not automatically admissible. And what if you need an expert? Do you know when you need one? How to get one etc.? These are important factors to consider.
(5) In the event you are in litigation and reach a settlement, are you prepared to draft a mutual release and settlement agreement that will be binding on all parties?
(6) Do you have time to make it to court for required hearings? Are you capable or working out extensions and stipulations with the other attorney and things like that? Just another factor to consider.
These are just a few things to think about when deciding whether or not to represent yourself in a civil predatory lending // foreclosure lawsuit, or even when filing bankruptcy or filing an adversary proceeding in bankruptcy. With all the information on the internet these days, (some even post their pleadings now) it is possible to represent yourself, but just weigh the pros and cons. If money is an issue, and it often is (we do not take foreclosure litigation cases on a contingency fee basis which I assume is fairly standard) then perhaps you have no choice, but sometimes you might find hiring a lawyer is something you can’t afford NOT to do. Either way, we wish the best.
Okay, this is a real interesting case. A California homeowner from Westminster California pulls off a HUGE Truth in Lending / Quiet Title win against Chase mortgage. Validating the need to obtain a forensic loan audit when you have a loan (refi loan) originated within the last three years and suspect there may have been material truth in lending violations in your loan file.
As we have discussed on many other blog posts, including on our site http://www.rescindmyloan.net IF YOU HAVE A REFINANCE LOAN TRANSACTION WITHIN THE LAST THREE YEARS AND YOU ARE FACING A FORECLOSURE (OR EVEN IF YOU ARE NOT FACING A FORECLOSURE BUT WANT TO SEE IF YOU HAVE ANY LEGAL RIGHTS WORTH PRESERVING), you should consider having a Truth in Lending (“TILA”) forensic loan audit performed to see if you have an ability to excerise “extended three year rescission rights.” Yes, that’s right, where you have material TILA violations in your loan documenhts (ex. under-disclosure of the APR or finance charge, and/or failure to receive two copies for each borrower or person with a security interest in the property) you have a LEGAL RIGHT to rescind your loan as against your current lender – which includes those secret lenders which the loan servicers are trying to protect, like the trustee of a securitized loan trust, etc. Why? TILA rescission rights apply TO ALL ASSIGNEES OF THE LOAN. Trust me when I tell you, this is not something the “lenders” want to deal with.
Under TILA, when you rescind your loan, the security interest is automatically void and the lender must return all monies received in connection with the loan and the borrower has no obligation to pay any finance charges. The key is the identify the TILA violation through a forensic document examination, and then to submit a valid rescission letter to all appropriate parties. Once you do this, technically speaking, the lender must acknowledge your request to rescind and takes steps to reflect cancellation of their security interest.
What happens is when this right is exercised, normally the lender will ignore it, or dispute it altogether. TILA is desiged to be a self-enforcing rememdy and it is a “consumer protection statute” that is to be “liberally construed to protect borrowers against the mighty banks who are in the best position to ensure TILA compliance by giving clear and conspicouos disclosure of the cost of credit and other meaningful disclosures essential to a consumer credit transaction.
Well in this case (Nguyen v. Chase Bank), the Plaintiff, GOING IN PRO PER WITH A VERY WELL WRITTEN COMPLAINT, socked it to Chase who was also confronted with questionable conduct that it was argued violated the preliminary injunction obtained by the savvy Plaintiff.
The Plaintiff sent in his rescission letter and made an offer to tender which was rejected by Chase. Under TILA, the borrower must also tender back the loan proceeds received minus what they are owed the lender. When Chase rejected the tender offer, the Plaintiff sued for TILA violations, Forgery, Rescission, and other damages. Mr. Nguyen obtained a preliminary injunction. The Defendants, despite the injunction, filed a Notice of Sale acting in complete indifference to the Plaintiff’s Federal TILA rights.
At the end of the Day, the judge issued an order that “the Deed of Trust recorded with the Orange County Recorder……is WHOLLY VOIDED……..THAT A DEED OF RECONVEYANCE ISSUE……ALL ADVERSE CLAIMS AGAINST THE PROPERTY ARE QUIETED…….AND THAT THE PROMISSORY NOTE IS RESCINDED…….
Folks, if you were wondering why we have been shouting from the rooftops that if your refi loan was in the last three years, you should get a mortgage documents analysis from a qualified loan auditor or legal professional. This case shows the potential power of TILA, as we state on our website, is perhaps “your most powerful weapon” to battle and win the war on foreclosure.
Even if you are working with a modification company, or “attorney-backed” firm, or even a law firm, if your loan is within three years, DO NOT NEGLECT TO GET A GOOD SOLID TILA ANALYSIS AND DISCUSS A TENDER LITIGATION STRATEGY WITH A TRUTH IN LENDING LAWYER. THE HOUSE YOU SAVE MAY BE YOUR OWN.
Mr. Nguyen, my hat is off to you for a job well done.
Many homeowners have worked hard to try to get a loan modification on Fannie and Freddie loans. Like alot of other “lenders”, the loan modifications are denied because they do not want to modify the loan, lack of income, excessive back-end expenses or other reasons (such as failure to pass the “net present value test”). The Net present value test is basically a back-room determination as to whether or not it is in the “lender” or “investors” best financial interest to modify the loan, versus simply foreclosing on it.
Well, fed-up homeowners unable to obtain a modification, and doing a little net present value test of their own when the lender refuses to modify the loan, or gives a chintzy modification. Some homeowners are deciding it is in THEIR BEST FINANCIAL INTEREST TO SIMPLY WALK AWAY FROM THE UNDERWATER OR DEPRECIATING ASSET.
When that happens, it seems Fannie Mae is getting bent out of shape when a homeowner looks after THEIR BEST FINANCIAL INTEREST. In an attempt to show homeowners “who’s boss” Fannie Mae released this press release:
Basically, Fannie Mae will blackball any homeowner who walks on their property (often called a “strategic default”) without first trying to submit for a modification and where they have the ability to pay the loan. Yep, if you have a Fannie Mae loan and walk, you will not get another Fannie Mae backed loan for seven years. That should teach you a lesson thinks they.
Anyway, just wanted to keep you posted on what’s going on. In addition to that, the word on the street is that Fannie Mae will no longer extend sale dates when a borrower is trying to pursue a short sale. If you have a sale date of Dec. 25th for example, and you are in the progress of negotiating a short sale, rumor has it they will not extend the sale date to help you get the short sale approved, and thereby protect your credit to the extent possible. Just another happy greeting from your friendly neighborhood “lender.”
Okay, so I am digressing. This blog post is not about foreclosure defense. Not about real estate law. I have a very simple question to ask. IS IT BETTER TO DIE ON OFFENSE OR DIE ON DEFENSE (not that death is ever good, and it is not inevitable). I would argue it is best to win, and on offense. Here is the situation. I use the Football Game Analogy.
I have been watching football games for about 40 years. When I was young, I lived in San Antonio Texas, and I was a HUGE Dallas Cowboys fan. I Loved football in all forms. But I have been watching games a long time and at times, a it seems to me a common scenario often unfolds:
THE TEAM ON DEFENSE IS TIED, OR LOSING. THE OPPONENT HAS THE BALL AND THEY ARE MARCHING DOWN THE FIELD. THE CLOCK IS DWINDLING WITH EVERY PLAY. THE TEAM THAT IS ON THE OFFENSE IS LOVING LIFE. WHY? THEY ARE ON THE TEAM ON THE MARCH AND THE CLOCK IS DWINDLING. IS THIS SO HARD TO FIGURE OUT. THE TEAM ON DEFENSE SITS AROUND AND TRIES TO DEFEND AS THE TEAM ON THE OFFENSE MOVES INSIDE THE 20 AND THEN INSIDE THE 10.
At this point, the clock usually dwindles down to a minute or two. The defense puffs its chest and pretends they are going to make a goal line stand, ala the Pittsburg stealers “iron curtain” a bygone team of destiny.
The main problems at this point, and with this approach, are:
(1) Defense is losing ground and time is running out
(2) The Offense has the momentum and they are marching home to the goal line
(3) The Defense is beat up, tired, and thinking of a cold brew
(4) The sweet taste of victory is in the mouths of the offense (mainly because they are tied, or have the lead, and the clock is dwindling and the defense is beat and they know it)
So what happens next? The offense, (usually within field goal range at this point), marches on. The defense continues to puff its chest, and suck wind, pretending they are going to make some kind of goal line stand.
NOW WHAT I PROPOSE – IS THAT THE DEFENSE (IF THEY WILL BE WITHIN 8 POINTS AFTER ALLOWING A TOUCHDOWN) SHOULD SIMPLY DO A MEXICAN STYLE “OLE” AND LET THE OTHER TEAM SCORE SO THEY CAN GET THE BALL BACK, AND SO THAT THEY CAN THEN GO ON THE OFFENSE. IF THEY CAN GO ON THE OFFENSE TO GET THE POINTS BACK AND POTENTIALLY TIE THE GAME AT THE OTHER END, THIS, IN MY MIND, IS A MUCH BETTER RESULT. DIE ON OFFENSE, NOT DEFENSE. THE DEFENSE IS ALREADY BEAT, AND THERE IS RARELY A “GOAL LINE STAND.” LET THE OFFENSE TAKE A SHOT.
The game I am referring to is the Monday Night Football game between the Packers and the Bears (September 27, 2010). LOOK IT UP. The Bears had the Packers tied with just a minute or two remaining. The Bears backed the Packers up to the goal line with like a minute to spare. (YEAH, IT WAS PRETTY OBVIOUS THE BEARS WOULD SCORE – AT LEAST A FIELD GOAL TO WIN IT – AND LEAVE ABOUT 10 SECONDS FOR THE PACKERS TO WORK WITH). The Packers coach chose THE AGE-OLD “goal line stand” approach as if the 20 yard field goal was not inevitable (I mean, comeon, what are the stats on this, for sure they score 3 points to win it)? To boot, there was like 30-45 seconds left. Yeah, great time for a “goal line stand” when a field goal wins the game.
As predictable, the Bears scored the touchdown and kicked off with like 4 seconds left. Good luck. The Packers did some old ‘Stanford style’ flick and pitch routine to try to save the day, but this amounted to little more than a 4 seconds of a circus act. The Bears won, with their offense. The Packers lost, trying to pretend their was some goal line defense to be had and maybe they would miraculously block the filed goal click. Didn’t happen. Rarely does.
My point is, WHY NOT LET THE BEARS SCORE, GO UP BY 8, AND AT LEAST GET ABOUT A MINUTE BACK TO TRY TO GO BACK AND SCORE A TOUCHDOWN, AND DO THE TWO-POINT CONVERSION. IN OTHER WORDS, WHY NOT DIE ON AN AGGRESSIVE OFFENSE, THAN DIE WITH A TIRED DEFENSE? AREN’T OFFENSES TRAINED ON THE “TWO-MINUTE DRILL?” DIE WITH THEM AT THE HELM.
MAYBE FORECLOSURE DEFENSE IS THE SAME WAY. WHY GET BEATEN DOWN, BATTERED, LIED TO, TRICKED, SPIT ON, DECEIVED, PLAY VICTIM TO A TRIAL PLAN MODIFICATION FRAUD SCHEME, HAVE SOME PRETENDER LENDER WHO COULD NEVER PRODUCE CREDENTIALS TO JUSTIFY THEY OWN YOUR LOAN FORECLOSE ON YOU, ETC.? MAYBE THE BEST FIGHT IS ON THE OFFENSE – SWINGING FOR ALL ITS WORTH. MAYBE IT IS BETTER TO WIELD THE SWORD THAN BE STABBED BY ONE IN A CORNER. MAYBE YOU NEED TO GO ON THE OFFENSIVE FOR A CHANGE, BREAK THE OLD CYCLES, AND STOP TAKING THE PUNCHES SQUARELY ON THE FOREHEAD? MAYBE IT IS BETTER TO DIE (IF THAT IS POSSIBLY THE END RESULT) ON OFFENSE, THAN TO GET TRAMPLED ON DEFENSE?
Although I loved football, my talent was in baseball. As they taught me in the Cincinnati Reds organization many years ago, “sometimes the best defense is a good offense.”
Just something to think about. NFL coaches pass the baton just like everyone else. They cannot break the cycles of what they have been taught. They may cite statistics or whatever to justify their “goal line stand” with one minute remaining but people who have been watching the game know this approach is painful to watch. Just my lousy two cents for whatever it is worth.
PS I would welcome a rebuttal with football statistics – tell me how my logic is flawed in regard to football games. At any rate, at the end of the day, having the other team ram home the win on a tired defense seems to be a anti-climatic outcome, at least to me.
I tried to email the Packers coach, but there was no email link to be found. I just want to know. Why do you do that? What is the rationale? What are the stats? Is this good TV? Is this good sport? For my money, I want a chance to win, to take charge of my destiny, not just to watch the clock run out on some pretend defense. Makes me wonder what the late great Packers coach Vince Lombardi would have done. He said: “destiny is not a matter of chance, it is a matter of choice……it is not something to wish for, it is something to be attained.” What would he have done?
To many people, saving the family home from foreclosure is something to be attained.
The following is general legal information only and not intended as legal advice or a substitute for obtaining legal advice. For specific answers to your questions please consult a real estate attorney. Steve Vondran, Esq., is a real estate attorney licensed to practice law in California and Arizona. He can be reached atsteve@vondranlaw.com or by phone at (877) 276-5084. There is no representation that this article is 100% accurate or up-to-date as the law is constantly evolving.
(1) If a borrower has a forensic loan analysis done and uncovers a “material truth in lending violation” in their loan file, and if the loan was originated within the last three years, then an “extended three year right to rescind” the loan is raised. The extended right to rescind exists only for refinance transactions on consumer loans (not for purchase loans or commercial or business loans unfortunately).
NOTE: There are several different ways to get a “material TILA violation.” The main ones I will mention are failure of each borrower or person with security interest in the property to get two (2) properly executed notices of right to cancel. Another one is under-disclosure (outside permitted tolerance leves) or the Annual Percentage Rate (APR) and under-disclosure of Finance Charges / Amount Financed. There are other potential violations, and you should consult a forensic loan examiner if you have loan within the last three years.
(2) In this event, a Rescission letter must be sent to the lender, and all parties who at ay time may have had a financial interest in the loan. The letter should set forth that “I WISH TO CANCEL” the loan, state the loan number, and all other pertinent information about the loan, including specific TILA violations (although this is not a legal requirement). Your letter should also discuss the lenders legal obligations under TILA law. To be safe, you should have a Federal Truth in Lending Lawyer review your file and draft this letter for you.
(3) What are the legal obligations of the parties after the TILA rescission letter is sent (loan rescinded)? Let’s take a look:
(a) If the Lender disputes the right to rescind, they have 20 days to file a legal action for declaratory relief. See 15 U.S.C. 1625(b). I have not seen that they will go to this extent for the most part. Rather, they will either respond to your letter telling you that you do not have a valid claim, or, they just blow you off all together. Assuming they don’t file for declaratory relief, here is what TILA Law (also known as Reg Z) says must happen next.
NOTE: TILA rescission applies to ALL ASSIGNEES OF THE LOAN. There is no “holder in due course” argument or anything like that. See 15 U.S.C. 1641(c),Belini w. Washington Mutual Bank, 412 F.3d 17 (1st Cir. 2005), and Ocwen Fed. Bank v. Russell, 53 P.3d 312 (Haw Ct. App. 2002).
(b) STEP ONE, by operation of law, the security interest and promissory note automatically becomes void and the consumer is relieved of any obligation to pay any finance or other charges (15 USC 1635(b); Reg. Z-226.15(d)(1),226.23(d)(1). . See Official Staff Commentary § 226.23(d)(2)-1. (See Willis v. Friedman, Clearinghouse No. 54,564 (Md. Ct. Spec. App. May 2, 2002) (Once the right to rescind is exercised, the security interest in the property becomes void ab initio). Thus, the security interest is void and of no legal effect irrespective of whether the creditor makes any affirmative response to the notice. (See Family Financial Services v. Spencer, 677 A.2d 479 (Conn. App. 1996) (all that is required is notification of the intent to rescind, and the agreement is automatically rescinded).
(c) STEP TWO, THE LENDER HAS A TENDER OBLIGATION TO THE BORROWER. YES, YOU HEARD THAT RIGHT, BY STATUTE, IT IS THE LENDER WHO MUST TENDER FIRST. NOT THE BORROWER. THE QUESTION OF WHO HAS TO TENDER FIRST CAN ONLY BE MODIFIED BY THE JUDGE. As part of the lender’s legal tender obligation under TILA, the lender must return any money, including that which may have been passed on to a third party, such as a broker or an appraiser and to take any action necessary to reflect the termination of the security interest within 20 calendar days of receiving the rescission notice. See 15 USC 1635(b); Reg. Z-226.15(d)(2),226.23(d)(2).
(d) STEP THREE: After the Lender has fulfilled their obligations under TILA, the borrower must then TENDER all proceeds they received in connection with the loan transaction. That is, they must pay the lender back what they got. There are no free lunches, and you cannot get something for nothing or your house for free.
NOTE: Under TILA, the Courts are given the EQUITABLE POWER to modify Steps One and Two (technically speaking, the Court cannot revive the security instrument that was voided when the borrower rescinded) but the Court can condition the ability to rescind on tender, based upon a balance of the equities in the case. You will need a foreclosure or TILA rescission attorney to explain this to you, and there are a bunch of cases that discusses the tender obligations and who should have to tender first, the borrower or the lender.
NOTE: One you send the TILA rescission letter to your creditor, you may want to try to prepare a recordable document and see if you can record it so the rest of the world is on notice that the loan has been rescinded. You do this because the lender will likely be licking its chops and setting the stage for foreclosure once it gets your letter (often times the borrower is in foreclosure and the lender has been unwilling to provide a loan modification, or a meaningful loan modification which compels the borrower to explore and assert its other legal rights) and you would like to try to prevent a Sale or transfer of the property. Again, you are wise to discuss this with a foreclosure or real estate lawyer with knowledge of truth in lending law.
SPECIAL ISSUES WHEN RESCINDING YOUR LOAN UNDER TRUTH IN LENDING (“TILA”) AND FILING BANKRUPTCY.
(1) Filing Chapter 7 or Chapter 13 Bankruptcy does not terminate your right to rescind your loan. You can still do it. However, there are a few things to keep in mind. In most cases, the rescission right belongs to the trustee to bring the action, that is, the right to rescind the loan is one held by the estate (rather than the debtor’s right to exercise – unless the proceeds are exempt to the debtor). If the proceeds are exempt, the debtor should be able to file the case. See in re Polis, 217 F.3d 899 (7th Cir. 2000) and Christy v. Heights Financial Corp., 101 B.R. 542 (C.D. Ill. 1987).
If there is no exemption to cover the cause of action or the proceeds, then the Trustee will have to bring the claim or has standing to bring the claim. In these cases, if the Trustee does not want to bring the claim, make sure you get a determination (or stipulation) that the Trustee hasabandoned the Claim so you can bring it in the current bankruptcy case or at a later district court case yourself. See Bryson v. Bank of N.Y., 584 F. Supp. 1306 (S.D.N.Y. 1984) for authority that the TILA case must abandoned by the Bankruptcy Trustee. In Bryson the Court said:
Upon a filing of bankruptcy, title to the bankrupt’s property vests in the trustee in bankruptcy. “Property” includes the right to pursue causes of action formerly belonging to the debtor. Hanover Insurance Co. v. Tyco Industries, Inc., 500 F.2d 654, 656 (3d Cir.1974). Bryson thus was not a proper plaintiff when this suit was instituted. However, a trustee may abandon his claim to any asset which he deems to be less valuable than the cost of recovering it. Id. at 657; 11 U.S.C. § 554(a). This is exactly the statement plaintiff’s trustee makes in the submitted affidavit. An effective abandonment would relate back to the time of filing of the petition, thereby retroactively making plaintiff a proper party. Brown v. O’Keefe, 300 U.S. 598, 602, 57 S.Ct. 543, 546, 81 L.Ed. 827 (1937).
“Abandonment, however, is not effectuated by an affidavit from the trustee. The Bankruptcy Code, specifically 11 U.S.C. § 554, authorizes a trustee to abandon any property of the estate “[a]fter notice and a hearing.” Implementing this, Fed.R. Bankruptcy 608 provides for approval by the Bankruptcy Court of such abandonment. The Advisory Committee Note to Rule 608 states that the rule “codifies the preferred practice developed under case law.” See, e.g., Lincoln Nat. Life Ins. Co. v. Seales, 62 F.2d 582, 585 (5th Cir.1933). According to Collier on Bankruptcy, which is cited by the Advisory Committee as authority for the case law practice, the preferred practice is to require court approval as a “condition prerequisite” to abandonment by the trustee. 4 Colliers on Bankruptcy, ¶ 554.01 (15th Ed.1982). Rule 608 and § 554 must therefore be read to require court approval before a trustee can abandon property otherwise within the estate. This rule assures that the creditors of the bankrupt, for whom the trustee must conserve the estate, are given an opportunity to object to the returning of any property to the bankrupt. In the absence of court approval of trustee abandonment of plaintiff Bryson’s claims, they must be dismissed in their entirety.
(2) Also realize, if you file a district court case to rescind your loan BEFORE you go into bankruptcy (or where your TILA claim arose prior to filing bankruptcy but was not filed – for example, the TILA rescission cause of action relates to a loan entered into PRIOR to filing BK but you have not filed suit before filing your BK petition), if you filed a TILA state or federal case your TILA claim can be removed to the bankruptcy Court and your TILA claim can become part of (property of) the bankruptcy estate. Even if you haven’t filed the case yet, if the cause of action arose before the BK petition, there is a good argument the TILA cause of action is part of the bankruptcy estate. Again, you may want to contact the trustee to have the trustee stipulate to abandoning the case or letting you bring it so you have standing to file it (a common objection the opponent may raise).
As was said in the Polis case cited above:
On the date Polis filed her petition in bankruptcy, she had not yet sued Getaways, but the legal claim on which the suit was based, having arisen out of a transaction (the sale of the travel package) that had occurred before the petition was filed, was already “property” of the debtor and hence of the debtor’s estate in bankruptcy. Cable v. Ivy Tech State College, 200 F.3d 467, 472-73 (7th Cir.1999); In re Carousel Int’l Corp., 89 F.3d 359, 362 (7th Cir.1996); In re Smith, 640 F.2d 888, 890 (7th Cir.1981) (Truth in Lending Act claims-just as here); Northview Motors, Inc. v. Chrysler Motors Corp., 186 F.3d 346, 350 (3d Cir.1999); In re Wischan, 77 F.3d 875, 877 (5th Cir.1996); Wissman v. Pittsburgh National Bank, 942 F.2d 867, 869-71 (4th Cir.1991). The question is what its value was then.
As to the value question the court held:
“The Code provides that the “value” of property sought to be exempted “means fair market value” on the date the petition for bankruptcy was filed, 11 U.S.C. § 522(a)(2), unless the debtor’s estate acquires the property later.” Although we may assume (without having any case law to go on) that a Truth in Lending Act claim is not assignable and so cannot be the subject of a “market” transaction in the literal sense, that is irrelevant. Legal claims are assets whether or not they are assignable, especially when they are claims for money; as a first approximation, the value of Polis’s claim is the judgment that she will obtain if she litigates and wins multiplied by the probability of that (to her) happy outcome. That is roughly how parties to money cases value them for purposes of determining whether to settle in advance of trial. They do so whether or not the claim is assignable; unassignable claims (tort claims, for example) command positive prices in the settlement “market.”
NOTE: In a Chapter 7 (or Chapter 11 bankruptcy case), the Bankruptcy Trustee, (or the Debtor in possession in a Chapter 11 case), can file a motion to sell property of the estate “outside the ordinary course of business” by seeking to conduct a “363 Asset Sale”. We are writing a separate blog on this rather interesting topic. In general, what does that mean? It means, that in many cases, the Bankruptcy Trustee has the right and legal authority to sell your property (including your TILA lawsuit) to the highest bidder, and may even sell your TILA case at a Bankruptcy Auction under 11 U.S.C. 363. Yes, that means they can attempt to sell and seek court approval of the sale of the asset subject to an “auction” of the claim to any potential over-bidders. So your TILA claim could be sold-off to the highest bidder in a Bankruptcy Court. Yes, that is right – Judge turned auctioneer – it really is interesting).
Can you guess who might be interested in bidding (paying cash to settle your TILA case at 363 Sale/bankruptcy auction? If you said the lender who is being sued for rescission and TILA statutory damages, you are a TILA pro. That is right, and that is exactly what happened in one case. The lender (“creditor” under TILA) effectively bid about 5k to “buy” and “settle” – meaning the debtor had to dismiss adversary proceeding with prejudice – the TILA case filed by the Debtor. Wait, that seems strange right? The lender who is being sued gets to buy the lawsuit (unless someone bids higher of course and as long as the court approves the sale as being in good faith and at arms length) and the Trustee is more than happy to generate some revenue – for both themselves (yes, the BK trustee earns a commission on assets recovered for the estate) and the rest goes to the unsecured creditors. So, you need to at least understand that there is a potential the lenders being sued will want to bid on the lawsuit (“asset” of the estate) and try to cash out the Chapter 7 Trustee. You will have a chance to over-bid and different types of financial bids will have to be considered by the judge including contingency type bids. This is certainly a consideration to be made when thinking of filing an adversary proceeding to rescind your loan under TILA when the claim arose, or was filed before bankruptcy.
Note: As stated above as borrower/debtor, you can bid on your own case being auctioned off. And you do not have to bid ALL CASH or anything like that. There is another blog we will be writing that discusses the Lahijani case which discusses the different types of bids the judge can consider in deciding whether a bid is in good faith. Google “Vondran discusses Lahijani case.”
(3) In regard to the bankruptcy petition itself, the TILA damages should be listed as an asset (property) of the estate and if there is a homestead exemption at play (ex. the 704 exemption in California) or other exemption, this should be listed as exempt. Being exempt may permit the borrower to bring the TILA action. A dollar value to the claim should also be stated, and the “statement of intent” of the debtor should list the intent to rescind the loan. Again, a Truth in Lending lawyer can help you craft good language for your statement of intent which will put the lenders and the banks on notice of your plans. People have asked whether filing a chapter 7 bankruptcy petition, and then filing an adversary proceeding seeking a determination that the “lien is invalid” will compel a loan workout. I have not seen that result being forthcoming. If you go to rescind your loan, plan on following through which again normally will require (a) equity in the property and (b) some inequity on part of the lender and (c) sale of the property. Those are the harsh realities of TILA rescission in Bankruptcy.
NOTE: A lot of people miss this (including opposing counsel for Banks). IF A BANK FAILS TO HONOR YOUR RESCISSION LETTER, THAT IS A LEGAL VIOLATION TRIGGERING A ONE-YEAR RIGHT TO SUE FOR STATUTORY MONEY DAMAGES. MOST LENDERS FAIL TO BELIEVE THEY CAN BE HELD ACCOUNTABLE FOR THIS. If your loan was originated within one year, there is also a separate statutory damage claim that can be brought. If the loan was transferred from the originating lender to a new “lender” on the secondary market, then the TILA violation must be “apparent on the face of the documents” (ex. Notice of Right to Cancel that has no dates filled in) to trigger lender liability.
NOTE: Another trick to avoid…….all assignees of the loan are subject to TILA rescission. I have seen some really bizarre arguments by lenders for big banks such as Wells Fargo and One West bank who do not seem to understand this relatively simple concept. If they are a loan assignee, they should audit the files they purchase and if there is a material TILA violation they should decline the purchase of that particular loan. That is their problem to deal with.
(4) Another thing to consider is some courts may deem the TILA claim property of the estate and that ONLY THE TRUSTEE HAS STANDING to bring the TILA claim. Again, if the Trustee won’t bring the claim, get a determination that they abandoned it so you, as debtor, can bring the claim in the current BK case or at a later date.
(5) What does the Borrower get back from the creditor when it rescinds the loan (remember, STEP ONE of TILA is the LENDER MUST TENDER – unless the Court later modifies or conditions this step). You should pretty much argue that all fees, costs, finance charges, and “other charges” paid in connection with the loan should be refunded or credited to the consumer. For example, the following fees, costs, finance charges and other charges should be considered:
FEES THAT SHOULD BE REFUNDED TO BORROWER FOLLOWING TILA RESCISSION – “ALL FINANCE AND OTHER CHARGES”\
√ All Finance charges paid in connection with the credit transaction
√ All late fees paid
√ Any pre-payment penalty fees paid
√ Any fees paid to any third party in connection with the loan (ex. appraisal fees, credit report fees, filing fees, doc prep fees, loan origination fees, points, rate lock fees, etc.)
√ Any money or property given to anyone in connection with the consumer credit transaction
√ Any attorney fees paid by the consumer
√ Yield Spread Premium (YSP)
NOTE: Generally these fees are treated as an offset to the borrower’s tender obligation, and you can basically create a new payoff amount by figuring out what you are owed from the lender versus the amount of the loan owed (the borrowers tender obligation). It should be argued that the Court has NO POWER to modify what amounts are owed the borrower. See Semar v. Platte Valley Federal Sav. & Loan Ass’n, 791 F.2d 699, C.A.9 (Cal.),1986. In Platte, the Court held:
“On rescission, the security interest is dissolved and the borrower returns “the property”-in this case the loan proceeds-to the lender. 15 U.S.C. § 1635(b). TILA specifically states that the borrower “is not liable for any finance or other charge.” Id. Interest is a finance charge. 15 U.S.C. § 1605(a); see Ljepava v. M.L.S.C. Properties, Inc., 511 F.2d 935, 938 (9th Cir.1975) (district court subtracted from amount borrower owed lender under a TILA rescission “finance charge” that included 10% interest, commissions, and “extra payment”); 12 C.F.R. § 226.4(b)(1). The district court erred by making the Semars responsible for interest and many of the charges listed on the Closing Statement. The proper formula under the statute is the one suggested by the Semars: the loan amount less all charges in the loan agreement. Therefore, they owe Platte Valley $92,290.65. 15 U.S.C. § 1605(a) provides: “Except as otherwise provided in this section, the amount of the finance charge in connection with any consumer credit transaction shall be determined as the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. The finance charge does not include charges of a type payable in a comparable cash transaction. Examples of charges which are included in the finance charge include any of the following types of charges which are applicable:
(1) Interest, time price differential, and any amount payable under a point, discount, or other system of additional charges.
(2) Service or carrying charge.
(3) Loan fee, finder’s fee, or similar charge.
(4) Fee for an investigation or credit report.
(5) Premium or other charge for any guarantee or insurance protecting the creditor against the obligor’s default or other credit loss.
“Platte Valley concedes that the Semars’ formula is correct under TILA but argues that the district court has equitable discretion to alter the statute. Platte Valley cites Rachbach v. Cogswell, 547 F.2d 502 (10th Cir.1976), which held that the district court did not abuse its discretion by requiring the borrower to repay principal and interest in a TILA rescission.However, this decision contravenes 15 U.S.C. § 1635(b), which states that a borrower is not liable for any finance charge, and 15 U.S.C. § 1605(a), which lists interest as an example of a finance charge. We defer to Congress’ method of enforcing TILA and follow the plain language of the statutes.”
NOTE: As set forth above, the Creditor should also return any money or property even if it was given to a third party in connection with the loan transaction. For example, fees paid to the broker, appraisers, closing costs, etc., even if such fees and costs “don’t represent profit to the creditor” See Official Staff Commentary 226.23(d)(2)(1). Here is a good link to review http://www.bankersonline.com/regs/226/suppi226-23.html.
As it says here:
Paragraph 23(d)(2).
1. Refunds to consumer. The consumer cannot be required to pay any amount in the form of money or property either to the creditor or to a third party as part of the credit transaction. Any amounts of this nature already paid by the consumer must be refunded. “Any amount” includes finance charges already accrued, as well as other charges, such as broker fees, application and commitment fees, or fees for a title search or appraisal, whether paid to the creditor, paid directly to a third party, or passed on from the creditor to the third party. It is irrelevant that these amounts may not represent profit to the creditor.
2. Amounts not refundable to consumer. Creditors need not return any money given by the consumer to a third party outside of the credit transaction, such as costs incurred for a building permit or for a zoning variance. Similarly, the term any amount does not apply to any money or property given by the creditor to the consumer; those amounts must be tendered by the consumer to the creditor under §226.23(d)(3).
Citations to borrower refund provisions are: Reg Z 226.15(d)(1), 226.23(d)(1), 15 U.S.C. 1635(b).
NOTE: Again, make sure you ask for just about everything. As one Court put it: “the creditor bears the risk of loss and they can limit their loss by complying with TILA. See French v. Wilson, 446 F. Supp. 216 which held:
The Truth in Lending Act has been interpreted as being “remedial in nature” and “must be construed in liberal fashion if the underlying Congressional purpose is to be effectuated.” N. C. Freed Company, Inc. v. Board of Governors of Federal Reserve System, 473 F.2d 1210, 1214 (2nd Cir. 1973), cert. denied, 414 U.S. 827, 94 S.Ct. 48, 38 L.Ed.2d 61 (1973). See also Littlefield v. Walt Flanagan and Company, 498 F.2d 1133, 1136 (10th Cir. 1974); Ratner v. Chemical Bank New York Trust Company, 329 F.Supp. 270 (S.D.N.Y.1971). As the Court in Starks v. Orleans Motors, Inc., 372 F.Supp. 928, 932 (E.D.La.1974), aff’d mem., 500 F.2d 1182 (5th Cir. 1974) aptly stated: “Where the nature of an act is remedial, as here, it should be construed liberally in an attempt to provide the remedy, not avoid it………“Congress’ intended operation of the statute, as evidenced by the 1635(b) creditor-forfeiture provision, therefore clearly calls for a debtor windfall if the creditor does not set about to rectify his earlier nondisclosures in the manner envisaged by the statute. In fact, the Act flatly provides that if his creditor continues in his untoward ways, the debtor incurs no obligation to pay for property which he is at the same time entitled to keep.”
(6) TOLLING OF THREE YEAR PERIOD TO RESCIND (or one year damages provision under TILA) – is possible if you file for Bankruptcy. For example, if the three-year right to rescind is about to expire, it may be possible that you can file Bankruptcy and then rescind in the bankruptcy court even if the rescission exercise comes after the three year period (for example, you might get an extra sixty days to rescind – see Thomas v. GMAC Residential Funding Corp., 309 B.R. 453 (D. MD. 2004). The same is probably true if the one year statute for statutory damages is about to expire. See Section 11 U.S.C. 108(a) for authority. Just note, it may require the trustee to bring the action. But see In re Gaskins, 98 B.R. 328 which permits a claim brought by the debtor on behalf of the estate. Just something to keep in mind.
(7) BORROWER’S “TENDER” REQUIREMENT IN BANKRUPTCY:
COURTS CAN (OR ARGUABLE “SHOULD”) TAKE INTO ACCOUNT A BORROWERS ABILITY TO TENDER THE LOAN BALANCE IN BANKRUPTCY COURT AND DETERMINE THEAMOUNT OF TENDER – See In re Giza 428 B.R. 266 (Bkrtcy.D.Mass.2010). In Giza, the Court discussed:
“When a security interest is voided, the underlying claim becomes unsecured, and the Bankruptcy Code provides for how all unsecured claims must be treated in bankruptcy by the Chapter 13 plan under 11 U.S.C. § 1322(a)(3). The debtor may designate unsecured claims into different classes, but only if the designation does not discriminate unfairly against any class so designated. 11 U.S.C. § 1322(b)(1). And once a class is designated, the plan must “provide the same treatment for each claim within a particular class …” 11 U.S.C. § 1322(a)(3). Tender in full of the Gizas’ obligation to Deutsche Bank–should this Court otherwise find that the conditions for rescission have been met–would violate the requirements of § 1322(a)(3) by giving Deutsche Bank’s unsecured claim preferential treatment. Even if practical, such a payment would rob other unsecured creditors of most, if not all, of the dividends on their unsecured claims. Inasmuch as Deutsche Bank’s unsecured claim would be no different in character as any other, classifying the claim differently would be just the type of unfair discrimination as is expressly prohibited by § 1322(a)(3).
The Giza Court continued:
“Even if the Jaaskelainen view is correct and tender is a requirement for rescission, the outcome should be the same. In Jaaskelainen, the court still emphasized that“traditional equitable notions” were an important factor to consider when crafting appropriate tender. Wells Fargo Bank, N.A., 407 B.R. at 462. In remanding the case back to the bankruptcy court, the court urged: “consideration of the appropriate conditions to impose on Debtors’ exercise of rescission. In undertaking this evaluation the bankruptcy court should consider traditional equitable notions, including such factors as the severity of Appellants’ MCCCDA violation and thedegree to which Debtors are able to pay the principal amount.”
“Indeed, in a Chapter 13 case, this Court, sitting as a court of equity, is well-suited to decide a debtor’s ability to pay his or her creditors, including those creditors whose claims may be repaid in whole or in part on account of their violations of TILA and MCCCDA. And, to the extent that such discretion is itself limited by the provisions of Chapter 13, that limitation is one prescribed by Congress in 11 U.S.C. § 1322(a)(3). To hold otherwise also would strike at the goals Congress sought to achieve in both the Bankruptcy Code and TILA.
“As the court stated in In re Piercy, “[i]t would be palpably unfair to deny the relief to which a consumer is entitled under TIL [A] because that consumer has also availed himself of bankruptcy relief. To do so would require that the consumer choose between bankruptcy and TIL[A], something neither form of statutory relief contemplates.” In re Piercy, 18 B.R. 1004, 1007 (Bankr.W.D.Ky.1982). Accordingly, the Court will not dismiss the Gizas’ claim for rescission but will, if the conditions for rescission are otherwise met, determine the amount of tender and order the Gizas to classify that claim and treat it consistently with those of other unsecured creditors of these debtors.”
Note: we have written another Brief about balancing the Equities of a Case and Determining whether or not (outside the bankruptcy court for the most part) the Courts can condition full tender on the ability of borrower to tender. (Google Vondran Equities must be balanced in a TILA case including a lender forcing you into court to assert rights that are supposed to be self-enforcing).
WHAT YOU NEED TO CONSIDER IF YOU THINK YOU HAVE A TRUTH IN LENDING (CASE FOR LOAN RESCISSION):
(1) HAVE YOUR LOAN FILE AUDITEDFOR MATERIAL TRUTH IN LENDING VIOLATIONS BY A REAL ESTATE LAWYER (YOU CAN REACH US AT 877-276-5084). LOAN NEEDS TO BE A REFINANCE TRANSACTION WITHIN THE LAST THREE YEARS TO BE WORTH THE TIME, MONEY, AND EFFORT.
(2) DRAFT AND SERVE A TILA RESCISSION NOTICE TO YOUR LENDERS (AS MENTIONED ABOVE, THERE ARE MANY REQUIREMENTS TO TAKE INTO ACCOUNT, AND YOU WILL PROBABLY WANT TO INCLUDE OTHER LEGAL REQUESTS AT THE SAME TIME). YOU MAY WANT TO TRY TO RECORD THE LETTER IN THE COUNTY RECORDER’S OFFICE WHERE THE REAL PROPERTY IS LOCATED. NOTE: THEY MAY NOT ACCEPT IT FOR RECORDING. YOU NEED TO CHEK THEIR RULES FOR RECORDABLE DOCUMENTS.
(3) IF THE LENDER FAILS TO TENDER, OR FAILS TO FILE A DECLARATORY RELIEF ACTION CHALLENGING YOUR RIGHT TO RESCIND, THEY ARE BASICALLY SPITTING ON YOUR FEDERAL TILA RIGHTS AND FORCING YOU INTO COURT (AND FORCING YOU TO INCUR LEGAL FEES TO ENFORCE YOUR LEGAL RIGHTS). THIS IS INEQUITABLE BECAUSE TILA IS SUPPOSED TO BE SELF-ENFORCING, BUT THEY ARE HOPING EITHER: (A) YOU WONT FILE BANKRUPTCY (OR A STATE OR FEDERAL PREDATORY LENDING LAWSUIT), (B) YOU CAN’T AFFORD TO LITIGATE YOUR TILA CLAIM – OR HAVE NO VALID TILA CLAIM, OR (3) THAT YOU WILL JUST DISAPPEAR AND WALK AWAY FROM YOUR HOME AND DEAL WITH THE FORECLOSURE ON YOUR CREDIT.
(4) IF YOU HAVE VALID DEBTS TO DISCHARGE OR REORGANIZE, YOU MAY WANT TO CONSIDER WHETHER A CHAPTER 7 OR CHAPTER 13 BANKRUPTCY IS RIGHT FOR YOU. IF SO, THE TILA CLAIM MAY BE BROUGHT IN A BANKRUPTCY COURT (USUALLY FILED AS AN ADVERSARY PROCEEDING).
(5) WHEN YOU GET INTO A BANKRUPTCY COURT, YOU WILL LIKELY HAVE TO FILE AN “ADVERSARY PROCEEDING” (WHICH IS A COMPLAINT IN THE BANKRUPTCY COURT) CHALLENGING THE EXTENT OR VALIDITY OF THE LIEN. THE IDEA IS ONCE YOU HAVE RESCINDED YOUR LOAN, THAT LOAN IS UNSECURED, AND IF YOU ARE IN BANKRUPTCY, THE LIEN SHOULD BE TREATED AS UNSECURED AND THE LENDER SHOULD BE LUMPED IN, AND TREATED THE SAME AS ALL OTHER UNSECURED LENDERS. WHY IS THIS? UNDER TILA, THE STEP REQUIRING THAT “THE SECURITY INSTRUMENT IS VOID BY OPERATION OF LAW“ TECHNICALLY SPEAKING, SHOULD NOT (OR PERHAPS CANNOT) BE ALTERED BY THE COURTS. ONLY THE QUESTION OF WHO TENDERS FIRST, OR WHETHER RESCISSION SHOULD BE CONDITIONED ON TENDER SHOULD BE THE ISSUE. THE LOAN ITSELF SHOULD BE TREATED AS UNSECURED. OF COURSE, IT IS PROBABLY THE CASE THAT YOU NEED TO PROVE THE VALIDITY OF THE TILA VIOLATION CLAIM TO REACH THIS RESULT. See Williams v. BankOne, N.A. See In re Williams, 291 B.R. 636, 657-58 (Bankr.E.D.Pa.2003) (“The language of § 1635(b) and Regulation Z as supported by the legislative history to § 1635(b) informs that, while courts can modify the procedures set forth in § 1635(b), they cannot modify the voiding of a creditor’s security interest.”).
NOTE: IF YOU FILE FOR BANKRUPTCY YOU WILL GET AN AUTOMATIC STAY, BUT THE LENDER MAY TRY TO FILE A MOTION TO LIFT THE AUTOMATIC STAY. AS SUCH, YOU MIGHT ALSO WANT TO CONSIDER FILING A LIS PENDENS (YES, WE HAVE SEEN ACTS SUCH AS TRYING TO SELL YOUR PROPERTY AFTER A CREDITOR’S HEARING BUT BEFORE YOUR ADVERSARY PROCEEDING CASE IS HEARD ON THE MERITS), AND SEEKING AN INJUNCTION AGAINST FORECLOSURE IN THE ADVERSARY PROCEEDING IS PROBABLY A WISE IDEA.
NOTE: WE TALK MORE ABOUT ADVERSARY PROCEEDINGS ON OTHER BLOGS (GOOGLE “VONDRAN ADVERSARY PROCEEDINGS IN BANKRUPTCY”).
(6) IN BANKRUPTCY, THE COURT SHOULD APPLY EQUITABLE PRINCIPLES, INCLUDING EQUITABLE CONSIDERATIONS TO THE UNSECURED CREDITORS, AND THEINEQUITY OF DEFENDANTS CONDUCT IN FORCING YOU INTO COURT TO ASSERT YOUR TILA RIGHTS, WHEN DETERMINING WHAT AMOUNT OF TENDER THE BORROWER IS ABLE TO PAY, OR SHOULD PAY, AND HOW AND WHEN THOSE PAYMENTS SHOULD BE MADE (EX. OVER 60 MONTHS IN A CHAPTER 13 CASE, ALLOWING SALE OF THE HOUSE IN A CHAPTER 7 CASE ETC.). See In re Giza 428 B.R. 266 (Bkrtcy.D.Mass.2010) discussed further above. Also see Ray v. Citifinancial Inc., 228 F.Supp 2d 664, 670 (D. Md. 2002) which held: “courts can take into account the equities of the case including those affecting unsecured creditors.” And in re Bell, 309 B.R. 139 (Bankr. E.D. Pa 2004) where the Court permitted borrower to pay tender, after offsets for lender tender, over 60 month bankruptcy plan in Chapter 13 case.
(7) ALSO, IF THE LENDERS CONDUCT IS PARTICULARLY REPREHENSIBLE, OPPRESSIVE OR SHOCKING TO THE CONSCIENCE, CONSIDER WHETHER THE OBLIGATION TO TENDER SHOULD BE COMPLETED ELIMINATED. As the court said in one case: “My research reveals that although some courts have recognized that such a remedy may be imposed under § 1635(b), it is viewed as a harsh one and therefore to be confined to “situations where creditors have tried to deceive or cheat the consumer.”Michel v. Beneficial Consumer Discount Co. (In re Michel), 140 B.R. 92, 101 (Bankr.E.D.Pa.1992) (refusing to allow debtors to eliminate debt where creditor had “committed substantial TILA violations” but no “serious overreaching or improper conduct”). See also Shepard v. Quality Siding & Window Factory, 730 F.Supp. 1295, 1306-07 (D.Del.1990) (ruling that if a “creditor does not properly respond to the consumer’s notice of rescission,” the consumer’s obligation to the creditor can be eliminated but noting that “courts have avoided such a harsh result when there is no evidence that the creditor tried to cheat or deceive the consumer.”). I need not decide whether or under what circumstance release of the debt is an available remedy under § 1635(b) since there is no evidence in the record before me that Aames or BankOne tried to deceive or cheat the Williams. Consequently, I find no merit in Debtor’s contention that she should be relieved of her tender obligation. See In re Williams 291 B.R. 636 (Bkrtcy.E.D.Pa.,2003).
(8) Also, there is some legal authority where the borrower has offered to tender, and the creditor has refused to accept tender, that no obligation to tender exists. The situations where this applies will probably be limited in that the Bankruptcy Courts are Courts of “equity” and may not be willing to go this far.
What there is legal precedence for is tendering (all or some of the amounts due) over 3 months, 60 months, or even longer in a Chapter 13 setting or reaching some other type of “middle ground” or “compromise result”. Again, the Courts have the equitable authority to do this in a TILA rescission case in bankruptcy. See 2004 Bankr. LEXIS 2366 (Bankr. E.D. Pa. Nov. 1, 2004); Williams v. Bank One, 291 B.R. 636 (Bankr. E.D. Pa. 2003) and Clay v. Johnson, 77 F. Supp 2d, 879 (N.D. ILL. 1999). If the payments are not made in the Chapter 13 plan, then the creditor may still retain the lien (although there is a good argument that the loan must still be treated as rescinded). See Bell v. Parkway Mortgage, Inc. (in re Bell) 314 B.R. 54, 60-61 (Bankr. E.D. Pa 2004).
(9) Just a quick note on TILA statutory damage awards (ex. for failing to honor your TILA rescission letter), the award may go the Trustee for the benefit of unsecured creditors, unless such amounts are exempt to the debtor in Bankruptcy. See in re Perkins, 106 B.R. 863, 875, (Bankr.E.D.Pa 1989). There is also legal authority that proceeds under a TILA lawsuit should be paid to the debtor in cash and should not be offset against a debt discharged in bankruptcy. See in re Riggs, 623 F.2d 68 (9th Cir. 1980).
The following is general legal information only and not intended as legal advice or a substitute for obtaining legal advice. For specific answers to your questions please consult a real estate attorney. Steve Vondran, Esq., is a real estate attorney licensed to practice law in California and Arizona. He can be reached at steve@vondranlaw.com or by phone at (877) 276-5084. There is no representation that this article is 100% accurate or up-to-date as the law is constantly evolving.
INTRODUCTION
When we file lawsuits alleging predatory lending, truth in lending violations, RESPA violations, unfair competition, fraud, misrepresentation and the like and seeking money damages, loan rescission, quiet title and other remedies, sometimes the Defendants fail to respond. When the lenders, investors, loan servicers, MERS, or others fail to answer (which does happen from time to time) the next step is to “take a default” against them. The following is the process we normally follow in handling our cases. This usually involves two steps: (1) Filing the entry of default and (2) the “prove-up” stage. This article discusses an overview of the general process. It may vary depending on the type of case, causes of action alleged, the court’s rules, etc.
OVERVIEW OF STEPS REQUIRED TO TAKE A DEFAULT JUDGMENT IN CALIFORNIA
First, after the Defendant fails to respond to a complaint within the time permitted a document must be filed with the Court to get them to enter the default of that Defendant. Here is a look at the judicial counsel form we use for that purpose: http://www.courtinfo.ca.gov/forms/fillable/civ100.pdf
NOTE: If your case involves a simple contract issue, the Clerk may be able to enter that judgement. In most other cases, you will need to proceed to the steps listed below.
Next, after the Court enters the Default of the Defendant, within 45 days a similar application to the court is made to actually get the Default Judgement against the non-answering defendants. This application will use the same form above, except we check the “court judgment” box and “I request a court judgment.” At this point, it is also wise to check with the Court clerk to see how the judge hears default judgments. Some Courts want oral evidence for example, and some would prefer to hear the case on affidavits, declarations, exhibits, etc. and not to hear live testimony. So we check with the Court to figure this out. In Quiet Title, or Fraud Real Estate actions, it is likely the Court will at some point require an oral prove up hearing with live testimony.
At any rate, it is time to fill out the form and basically time to bring the evidence forward to prove the case against the non-answering defendant and to obtain a monetary judgment in according to proof and “for sums which appear just”.
NOTE: When seeking a default it is important to note that we cannot obtain a default judgment in an amount in excess of sought in the complaint and cannot add new causes of action that were not raised in the complaint. This highlights the importance of having a well-plead complaint which must also be sufficient to raise facts constituting a prima facie case as to each cause of action for the Court will not award a defaul if the facts don’t meet the elements required for a particular cause of action. HERE IS LINK TO RULE 3.1800 CALIFORNIA RULES OF COURT IN REGARD TO DEFAULT JUDGEMENTS AND WHAT IS NEEDED. http://www.courtinfo.ca.gov/rules/index.cfm?title=three&linkid=rule3_1800.
AS YOU CAN SEE THERE IS A VERY SPECIFIC SET OF REQUIREMENTS TO OBTAIN THE DEFAULT JUDGMENT INCLUDING:
● Declarations under penalty of perjury
● Any Documentary Evidence or Exhibits which which are admissible as evidence
● Case Summary
● Declaration of Counsel in support of Application for Default Judgement by Court
● Legal Basis for any Attorney Fees requested (check with the Court to see if they have a Attorney fee schedule which may set forth maximum amounts that may be requested)
● Any interest calculations such as “per diem to date of entry of judgment.”
● Memorandum of Costs
● Declaration that Defendant is non-military
● Proposed form of Judgment
● Dismissal of parties to which a judgment is not sought
● Proof of publication if the defendant(s) were served (Summons and Complaint) by publication. (ex. State in a declaration that Publication Rules were complied with).
ALSO NOTE: California Code of Civil Procedure Sectoin 587 which states:
An application by a plaintiff for entry of default under
subdivision (a), (b), or (c) of Section 585 or Section 586 shall
include an affidavit stating that a copy of the application has been
mailed to the defendant’s attorney of record or, if none, to the
defendant at his or her last known address and the date on which the
copy was mailed. If no such address of the defendant is known to the
plaintiff or plaintiff’s attorney, the affidavit shall state that
fact.
NOTE: As you can see there are very strict requirements to getting a default judgement. If certain steps in the entire process are not followed, Default Judgments, even if obtained (note there is no guarantee a default judgment will ultimately be obtained, or be obtained in the amounts requested just because the Defendant fails to appear – the case and amounts have to be proven) can be subject to appeal or collateral attack.
SOME COMMON GROUNDS FOR ATTACKING OR APPEALING A DEFAULT JUDGEMENT ARE:
(a) Court lacked jurisdiction to hear case or render a judgment.
(b) Improper service of summons and complaint (no reasonable attempt to give actual notice of the lawsuit to defendant).
(c) Complaint did not state a valid cause of action.
(d) New causes of action (not set forth in the complaint) were raised at the prove up stage.
(e) Relief requested and granted at prove-up exceeded relief asked for in the complaint.
(f) Insufficnency of Evidence that lead to Default Judgment
(g) Default was taken against Defendant (but another Defendant who answered the complaint was found not liable which would also make Defandant not liable – ex. Defendants were two partners who were sued in regards to partnership activities and the answering defendant proved there was no legal violations).
SO, THE BOTTOM LINE IS THERE NEEDS TO BE A WELL PLEAD COMPLAINT BEFORE SEEKING A DEFAULT JUDGMENT, INCLUDING SETTING FORTH THE AMOUNTS SOUGHT AND THE FACTUAL SUPPORT FOR THE CAUSES OF ACTION PLED. WHEN THE DEFENDANTS DON’T ANSWER ON TIME THERE IS A SPECIFIC PROCEDURE THAT MUST BE FOLLOWED TO TAKE THE DEFAULT AND PROVE IT UP. FAILURE TO TAKE THE PROPER STEPS AT ALL STAGES COULD RESULT IN AN ATTACK ON THE JUDGEMENT.
In Re Barry Weisband, 427 B.R. Chapter 13 (Dist. Ariz. 2010). Case No. 4:09-bk-05175-EWH.
The following is general legal information only, and just my interpretation of the Weisband case. Other interpretations may be possible. In addition, law often changes, please check to make sure this is good and valid case law at the time if reading. Steve Vondran is a Phoenix Foreclosure and Bankruptcy Lawyer and also serves Clients in California where he is also licensed to practice law. He can be reached at (877) 276-5084.
Facts:
Barry Weisband filed for Chapter 13 Bankruptcy in March of 2009. One of his listed assets was his real property located at 5424 E. Placita Apan in Tucson, AZ. Weisband obtained the property when he executed a promissory note for $540,000 to GreenPoint Mortgage Funding secured by a deed of trust on October 6, 2006. The deed of trust was signed by Weisband on October 9 and recorded October 13 of the same year (2006). Importantly, the deed of trust named GreenPoint as the lender and MERS as the beneficiary “solely as nominee for GreenPoint, its successors and assigns.” On an undated and separate piece of paper, GreenPoint endorsed the note to GMAC. GMAC therefore had physical possession of the original note in late 2006.
LOAN SECURITIZATION – THE FIVE CONTRACTS AT ISSUE IN THIS CASE:
(1) 4/10/06 FLOW INTERIM SERVICING AGREEMENT (between Green Point and Lehman) – The “FISA” AGREEMENT.
According to GMAC, GreenPoint entered into an agreement with Lehman to sell loans it originated to Lehman Brothers Holdings under a “Flow Interim Servicing Agreement” (FISA) executed on an earlier date of 4/10/06. Under this Flow Agreement, GreenPoint agreed to sell certain loans to Lehman, and Green Point was to remain as servicer of these loans. As the Court later discussed, there was never any proof that Lehman got any transfer of notes from Green Point (recall the endorsement above was to GMAC, not to Lehman), and no assignment of the Deed of Trust from MERS.
(2) 11/1/06 MORTGAGE LOAN SALE AND ASSIGNMENT AGREEMENT (between Lehman and SASC Corporation) – The “MLSAA” AGREEMENT.
Under this agreement Lehman would sell/transfer the loans it received from Green Point to Structured Asset Securities Corporation (SASC). SASC Corporation would then create a securitized loan trust (called the “Green Point Funding Trust”) under a separate Trust Agreement (discussed below) and SASC would be entitled to receive the principle and interest payments. As discussed below, there was again no proof that SASC ever got any transfer of any note or deed of trust in regard to the debtors loan as GMAC had argued.
(3) 11/1/06 SECURITIZED LOAN TRUST AGREEMENT (between SASC, Aurora Loan Services, and US National Bank). Under this agreement, the following parties assumed the following roles:
(1) SASC, was Trustor
(2) U.S. Bank, was Trustee
(3) Aurora, was “Master Loan Servicer”
(4) 11/1/06 – RECONSTITUTED SERVICING CONTRACT (which essentially claimed Green Point would be the servicer of the loans in the trust. However, Green Point went out of business in 2007).
Under this agreement, GMAC was to service the loans in the securitized loan trust (essentially leaving Aurora Loan Services as the “master servicer” and GMAC as the “sub-servicer”).
IF YOU ARE STILL FOLLOWING THE STORY YOU ARE TO BE COMMENDED. AT THIS POINT, TO RECAP, GREEN POINT ORIGINATES THE LOANS, MERS IS THE BENEFICIARY UNDER THE DEED OF TRUST IN A NOMINEE CAPACITY FOR GREEN POINT AND ITS SUCCESSORS AND ASSIGNS, AND THE ORIGINAL NOTE WAS TRANSFERRED AND ENDORSED TO GMAC, BUT THE LOANS ARE SOLD TO LEHMAN, AND THEN ASSIGNED TO SASC WHO CREATES A LOAN TRUST WHERE THE LOANS ARE ALLEGEDLY HELD AND SASC HAS THE RIGHT TO PRINCIPLE AND INTEREST PAYMENTS EVEN THOUGH GMAC HAS THE ORIGINAL NOTE. WELCOME TO SECURITZED LOANS.
At some point, the debtor became delinquent on the loan, and filed for Chapter 13 bankruptcy protection. While the automatic stay was in effect, MERS assigned the Deed of Trust to GMAC (apparently trying to convey standing on GMAC to file the motion to lift the automatic stay). There was never any proof of any transfer of the loan or deed of trust to Lehman, or to SASC, and no proof the note or deed of trust wound up in the securitized trust, or that the debtors loan was subject to the SSA (servicing agreement purporting to confer sub-servicer status on GMAC).
GMAC then filed a motion to lift the automatic stay (to try to sell the property) and the Debtor objected to GMAC’s proof of claim. In filing its proof of claim in support of its motion to lift the automatic stay, GMAC attached a copy of the note and the MERS assignment of the Deed of Trust, and an endorsement on a separate piece of paper (the endorsement was on an allonge and not attached to the note).
This dispute set the stage for an evidentiary hearing to determine whether or not GMAC had the legal right to lift the automatic stay in bankruptcy.
As discussed in the case: “GMAC advances three different arguments in support of its claim to be a “party in interest” with standing to seek relief from stay:
(1) First, GMAC asserts it has standing because the Note was endorsed to GMAC and GMAC has physical possession of the Note (although recall the loans were supposedly sold to Lehman and then to SASC who would theoritcally own the debtors loan). In essence GMAC seemed to be claiming it owned the loan as evidenced by its attachment to the proof of claim. This simply was not true. This was GMAC’s so called “custodian assignee” argument (i.e. we hold the note as a custodial guardian for the true owner of the loan).
(2) Second, GMAC asserts that by virtue of the MERS Assignment of the Deed of Trust, it is a beneficiary of the DOT and entitled to enforce and foreclose the DOT under Arizona law. (again, how could GMAC have a security interest in the debtors property if the loans were sold to Lehman, and then to SASC who had the right to receive principle and interest payments – a traditional concept of “beneficiary”)? There is also legal authority that MERS assignment of the Deed of Trust, without the note, is null and void and conveys nothing. See our blog posting on In re Walker case in California Bankruptcy Court.
(3) Third, GMAC asserts it has standing because it is the servicer of the Note. The court addresses each of GMAC’s claims in turn.”
As a last resort, GMAC argued it was the authorized loan servicer (sub-servicer under the 11/1/06 SSA agreement). The Court would eventually hold there was no proof the trust ever got the note and deed of trust so there was no way to know for sure that GMAC was the authorized servicer of a loan that did not appear to be covered or included in the SSA.
Legal Issue:
Did GMAC have constitutional / prudential standing to bring the Motion to Lift the Automatic Stay in Bankruptcy Court and was it the real party interest to bring such claim?
Holding:
No. GMAC was not the holder of the note under entitled to enforce such under Arizona law and did not have constitutional standing as a “custodian’s assignee,” and was not the real party in interest entitled to seek relief from the automatic bankruptcy stay. Their motion to lift the automatic stay was therefore denied.
The Court’s Rationale:
The Court first discussed the two relevant concepts of (a) CONSTITUTIONAL STANDING and (b) PRUDENTIAL STANDING - Real Party in Interest (both are required to bring the lift-stay motion:
CONSTITUTIONAL STANDING / PRUDENTIAL STANDING (REAL PARTY IN INTEREST)
To this point the Court held:
“Nevertheless, in order to establish a colorable claim, a movant for relief from stay bears the burden of proof that it has standing to bring the motion. In re Wilhelm, 407 B.R. 392, 400 (Bankr. D. Idaho 2009). The issue of standing involves both “constitutional limitations on federal court jurisdiction and prudential limitations on its exercise.” Warth v. Seldin, 422 U.S. 490, 498 (1975). Constitutional standing concerns whether the plaintiff’s personal stake in the lawsuit is sufficient to have a “case or controversy” to which the federal judicial power may extend under Article III. Id.; see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992); Pershing Park Villas Homeowners Ass’n v. United Pac. Ins. Co., 219 F.3d 895, 899 (9th Cir. 2000).
Additionally, the “prudential doctrine of standing has come to encompass several judicially self-imposed limits on the exercise of federal jurisdiction.’” Pershing Park Villas, 219 F.3d at 899. Such limits are the prohibition on third-party standing and the requirement that suits be maintained by the real party in interest. See Warth v. Seldin, 422 U.S. at 498-99; Gilmartin v. City of Tucson, 2006 WL 5917165, at *4 (D. Ariz. 2006). Thus, prudential standing requires the plaintiff to assert its own claims rather than the claims of another. The requirements of Fed. R. Civ. P. 17, made applicable in stay relief motions by Rule 9014, “generally falls within the prudential standing doctrine.” In re Wilhelm, 407 B.R. at 398.
NEXT, THE COURT APPLIED THE LAW TO THE FACTS OF THE CASE TO DETERMINED WHETHER GMAC HAD STANDING TO BRING THE LIFT-STAY MOTION.
As to GMAC’s first argument, GMAC did not demonstrate it was the holder of the note under Arizona law (A.R.S. 47-3301 says only the “holder” of the note can enforce it). The court cited A.R.S. Section 47-1201(B)(21)(a) defining a holder as “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” Because GMAC’s endorsement was on a separate piece of paper (allonge) rather than fixed to the note, it could not be considered the holder of the loan. The allonge must be affixed to the note to effectuate a legal transfer of the note. Therefore, the possession of the original note (one GMAC produced in court) meant nothing as GMAC “didn’t prove the note was properly payable to GMAC.” In addition, the allonge endorsement was not included with GMAC’s proof of claim, further indicating that it had not been affixed to the note at the time of transfer.
NOTE: the Court noted an exception to the allonge rule (the allonge endorsement need not be attached to the note) if 4 elements are shown: (1) if the assignment of the note was signed and notarized on the same day as the trust deed, (2) if the assignment specifically referenced the escrow number, (3) if the assignment identified the original note holder, and (4) if the assignment recited that the note was to be attached.See in re Nash, 49 B.R. 254, 261 (Bankr. D. Ariz. 1985) where “holder” in due course status was established.
Nevertheless, the court concluded that GMAC did not qualify under this exception because there was no proof that that the allonge containing the special endorsement from GreenPoint to GMAC was executed at or near the time the note was executed. SPECIFICALLY, THE COURT STATED:
“GMAC cannot overcome the problems with the unaffixed Endorsement by its physical possession of the Note because the Note was not endorsed in blank and, even if it was, the problem of the unaffixed endorsement would remain. As a result, because GMAC failed to meet its burden of demonstrating that the Endorsement was proper, it has failed to demonstrate that it is the holder of the Note.”
As to their second argument, the MERS assignment of the deed of trust DID NOT provide GMAC with Standing. The Court noted that an assignee of a deed of trust “stands in the shoes” of the assignor, taking only those “rights and remedies the assignor held. SINCE MERS HAD NO FINANCIAL INTEREST IN THE NOTE, THERE WAS NONE TO TRANSFER TO GMAC, AND NO STANDING CONFERRED TO GMAC BY ASSIGNING THE DEED OF TRUST.
HERE IS WHAT THE COURT SAID AS TO THE MERS ASSIGNMENT OF THE DEED OF TRUST TO GMAC:
“GMAC argues that it has standing to bring the Motion as the assignee of MERS. In this case, MERS is named in the DOT as a beneficiary, solely as the “nominee” of GreenPoint, holding only “legal title” to the interests granted to GreenPoint under the DOT. A number of cases have held that such language confers no economic benefit on MERS. See, e.g., In re Sheridan, 2009 WL 631355, *4 (Bankr. D. Idaho 2009); In re Mitchell, 2009 WL 1044368, *3-4 (Bankr. D. Nev. 2009); In re Jacobson, 402 B.R. 359, 367 (Bankr. W.D. Wash. 2009). As noted by the Sheridan court, MERS “collect[s] no money from [d]ebtors under the [n]ote, nor will it realize the value of the [p]roperty through foreclosure of the [d]eed of [t]rust in the event the [n]ote is not paid.” 2009 WL 631355 at *4.
Because MERS has no financial interest in the Note, it will suffer no injury if the Note is not paid and will realize no benefit if the DOT is foreclosed. Accordingly, MERS cannot satisfy the requirements of constitutional standing. GMAC, as MERS’ assignee of the DOT, “stands in the shoes” of the assignor, taking only those rights and remedies the assignor would have had. Hunnicutt Constr., Inc. v. Stewart Title & Trust of Tucson, Trust No. 3496, 187 Ariz. 301, 304 (Ct. App. 1996) citing Van Waters & Rogers v. Interchange Res., Inc., 14 Ariz. App. 414, 417 (1971); In re Boyajian, 367 B.R. 138, 145 (9th Cir. BAP 2007). Because GMAC is MERS’ assignee, it cannot satisfy the requirements of constitutional standing either.”
Third, the Court rejected GMAC’s argument that they had standing to pursue the lift stay motion as the servicer of the note. The court reasoned that because there was insufficient evidence that the note and the deed of trust were transferred to the final Trust (ex. from Green Point to Lehman, to SASC to the Trust), GMAC could not claim that it was the servicer of the note as claimed – there was no proof the NOTE AND DEED OF TRUST were part of the Trust. To this point the Court discussed the nature of securitized loans:
Securitization of residential mortgages is “the process of aggregating a large number of notes secured by deeds of trust in what is called a mortgage pool, and then selling security interests in that pool of mortgages.” Kurt Eggert, Held Up In Due Course: Predatory Lending, Securitization, and the Holder in Due Course Doctrine, 35 CREIGHTON L. REV. 503, 536 (2002). The process begins with a borrower negotiating with a mortgage broker for the terms of the loan. Then, the mortgage broker either originates the loan in its own name or in the name of another entity, which presumably provides the money for the loan. Almost immediately, the broker transfers the loan to the funding entity. “This lender quickly sells the loan to a different financial entity, which pools the loan together with a host of other loans in a mortgage pool.” Id. at 538.
The assignee then transfers the mortgages in the pool to another entity, which in turn transfers the loans to a special purpose vehicle (“SPV”,) whose sole role is to hold the pool of mortgages. Id. at 539. “The transfer to the special purpose trust must constitute a true sale, so that the party transferring the assets reduces its potential liability on the loans and exchanges the fairly illiquid loans for much more liquid cash.” Id. at 542. Next, the SPV issues securities which the assignee sells to investors. Id. at 539.
Once the securities have been sold, the SPV is not actively involved. It “does not directly collect payments from the homeowners whose notes and deeds of trust are held by the SPV.” Id. at 544. Rather, servicers collect the principal and interest payments on behalf of the SPV. Id. Fees are associated with the servicing of loans in the pool. Therefore, GMAC WOULD HAVE constitutional standing if it is the servicer for the Note and DOT because it would suffer concrete injury by not being able to collect its servicing fees. In re O’Kelley, 420 B.R. 18, 23 (D. Haw. 2009). In this case, however, the evidence does not demonstrate that the Note and DOT were transferred to the Trust, and, without that evidence, there is no demonstration that GMAC is the servicer of the Note.
NOTE: AFTER DETERMING THERE WAS NO STANDING FOR GMAC TO PURSUE THE MOTION TO LIFT THE BANKRUPTCY STAY, THE COURT ADDRESSED THE DEBTORS ARGUMENT THAT “ONLY THE SECURITIZED LOAN INVESTORS HAVE STANDING TO LIFT THE STAY.” The court, in rejecting this argument stated:
The Debtor argues that, in an asset securitization scheme, only the securities investors have standing to seek stay relief because they are the only parties with a financial interest in the securitized notes. However, because the Debtor executed the Note and received consideration (which he used to purchase the house), the contract is enforceable regardless of who provided the funding. In other words, the fact that the funds for a borrower’s loan are supplied by someone other than the loan originator, does not invalidate the loan or restrict enforcement of the loan contract to the parties who funded the loan. A number of cases and treatises recognize that consideration for a contract, including a promissory note, can be provided by a third party. See, e.g., DCM Ltd. P’ship v. Wang, 555 F. Supp. 2d 808, 817 (E.D. Mich. 2008); Buffalo County v. Richards, 212 Neb. 826, 828-29 (Neb. 1982); 3 WILLISTON ON CONTRACTS 7:20 (Richard A. Lord, 4th ed. 2009); RESTATEMENT (SECOND) OF CONTRACTS 71(4) (2009).
Notes are regularly assigned and the assignment does not change the nature of the contract. The assignee merely steps into the shoes of the assignor. In re Boyajian, 367 B.R. 138, 145 (9th Cir. BAP 2007); In re Trejos, 374 B.R. 210, 215 (9th Cir. BAP 2007). No additional consideration is required, as opposed to a novation which creates a new obligation. Id. at 216-17 citing RESTATEMENT (SECOND) OF CONTRACTS 280, cmt. e. Therefore, the Debtor’s argument that the Note is unenforceable because the funder of the Note was not the payee fails. The Note is still valid and can be enforced by the party who has the right to enforce it under applicable Arizona law.
THE COURT ALSO ADDRESSED WHAT TYPE OF PROOF OF NOTE ASSIGNMENT IS REQUIRED TO LIFT THE AUTOMATIC STAY:
A movant for stay relief need only present evidence sufficient to present a colorable claimnot every piece of evidence that would be required to prove the right to foreclose under a state law judicial foreclosure proceeding is necessary. In re Emrich, 2009 WL 3816174, at *1 (Bankr. N.D. Cal. 2009). Accordingly, not every movant for relief from stay has to provide a complete chain of a note’s assignment to obtain relief.
Arizona’s deed of trust statute does not require a beneficiary of a deed of trust to produce the underlying note (or its chain of assignment) in order to conduct a Trustee’s Sale. Blau v. Am.’s Serv. Co., 2009 WL 3174823, at *6 (D. Ariz. 2009); Mansour v. Cal-W. Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009); Diessner v. Mortg. Elec. Registration Sys., 618 F. Supp. 2d 1184, 1187 (D. Ariz. 2009). It would make no sense to require a creditor to demonstrate more to obtain stay relief than it needs to demonstrate under state law to conduct a judicial or non-judicial foreclosure. Moreover, if a note is endorsed in blank, it is enforceable as a bearer instrument. See In re Hill, 2009 WL 1956174, at *2 (Bankr. D. Ariz. 2009). Therefore, this Court declines to impose a blanket requirement that all movants must offer proof of a note’s entire chain of assignments to have standing to seek relief although there may be circumstances where, in order to establish standing, the movant will have to do so.
Conclusion:
The Weisband Court held that GMAC lacked standing to move for relief of stay (both constitutional and prudential standing – real party in interest). GMAC’s possession of the original note did not entitle it to enforce the note because the allonge was not properly affixed to the note meaning there was no right to seek payment on the note. MERS has no financial interest in a deed of trust (because is collects no loan payments and is not injured in the event of foreclosure) so it has no real interest to transfer to the assignee (who stands in the shoes of the assignor) and so the assignment of the deed of trust (security for payment of the loan) is essentially a transfer of no legal interests. The in re Walker blog we wrote and cited above also lends credence to this position. Finally, without proof that a note and deed of trust was transferred to the underlying securitized loan trust (at least evidence sufficient to raise a colorable claim of transfer of ownership of the trust), GMAC could not claim standing as a loan servicer (although it is injured in the sense that it loses the right to collect loan payments when a borrower is in default). The Court did not make exactly clear what kind of proof was required, and indicated a full chain of transfer may not be required, but there may be some cases where it is. As such, GMAC’s motion was denied, and they could not lift the stay. What the consequences of that are is anybody’s guess. Perhaps it is time for the debtor to file an adversary proceeding to challenge the validity of the lien? Perhaps there is some type of settlement?
Sometimes people actually like what I am doing, how I treat people, and the fact that I fight for the rights of homeowners against big banks. I frequently hear that someone was thinking of going to law school and becoming a lawyer. Here are my thoughts on the topic. I don’t think everyone should go to law school, but some people MUST go. Here are my thoughts on the topic. Here are the characteristics of what I think makes a good lawyer. If you can HONESTLY answer “that’s me” to 7 or more of these, then maybe pursuing a career in law is a wise choice for you:
(1) You have to love to argue with anybody about anything at anytime. Not “I don’t back down or I love to argue when pushed” but truly day in and day out, you want to argue about everything, from what to movie is the best to watch, to how ths country should be run, etc.
(2) You have love to research and write. This business is all about pushing paper and pushing it fast and often. If you love to write and are good at it then maybe this is the job for you. Lawyers draft briefs, contracts, motions, pleadings, and hundreds of other documents each and every year. Writing is a huge part of practicing law. If you love to write, that is a good sign that you MIGHT make a good lawyer.
(3) You have to be willing to work 15/7 – TYPE A. Some of the best attorneys work seventy or eighty hours PER WEEK. I know that may sound crazy to people who like to take it easy and enjoy a rock concert three times a week, and watch reality TV, and basically just philosophize about life. If you are a workaholic, and enjoy burning the midnight oil, you may want to consider jumping into the legal profession.
(4) You have to be a good listener and strong negotiator. Lawyers negotiate on a daily basis. Whether you are a real estate lawyer helping to negotiate a commercial loan workout, or a personal injury attorney trying to negotiate a settlement, you have to be good at listening, and negotiating both with clients and opposing counsel. That is the game, and you have to be good at it. Too many lawyer like to be research guys that “like to figure things out” and basically sit in the backroom and do nothing but think about things all day long. Real lawyers want to be in the pit negotiating deals that solve problems.
(5) You have to be persuasive when you are argue. This is most essential if you plan to be a litigation attorney. When you litigate, there are motions being filed left and right, especially when big fortune 500 companies are involved. When this happens, you have to be prepared to out-reserch, out-write, and out-argue your opponents. If you are weak in the knees in any of these areas, don’t waste your time or money going to law school to be a litigator.
(6) You have thick skin and not get bent out of shape about everything that does not go your way. Again, opposing counsel are there to disparage your case, eat your lunch, and tell the judge you are basically a moron. Yes, that is the way it goes. Every time you file something some person on the other end, equally trained in the law, is going to tell you, and the judge, that your claim lack merit, makes no sense, etc. This is the nature of litigation. If your feelings get hurt easily, give this profession no more consideration, because you will be eaten alive. Litigation is nasty, litigants are nasty, and even the judge may be nasty toward your position. If water rolls off your back, law may be a good choice for you.
(7) You have to be extremely organized and excel at managing your time. As a lawyer, you will need to balance your time between legal research, marketing, drafting documents, appearing in court, and dealing with demanding clients (yes they pay good money and expect you to communicate constantly). If you cant make it happen, and cant handle the pressure cooker, then don’t waste your time.
(8) You have to be persistent in trying to achieve the desired result. Rome wasn’t built in a day, and settlements normally aren’t achieved overnight. You have to convince the other party that they have more to lose than you do. Or should I say, that their client has more to lose than yours does. This is not always a simple task, and normally requires several hearings and rulings before your opposition may be inclined to see things your way, see the law your way, and eventually talk their clients into giving ground and settling on terms favorable to your client. If you want quick solutions and quick resolutions to problems, don’t waste your time with practicing law, it will be disappointing to you.
(9) You have to be innovative and find innovative solutions to potential complex problems. Sometimes you have to “think out of the box.”
(10) You have to be assertive, not aggressive, but assertive. Law requires advocacy. People are paying you good money to advocate on their behalf. You have to do your legal research, prepare, and then advocate for each client as if it were your own brother, sister, mom or dad. This may sound easy in concept, but requires a lot of effort in reality. Again, if you are the kind of person that just hopes “common sense” prevails, or hopes that other people can read your mind, or read your body language and figure out where you are coming from, you will probably be disappointed in the practice of law.
Anyway, I hope this answers some of the tougher questions as to whether going for a law degree is right for you or not. It is a lot of time, money, and effort to make it all happen, but if law fits like a glove, then this may well be the perfect profession for you. If not, there are other noble causes you can do with your life, and you would be wise to explore those options as well.
Here is some general information on the TILA law. Commercial loans are not covered by TILA. But that is always not a easy question to figure out (is the loan commercial or is it a loan on the primary residence of the borrower). Here are a few ideas:
TIL is a remedial statute to be broadly construed to further the Congressional purpose of meaningful disclosure of credit terms. Rachbach v. Cogswell, 547 F.2d 502, 505 (10th Cir. 1976). Whether a transaction is primarily consumer or commercial in nature so as to be subject to this subchapter is a factual issue to be resolved by trier of fact by looking to transaction as a whole and purpose for which credit was extended. Gallegos v. Stokes, C.A.10 (N.M.) 1979, 593 F.2d 37. In a loan transaction in which the borrower uses his principal dwelling to secure the loan from the creditor, the Truth in Lending Act (TILA) provides the borrower with a right to rescind the transaction. Truth inLending Act, § 125(a), as amended, 15 U.S.C.A. § 1635(a). In re Webster, 300 B.R. 787 (Bankr. W.D. Okla. 2003).
15 U.S.C. § 1635(a) (emphasis added). The plain statutory text of § 1635 provides that a debtor’s right to rescind arises only when the loan transaction is secured by the debtor’s “principal dwelling.” Although TILA itself does not define a “principal dwelling,” Title 12 of the Code of Federal Regulations implementing TILA, known as Regulation Z, provides some guidance. *471 First, Regulation Z defines a “dwelling” as “a residential structure that contains 1 to 4 units, whether or not that structure is attached to real property.” 12 C.F.R. § 226.2(a)(19) (2007). Second, it provides that “[a] consumer can only have one principal dwelling at a time. Thus, a vacation or other second home would not be a principal dwelling.” 12 C.F.R. § 226 Supp. I, Section 226.2(a)(24)(3) (2007) (emphasis in original); see also Scott v. Wells Fargo Home Mortgage, Inc., 326 F.Supp.2d 709, 715 (quoting Scott v. Long Island Sav. Bank, 937 F.2d 738, 741 (2d Cir.1991)).
Introduction: Foreclosures and bankruptcies do not appear to be ending anytime soon. The lenders, loan servicers and investors of securitzed loans are making things more difficult than ever on desparate homeowners. SB94 passed in October 11, 2009 literally forcing brokers and attorneys out of the loss mitigation business and left California homeowners grasping for information about how to best take on these 5000 pound gorrillas. Is there anything a conscientious lawyer can do to legally and ethically help these homeowners in financial distress and trying to save their homes from foreclosure? YES THERE IS! There are still a certain class of lawsuits that can and should be filed against financial institutions that willingly violate the state and federal rights of homeowners. It is literally shocking to see the amount of abuses that go on, and if not identified, go unnoticed and unchallenged. For example, foreclosure laws that are not followed, invalid substitution of trustees, selling homes while a modification was in effect, TILA rescission letters ignored, RESPA QWR’s ignored, demands to identify the holder of the loan ignored, demands to agree to unwarranted deficiency judgments as part of the loss mitigation process, etc. These are but a few of the things that are becoming somewhat typical in the foreclosure marketplace. This foreclosure seminar will help the legal practitioner identify, assert, and stand up for the legal rights of their clients through civil lawsuits and bankruptcy actions.
IF YOU ARE A CALIFORNIA LAWYER LOOKING TO GET INTO THE FORECLOSURE DEFENSE BUSINESS, (OR A PRACTICING REAL ESTATE OR BANKRUPTCY LAWYER ALREADY HANDLING CASES IN THIS AREA), THIS SEMINAR SHOULD BE OF SIGNIFICANT VALUE TO YOU. LEARN THE INSIGHTS ATTORNEY STEVE VONDRAN HAS LEARNED IN HIS TWO YEARS FIGHTING THE FORECLOSURE BATTLE. LEARN THE TIPS, TRICKS, AND INSIGHTS STEVE VONDRAN HAS LEARNED, AND OBTAIN COPIES OF THE FORECLOSURE MATERIALS HE USES IN HIS DAILY BATTLE AGAINST THE LENDERS AND LOAN SERVICERS.
THE GOAL OF FORECLOSURE COLLEGE IS TO HELP YOU BETTER UNDERSTAND THE LEGAL ISSUES FACING YOUR CLIENTS, AND HELP YOU MORE EFFECTIVELY ADVOCATE ON THEIR BEHALF BY LEARNING TO SEPARATE THE FACT FROM THE FICTION, AND GOOD CASES FROM BAD.
ABOUT STEVE VONDRAN, ATTORNEY
Attorney Steve Vondran will be giving the seminar. He has been a real estate attorney for about 6 years and prior to becoming an attorney was a mortgage loan officer at American Home Equity in Irvine, California. He has also sold residential and commercial real estate, the later with DAUM commercial real estate. When the loss mitigation business blossomed over two years ago, Mr. Vondran was one of the first attorneys that starting focusing his practice on helping homeowners with their foreclosure issues. He was responsible for helping over 50 California Real Estate Brokers legally operate in the loan modification business by having them set-up to do business through the California Department of Real Estate (DRE) with approved advance fee agreements and verified accountings. He has also represented California clients in loan modification process – pre-SB94, and has filed predatory lending lawsuits seeking TRO’s, injunctions, and money damages against major lenders such as Wachovia, Wells Fargo, Indymac, Bank of America, SPS, Cal-Western Reconveyance, Executive Trustee Services, and more. He has also represented Clients in Chapter 7 bankruptcy actions, including filing oppositions to motions to lift the automatic stay in bankruptcy and filing adversary proceedings in bankrupty Court. Mr. Vondran is a member of the State Bar for both Arizona and California, and is a licensed real estate broker in both jurisdictions. He is admitted to practice law in most state and federal courts in California and Arizona and is a member of the Orange County Trial Lawyers Association.
DOES FORECLOSURE COLLEGE QUALIFY FOR DRE MCLE CONTINUING EDUCATION UNITS?
We plan to file an application with the California State Bar to provide continuing education (MCLE) units for this Foreclosure Seminar. AT THIS TIME THERE IS NO MCLE UNITS.
WHO SHOULD ATTEND FORECLOSURE COLLEGE?
(1) California Attorneys looking to make a lateral move into foreclosure defense/bankruptcy
(2) Current California Attorneys looking for tips, tricks, strategies, and insights that may help in providing more effective advocacy and representation
(3) Other Interested Professionals
WHAT TOPICS WILL BE ADDRESSED AT FORECLOSURE COLLEGE?
(1) The Battlefield: understanding the loss mitigation landscape / MERS & securitized loans (who owns my loan?) / Chain of Title
(2) Know thy enemy: understanding the nature of the beast (the lenders and loan servicers and their attorneys)
(3) Overview of available Loss Mitigation Options (short sale / deed in lieu / bankruptcy / modification) / SB94
(4) The law of short sales / short sale considerations / deficiency judgments
(5) Loss mitigation without Litigation (mortgage mediation) / HAMP & other loss mitigation programs / mathematics of modification / Trial Plan Fraud
(6) Understanding Forensic Loan Audits / Predatory Lending / Holder in Due Course
(7) Truth in Lending Rescission / Recoupment – Your Most Powerful Weapon?
(8) Setting a case up for litigation (QWR’s / Debt Validation / Beneficiary statements / Chain of title)
(9) Suing your broker: option arm loans and fiduciary duties / RESPA & YSP
(10) Foreclosure process: foreclosure laws and common violations / California one action “security first” rule
(11) What to expect when litigating your loan / causes of action / removal / TRO & Injunction / Fee Models
(12) What is lis pendens in California and how to use it?
(13) What is quiet title in California and when to use it?
(14) What is produce the note theory?
(15) The Indymac / FDIC / OneWest bank phenomena
(16) All roads lead to bankruptcy: “prove you are my creditor” strategy
(17) Bankruptcy adversary proceedings & challenging proof of claim
(18) Bankruptcy fighting lender / servicer lift-stay motions
(19) Understanding Foreclosure Scams / Law Centers / Homeowner recourse
(20) Attorney Ethics issues that may arise in Foreclosure Defense
WHAT MATERIALS YOU WILL RECEIVE AT FORECLOSURE COLLEGE?
FORECLOSURE COLLEGE ATTENDEES WILL RECEIVE A THREE THREE RING BINDER INCLUDING THE FOLLOWING VALUABLE MATERIALS:
(Some Documents will be provided on a Removable disc)
(1) COPY OF QUALIFIED WRITTEN REQUEST LETTER
(2) COPY OF DEMAND TO IDENTIFY HOLDER OF THE LOAN LETTER UNDER 15 USC 1641
(3) COPY OF TRIAL PLAN FRAUD / BREACH OF CONTRACT LETTER
(4) COPY OF LOAN MOD SCAM LETTER
(5) COPY OF TILA RESCISSION LETTER
(6) SAMPLE OF ATTORNEY LOAN AUDIT / PREDATORY LENDING CHECKLIST
(7) TRO / PRELIMINARY INJUNCTION CHECKLIST
WHAT IS THE COST OF FORECLOSURE COLLEGE?
$2,500 (INCLUDES REFRESHMENTS DURING SEMINAR / THERE WILL BE SPECIAL PRICING ON HOTEL ROOMS)
WHERE WILL THE FORECLOSURE SEMINAR COLLEGE TAKE PLACE?
The Seminar will be held in September (TBA) in Newport Beach, California. Starting time is 8:30 am – 5:00 pm. Exact location will be announced as soon as ascertained. A minimum of 7 attendees is required in order for the event to take place. If the event does not take place, a full refund will be immediately provided. TO BOOK YOUR SEAT CALL (877) 276-5084
Here is the scenario……you file a predatory lending lawsuit alleging all sorts of causes of action. Here are a few of the typical causes of action you might raise in a predatory lending lawsuit:
Fraud
Misrepresentation
Deceit
Elder Abuse
Truth in Lending Violation (Rescission, etc.)
RESPA
Civil Conspiracy
Breach of contract
Unjust enrichment
etc.
You are all reved up because you just filed a lawsuit against the lender, and maybe even te loan servicer (sometimes people sue the loan servicer by accident because they are think, or are lead to believe the servicer owns the loan). Anyway, that is another story. So you file the lawsuit, and then a few weeks later you get notice that the DEFENDANTS ARESEEKING TO REMOVE THE CaSE FROM STATE COURT TO FEDERAL COURT.
I recently had this happen in a trial plan fraud / breach of contract case. Now, there are two ways to get to federal court:
(1) One of your causes of action raises a “federal question” (ex. the TILA and RESPA claim in the above example wouldraise federal questions) and;
(2) There is “diversity of citizenship” among the defendants (meaning essentially you and each of the defendants are from different states), AND the lawsuit must be seeking more than $75,000 in damages.
Now there are alot of little nuances to these two requirements, but suffice to say meeting either test will allow them to remove your case to federal courts. Federal courts, at least in my opinion, are harder to win in for homeowners based on the research I have done in other cases. To me, federal court is where “predatory lending claims go to die.” Now this is just one mans opinion, based on alot fo the cases I have read.
Anyway, in this case I informed the other attorney that there were no grounds to take the case to federal court, but that did not stop them. I immediately filed a motion for remand and cited extensively the cases supporting my position. At the end of the day, we won, and the case was remanded back to federal court where it should have been in the first place. There are some things you can do to make it less likely that they lender will remove the case, but that is why you might want to hire a lawyer rather than go in pro per.
At any rate, the lesson here is to be careful what claims you are bringing in your predatory lending lawsuit. Federal claims will probably land you in federal court where the costs might be higher, the procedural rules may trip you, etc. Do not let the lenders have thier way.
Can a lender or their agent (ex, the loan servicer) pursue a non-judicial foreclose on real property via exercising the power of sale contained in the deed of trust, if the alleged creditor has only the note and no assignment and recording of the deed of trust (the security for payment of the note)? Understanding California Civil Code Section 2932.5.
This article is general legal information only and not intended to serve as legal advice or a substitute for legal advice. As law is constantly changing and evolving, the information may not be 100% complete, accurate or up-to-date. For specific questions about your legal liability in regard to junior loans, please contact a skilled and experienced real estate or foreclosure defense lawyer.
Steve Vondran is a California Real Estate Lawyer who is licensed to practice law in California and Arizona. He also holds a real estate broker’s license in California and Arizona and has a background in mortgage brokering and commercial real estate. HE can be reached at steve@vondranlaw.com or (877) 276-5084.
First, let’s get some general rules on the table that lenders and their attorneys will rely on when seeking to foreclose on your property:
(1) There is no obligation to produce the original note if a lender seeks to conduct a private trustee sale (i.e. a non-judicial foreclosure that relies on the power of sale contained in the deed of trust). In other words, do not try to file for an injunction in a court of law to fight the lender and challenge whether or not they own the loan, because you have no right to ask who is foreclosing on you in a private sale. Sad yes, but such is the law. Therefore, in a non-judicial foreclosure setting, there is no way to force them to prove they are in fact your creditor with the right to foreclose. Their mere allegation that they have the note is all they need if you challenge them at this stage, and do not expect the judge to rule otherwise.
(2) In support of their right to foreclose non-judicially, lenders like to use the “security follows the note” argument and line of cases to support their position that if they merely allege that they have the note, then that must also mean they have the security interest (i.e. the deed of trust or mortgage) whether or not the security interest is/was specifically assigned to them – normally by MERS who originally records the security interest in as many as 60 million mortgages across the United States. For this proposition they usually cite two cases: (a) Carpenter v. Longan, 83 U.S. 271, 275 (1873); and (b) Restatement Third of Property (Mortgages) Section 5.4 (1997). Note that these pre-date most loan securitization.
LONGAN: In Longan the United States Supreme Court held: “The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.” Note, this case says only that assigning the note also assigns the security (i.e. the right to foreclose). The case does NOT say that the POWER OF SALE is also assigned when a note is assigned. This is important, because without the power of sale, a lender should be relegated to conducting a JUDICIAL FORECLOSURE SALE AND NOT A PRIVATE TRUSTEE SALE USING THE POWER OF SALE.
RESTATMENT: It appears to be the general rule in California that the transfer of a mortgage note transfers with it the related mortgage – “the mortgage follows the note” as they say. The RESTATEMENT (THIRD) OF PROPERTY (MORTGAGES) § 5.4 (1997), relied on by many lenders in their briefs, states: “a transfer of an obligation secured by a mortgage also transfers the mortgage unless the parties to the transfer agree otherwise.” The rationale is to avoid economic waste to the lender and avoid a windfall to the borrower if the note and mortgage are split – rendering the mortgage note unsecured. The Restatement also cites the case of Carpenter v. Longan, 83 U.S. 271 (1827) “all the authorities agree that the debt is the principal thing and the mortgage an accessory.”
These cases seem to give the lenders wide latitude to just merely claim they own the note (they never want to show it) and have the Court agree that the security naturally follows (whether or not the deed of trust was assigned, acknowledged, and recorded) and that the lender therefore has standing to lift a stay in bankruptcy court. If the lender can show proof of the original promissory note in the BK lift-stay motion, I would say I might agree. But again, they will not want to show the note, and it is up to the BK judge to demand they show this critical piece of evidence before they allow a creditor to lift the automatic stay. If you want legal authority take a look at In re Hwang, 396 B.R. 757 (C.D. California 2008. I have attached a link to my case brief on this important case: http://www.producethenoteattorney.com/2010/05/in-re-hwang-an-overview-of-motion-for-relief-from-automatic-stay-real-party-in-interest-and-constitutional-standing-requirements-in-a-california-bankruptcy-court/
But is the same true if a homeowner files for an injunction trying to prevent a lender from conducting a non-judicial foreclosure sale where there is simply no proof the lender has physical possession of the note and the chain of title does not indicate any assignment or recording of the deed of trust (i.e. the power of private sale never conveyed per 2932.5)?
Applying Constitutional law standards, States are always free to grant more rights and freedoms that the United States Supreme Court may grant, but states cannot provide less. I would argue that is what California did when it enacted Civil Code Section 2932.5 by requiring an actual assignment and recording of the deed of trust if the lender/mortgagee wants to exercise the power of sale and conduct a private trustee sale – Notice of Default / Notice of Sale – outside the watchful eye of the Court (as would be required in a judicial sale). In other words, if a lender wants to foreclose in a non-judicial private trustee sale fashion, it would seem they need both the endorsed note and physical possession of such – or, physical possession of the note endorsed in blank – AND the assignment of the deed of trust duly acknowledged and recorded as required under California Civil Code Section 2932.5. Without both, I would argue a lender is relegated to a judicial foreclosure sale only, and the Court should enjoin the attempted and threatened private trustee sale. At least that is my honest opinion and it would be great if it worked out that way. There is not a lot of case law on this curious code section.
Let’s take a look at 2932.5 and tell me if you agree. First off, here is a link to the law I am talking about so we can all take a look at it. It is short and sweet so do not be intimidated. http://law.onecle.com/california/civil/2932.5.html I have pasted the law below if you are the type of person who hates opening up links:
“Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded.”
Looks to me like the power of sale (i.e. the right to pursue a private judicial foreclosure sale) requires an assignment of the deed of trust and recording of such in the County recorder’s office. If that is not what this law means, then what does it mean? In other words, if a lender conducts a private trustee sale and the chain of title reflects that there has been no assignment or recording of the deed by that lender or its agent, wouldn’t that make the private sale voidable and subject to set aside? See our blog piece on the “lender please don’t make me tender” rule before you get excited. Here is a link to that post.
Bolstering this position that the deed of trust must be assigned, acknowledged, and recorded before exercising the private power of sale in California is the case of Strike v. Transwest Discount Corp, 92 CA3d, 735 (1979). In this case the court held:
“A recorded assignment of note and deed of trust vests in the assignee all of the rights, interests of the beneficiary (Musgrave v. Renkin, 180 Cal. 785 [183 P. 145]) including authority to exercise any power of sale given the beneficiary (Civ. Code, § 858)…… The power of sale here derived from the instrument itself. (Civ. Code, § 2932; McDonald v. Smoke Creek Live Stock, 209 Cal. 231).”
Therefore, I would think you have at least a fair argument that a lender seeking to foreclose non-judicially, outside the Courts presence (as in a judicial foreclosure), that they would need to be able to establish that the deed of trust was properly assigned and recorded in addition to owning the note, although as discussed above they don’t have to show the note. If there is no proof of recorded assignment of the security in the County Recorder’s office, I would argue the lender has only the right to foreclose judicially (subject to a four year statute of limitations**), and by filing the Notice of Sale and Notice of Default, the lender has indicated that they are not willing to go that route. The problem is, if you filed for an injunction, they would probably just quickly assign and record the deed of trust killing the argument altogether. If any one else has any other opinions or interpretations, or even case law, I would love to see/hear it.
** There are time limits to file a judicial foreclosure as stated in the case of Aviel v. Ng, 161 Cal.App.4th 809, (2008) where the Court held: “The running of the statute of limitations on an obligation underlying a mortgage or deed of trust bars judicial foreclosure of the mortgage as well as an action to enforce the obligation. Cal.Civ.Code § 2911(1).”
For now, suffice it to say, this might be something to look into or argue if you are going all out and trying to save your home from foreclosure. Before filing any civil lawsuit, you should consult with a real estate or foreclosure lawyer to determine whether you have proper legal grounds to file a lawsuit.
One way this popped up in a bankruptcy case was the lender sought to record the assignment of the deed of trust while the borrower was in bankruptcy court and protected by the automatic stay. We are arguing that this is an attempt to perfect its right to non-judicially foreclose (i.e. they are trying to comply with 2932.5 to get the right to foreclose non-judicially) and that such action to perfect its interest violates Bankruptcy Code Section 362 which prohibits the following:
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
Again, just trying to give you some things to think about as you fight to save your home from foreclosure. Although the security may follow the note and that may be fine to judicially foreclose, perhaps that security interest must be assigned, acknowledged and recorded in order to preserve the right to conduct the private non-judicial trustee sale under the power of sale contained in the security. The deed of trust itself may also have some language you need to look at that that may dictate other rights.
NOTICE: The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case you should seek out the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. Law is always changing. The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this). Copyright 2010 – Law Offices of Steven C. Vondran – All Rights Reserved.
The California “One Action Rule” (Security-First Rule) – Can you second mortgage lender sue you on the note for default of the junior mortgage / deed of trust?
We have been getting many calls lately from California homeowners (and even some commercial business owners) asking us if their lender can hold them liable for their second mortgage in California. And if so, can they sue them on the note without first seeking the foreclosure route. This article will attempt to provide some illumination to these issues and will relate to owner occupied single-family residences in California who have second mortgages that are in default or at risk of going into default. At issue is the One Action / Security First Rule of California Code of Civil Procedure Section 726(a).
This article is general legal information only and not intended to serve as legal advice or a substitute for legal advice. As law is constantly changing and evolving, the information may not be 100% complete, accurate or up-to-date. For specific questions about your legal liability in regard to junior loans, please contact a skilled and experienced real estate or foreclosure defense lawyer.
Steve Vondran is a California Real Estate Lawyer who is licensed to practice law in California and Arizona. He also holds a real estate broker’s license in California and Arizona and has a background in mortgage brokering and commercial real estate. He can be reached at steve@vondranlaw.com or (877) 276-5084. More foreclosure defense resources can be found at http://www.ForeclosureDefenseResoureCecenter.com or http://www.CaliforniaShortSaleLawyer.com
You own a home and have a first and second mortgage, both secured by a deed of trust on your primary residence. The first mortgage is 500k and the second mortgage is 100k. You are paying the first mortgage but are delinquent on the second mortgage. The second mortgagee is threatening to sue you on the note or otherwise hold you liable for your default on the second mortgage. You are concerned and don’t know whether or not they can sue you or not or whether you should try to workout a deal with them.
The general rule regarding a lenders rights when you are in default of your promissory note, and assuming the deed of trust has a “power of sale clause,” is the ONE ACTION RULE:
A secured lender has the option of “electing its remedies” when a deed of trust and note and not being paid as agreed. They can either pursue judicial foreclosure (which means they file a lawsuit against you seeking a court order to sell your real property, and to seek a deficiency judgment if the loan is not subject to California’s anti-deficiency laws under section 580 of the Civil Code) or, they can seek to pursue a non-judicial foreclosure sale (which allows them to sell your property after sending you a notice of default, deed of trust, and complying with other provisions of California Civil Code Section 2924 et seq – the California Foreclosure Laws.
What this means then is a secured lender must either seek to go to court to foreclose on your judicially, or then can seek to perform a non-judicial foreclosure sale. The COMPLETION of either one constitutes an “action.”
Now, in most cases, a junior lien holder (i.e. a second mortgagee) is not going to foreclose on you either judicially or non-judicially. Why is that? Because in order for them to get paid, they first mortgage holder (the senior lien holder) would have to get paid first following the trustee sale (in the case of a non-judicial foreclosure sale) or following the Court ordered sale of the property in a judicial foreclosure. In these times when property values are declining faster than temperatures at the north pole, second mortgage holders are not often left holding a lot of “security” for the loans they gave to borrowers. This raises a problem. Many of the junior lien holders have no security and no interest in foreclosing. What these junior note holders might want to do is to waive the security and “sue you on the note.” The question is, whether they have the legal right to do this in California?
Enter the California “One Action Rule.” What does the one action rule state? Well, lets start by getting the statutory law on the table – California Code of Civil Procedure Section 726, the (“Security First”) One Action Rule
(a) There can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property or an estate for years therein, which action shall be in accordance with the provisions of this chapter. In the action the court may, by its judgment, direct the sale of the encumbered real property or estate for years therein (or so much of the real property or estate for years as may be necessary), and the application of the proceeds of the sale to the payment of the costs of court, the expenses of levy and sale, and the amount due plaintiff, including, where the mortgage provides for the payment of attorney’s fees, the sum for attorney’s fees as the court shall find reasonable, not exceeding the amount named in the mortgage.
(b) The decree for the foreclosure of a mortgage or deed of trust secured by real property or estate for years therein shall declare the amount of the indebtedness or right so secured and, unless judgment for any deficiency there may be between the sale price and the amount due with costs is waived by the judgment creditor or a deficiency judgment is prohibited by Section 580b, shall determine
the personal liability of any defendant for the payment of the debt secured by the mortgage or deed of trust and shall name the defendants against whom a deficiency judgment may be ordered following the proceedings prescribed in this section. In the event of waiver, or if the prohibition of Section 580b is applicable, the decree shall so declare and there shall be no judgment for a deficiency. In the event that a deficiency is not waived or prohibited and it is decreed that any defendant is personally liable for the debt, then upon application of the plaintiff filed at any time within three months of the date of the foreclosure sale and after a hearing thereon at which the court shall take evidence and at which hearing either party may present evidence as to the fair value of the real property or estate for years therein sold as of the date of sale, the court shall render a money judgment against the defendant or defendants for the amount by which the amount of the indebtedness with interest and costs of levy and sale and of action exceeds the fair value of the real property or estate for years therein sold as of the date of sale. In no event shall the amount of the judgment, exclusive of interest from the date of sale and of costs exceed the difference between the amount for which the real property or estate for years therein was sold and the entire amount of the indebtedness secured by the mortgage or deed of trust. Notice of the hearing shall be served upon all defendants who have appeared in the action and against whom a deficiency judgment is sought, or upon their attorneys of record, at least 15 days before the date set for the hearing. Upon application of any party made at least 10 days before the date set for the hearing the court shall, and upon its own motion the court at any time may, appoint one of the probate referees provided for by law to appraise the real property or estate for years therein sold as of the time of sale. The probate referee shall file the appraisal with the clerk and the appraisal is admissible in evidence. The probate referee shall take and subscribe an oath to be attached to the appraisal that the referee has truly, honestly and impartially appraised the real property or estate for years therein to the best of the referee’s knowledge and ability. Any probate referee so appointed may be called and examined as a witness by any party or by the court itself. The court shall fix the compensation, in an amount as determined by the court to be reasonable, but the fees shall not exceed similar fees for similar services in the community where the services are rendered, which may be taxed and allowed in like manner as other costs.
(c) No person holding a conveyance from or under the mortgagor of real property or estate for years therein, or having a lien thereon, which conveyance or lien does not appear of record in the proper office at the time of the commencement of the action need be made a party to the action, and the judgment therein rendered, and the proceedings therein had, are as conclusive against the person holding the unrecorded conveyance or lien as if the person had been a party to the action. Notwithstanding Section 701.630, the sale of the encumbered real property or estate for years therein does not affect the interest of a person who holds a conveyance from or under the mortgagor of the real property or estate for years therein mortgaged, or has a lien thereon, if the conveyance or lien appears of record in the proper office at the time of the commencement of the action and the person holding the recorded conveyance or lien is not made a party to the action.
(d) If the real property or estate for years therein mortgaged consists of a single parcel, or two or more parcels, situated in two or more counties, the court may, in its judgment, direct the whole thereof to be sold in one of the counties, and upon these proceedings, and with like effect, as if the whole of the property were situated in that county.
(e) If a deficiency judgment is waived or prohibited, the real property or estate for years therein shall be sold as provided in Section 716.020. If a deficiency judgment is not waived or prohibited, the real property or estate for years therein shall be sold subject to the right of redemption as provided in Sections 729.010 to 729.090, inclusive.
(f) Notwithstanding this section or any other provision of law to the contrary, any person authorized by this state to make or arrange loans secured by real property or any successor in interest thereto, that originates, acquires, or purchases, in whole or in part, any loan secured directly or collaterally, in whole or in part, by a mortgage or deed of trust on real property or an estate for years therein, may bring an action for recovery of damages, including exemplary damages not to exceed 50 percent of the actual damages, against a borrower where the action is based on fraud under Section 1572 of the Civil Code and the fraudulent conduct by the borrower induced the original lender to make that loan.
(g) Subdivision (f) does not apply to loans secured by single-family, owner-occupied residential real property, when the property is actually occupied by the borrower as represented to the lender in order to obtain the loan and the loan is for an amount of one hundred fifty thousand dollars ($150,000) or less, as adjusted annually, commencing on January 1, 1987, to the Consumer Price Index as published by the United States Department of Labor.
(h) Any action maintained pursuant to subdivision (f) for damages shall not constitute a money judgment for deficiency, or a deficiency judgment within the meaning of Section 580a, 580b, or 580d of the Code of Civil Procedure.
Wow, that is a mouthful. What does it all mean? Well there are many cases in California that attempt to ascertain what this section really means. Without going into great detail, here are a few general observations that appear to be well accepted in regard to California’s one action rule (aka single action rule):
(1) Secured Lender’s have the right to choose or elect how they want to foreclose on you. They can go the judicial foreclosure route (i.e. file a lawsuit and potentially seek a deficiency judgment) or they can seek to go the non-judicial foreclosure route. The non-judicial foreclosure route is NOT technically considered to be an “action” because such is done privately and does not involve use of the Courts (except the small little often unmentioned fact that foreclosure trustee sales are normally carried out of the courthouse steps). The “action” part of the ONE ACTION RULE seems to refer to resorting to a judicial foreclosure and the court process. That being said, a secured lender may elect to “double track” or “dual track” by filing both a non-judicial foreclosure action AND seeking to pursue a non-judicial foreclosure at the same time. Why would they do this? Well following a completed non-judicial foreclosure sale there is no way to seek a deficiency judgment in most cases and by filing the judicial foreclosure lawsuit, the lender may be able to keep you sweating with the threat of a deficiency judgment (assuming your loan is not protected purchase money under 580). But again, once one action is completed, that should be the end of the road for the lender under the ONE ACTION RULE.
Keep in mind, a “secured creditor” can be any creditor of any type of loan or judgment that has a security interest on your real property. This includes for example the case where one party got a divorce judgment for 100k against the other forcing them into bankruptcy when the creditor tried to enforce the note without first foreclosing. See DiSalvo v. DiSalvo (in re DiSalvo) (BAP 9th Cir. 1998) 221 B.R. 769. In that case, the Court held that the 726(a) rule applied and since the creditor forced the debtor into bankruptcy court without first filing for foreclosure, that sanctions were appropriate against the creditor (at first the judge wiped out the debt completely, which I believe was reversed on appeal). At any rate, sanctions for the 726 violation was appropriate even though the case did not involve a bank dealing with a defaulting borrower under a promissory note and deed of trust.
Now TWO QUICK POINTS: you may be wondering what the rationale is for having the SINGLE ACTION rule in California. The stated rationale you will often hear is to protect the debtor against multiple actions that affect the debt. It is not clear how allowing dual tracking serves that purpose but sa la vie.
Next, you may be asking, what would a lender prefer to do to enforce their debt? File a non-judicial foreclosure sale or seek a judicial (court) foreclosure? Here are some quick pros and cons about each to keep in mind:
NON-JUDICAL FORECLOSURE v. JUDICAL (COURT / LAWSUIT) FORECLOSURE – PROS AND CONS
Non Judicial Foreclosure is probably the preferred route for most lenders. It is quicker and cheaper and does not involve attorney fees to the extent litigation does. Judical foreclosure involves filing a lawsuit, service of process, discovery, potential for lender counterclaims (such as TILA recoupment claims – discussed in other blogs).
In a private trustee sale, there is no judicial oversight, and the lenders would prefer this sort of freedom. In one particular regard being that of the “produce the note theory.” This is where a lender would be asked to show it holds an original copy of the promissory note to prove it has the right to enforce the debt. If the lender files a suit in a court of law, this is something they may be required to show to prove their STANDING to file the lawsuit and to prove they are the REAL PARTY IN INTEREST TO BRING THE LAWSUIT. Given the nature of MERS loans, securitized loans, and the secondary loan market, they don’t want to be bothered with these “technicalities” as they seem to believe it is. In a private sale, anyone could essentially foreclose on you, at least in my opinion. There is no judicial oversight of any of these types of issues.
There is no right of redemption following a private trustee sale as there is in a judicial foreclosure sale. What this normally translates to is more money for the lender at the foreclosure auction. Why? If you were bidding on property at a judicially ordered sale, and if you knew the defaulting borrower would have one full year to redeem the property and get it back, you probably would pay less, and the bids would come in less to take into account this potential contingency.
In a Court of law, there are statutes of limitations that don’t apply to the same extent in a non-judicial foreclosure setting. The statute of limitations in a California written breach of contract case is 4 years. Another reason why non-judicial foreclosure sales are often preferred, sometimes out of necessity.
Now back to the ONE ACTION RULE in California. What the above amounts to is that the lender must chose what it wants to do and how to foreclose on their security instrument (the mortgage or deed of trust), but regardless of which route a secured lender chooses, under Section 726, they must FIRST SEEK TO GET THEIR MONEY OUT OF THE SECURITY THEY HOLD ON YOUR PROPERTY BEFORE THEY CAN EVER SEEK TO WAIVE THE SECURITY AND JUST GO AND SUE YOU ON THE NOTE (SUE FOR BREACH OF CONTRACT AND TRY TO GET A JUDGMENT AGAINST YOU).
That means, a second mortgage holder holding a secured junior lien cannot just try to take you to court and sue on the note. They must wait for the first mortgage holder to foreclose on you and take what they can get. Or, they must initiate the foreclosure, see what proceeds are derived, see that the senior lien-holder gets paid all that they are owed and then take whatever peanuts are left after that as their proceeds. In this declining real estate market where so many people are “upside-down” this often is not a very attempting proposition for second mortgage holders / loan servicers such as Wachovia, Wells Fargo, Chase, WAMU, Bank of America, Countrywide, Deutsche, SPS, OCWEN, U.S. Bank, Citimortgage, etc. If one of these lenders who are secured, partially secured etc., try to sue you without first foreclosing then you will want to either make sure you raise the 726 defense, or else seek sanctions against them for failing to comply with the California One-Action Rule. If you don’t raise the defense, you waive it and shoot yourself in the foot. Again, the creditor must proceed against the security initially to be in compliance with the law.
But note that there appear to be at least a few circumstances where a junior lien holder can legally get around the 726 one action rule and sue directly on the obligation, namely where their security has become “LEGALLY WORTHLESS” (but be sure to contrast that with “ECONOMICALLY WORTHLESS” which is not subject to a 726 workaround).
SITUATIONS WHERE A JUNIOR LIEN (SECOND MORTGAGE) MAY BECOME LEGALLY WORTHLESS ENTITLING THE HOLDER OF THE LOAN TO SUE YOU DIRECTLY WITHOUT FORECLOSING:
(1) When the real property doesn’t exist – See Dyer Law & Collection Co. v. Abbott, 52 CA 545, (1921).
(2) Where the security is destroyed: See Cohen v. Marshall, 197 Cal, 117 (1925) wherein the Court stated: “There can be but one action for the recovery of any debt, or the enforcement of any right secured by mortgage upon real or personal property, which action must be in accordance with the provisions of this chapter.” It is the settled law, however, that in case of a failure or destruction of the security, without the fault of the mortgagee, the mortgagee will not be restricted to a procedure which manifestly must prove to be vain and idle.”
(3) When the real property is not owned by the borrower – See Otto v. Long, 127 C 471 (1900). The Court set forth some rationale for the one action rule: “1. To confine the mortgagee to one action; 2. To make the security the primary fund from which satisfaction is to be made; and 3. To give plaintiff a judgment for the deficiency, if any, remaining after exhausting the security.”
(4) Where a senior lien holder forecloses (“sold out junior”) and the junior is left POSITIVELY holding nothing but a bag of foreclosure dust, then for all practical purposes their lien/security is deemed legally worthless and they are entitled to sue on the note to try to collect something off their debt. See Roseleaf Corporation v. Willy F. Chierghino, 59 Cal.2d 35, (1963) wherein the Court held: “the one form of action rule of section 726 does not apply to a sold out junior lienor…….there is no reason to compel a junior lienor to go through foreclosure when there is nothing left to sell…….their security has been rendered valueless by a senior sale.” A senior foreclosure sale conveys the property to the purchaser free of all junior liens and the junior can then sue on the note and seek a deficiency subject to 580 anti-deficiency protections (which may be reduced in an action on the note) and any other “non-recourse” provision that may have been provided for. NOTE: in these circumstances, the borrower may be subject to both the foreclosure of the first mortgage and a suit for breach of the note on the second (i.e. multiple actions that 726(a) was seeking to avoid).
(5) Where the mortgage (security) not properly perfected: “A simple action on a note has been permitted where the mortgage was void for the reason that it lacked the signature of the mortgagor’s wife (Powell v. Patison, 100 Cal. 236. See Giandeini v. Ramirez, 11 Cal.App.2d 469 (1936).
These are but a few examples where the junior lender may get around the security-first rule. Again, if you are dealing with a second mortgage holder who merely BELIEVES that the real estate market has declined to the point where the security is ECONOMICALLY WORTHLESS, (ex. market dropped) this should not allow them to waive the security and try to sue you for breach of contract. See Barbieri v. Ramelli, 84 C 154, (1890) and Giandeini v. Ramirez, 11 CA2d 469, (1936). Be on the lookout for this and raise the 726(a) “security first defense” and seek monetary sanctions. In these cases, the law in California is to force the second mortgage holder to foreclose on the property judicially and let the market place decide if they are right. See Security-First National Bank v. Chapman, 31 CA2d 182 (1939). If after the first is paid, there are insufficient funds, then the junior creditor should seek the deficiency judgment within three months, if available.
Another thing to look out for, if a Creditor takes security for an obligation, and the security is worthless at the time the creditor takes the mortgage or deed of trust to secure the obligation, the one action rule should still apply, and the creditor should be forced to foreclose on the security first. This happened in the case of In re DiSalvo, 221 B.R. 769, 9th Cir. 1998). In this case the Court stated: “there was evidence in this case that the security was without value at the time the trust deed was executed…….a creditor does not have the right to accept worthless security and then waive it, thereby converting the obligation into a personal one……where, as in this case, the mortgage on its face purports to be a security for a debt, a foreclosure and sale is the proper mode for determining whether the security is in fact valueless.” (Citing the Security-First Case above).
The same rationale holds that foreclosure should be pursued rather than an action on the note for attachment if your second mortgage is even PARTIALLY SECURED. Again, it is up to the marketplace to make the determination as to value, not a lender.
So, in most cases, your second mortgage will probably be either under-secured (partially secured) or not secured at all. But the lender should follow the one action rule and choose a foreclosure path (either judicial or non-judicial) and seek to foreclose on the “security first” and recover a deficiency judgment only if not barred by the section 580 California anti-deficiency judgment statute (which basically protects purchase money – also the subject of another blog). Again, these are fact-intensive inquiries and if you have a question about potential liability in regard to your second, or first mortgage, contact a foreclosure or real estate lawyer. In the words of Forrest Gump, “that’s all I got to say about that.”
KEYWORDS: CALIFORNIA ONE ACTION RULE / CALIFORNIA SECURITY-FRIST RULE / CALIFORNIA FORECLOSURE DEFENSE LAWYER / CALIFORNIA FORECLOSURE DEFENSE ATTORNEY / CALIFORNIA CHAPTER 7 BANKRUPTCY / DEFICIENCY JUDGMENT LIABILITY / CAN SECOND MORTGAGEE SUE ON THE NOTE? / JUNIOR LIEN HOLDER FORECLOSURE OPTIONS / NEWPORT BEACH FORECLOSURE LAWYER / NON-JUDICICAL FORECLOSURE SALE V. JUDICIAL FORECLOSURE SALE.
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NOTICE: The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case you should seek out the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. Law is always changing. The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this). Copyright 2010 – All Rights Reserved
THE FOLLOWING IS GENERAL LEGAL INFORMATION. IF YOU HAVE SPECIFIC QUESTIONS, PLEASE CONTACT A PHOENIX REAL ESTATE LAWYER.
We have been getting a lot of questions lately on lis pendens and quiet title law in Arizona. Some people confuse these two important foreclosure defense topics. Basically, after you file a lawsuit, and if your lawsuit involves title to real property (be careful there are penalties for wrongfully filing a lis pendens), then you may will want to file a lis pendens that puts potential buyers of your home (ex. at a foreclosure auction) on “constructive notice” of your lawsuit. A lis pendens (which means notice of pending litigation in latin) normally serves to cloud the title and prevents third parties from wanting to purchase your property (hard to get title insurance if there is a lis pendens on your property).
HERE IS A LINK TO THE ARIZONA LIS PENDENS STATUTE IN ARIZONA:
12-1191. Notice of pendency of action affecting title to real property; filing; constructive notice to purchaser or encumbrancer; release of notice of pendency of action; failure to issue release; liability
A. In an action affecting title to real property, the plaintiff at the time of filing the complaint, or thereafter, and the defendant at the time of filing the defendant’s pleading when affirmative relief is claimed in such pleading, or thereafter, may file in the office of the recorder of the county in which the property is situated a notice of the pendency of the action or defense. In any action to foreclose a mechanics’ or materialmen’s lien pursuant to title 33, chapter 7, article 6, the lien claimant shall file a notice of pendency of action as prescribed by section 33-998 within five days of filing the action or raising the defense. The notice shall contain the names of the parties, the object of the action or affirmative defense, the relief demanded and a description of the property affected.
B. The recorder shall file the notice and record and index it in the names of the parties to the action, and thereafter a purchaser or encumbrancer of the property affected shall be held to have constructive notice of the pendency of the action and the claims therein made except as prescribed in subsection D of this section.
C. If a notice of pendency of action has been recorded pursuant to this section and the action is dismissed without prejudice for lack of prosecution, the plaintiff or plaintiffs of the action, within thirty days after such dismissal, shall issue to the defendant of the action a release of the notice of pendency of action. Such release shall be in the form of a recordable document. Failure to grant such release shall subject the person filing the notice of action or defense to liability in the amount of one thousand dollars and also to liability for actual damages.
D. After the withdrawal or release of a notice of pendency of action or recordation of a certified copy of an order expunging a notice of pendency of action and before the recordation of a certified copy of the judgment or decree in the action, the following apply:
1. The notice of pendency of action and any of the information derived from the notice does not constitute actual or constructive notice of any of the matters contained in the notice or any matters related to the action.
2. The notice of pendency of action and any of the information derived from the notice does not create a duty of inquiry in any person dealing thereafter with the affected property.
3. Except for a person who is a nonfictitious party to the action at the time of recording the notice of withdrawal, the release of the notice of pendency of action or the order expunging the notice of pendency of action, a person shall not be deemed to have actual knowledge of the action, any of the matters contained in the notice or any matters related to the action, if both of the following apply:
(a) That person for valuable consideration becomes a purchaser, transferee, mortgagee or other encumbrancer of any interest in the real property that is subject to the action.
(b) That person acquires that interest by a conveyance that is recorded after the notice of withdrawal or release or order of expungement and before the recording of a certified copy of a judgment or decree issued in the action.
A person described in paragraph 3 shall not be deemed to have notice of the action or notice of any matters related to the action even if the person has actual knowledge of the action or matter and regardless of when or how that knowledge was acquired.
HERE IS THE ARIZONA LIS PENDENS SECTION SECTION 33-998 DESCRIBED ABOVE:
33-998. Limitation of action to foreclose lien; attorney fees
A. A lien granted under the provisions of this article shall not continue for a longer period than six months after it is recorded, unless action is brought within that period to enforce the lien and a notice of pendency of action is recorded pursuant to section 12-1191 in the office of the county recorder in the county where the property is located. If a lien claimant is made a party defendant to an action brought by another lien claimant, the filing within such period of six months of an answer or cross-claim asserting the lien shall be deemed the commencement of an action within the meaning of this section.
B. In any action to enforce a lien granted under this article, the court may award the successful party reasonable attorney fees.
GENERAL OVERVIEW OF ARIZONA LIS PENDENS LAW:
FILE YOUR LAWSUIT, IF IT AFFECTS TITLE TO REAL PROPERTY YOU MAY ALSO FILE A LIS PENDENS WITH THE COUNTY RECORDER AFTER THE LAWSUIT IS FILED.
I GENERALLY PROVIDE WRITTEN NOTICE TO ANY AND ALL ADVERSE PARTIES BY CERTIFIED MAIL BEFORE I FILE THE LIS PENDENS
FILE THE LIS PENDENS PROMPTLY AFTER FILING THE LAWSUIT, THIS WILL PUT POTENTIAL PURCAHSERS OF YOUR PROPERTY ON “CONSTRUCTIVE NOTICE THAT A LAWSUIT AFFECTING TITLE TO REAL PROPERTY IS PENDING
SOME PEOPLE CONFUSE LIS PENDENS WITH QUIET TITLE. SEE OUR OTHER BLOGS WHICH DISCUSS QUIET TITLE. GOOGLE “VONDRAN QUIET TITLE.”
Here is the situation, in this age of securitized loans, (where loan servicers try to intentionally hide the identity of the true creditor of the loan, or where there simply is no way to tell for sure who owns the loan) it is usually very difficult to determine who owns your loan. The loan servicer will pretend to be the agent for the owner of the loan, and you are supposed to take this at face value, no questions asked. Why? because they are Fortune 500 Banks and you are a tiny helpless peon. OK, I am be facietious.
At any rate, if you send a qualified written request; demand to identify the holder of the loan, and debt validation letter to your so called “lender” or loan servicer and you do not get a worthwhile answer as to who the owner of your loan is (expect a mediocre response rate to these letters, and don’t think you will always get a straight answer), but if these large financials institutions cannot prove who owns your loan, let me ask you an important question, SHOULD THESE PRETENDER LENDERS AND THEIR AGENTS BE PERMITTED TO REPORT NEGATIVE CREDIT TO THE THREE CREDIT BUREAUS (EXPERIAN, TRANS UNION, AND EQUIFAX) WHERE THEY CANNOT, AND WILL NOT PROVE THEY ARE THE TRUE CREDITOR OF YOUR LOAN?
SHOULD THE BE ALLOWED TO REPORT A FORECLOSURE, OR REPORT LATE PAYMENTS ALLEGEDLY OWED TO THEM BUT NOT PAID ON A TIMELY BASIS? CAN THIS BE CHALLENGED LEGALLY? THIS IS A VERY IMPORTANT QUESTION THAT MAY BE WORTH EXPLORING.
Interesting idea. I found this article as a starting point. Not sure how the credit bureaus would respond to such a challenge. Would they make them produce the note to prove they are a “real creditor” of your loan and able to report negative credit against you? Fair question.
FORECLOSURE CASES INVOLVING MERS – LEGAL BRIEFING OF CASE BY CALIFORNIA AND ARIZONA FORECLOSURE LAWYER STEVE VONDRAN.
The foregoing is just my personal interpretation/opinion of the case and is not intended to be construed as legal advice or a substitute for legal advice. For specific questions consult a foreclosure and/or bankruptcy lawyer. Attorney Steve Vondran is licensed to practice law in California and Arizona. He is also a real estate broker in each state, and is on Neil Garfield’s Living Lies Websites under “lawyers who get it.”
This case involved a foreclosure action that MERS sought to set aside. Basically MERS was arguing that it should have been a party to a foreclosure action, and since it did not receive any notice of the foreclosure action, the foreclosure should be set aside. MERS was essentially claiming to have all the rights as would the true owner of the loan, they claimed to hold title to the property, and argued they were a “necessary party to the foreclosure action” that proceeded without notice to MERS. Pulaski Mortgage was the alleged “lender” under the Deed of Trust.
According to MERS, MERS members contractually agree to appoint MERS as their common agent for all security instruments registered with MERS. MERS asserts that it holds the authority to exercise the rights of the lender, and for that purpose, it holds bare legal title. Thus, it is alleged that a principal-agent relationship existed between MERS and Pulaski Mortgage under the contract terms of the deed of trust. Thus, MERS, by the terms of the deed of trust, and its own stated purposes, was the lender’s agent, including not only Pulaski Mortgage but also any successors and assigns.
MERS asserts authority to act, arguing that once it becomes the agent on a security instrument, it remains so for every MERS member lender who acquires ownership. This authority is alleged to arise from the contractual relationship between MERS and MERS members. Thus, MERS argues it may act to preserve the rights of the lender regardless of who the lender may be under the MERS electronic registration.
II. Legal Issue
Is MERS a beneficiary under a Deed of Trust (or do they hold legal title to a mortgage) based upon the mere fact that a borrower signs a deed of trust naming MERS as the beneficiary and nominee of the lender and its successors and assigns such that no foreclosure action should proceed without MERS as a necessary party to the action?
III. Courts Holding: NO, MERS is at best an agent of the beneficiary and not an owner of the loan despite language in the deed of trust. MERS was not a necessary party to the foreclosure sale as the lender (Pulaski Mortgage – the party entitled to payment – the beneficiary) was provided notice of the foreclosure action. MERS had no rights to act as the true owner of the loan.
IV. Rational
(1) The deed of trust indicates that MERS holds legal title and is the beneficiary, as well as the nominee of the lender. It further purports by contractual agreement with the borrower to grant MERS the power to “exercise any and all rights” of the lender, including the right of foreclosure. However the deed of trust provides that all payments are to be made to the lender, that the lender makes decisions on late payments, and that all rights to foreclosure are held by the lender.
(2) No payments on the underlying debt were ever made to MERS. MERS did not service the loan in any way. It did not oversee payments, delinquency of payments, or administration of the loan in any way. Instead, MERS asserts to be a corporation providing electronic tracking of ownership interests in residential real property security instruments. See In re MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 861 N.E.2d 81 (2006). According to MERS, it was developed by the “real estate finance industry” and was designed to facilitate the sale and resale of instruments in “the secondary mortgage market, which include one of the government sponsored entities.” MERS contracts with lenders to track security instruments in return for an annual fee.
(3) MERS is listed as a nominee on the deed of trust. A nominee is “a person designated to act on behalf of another, usually in a very limited way.” Black’s Law Dictionary 1076 (8th ed. 2004). A nominee is also a “person who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit of others.” Id. As discussed above, MERS was not designated to act on behalf of another under the facts of this case.Further, it held no title in this case where title vested in the trustee, and finally, it received and distributed no funds for the benefit of others. An agent is a person who, by agreement with another called the principal, acts for the principal and is subject to his control.” Taylor v. Gill, 326 Ark. 1040, 1044, 934 S.W.2d 919, 922 (1996) (quoting AMI 3d 701 (1989).
(4) In regard to MERS argument that it is the agent for every “lender” who may later acquire a loan on the secondary loan market, the Court stated: “We specifically reject the notion that MERS may act on its own, independent of the direction of the specific lender who holds the repayment interest in the security instrument at the time MERS purports to act. “[A]n agent is authorized to do, and to do only, what it is reasonable for him to infer that the principal desires him to do in the light of the principal’s manifestation and the facts as he knows or should know them at the time he acts.” Hot Stuff, Inc. v. Kinko’s Graphic Corp., 50 Ark. App. 56, 59, 901 S.W.2d 854, 856 (1995) (citing Restatement (Second) of Agency § 33 (1958)). Nothing in the record shows that MERS had authority to act.
(5) However, MERS also argues that it holds a property interest through holding legal title. Specifically, it purports to hold legal title with respect to the rights conveyed by the borrower to the lender. The court disagreed. (Note how in MERS responses to my Blog it acts like it can do whatever it wants because of the borrower agreed to this when they signed the Deed of Trust. Note that the Court in this case doesn’t see things that way).
(6) Further, MERS is not the beneficiary, even though it is so designated in the deed of trust. Pulaski Mortgage, as the lender on the deed of trust, was the beneficiary. It receives the payments on the debt. The cases cited by MERS only confirm that MERS could not obtain legal title under
the deed of trust. Finally, we are cited to Beloate v. New England Securities Co., 165 Ark. 571, 575, 265 S.W. 83 (1924), where this court stated that the real owner of the debt, as well as the trustee in the mortgage, are necessary parties in the action to recover the debt and foreclose the mortgage. Again, this case supports the conclusion that East was a necessary party and MERS was not.
(7) Finally, we note that Arkansas is a recording state. Notice of transactions in real property is provided by recording. See Ark. Code Ann. § 14-15-404 (Supp. 2007). Southwest is entitled to rely upon what is filed of record. In the present case, MERS was at best the agent of the lender. The only recorded document provides notice that Pulaski Mortgage is the lender and, therefore, MERS’s principal. MERS asserts Pulaski Mortgage is not its principal. Yet no other lender recorded its interest as an assignee of Pulaski Mortgage. Permitting an agent such as MERS purports to be to step in and act without a recorded lender directing its action would wreak havoc on notice in this state.
What principles of law might derive from this case?
(1) MERS CANNOT CLAIM IT IS THE OWNER OF YOUR LOAN JUST BECAUSE THE DEED OF TRUST INDICATES IT IS A “BENEFICIARY OF A LOAN” Why? MERS lends no money, and is not entitled to repayment (the Court is looking to the actual function of a “lender” rather than some “paper authority” (emphasis added) that supports its right to act as a lender or beneficiary of a loan. Note that this is consistent with what the Kansas Supreme Court stated in its landmark holding against MERS which we also briefed on our blogs: http://www.foreclosuredefenseresourcecenter.com/author/admin/
(2) MERS role as “nominee” of the lender (i.e. the initial lender) and “its successors and assigns” – the subsequent lenders who trade loans in the secondary market also does not appear as strong as MERS would like. Again, the phrase “nominee of lender its successors and assigns” is just another piece of paper authority stated in the deed of trust that MERS relies on for its power and authority. As the Court stated, “at best” MERS is a “agent of lender.” But as stated above, the Court did not cave in to MERS argument that MEMBER Banks under the MERS contracts appoint MERS as agent. The Court seemed to suggest that there should be some appointment or direction by the principal (the lender) for the agent who will control the direction and activities of MERS. My knowledge of MERS shows they do not like to act at anyone’s authority or direction as they feel they are basically empowered to do whatever they want.
As was stated in the Kansas case the role as MERS as “nominee” (agent for principal, the lender) is not clear. They could be nothing more than a straw man according to the judge. Therefore, when MERS acts in any capacity, their acts should be closely scrutinized. Perhaps this makes sense why MERS is signing loan modification agreements, but are they singing on behalf of a principal (lender) who has specifically authorized their acts? What are they attempting to accomplish? Make sure they are being clearly “authorized” by a principal to act on their behalf.
If you are having issues trying to determine who owns your loan, who the beneficiary is, who has the right to foreclose, and if you are thinking of filing bankruptcy, have a foreclosure defense lawyer review your notice of default, notice of sale, chain of title, deed of trust, and other critical documents to see who the true lender might be. There may be legal challenges you can raise in “stay litigation (motions for relief from automatic stay), challenges to proofs of claims filed in bankruptcy court, and in adversary proceedings challenging the validity of an alleged lien. Just who your true creditor is, and who their truly authorized agents are is becoming an interesting issue in the age of loan securitization.
ABOUT US:
The Law Offices of Steve Vondran in licensed to practice law in California and Arizona. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.
To see some of other other websites dealing with the financial crisis please review the following websites:
(1) www.OptionArmLawyer.com (potential attacks against the predatory option arm loan – aka “Pick-a-Prey”)
(2) www.TrialPlanFraud.com (tackling issues involved with what we call trial-plan shennanigans)
(3) www.BKAttorneyS.net (BK Attorney Steve – Chapter 7 Bankruptcy information for Arizona and California Homeowners)
(4) www.RescindMyLoan.net (website that discusses Truth in Lending Rescission information)
(5) www.LoanModRadio.com (site which features foreclosure defense issues in streaming audio)
(6) www.ProduceTheNoteAttorney.com (general information on the “Produce the Note” foreclosure defense strategy that is running rampant on the Internet)
Some legal cases we are able to accept in a contingency fee basis. Certain select cases are listed on www.ContingencyCase.com an online legal directory for lawyers who will consider taking cases on a contingency fee basis in a variety of legal areas. There is no guarantee we will be able to take your case on contingency fee.
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Fredonia
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Winkelman
Jerome
The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case you should seek out the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. Law is always changing. The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).
The foregoing is just my personal interpretation/opinion of the case and is not intended to be construed as legal advice or a susbstitute for legal advice. For specific questions consult a foreclosure and/or bankruptcy lawyer. Attorney Steve Vondran is licensed to practice law in California and Arizona. He is also a real estate broker in each state, and is on Neil Garfield’s Living Lies Websites under “lawyers who get it.”
This case involved a judicial foreclosure involving a Kansas Homeowner. In Kansas a foreclosure must proceed in a Court of law (Called a “judicial foreclosure”). The homeowner had both a first and second loan. The holder of the first mortgage was Landmark National Bank. The holder of the second mortgage was Millenia Mortgage, who had sold their interest to Sovereign Bank.
After the foreclosure lawsuit was filed, neither the homeowner nor Millenia Mortgage responded, prompting Landmark National Bank (the holder of the first mortgage) to seek an entry of default and order to sell the property.
Well, MERS and Sovereign Bank (the alleged holder of the second mortgage) both protested and filed a motion to set-aside the default an moved to intervene into the case (they did not argue that they should have been joined by Landmark). MERS claimed to have legal title to the mortgage for both Millenia and Sovereign Bank and therefore claimed they were a “necessary party” to the foreclosure action and should have been a party to the lawsuit.
II. Legal Issue
Whether a party (MERS) who lends no money, collects no money, and has no other interest in real property, other than potentially as a nominee, is a necessary party to a judicial foreclosure action such that their motion to intervene should have been granted by the trial court?
III. Courts Holding: NO
(1) A party is not contingently necessary in a mortgage-foreclosure lawsuit when that party is called the mortgagee in a mortgage but is not the lender, has no right to the repayment of the underlying debt, and has no role in handling mortgage payments.
IV. Rational
(1) The Court first discussed the traditional nature of a mortgage:
“A mortgage grants a title or lien against a property as security for the payment of a debt or the performance of a duty. The “mortgagor” is the borrower who grants a mortgage in exchange for a loan; the “mortgagee” is the lender who gives the loan secured by the mortgage. See Black’s Law Dictionary 1031, 1034 (8th ed. 2004). The mortgagee is so well understood as the lender that Black’s Law Dictionary defines a “foreclosure” as an action brought by the lender/mortgagee: a foreclosure is a “legal proceeding to terminate a mortgagor’s interest in property, instituted by the lender (the mortgagee) either to gain title or to force a sale in order to satisfy the unpaid debt secured by the property.” Black’s Law Dictionary 674. Similarly, the tie between a mortgage and an underlying debt is so intrinsic that Kansas law provides that “[t]he assignment of any mortgage . . . shall carry with it the debt thereby secured.” K.S.A. 58-2323. Indeed, an assignment of a mortgage without the debt transfers nothing. 55 Am. Jur. 2d, Mortgages § 1002. Thus, the mortgagee, who must have an interest in the debt, is the lender in a typical home mortgage.”
(2) The Court went on to discuss the way MERS is setup with its member banks and how loans are traded, bought, and sold on the secondary loan market. Here is what the Court said:
“But for reasons thought beneficial by a group of lenders who trade mortgages, the form of mortgage used in this case designates an entity that is not the lender as the mortgagee. See MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 96, 828 N.Y.S.2d 266, 861 N.E.2d 81 (2006) (MERS was established by large lenders to allow easy electronic trading and tracking of mortgages). Specifically, the mortgage says that the mortgagee is MERS, though “solely as nominee for Lender.” Does this mean that MERS really was the mortgagee, even though it didn’t lend money or have any rights to loan repayments? Assuming so, MERS argues that it was a necessary party to the foreclosure and that the foreclosure must be set aside. But the premise upon which MERS bases this argument is flawed.”
(3) The Court then discussed what MERS actually does, and is, and concluded that at best, under the mortgage at issue, MERS could be no more than a nominee (or agent for “the principal, the “lender”)
“What is MERS’s interest? MERS claims that it holds the title to the second mortgage, not the real estate. So it does, but only as a nominee. In terms of the roles that we’ve discussed in the mortgage business, MERS holds the mortgage but without rights to the debt. The district court found that MERS was merely an agent for the principal player, Millennia. While MERS objects to its characterization as an agent, it’s a fair one.
MERS had no right to the underlying debt repayment secured by the mortgage; MERS did not even act as the servicing agent to receive the payments and remit them to the lender. MERS’s right to act to enforce the mortgage was strictly limited: if “necessary to comply with law or custom,” MERS could foreclose the mortgage or enter a release of the mortgage. MERS certainly could not act at odds to its principal, the lender (emphaSis added). Its role fits the classic definition of an agent: one “‘authorized by another to act for him, or intrusted with another’s business.’” In re Tax Appeal of Scholastic Book Clubs, Inc., 260 Kan. 528, 534, 920 P.2d 947 (1996) (quoting Black’s Law Dictionary 85 [4th ed. 1968]).
Only one Kansas case has discussed the meaning of nominee in any detail. In Thompson v. Meyers, 211 Kan. 26, 30, 505 P.2d 680 (1973), the court noted that the meaning of the term may vary from a pure straw man or limited agent to one who has broader authority.
But whatever authority the nominee may have comes from the delegation of that authority by the principal. In its ordinary meaning, a nominee represents the principal in only a “nominal capacity” and does not receive any property or ownership rights of the person represented. See, e.g., Cisco v. Van Lew, 60 Cal. App. 2d 575, 583-84, 141 P.2d 433 (1943); see also Applebaum v. Avaya, Inc., 812 A.2d 880, 889 (Del. 2002) (referring to nominees “as agents of the beneficial owners”). The Millennia mortgage does not purport to give MERS any greater rights than normally given a nominee. The mortgage says that MERS acts “solely as nominee for Lender.” There is no express grant of any right to MERS to transfer or sell the mortgage or even to assign its duties as nominee. Nor does MERS obtain any right to the borrower’s payments or even a role in receiving payments.”
(4) The Court concluded that MERS was not a necessary party to the foreclosure action
“MERS and Sovereign correctly note that a foreclosure judgment may be set aside for failure to join a contingently necessary party. E.g., Wisconsin Finance v. Garlock, 140 Wis. 2d 506, 512, 410 N.W.2d 649 (1987). For the purposes of our case, a party is contingently necessary under K.S.A. 60-219 if the party claims an interest in the property at issue and the party is so situated that resolution of the lawsuit without that party may “as a practical matter substantially impair or impede [its] ability to protect that interest.” The real issue is that of the lender, the true mortgagee, to protect its security interest against the property. Whether MERS may act as a nominee for the lender, either to bring a foreclosure suit or for some other purpose, is not at issue in Landmark’s foreclosure lawsuit. Moreover, an agent for a disclosed principal is not a necessary party to a lawsuit adjudicating the substantive rights of the principal. Hotel Constructors, Inc. v. Seagrave Corp., 99 F.R.D. 591, 592 (S.D.N.Y. 1983); Liles v. Winters Independent School District, 326 S.W.2d 182, 188 (Tex. App. 1959).”
What principles of law might derive from this case?
(1) At least as to the loan in question, MERS is no more than an agent for a disclosed principal (who is the “lender”). In the context of securitized loans, it is often impossible to tell who the real “lender” is, that is, the company that was the source of funds for the loan. Typically, the original “lender” in a MERS loans, lends none of their own money an sells the loan usually in the first few days, and a review of the “lender’s” balance sheet may not reveal that the original lender in fact lent any money at all, and was instead being used to generate a security instrument that would be sold on Wall Street.
(2) A “necessary party” (in this case to a judicial foreclosure) is one who has a real interest in the property and needs to protect that interest. MERS has no financial interest in a loan as pointed out by the Court, because it collects no money, lends no money etc. For this reason, MERS should stop pretending it is the “beneficiary” under a Deed of Trust just because the Deed o Trust recites this, and just because the borrower supposedly agrees to this when they signed the Deed of Trust as the MERS representative discussed in their email to me. This court at least does not buy that line of thinking.
(3) If MERS is not a necessary party to a transaction, and only plays a role as a nominee it should not be trying to lift automatic stays in a bankruptcy Court (this is an attempt to assert third party standing) and they should not be deemed a “real party in interest” to a bankruptcy proceeding. However, if MERS insists on being acting as if it is a “beneficiary” perhaps they should be listed on the bankruptcy schedules so that any liability to them will be discharged.
(4) This case seems to suggest that MERS can only be an “agent” if it is directed so or authorized by a know principal, who is the lender. Again, MERS comment on my website says that all member banks who trade MERS loans have authorized MERS to act on their behalf.
(5) The role as MERS as “nominee” (agent for principal, the lender) is not clear. They could be nothing more than a straw man according to the judge. Therefore, when MERS acts in any capacity, their acts should be closely scrutinized. Perhaps this makes sense why MERS is signing loan modification agreements, but are they singing on behalf of a principal (lender) who has specifically authorized their acts? What are they attempting to accomplish? Make sure they are being clearly “authorized” by a principal to act on their behalf. Even so, please see our other blog posting on the Arkansas MERS case which seems to indicate that MERS can only be the agent for the “original lender” and not all subsequent MERS members that may come into ownership of the loan (even though the Note and Deed of Trust are normally separated after origination resulting in, as the Court put it: “[t]he assignment of any mortgage . . . shall carry with it the debt thereby secured.” K.S.A. 58-2323. Indeed, an assignment of a mortgage without the debt transfers nothing. 55 Am. Jur. 2d, Mortgages § 1002.
ABOUT US:
The Law Offices of Steve Vondran in licensed to practice law in California and Arizona. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.
To see some of other other websites dealing with the financial crisis please review the following websites:
(1) www.OptionArmLawyer.com (potential attacks against the predatory option arm loan – aka “Pick-a-Prey”)
(2) www.TrialPlanFraud.com (tackling issues involved with what we call trial-plan shennanigans)
(3) www.BKAttorneyS.net (BK Attorney Steve – Chapter 7 Bankruptcy information for Arizona and California Homeowners)
(4) www.RescindMyLoan.net (website that discusses Truth in Lending Rescission information)
(5) www.LoanModRadio.com (site which features foreclosure defense issues in streaming audio)
(6) www.ProduceTheNoteAttorney.com (general information on the “Produce the Note” foreclosure defense strategy that is running rampant on the Internet)
Some legal cases we are able to accept in a contingency fee basis. Certain select cases are listed on www.ContingencyCase.com an online legal directory for lawyers who will consider taking cases on a contingency fee basis in a variety of legal areas. There is no guarantee we will be able to take your case on contingency fee.
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The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case you should seek out the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. Law is always changing. The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).
We have been getting more and more questions about TILA (Truth in Lending Law) and the extended three year right of rescission. Here is one of our write-ups that discusses this concept in general terms. THE FOLLOWING IS NOT LEGAL ADVICE OR TO BE CONSTRUED AS LEGAL ADVICE OR A SUBSTITUTE FOR LEGAL ADVICE. FOR SPECIFIC INFORMATION ON YOUR CASE CONTACT A FORECLOSURE DEFENSE OR TILA LAWYER.
DEFENDANTS (THAT’S THE LENDERS/LOAN SERVICERS AND THEIR “INVESTORS”) SHOULD NOT BE PERMITTED TO FORECLOSE ON THE SUBJECT PROPERTY WHERE PLAINTIFF HAS EXERCISED ITS VALID RESCISSION RIGHTS UNDER FEDERAL TRUTH IN LENDING LAW. IN EXERCISING ITS RESCISSION RIGHTS, THE SECURITY INSTRUMENT ON THE PROPERTY IS NULL AND VOID AND THERE IS NOTHING TO FORECLOSE ON.
FEDERAL TRUTH IN LENDING LAW
The Truth in Lending Act (TILA) is a cornerstone of consumer credit legislation. The Statute is Congress’s effort to guarantee the the accurate and meaningful disclosure of the costs of consumer credit and thereby to enable consumers to make informed choices in the marketplace. See 15 U.S.C. § 1601(a).
The Act is designed to protect borrowers who are not on an equal footing with creditors either in bargaining power or with respect to the knowledge of credit terms. In other words, TILA was passed to aid the unsophisticated consumer. See Thomka v. A.Z. Chevrolet, Inc. 619 F.2d 246 (3d Cir. 1980). The Act is also remedial and must be liberally construed in favor of borrowers. See King v. California, 784 F.2d 910 (9th Cir. 1986). Except where Congress has relieved lenders of liability for noncompliance, it is a strict liability statute. Courts should continue to assure that consumers are accorded the full remedies available under the Act for violations found, even if they might seem technical. See Rodash v. AIB Mortgage Co., 16 F.3d 1142, 1145, 1149 (11th Cir. 1994).
Although Congress permitted the Federal Reserve Board to issue regulations implementing TILA (Reg Z), and to issue interpretations and official staff commentary that the Courts consider to be persuasive authority, the FRB’s authority is not without limits, and a regulation that conflicts with TILA cannot stand. See Fabricant v. Sears, Roebuck, Clearinghouse No. 54,563 (S.D. Fla. Mar. 5, 2002).
NOTICE OF RIGHT TO CANCEL – DISCLOSURE REQUIREMENTS
Under Federal Truth in Lending Law, each Borrower, or person with ownership interest in the property, (in a non-purchase loan or other exempt transaction) in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any property which is used as the principal dwelling, shall be provided with TWO (2) COMPLETED copies EACH of a notice of right to rescind (cancel). It is the lender’s obligation to complete these forms and deliver TWO copies to each Borrower or person with Ownership interest in the Property. 15 U.S.C. § 1635(a), Reg. Z §§ 226.5(b), 226.23(b). If each borrower or person with ownership interest is not provided two adequate copies of this Notice, an extended three year right to rescind is permitted under the Federal Truth in Lending Law.
The notice shall identify the transaction or occurrence and clearly and conspicuously disclose the following:
(1) The retention or acquisition of a security interest in the consumer’s principal dwelling.
(2) The consumer’s right to rescind, as described in paragraph (a)(1) of this section.
(3) How to exercise the right to rescind, with a form for that purpose, designating the address of the creditor’s place of business.
(4) The effects of rescission, as described in paragraph (d) of this section.
(5) The date the rescission period expires. (See Reg. Z §§ 226.15(b)(5) and 226.23(b)(5))
The plain-meaning implication of this statutory provision is clear (and therefore is controlling), the lender has the obligation to complete these forms, it is not the borrowers duty to determine what dates to insert into the forms, much less at the direction of a mobile notary. In fact, the escrow instructions and lender’s instruction sheet for the notice of right to cancel form set forth the requirement that the dates be inserted before the borrower was to be asked to sign all copies.
This reading of the law (that it is the lender’s obligation to insert the dates, and not the borrowers) is also consistent with the requirement #5 (set forth above) that “the lender shall clearly and conspicuously identify the date the rescission period expires.” In fact, at least two courts have held in the First and Second circuit: “the complexity of business transactions under TILA means that the average consumer cannot figure out when TILA rights expire…..” See Bonney v. Wash. Mutual Bank, No. 08-30087 (D. Mass. July 30, 2008).
(2) The Lender is required to provide TWO copies of the notice of right to cancel to EACH borrower along with a copy of all of the material TILA disclosures. Failure to meet these requirements also provides an extended three year right to rescind the loan transaction. See 15 U.S.C. § 1635(a); Reg. Z §§ 226.15(b), 226.23(b) and Webster v. Centex Home Equity Corp. (In re Webster), 300 B.R. 787 (Bankr. W.D. Okla. 2003).
THREE YEAR EXTENDED RIGHT TO RESCIND
(a) Consumer’s right to rescind. (1) “In a credit transaction in which a security interest is or will be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction….”
(b) Exercising the right of Rescission: 226.23(3) – “The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer’s interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.” There is also legal precedence for “tolling” the statute beyond three years where fraudulent concealment is shown. See Bank of New York v. Waldon, 751 N.Y.S.2d 341 (Sup. Ct. 2002).
226.23(2): (2) “To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor’s designated place of business.”
EFFECTS OF RESCISSION
(d) Effects of rescission. (1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.
(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.
ASSIGNEE LIABILTY FOR RESCSSION
While assignees are only liable for TILA “statutory damages” that are “apparent on the face of the loan documents” assignees are subject to the rescission right to the same extent as the original creditor. 15 U.S.C. §1641(c) states: “Any consumer who has the right to rescind a transaction under section 1635 of this title may rescind the transaction as against any assignee of the obligation. See also the case of Ocwen Fed. Bank v. Russell, 53 P.3d 312 (Haw Ct. App. 2002) which rejected the assignees holder in due course argument as being no defense to rescission. As other courts have held: “without such protection for the consumer the right of rescission would provide little or no effective remedy.” See Stone v. Mehlberg, 728 F. Supp. 1341, 1348, (W.D. Mich 1989). A loan servicer is deemed an assignee if it “is or was the holder of the obligation.”
WHAT DOES ALL THIS MEAN IN RAL LIFE WHEN FACED WITH FORECLOSURE?
(1) IF YOU HAVE A REFINANCE LOAN WITHIN THE LAST THREE YEARS YOU SHOULD HAVE YOUR LOAN FILE AUDITED TO SEE IF THERE IS A “MATERIAL” TRUTH IN LENDING VIOLATION THAT MAY ALLOW YOU TO RESCIND YOUR LOAN UP TO THREE YEARS AFTER THE LOAN OBLIGATION. THERE ARE SEVERAL DIFFERENT WAYS TO FIND A “MATERIAL” VIOLATION.
(2) DO NOT COUNT ON YOUR ATTORNEY OR ATTORNEY-BACKED COMPANY (LAW CENTER ETC.) TO CATCH THIS AS WE HAVE SEEN FAR TOO MANY INSTANCES OF NEGLECT IN THIS AREA
(3) IF YOU HAVE A RESCISSION CASE, YOU NEED TO MAKE SURE YOU SEND IN YOUR RESCISSION LETTER. CONTACT AN ATTORNEY TO DISCUSS THIS REQUIREMENT.
(4) YOU NEED TO START THINKING ABOUT A TENDER PLAN AND A LITIGATION STRATEGY. IF YOU DO NOT HAVE A TENDER PLAN, THEN TILA MAY NOT BE THE BEST WAY TO GO. AGAIN, CONSULT A FORECLOSURE OR TRUTH IN LENDING LAWYER TO ASSIST YOU AND EVALUATE YOUR CASE.
(5) ONCE YOU RESIND THE LOAN, THE SECURITY INSTRUMENT IS VOID AS A MATTER OF LAW, BUT BE PREPARED, YOU WILL NORMALLY HAVE TO ENFORCE THIS RIGHT BY GOING TO COURT. UNFORTUNATELY, CREDITORS FORCE YOUR HAND TO FILE A CIVIL LAWSUIT SEEKING A TRO AND INJUNCTION BEFORE THEY WILL CONCEDE.
(6) IF YOU ARE SUCCESSFUL IN YOUR TILA RESCISSION CASE, THE JUDGE IS SUPPOSED TO AWARD ATTORNEY FEES WHICH WILL HELP YOU RECOUP THE COSTS OF LITIGATION.
(7) EVEN IF YOU CANNOT EXERCISE TILA WITHIN THREE YEARS, YOU MAY BE ABLE TO ASSERT TILA AS A “DEFENSIVE” ACTION IN A RECOUPMENT CASE. WE WILL BE TALKING ABOUT THIS CONCEPT IN A FUTURE BLOG.
(8) FOLKS, IN THIS WAR ON FORECLOSURE, IT IS UP TO YOU TO IDENTIFY, ASSERT AND STAND UP FOR YOUR LEGAL RIGHTS. ALTHOUGH THE LENDERS WILL RARELY ADMIT TO A TILA VIOLATION, YOUR DOCUMENTATION FOLLOWING AN AUDIT WILL NORMALLY TELL THE STORY THEY WOULD RATHER NOT HEAR.
KEYWORDS: TRUTH IN LENDING RESCISSION / INJUNCTION / TRO / LIS PENDENS / PHOENIX TRUTH IN LENDING LAWYER / SCOTTSDALE TRUTH IN LENDING LAW / ARIZONA TRUTH IN LENDING LAWYER / CALIFORNIA TRUTH IN LENDING LAWYER / ORANGE COUNTY TRUTH IN LENDING LAWYER / THREE YEAR RIGHT OF RESCISSION UNDER TILA / TILA TENDER PLAN / SCOTTSDALE LOAN MODIFICATION / PHOENIX LOAN MODIFICATION / SECURITY INSTRUMENT VOID UNDER TILA FOLLOWING RESCISSION / TILA RESCISSION LETTER / RESCIND YOUR LOAN IN BANKRUPTCY / TILA FORENSIC LOAN AUDIT
Atorney Steve Vondran is licensed to practice law in the State of California and Arizona. WE HANDLE ONLY LITIGATION CASES IN CALIFORNIA POST SB-94, AND STILL HANDLE LOAN MODIFICATIONS FOR ARIZONA CLIENTS.
WE SERVE THE FOLLOWING CITIES IN CALIFORNIA AND ARIZONA.
THIS IS AN ADVERTISEMENT AND COMMUNICATION PURSUANT TO STATE BAR RULES. WE ONLY SEEK TO SERVE CLIENTS IN CALIFORNIA AND ARIZONA WHERE ATTORNEY STEVE VONDRAN IS LICENSED TO PRACTICE LAW. HE ALSO HOLDS A REAL ESTATE BROKER’S LICENSE IN EACH STATE.
So our Client is filing Chapter 7 bankruptcy in Arizona. We are trying to re-affirm the house debt and figure out exactly who we should be talking to. Of course, this is almost impossible to figure out.
GMAC is acting as the loan servicer on one hand, but then the Attorney for GMAC sends us an email with the Note attached informing us that GMAC owns the loan. Okay, sounds simple enough. Then, we look up my Clients Deed of Trust, and that says “MERS is the Beneficiary” of the loan and so we can only assume they claim to be the owner as well. Then, to add more confusion to the mix, we punch in my Clients address on the fannie mae loan lookup tool and low and behold that tells us “Fannie Mae owns your loan.” What is a reasonable borrower supposed to believe? Because of the conflict and confusion and competing rights being asserted we were forced to file an adversary proceeding in bankruptcy court to try to get to the bottom of this. We will keep you posted as to the outcome of the case.
Our office gets a good number of calls each day as the WAR ON FORECLOSURE wages on. It is truly amazing how many calls we get from homeowners who have been scammed, cheated, lied to, spit on, deceived, and perhaps even fraudulently abused. I got a call today regarding a homeowner that was a 70 years old and dealing with the “here’s a trial plan, thanks for your payments, oh we changed our minds” TRIAL PLAN NONSENSE scenarios.
Is this FRAUD? Is it BREACH OF CONTRACT? Is it UNFAIR AND DECEPTIVE BUSINESS PRACTICES? Is it HEARTLESS? What exactly is going on here? Why can’t the lenders and loan servicers play fair when it comes to HAMP modifications, and even as to internal (non-HAMP) modifications.
We have identified several different types of scenarios on our website www.TrialPlanFraud.com.
People often ask us, “what can we do about this kind of shenanigans perpetrated by the lenders and loan servicers” (and if these entities are acting as “agents” for the so-called “investors” of the securitized loans aren’t the investors (principal) also liable for these deceptive acts?
Here’s some insight on these trial plan issues:
(1) The lenders are not obligated to give you anything, but if they do, they should play fair and honor what they say they are willing to give you. For example, if you tell a 70 year old homeowner that they qualify for a trial plan modification (leading them to believe badly needed relief is at bay) shouldn’t the lender play fair, review the financials in good faith, and if nothing changes in a material manner from the time the trial plan was given until the time the final review takes place, shouldn’t this mandate that the lender/servicer/investor provide the modification? After all, we are not asking you to give something you were not already willing to give, we are simply asking you to honor your trial plan that you used to suck additional payments out of people. In this case, you would also be avoiding potential liability for elder abuse (financial elder abuse under California law). Why not play fair and do the honorable thing?
(2) If the lender/servicer/investor refuses to honor the modification, consider sending in a “TRIAL PLAN FRAUD / BREACH OF CONTRACT LETTER” outlining the relevant facts, payments made, and citing potential causes of action. You should consider putting the lender on notice of potential claims you may raise against them in a future civil lawsuit. Our law-firm can write these letters on your behalf which also includes a qualified written request and demand to identify the holder of the loan amongst other things.
(3) If all else fails you may want to discuss with legal counsel the potential for filing a civil lawsuit and seeking money damages, specific performance of the contract and/or an injunction to stop foreclosure. Some fact patters are better than others when it comes to deciding whether or not a civil lawsuit is in your best interest.
(4) When dealing with your lenders/investors/loan servicers, please make sure to make written notes of everything, document everything, take down names, dates, badge numbers, etc. You will need this for our trial plan breach letters and if you wind up filing a civil lawsuit. In this business you have to document everything, and trust no one. The lenders are only out to protect their own interests. They do not care about you or saving your home. Right now it is all about their cleaning up their books.
THESE ARE JUST A FEW THINGS TO KEEP IN MIND WHEN TRYING TO SAVE YOUR HOME FROM FORECLOSURE. FOR MORE INFORMATION VISIT HTTP//WWW.RESCINDMYLOAN.NET OR TO BOOK AN ATTORNEY CONSULTATION CALL (877) 276-5084.
There is a new wave of happenings in the loss mitigation marketplace. When a loan servicer or lender fails to modify a loan (especially loans that are upside down and in need of principal reduction) some buyers are deciding to blow off the lender and just walk away from the property.
Well of course the lenders are up in arms about this financial preservation strategy (as I learned in contract law many years ago, this is the concept of “efficient breach” wherein sometimes it is simply in ones best interest to breach a contract). Of course the rules change when the efficient breach is perpetrated on the mighty banks. To them this is “mortgage fraud” or “buy and bail” or “unethical” or “immoral.”
What banks fail to realize is that if they would provide MEANINGFUL MODIFICATIONS WITH ALL THE TAXPAYER FUNDED BAILOUT MONEY THEY RECEIVED PERHAPS PEOPLE WOULD NOT BE BAILING OUT ON THE LENDERS.
IF THE LENDERS (AND THEIR INVESTORS WHO INVESTED IN THE SECURITIZED LOANS) DO NOT WANT TO PROVIDE MEANINGFUL LOAN MODIFICATIONS BECAUSE THEY ARE SEEKING TO DO WHAT’S IN THEIR BEST INTEREST, SHOULD THEY REALLY BE SURPRISED THAT BORROWERS AND HOMEOWNERS ARE PROTECTING THEIR INTERESTS BY PURSUING WHAT SOME WOULD CALL A “STRATEGIC DEFAULT” STRATEGY.
Now, before you exercise these types of strategies, it would be wise to consult with a foreclosure defense lawyer to discuss your options, review your situation, and to analyze whether or not there is any liability in this regard. Whether or not something is immoral or unethical is a different question than whether or not something is illegal and can result in civil liability. Have your case reviewed.
IN THIS MARKETPLACE IT SEEMS THE TIDE IS SHIFTING TO AN EVERY MAN AND EVERY COMPANY FOR THEMSELVES APPROACH REGARDLESS OF THE IMPACT THAT MAY RESULT TO LOCAL NEIGHBORHOODS AND PEOPLE THAT ARE NOT IN DEFUAULT. WHO IS TO BLAME IS A QUESTION OF WHICH CAME FIRST, THE CHICKEN OR THE EGG.
PREDATORY LAWYERING? Here is another insider view of the types of things that go on when trying to saving your home from foreclosure……TALES FROM THE FORECLOSURE DEFENSE PIT. Attorney defending One West Bank and Wells Fargo in a TILA and Predatory lending lawsuit filed by our firm lies about postponing foreclosure.
Statement of Facts
My Client had rescinded their loan under Truth in Lending Law, and sent in a rescission letter to their lenders to this effect (due to material truth in lending violations). Under TILA, such rescission election applies to each and every loan assignee including in this case, Wells Fargo and One West Bank (you know the guys that bought up the failed Indymac’s loans in a sweetheart deal from the FDIC). Anyway, our firm was hired to file a lawsuit to assert our Clients rescission rights because, as is normally the case in TILA rescission, the “lender” denied my Client’s rescission rights forcing us into Court to rescind the loan, and seek our attorney fees.
As we have discussed in previous posts, the lenders typically and routinely deny your rescission request. Why? because they can, and because they like to force you into court where they try to raise the “tender” issue (one of their favorite ploys) even though the literal reading of TILA requires them to pay you back all the monies they received from you, and to remove the security instrument leaving no rights to foreclose on your property. At any rate, you can view other blogs for the tender issue.
At any rate, our lawsuit named One West Bank (supposedly the loan servicer) and Wells Fargo (supposedly the investor). We say supposedly, because when you are dealing with securitized loans, it can often be difficult to ascertain who in fact is the real lender and who has the note and deed of trust and the proper rights to collect money on your loan, and to foreclose on you. We talk about these types of “produce the note” and “prove you are a creditor in bankruptcy” issues on other blog posts.
So back to our story, so we file a TILA lawsuit, and seek to rescind the loan. We have a tender strategy in place and my Client wants their money back that they paid on the loan. This is their right. We are prepared to seek the TRO and then the Preliminary Injunction and prove up our case in a court of law.
Now remember, after you file a lawsuit, the Defendants only have a limited amount of time to answer the complaint or file a motion, etc. – typically 30 days in California and 20 days in Arizona. Defendants One West Bank and Wells Fargo (company that purchased Wachovia and World Savings) failed to file any responsive pleading in this time frame. YEAH, I SUPPOSE THEY WERE TOO BUSY DENYING LOAN MODIFICATIONS TO RESPOND TO A CIVIL LAWSUIT FILED UNDER TRUTH IN LENDING LAW. We know its not a money issue, because they got their nice big fat juicy bailout, so that couldn’t be the issue right?
So after the case is filed, and no answer or responsive pleading is made to the TILA lawsuit, we filed for a entry of DEFAULT and were preparing to prove up our case to the judge. That’s when the nonsense begins. First thing that happens is a lawyer for Wells/OneWest (yes, nowadays these companies typically hire one lawyer to represent both of their interests if you can believe it) calls and says he represents Wells/OneWest and that he wants back in the case even though he failed to respond in a timely manner. This attorney and firm shall remain nameless out of professional courtesy even though such is not really deserved.
So this attorney literally begs my Client to let them back into the case and agrees to postpone the sale date (that was already scheduled) but not yet enjoined by the TRO or preliminary injunction. The attorney even sends us an email to that effect. Since we realized in many cases the Courts are going to simply let the defendant back into the case anyway, we agreed to stipulate to allow them back into the case and to refrain from filing the TRO as we agreed to work on early settlement negotiations in good faith.
Good faith? Too good to be true. Next thing that happens is we start getting calls from another firm stating they represent Wells Fargo / OneWest Bank on the same case? Huh? One law firm is not enough so they hire two different firms to defend the TILA case and neither knows about the other. Laughable, but only somewhat surprising given some of the things we have seen in loss mitigation.
Thereafter, Attorney#1 goes on and has his Client conduct a foreclosure sale even though he later claimed (“this was against my advice”) and after also claiming (“I knew nothing about this”). Hmm. Long story short, we send a scathing letter to Wells One West demanding that they rescind the foreclosure sale because under TILA they had no security interest to foreclose on. Attorney #1 says he is no longer on the case, but that they have agreed to rescind the foreclosure sale. Then Attorney#2 calls and says he is on the case now but he will not answer any of our questions about rescinding the sale, but he begins to beg us for a stipulation to allow them back into the case and set-aside the default. At this point we tell them to pound sand unless they rescind the sale as they said they would do. Of course, this never happens. Instead, we moved froward with our TRO (restraining order) and eventually get our preliminary injunction granted even over the object of the Attorney#2 who was on the phone (courtcall) making some silly argument about tender. He really had nothing else to say. Keep in mind, Attorney#2 had not even appeared in the case, or filed any motions to get back into the case or rescinded the wrongful sale or anything. This is life in foreclosure land. Alot of chaos, confusion, and lack of good faith.
We are now going back in to prove up the default and seek to rescind the loan and get our attorney fees. This is just an example of how even relatively simple tasks (such as responding to a civil predatory lending lawsuit) are getting completely fouled up by these fortune 500 bankers and their attorneys who either care less about you, or worse, are predatory themselves.
This story only reinforces our vigor on why we need to hold these callous financial institutions accountable, and demand that they own up for the predatory loans they profit off, and the truth in lending rescission claims they think they can completely ignore (even after a lawsuit has been filed), and move to foreclose on a California homeowners primary residence even when their attorney states they wont. These types of callous and indifferent acts by major lenders and their foreclosure counsel only adds gas to the foreclosure defense fire by interjecting questionable conduct that seeks to deprive a California homeowner of their home.
MORAL OF THE STORY: Folks, when you are dealing with big lenders such as Wells Fargo and One West bank, be advised to look out only for yourself. This is not the first example of tricks, lies, and false statements in the foreclosure defense and bankruptcy context which stories abound (at least as far as the calls our office is concerned). At the end of the day these bully lenders and financial institutions and their hired guns have an arsenal of laws (and taxpayer bailout money) created especially for them (by their powerful lobbies and special interests) – such as (1) the tender rule following a foreclosure sale, (2) alleged federal preemption of state law predatory lending claims, (3) holder in due course doctrine, and the; (4) no duty owed by a bank to a borrower rule etc. (these are the big defenses the big boys typically pull out when sued and called to answer for their roles in mortgage meltdown).
We are all lead to believe (or should I say the banks argue) that the bailed out banks have done absolutely nothing wrong and played no role whatsover in this current financial crisis and that they deserved the bailout President Obama and Congress gave them, and that they hold all the cards in regard to loss mitigation, and that it was the borrowers created this mess, and that you are essentially powerless to challenge any of their acts of wrongdoing. In California, SB94 was passed to essentially deprive you of legal representation when seeking reasonable loss mitigation options. I suppose that is too much to ask for to allow Californians the “freedom to contract” with who they see fit to help them. It seems unconstitutional to simply impinge on your “freedom to contract” but again, I suppose your freedoms are subject to forces more powerful than you, namely fortune 500 financial institutions who literally write the laws. At the end of the day, they get their well-paid lawyers to fight their battles for them, while you are told YOU HAVE NO RIGHT TO PAY ANYONE IN ADVANCE TO REPRESENT YOUR INTERESTS. Welcome to the jungle!
Folks, you also need to ask yourself what types of banks and financial institutions you want to do business with in the future? Are there any banks that have your best interests at heart? Does anyone care about your legal rights or is it just about getting their hands on your money? You should think honestly about who you are going to bank with and deal with going forward. The lesson to be learned here, is that so-called “lenders” and “investors” are basically only out for one thing – money and profits, and if you and your home and your dreams stand in the way, they will do whatever it takes to steamroll over your opposition to their asserted authority. Should anyone really be surprised at anything these bailed-out dinosaur financial institutions pull? California and Arizona homeowners you must remain vigilant in this war against foreclosure, trust no-one and seek to identify, assert, and stand up for your rights.
PS. If you have a refinance loan within the last three years, make sure to have a TILA audit / forensic loan audit of your file undertaken by a foreclosure defense lawyer or other qualified professional. If you have a right to rescind your loan you should review this strategy with your foreclosure defense attorney. TILA creates some powerful rights that could wind up being the difference between facing a deficiency judgment and walking out of court with a check in hand following a bona fide rescission claim. The lenders would prefer you not examine this avenue of potential defense. TILA rescission also gets real muddy for them when dealing with securitized loans and trying to identify who got paid on the loan.
(1) Litigation is expensive and should be deemed one of the last resorts you consider along with Bankruptcy.
(2) You need a loan that has been originated within the past several years. Some people call on option arm (pick-a-pay loans) that are 7 years old. Probably not a good candidate for filing a lawsuit.
(3) You need to distinguish between suing your broker who put you into the loan (ex. a suit for fraud, deceit, breach of fiduciary duty, etc.) from a suit against the “lender” of the loan (who will usually claim no wrongdoing, and assert that the broker is to blame not them), and distinguish among the current holder of your loan (who will also claim no fault and just claim to be a loan investor or holder in due course), from your loan servicer (the company you are making payments to on your loan, and who likely has no liability for the option arm loan. You need to find a way to hold your current owner/investor liable and need to normally find a way to get an injunction to stop foreclosure (since this is the goal most people have). This is not always an easy task to identify proper grounds for a TRO or injunction. One good ground is a Truth in Lending (TILA) rescission claim.
(4) You need to determine your chances of winning especially if you are unable to get a preliminary injunction or TRO and the case goes to trial on the issue of money damages. Will the jury like your case? Some cases are better than other. For example, if you are an investor with 5 other loans, each with an option arm loan, and you took cash out on these loans, you have to ask whether a jury will really see you as the victim, or rather, just a disgruntled investor trying to litigate back his real estate losses. On the other side of the spectrum, if you are elderly couple, or minority, and none of your previous loans were option arm loans, and you were truly misinformed, deceived, and lied to in regard to the option arm loan, the teaser rate, the repayment options, and loan recasting feature, etc., this may be a better case to litigate. Each case is different and must be evaluated on its own merits.
(5) You should think about whether there is a better way to accomplish your goals (ex. pursuing a loan modification, or seeking a short sale of an upside-down property, or seeking a deed-in-lieu of foreclosure).
Yes, we are hearing more and more of these. People being dragged along making trial plan payments only to have the rug pulled out from beneath them. Unfortunately, you can also be on a trial plan and have them foreclose on you. So be careful, do not trust what these lenders and loan servicers are saying regarding trial plans and postponed sales especially where you have a foreclosure sale date and they have not agreed to extend (in writing). Even getting this is writing doesn’t always protect you. That’s how rigged the system is. If you have a refinance loan transaction within the last three years, get a TILA audit (truth in lending), if you have a right to rescind your loan (yes, there is an extended three year right to rescind you loan where material violations are found), you may want to consier rescindinng your loan if you are getting close to a sale date, and you are on a trial plan, but no permamnent modification has come. You have to do everything possible to protect yourself. Some people, if they have valid grounds to file for an injunction, will file for a TRO when it comes down to the wire and no modification has been provided. Anyway, check with your attorney about your situation. But whatever you do, DO NOT BLINDLY TRUST THAT THE BANKS ARE ALWAYS HERE TO HELP YOU OR ARE YOUR FRIEND. When you sue these banks, one of the first things they like to point out is WE OWE THE BORROWER NO FIDUCIARY DUTY……..THINK ABOUT THAT…….THEY WANT TO MAKE CLEAR THAT THEY DO NOT HAVE TO DO ANYTHING SPECIAL ON OYR BEHALF, OR OTHERWISE HAVE ANY DUTY TO TREAT YOU FAIRLY. YES, THIS IS THE LAW FOR THE MOST PART.
STEVE VONDRAN, ESQ.
FORECLSURE DEFENSE / BANKRUPTCY
CALIFORNIA / ARIZONA
PHONE (877) 276-5084
Here is another example of MERS playing big shot in the loan modification setting. Click on the link below to view the document. The “lender” of the loan is stated to by Indymac Mortgage Services. Meanwhile the top of the loan mod agreement states “Investor Loan #” (does this mean there is both a lender and a investor of the loan)? Who knows. The document is signed by MERS (the software company) for some reason. I suppose Indymac was not able to sign it for some reason and had to have MERS sign their loan modification agreement on their behalf for the investor? Confusing, I know.
IN THIS DAY AND AGE OF “MERS LOANS” (WHERE THE MORTGAGE ELECTRONIC REGISTRATION SYSTEMS – A MERE SOFTWARE COMPANY – POSES AS A BENEFICIARY OF A LOAN), CAN WE TRULY ACKNOWLEDGE ANY ALLEGED BENEFICIARY OF A LOAN AS BEING A “CREDITOR” IN A BANKRUPTCY SETTING?
Attorney Steve Vondran can be reached at steve@vondranlaw.com or (877) 276-5084. Mr. Vondran is licensed to practice law in California and Arizona and is currently assisting homeowners in foreclosure defense, predatory lending, bankruptcy, and loan modification (Arizona only). The following is general legal information only, and not legal advice.
MY NAME IS MERS AND I AM THE BENEFICIARY OF YOUR LOAN, NO I MEAN THE NOMINEE OF YOUR LENDER AND ITS SUCCESSORS AND ASSIGNS, I CAN LIFT THE AUTOMATIC STAY IN BANKRUPTCY – DO NOT CHALLENGE ME!RESPECT MY AUTHORITY.
Yes, to a certain degree we have been calling this “produce the note” bankruptcy style (or to be more accurate, “prove you are a creditor”). Here is a general overview of what we are talking about here. If you have a MERS loan (check your deed of trust see if it lists MERS as the nominee of the lender and its successor and assigns and the beneficiary of the loan), and you are thinking of filing Bankruptcy Chapter 7, give this article a close review.
We are a debt relief agency and we help people file for Bankruptcy Protection under the Bankruptcy Code. The following article is general legal information only and may not be current, up-to-date or accurate as law can be subject to interpretation and is constantly evolving. In addition, this article is not legal advice and not to be construed as a substitution for legal advice. If you have specific legal questions, please contact a bankruptcy lawyer or real estate lawyer or foreclosure lawyer as your case may require.
MERS IN BANKRUPTCY – RIP OPEN THE CURTAIN AND LETS SEE THE “WIZARD OF OZ” STANDING THERE WITH NOTHING BUT SMOKE AND MIRRORS.
WHAT IS MERS?
MERS stands for the Mortgage Electronic Registration System. They are essentially a software company that was set up to track the transfer (sale) of loan ownership rights, and loan servicing rights where loans are originated and transferred (sold) on the secondary market.
Where you see MERS pop up in the loan context is look on your deed of trust, if you see it say something similar to the following you have a MERS loan:
“MERS is the nominee of the lender, its successors and assign. MERS is the beneficiary.”
That is typically what you will see. Yes, you may be scratching your head like we do in our foreclosure defense work and asking yourself the following question, HOW IS IT THAT MERS IS BOTH A NOMINEE OF THE LENDER AND THE BENEFICIARY? It is a bit strange, but basically MERS is trying to hedge its bets. Where it needs to be an agent (nominee) it will act as an agent. Where they want to pretend to be the beneficiary, it will put the beneficiary hat on. Yes, MERS gets to be whoever it wants to be, or at least we should say that MERS can pretend to be whoever it wants to be in regard to loan foreclosure, trying to life a stay in bankruptcy etc.
Yes, MERS is assuming you will not challenge them, or that you do not have the money to challenge them, and/or that the judge will go right along with them in a civil lawsuit or allow them to lift the automatic stay in a bankruptcy setting.
Alas, there is the rub, people are starting to learn about MERS, and trying to find ways to challenge them. Our firm is also putting forth some new strategies to take on MERS, and MERS-related loans.
The analogy for MERS (pretender lenders) can also be extended to Trustees of Securitized trusts (as pointed out in California State bar MCLE units taught by Neil Garfield, a lawyer who can probably be called the “father of produce the note theory”). The point being that a trustee of a securitized trust who does not have the original promissory note, transferred and endorsed, along with an assignment of the note and deed of trust (the note and deed of trust are supposed to be assigned together for “the note without the deed of trust is a legal nullity” according to some legal cases. For example, where a trustee of a securitized trust cannot show proper transfer of the note and deed of trust, no one in their right mind should just assume that because the Trust claims to hold the loan, that they should be treated as a legitimate “creditor” in a bankruptcy case.
The point becomes, in this day and age, we are finding it increasingly difficult to find out WHO THE HOLDER OR OWNER OF YOUR LOAN IS. WHO IS ENTITLED TO PAYMENTS? WHO IS ENTITLED TO FORECLOSE ON YOU? WHO IS REQUIRED TO CONTACT YOU PURSUANT TO CALIFORNIA CIVIL CODE SECTION 2923.5 TO TRY TO WORK OUT LOAN MODIFICATIONS WITH YOU BEFORE THEY FORECLOSE? WHO DO YOU SUE WHEN YOU ARE FILING A TRUTH IN LENDING RESCISSION CASE TO FORCE THEM TO GIVE BACK THE MONEY THEY MADE AS PART OF THEIR TENDER OBLIGATION.
What we have found to be absolutely amazing in our work as a foreclosure defense and loss mitigation law firm is that when you contact your lender as ask them what should be a relatively simple and straight-forward question such as “WHO IS THE OWNER OF MY LOAN I WANT TO TALK TO THEM ABOUT A LOAN MODIFICATION” many California and Arizona homeowners will typically get the same answer: NONE OF YOUR BUSINESS……OR SORRY, WE CANNOT TELL YOU…….OR SORRY, WE DO NOT KNOW……OR, YES WE OWN IT, WHEN IN FACT THEY DONT.
If you think I am kidding, call your lender or more likely, your loan servicer and ask them who owns your loan. They may insist that Fannie Mae or Freddie Mac owns your loan. Both fannie and freddie have a loan lookup tool and you can google this to see of they “own your loan.” Of course, the result you will get you will have to take on faith, because you will not be able to download a copy of your note assigned to them, or a copy of your deed of trust assigned to them. Instead, Fannie Mae and Freddie Mac will be asking you to take it for granted that when they tell you they are the owner of your loan, that that is true and indisputable. If you ask for proof however, they will likely tell you to “pound sand.”
The rationale of many lenders seems to be this: “you took out a loan……you know you owe somebody……..that somebody might as well be us…….and there is no obligation for us to “show the note” in order to conduct a private trustee sale in California and Arizona (unfortunately the case law backs them up on this wild assertion) and if you try to file for an injunction to stop the foreclosure sale, we will point out the case law that says an original copy of the promissory note is not required in seeking to foreclosure in a non-judicial foreclosure sale. THAT MY FRIENDS IS BASICALLY WHAT YOU ARE UP AGAINST.
Meanwhile, Attorneys like me would like you to know that things are not always as they seem to be. Remember the Wizard of OZ? The guy behind the curtain that wanted you to believe he was the ultimate authority and not subject to challenge? Well, the lenders, loan servicers and MERS like to do the same thing when in comes to acting like they have all the credentials to prove their right to ACT IN RESPONSE TO REQUESTS FOR LOAN MODIFICATIONS, SHORT SALES, DEED-IN-LIEU OR FORECLOSURE, IN PRIVATE NON-JUDICIAL FORECLOSE SALES, TRYING TO LIFT AUTOMATIC STAYS IN BANKRUPTCY COURTS, AND EVEN EVICT PEOPLE FOLLOWING AN UNLAWFUL SALE BY A PRETENDER LENDER AS NEIL GARFIELD CALLS THEM.
In short, it is time to start asking the tough questions, and making these guys answer them with honesty, and in accordance with commercial law and other legal standards and making them PROVE they are the true creditor, or an agent of the true creditor when them come pushing people around in loss mitigation settings (even after they got their real nice bailout that saved their asses from bankruptcy and embarrassment).
IS MERS THE BENEFICIARY OF A LOAN?
As mentioned above, MERS is NOT A LENDER…….NOT A BENEFICIARY OF ANY LOAN. They did not lend you any money; they do not accept your loan payments, they do not discuss loan modifications or short-sales with you. Again, MERS is nothing more than a software company that is essentially made up of its member banks who like to hide behind the “MERS Curtain.” The use of MERS allows the TRUE OWNER of the loan to remain anonymous. That way, nobody knows who to go sue, unless and until a borrower goes into a default in which case MERS will ask one of its members to step forward and act as the creditor of the loan and move to foreclose. Until that day, you will never likely learn who “holds your loan or who “holds your loan” or who “the creditor or beneficiary of your loan is.” Again, the big banks, lenders, and wall street investors (who typically are the loan beneficiary as they are the ones seeking your loan payments after the servicer takes its cut) do not want you to know about them, because they do not want to answer for any predatory lending claims you may have. They would rather hide in the shadows for 4 or 5 years until statutes of limitations run, collecting your loan payments, trading your loan as many times as possible, and basically just living covertly off your interest payments.
Court cases have come down that have basically stated that MERS is NOT A BENEFICIARY OF A LOAN JUST BECAUSE IT CALLS ITSELF A BENEFICIARY UNDER YOUR DEED OF TRUST (CALLING A PIG A HORSE DOES NOT MAKE IT SO). AT BEST, COURTS WHO HAVE HEARD “MERS CASES” HAVE NORMALLY HELD THAT MERS MAY BE AN AGENT (NOMINEE) BUT THEIR CLAIM TO CREDITOR OR BENEFICIARY STATUS IS NOT MUCH MORE THAN SMOKE AND MIRRORS. We have discussed the Arkansas MERS case and Kansas Supreme Court Case on other blogs. We have also addressed “MERS BANKRUPTCY CASES” which have held that MERS does not have “standing” to lift an automatic stay in a bankruptcy court and that MERS is not a “real party in interest” in a BK case.
MERS hates these cases, even though it touts some of their alleged “successes” and the MERS TRIAL STRATEGY AND MERS LEGAL PRIMER on their website (assuming the article is still up there).
At any rate, do not expect MERS to stop, and as we discussed above, TRUSTEES OF A SECURITIZED LOAN TRUST (who like MERS cannot produce the note and assignment of deed of trust properly endorsed and transferred) should also not be acknowledged as TRUE CREDITORS who can do whatever the heck they want in private foreclosure sale settings, short sales, loan modifications, deed-in-lieu-of-foreclosure and in bankruptcy courts in California and Arizona where we are licensed to practice law. Note, we only serve loan modification clients in Arizona since California passed SB94 which essentially was the lenders way of putting loss mitigation representative out of business. That being said, we still file lawsuits seeking money damages, injunctions, TILA rescission, elder abuse cases, file lis pendens, file trial plan breach of contract cases seeking specific performance of the trial plan agreement, and force them to prove their creditor status (standing and real party in interest) in a BK Chapter 7 case where a debtor has legitimate debts (including deficiency judgment liability) that they seek to wipe out.
IF MERS IS NOT THE BENEFICIARY OF THE LOAN, THEN WHO IS?
This is the million dollar question. The Beneficiary is normally the party entitled to payment on your loan. Recall in the normal loan situation you have the Trustor (who is the borrower) and the Trustee (who has the power of sale given to them by the borrower) and the Trustee (who is the beneficiary of the loan, and the one who loaned the money).
This is the typical arrangement in a deed-of-trust setting. Mortgages are different and have only a mortgagor (the borrower) and the mortgagee (again, the bank that normally lends its own money).
It used to be the case (before securitized loans, and the secondary loan market) that banks would lend their money and then hold the loan, servicing it, and foreclosing on it if need be. The would, of course, hang on to your promissory note (which is evidence of the debt obligation) and would record the deed of trust in the local County Recorder’s office as evidence of the security interest in the loan. If you went into default on the loan, the bank would send you a notice of default or a notice of sale, and eventually they would foreclose on you. You never really had any reason to question who the owner or your loan was, or who your creditor was under this type of arrangement (which is often called “portfolio loans” or “whole loans.”).
Fast forward to the present, where you have loan brokers and “lenders” involved in many transactions, and the “lenders” typically do not loan any of their own money (yes, this sounds strange) but typically they will have entered into an agreement with another company who has agreed to buy, or otherwise fund your loan perhaps through a credit line, or perhaps by another agreement linking to a wall street investor.
WHAT? Yes, this means when you though your lender was “lending you money” often times there was no money lent by the original “lender” and your loan (at least the note part of it) was assigned or transferred through the secondary loan market where investment banks would carve up your note with other notes (called fractionalized notes) and create investment products for investors on wall streets to invest in (the products can essentially be called “tranches” and your loan, or a fractionalized portion of your loan is in one or more tranches). The tranches would be rated by Moody’s or Standard and Poor and investors on wall street (such as pension funds, foreign investors, insurance companies, and even investment bankers themselves) would purchase these up, thereby purchasing the right to your payments.
If you are savvy, you may be asking yourself, BUT WHAT ABOUT THE DEED OF TRUST – THE SECURITY FOR THE LOAN, WAS THAT TRANSFERRED TOO? Recall, we said the note and deed of trust has to be transferred together or it could be construed as a “legal nullity.” Well, as we discussed above, MERS often records the Deed of Trust and this is never assigned along with the promissory note to the investment trust that now supposedly holds your loan. So, they were separated.
This is one of the main points of contention, if it is a “legal nullity” to separate the note and deed of trust, doesn’t this mean that they securitized trust, or even the wall street investor who may have purchased an interest in your loan payments, does not have a right to enforce the debt they claim is owed (even though they may use the services of a specialized “loan servicer” who gets paid a percentage of each loan payment to act as if they work as the “agent of the beneficiary?”). Doesn’t this mean that neither the loan servicer (who has also tried to act as beneficiary on occasions), nor the trustee of the securitized trust, nor the wall street investor, nor MERS is a true “creditor” if they cannot produce both the transferred and endorsed promissory note, and the assigned deed of trust? Well, that seems to be a fair proposition.
So, if you are filing a bankruptcy petition (again, you must have bona fide good faith debts to discharge) and you are LISTING YOUR CREDITORS ON YOUR BK SCHEDULES(BOTH SECURED AND UNSECURED CREDITORS) WHAT EXACTLY ARE YOU SUPPOSED TO DO? List these companies and entities as “creditors” or list their alleged debts as “disputed” and list their alleged debts as “unsecured? Is it malpractice to grant these types of entities “creditor status” merely because they say they are a horse, and act like a horse, and their notice of default says they are a horse and their notice of sale say they are a horse, and their loss mitigation documents and HAMP agreements state they are the horse, when in fact, because they do not have the note properly endorsed and assigned along with the deed of trust they are just a pig? Should we take everything for granted, and give the Wizard of Oz the status they seek?
This is the question, this is the legal issue. These guys should be FORCED to prove they are legitimate and valid creditors given what we know of securitized loans.
WHY IS MERS SHIELDING THE IDENTITY OF THE TRUE BENEFICIARY OF THE LOAN?
Again, MERS was setup to assist its member banks to track loan servicing and ownership rights. They also help hide the identity of the true holder of the loan (the true beneficiary) as these parties only want an interest in your loan payment stream, and certainly do not want to end up a Plaintiff in a Truth in Lending rescission case (where they may actually have to give you your money back). So MERS helps aid this function, and MERS also allows members to buy, sell, and trade your loan without ever having to RECORD THE TRANSFERS OF THE NOTE AND DEED OF TRUST in the County Recorder.
Yes, this can deprive a County of essential revenues it needs for valuable social services) but it aids the bank in saving money so of course that is of paramount importance, at least to the banks.
MERS does other things as well, like advising its member banks on who to win lawsuits, and join MERS as a party when litigation ensues. They have it all planned out. It is only recently when MERS has started losing a few cases that its power, or lack of power, is coming to light, and the curtain is being pulled back. For now, they still feel they have power over the estimated 60 MILLION MERS LOANS THAT WERE ORIGINATED IN THE PAST DECADE OR SO.
CAN THE TRUSTEE OF A TRUST BE A BENEFICIARY OF A LOAN?
Again, this is a good question, under Commercial law standards, the note and the deed of trust would need to be assigned to the trust and as we know, this rarely appears to happen. In our foreclosure defense work, we will often hear “the trust owns the loan” or “Duetsche Bank as Trustee of the trust is the owner of the loan.” Again, they want you to take this on face value, admit you are in default of your loan, and give way to them because they are the entity billowing smoke up into the air, and angling the mirrors to blind your sight. As we have stated, in the past maybe you would give them credence for this type of ownership assertion. In this day and age of MERS, securitized loans, mortgage backed securities, CDO’s, etc., you have to ask questions and demand proof before you believe a word you hear. This is especially true in a BK filing.
There was a good Arizona bankruptcy Case that came down that talked about how a Securitized Trust could own a loan if the note and deed of trust were securitized, and if that occurs, then a loan servicer (GMAC in that case) would be able to claim standing in a Bankruptcy Court, and would be a real party in interest. We will be posting our brief of the Arizona case shortly. Google “Vondran Arizona Bankruptcy Lawyer Prove you are a Creditor” that should take you there. This is a pretty nice case that talks about what is legally required to prove standing in a Bankruptcy Court in a manner that would allow an entity to lift a foreclosure stay in bankruptcy court. In that case GMAC was basically told to go home as they had no standing in the Bankruptcy Court and was NOT a REAL PARTY IN INTEREST. So yes, these things CAN be challenged, and SHOULD be challenged in a Bankruptcy Court. The game playing, although allowed to be perpetrated in a private trustee sale, may have to come to a halt in a federal bankruptcy court, as it should.
ARE THERE ANY WAYS TO DETERMINE WHO THE OWNER OR HOLDER OF MY LOAN IS?
Sure, you can try using some of the ways we do to “ferret out the true holder of the loan….the true creditor…..the true beneficiary. You have to ask questions, and ASK THE LENDER OR LOAN SERVICERS IN WRITING. Here are a few of the things we do in our “Creditor Validation” and “Debt Validation” efforts.
Send in a Qualified Written Request under RESPA Section 6 (we have talked about QWR’s in other blog posts) where a bona fide billing or accounting dispute exists.
Send a request to identify the holder of the loan or master loan servicer under 15 U.S.C. 1641(f)
Send a debt validation letter demanding the “lender” validate their alleged debt, including identifying the holder of the loan, and producing the note and assignment of deed of trust.
Send in beneficiary demand letters.
If these letters go unanswered, or not answered in detail, of course this would raise suspicion, and doubt (again, what do they have to hide except the truth, namely that they are not valid legal creditors, and cannot prove such in some cases). This would also potentially create legal violations under TILA and RESPA and may turn them into potential defendants in a civil lawsuit if a proper predatory lending, or wrongful foreclosure case is brought. We call this MAKING THEM DO WORK TO JUSTIFY THEIR EXISTENCE AND JUSTIFY THEIR ASSERTIONS. Again, if they cannot answer these relatively simple questions and producing the proper documentation of their creditor status, how can we as bankruptcy lawyers treat them as legitimate secured creditors in a bankruptcy setting?
IF WE CANNOT ASCERTAIN THE IDENTITY OF THE TRUE HOLDER OF MY LOAN, AND IF WE ARE FILING CHAPTER 7 BANKRUPTCY SHOULD THE ALLEGED LENDER OR LOAN SERVICER BE TREATED AS A “CREDITOR” (EITHER SECURED ON UNSECURED) ON MY BANKRUPTCY CHAPTER 7 PETITION?
This is what we are saying above. Where good faith, bona fide legal challenges exist, although you may not be able to raise these in private non-judicial trustee sale settings (i.e. “there is no obligation to produce the note to pursue a private trustee sale”), I have not seen any requirement that says YOU MUST TREAT YOUR LENDER AS A BONA FIDE SECURED CREDITOR ON YOUR BANKRUPTCY APPLICATION FOR YOU KNOW YOU OWE SOMEBODY MONEY AND IT MIGHT AS WELL BE BANK OF AMERICA, OR CHASE, OR WELLS FARGO, ETC.
Consult with your bankruptcy Attorney to ask them how they handle MERS loans. You can also contact Attorney Steve Vondran’s office (offices in Phoenix, Arizona and Newport Beach, California servicing the Greater Phoenix / Scottsdale area and all areas of California) to discuss your case.
WHAT HAPPENS IF WE LIST THE ALLEGED LOAN CREDITOR / BENEFICIARY AS UNSECURED AND CHALLENGE THE DEBT AS DISPUTED?
This is another important issue, if they are not the true creditors, and their debt is challenged on a bankruptcy petition, then what happens next? How is this handled in a BK Court? Contact our office to setup a attorney consultation. Toll Free (877) 276-5084.
ARE THERE ANY CASES THAT TALK ABOUT MERS LOANS AND PRETENDER LENDERS?
Please check these sites for more information. There are also some good cases that have come out of California, Arizona, Kansas, and Arkansas that we will be highlighting on our foreclosure defense blogs. So stay posted or subscribe to our newsletter at Loan Mod Radio (the foreclosure defense show we used to air on California Angels Radio).
IS IT MALPRACTICE NOT TO CHALLENGE YOUR ALLEGED CREDITOR IN A BK SETTING WHERE THE LOAN AT ISSUE IS A MERS LOAN?
Again, for now this is an open question. If you are a BK attorney, perhaps you should be challenging MERS loans and demanding true creditors, lenders and beneficiaries prove such before allowing them to lift a stay in bankruptcy Court. Perhaps you should be charging an extra fee (whether your client can afford it or not – yes there are extra costs above and beyond your normal BK Chapter 7 fee), and perhaps you can use an outside firm like mine to conduct PROOF OF CLAIM CHALLENGES, ENGAGE IN STAY LITIGATION, OR TO FILE ADVERSARY PROCEEDINGS TO CHALLENGE THE EXTENT OR VALIDITY OF A LIEN. To those BK attorneys in California or Arizona (where we are licensed to practice law) who want to discuss co-counseling MERS cases, we are available for discussion at (877) 276-5084.
CONCLUSION – MERS (AND OTHER “PRETENDER LENDERS” AS NEIL GARFIELD CALLS THEM) IN BANKRUPTCY COURT.
In the world of securitized loans where the note and deed of trust is often separated by the use of MERS (the software company) and where it is often not clear who holds your loan or who your lender might be (this is often kept a big secret), it may be time to consider whether you should challenge these entities claims that they are your true creditor who is owed the money, and who has the right to foreclose on your loan, or lift your automatic stay in a bankruptcy court. The ramifications of taking such a position may threaten the “Wizard of Oz” hiding behind the loan curtain, but it also may work to your ultimate benefit. It is not clear who Bankruptcy Judges will treat such claims, but where you have a good faith belief the alleged “creditor” is just trying to pull a fast one because “you owe somebody it just might as well be me” and where you have bona fide debts, including potential deficiency judgment liability you want to discharge, perhaps the Bankruptcy Court may be your “court of last resort” to “make them produce the note.” These are strategies our firm is willing to investigate, consider, and allege where appropriate.
This is an advertisement and communication pursuant to state bar rules. No guarantees or representations as to any case outcome are ever given, and no predications made. Every case, lender, servicer, property, borrower, jury, and legal theory is different. Please do not email confidential information as there is not guarantee of confidentiality and no attorney-client relationship is formed until and unless a retainer agreement is signed by Client and Attorney .
Pretty typical story…..client is denied a loan modification, but still working in good faith in the loss mitigation system. Lender could basically care less and cannot be trusted NOT to foreclosure on Client. Where does this leave us? Where does this leave my client who is doing nothing more than working in good faith to save their home from foreclosure and do the right thing to short sale the property? Well, if it were possible to trust that bank of america would extend the foreclosure sale date and work in good faith, then perhaps resorting to the legal system, and litigation would not have to be the chosen path. Unfortunately, the lenders, including Bank of America in this case (and their agent Cal-Western Reconveyance Corporation) cannot be trusted to do the right thing. A foreclosure will normally hurt ones credit more than a short sale will, and a short sale may put a homeowner into a position to buy another house again in a shorter amount on time. Apparently this is too lofty of a goal for borrowers and homeowners in this day and age. And these greedy lenders who got bailed out, and who are at least partly to blame for the financial meltdown and the massive loss of real estate equity, are more than happy to take their money and run while scoffing at borrowers who are late on their mortgage payments, even following an exploding ARM loan or option arm loan.
So, while the lenders got their way with SB94, and kicked lawyers out of the loss mitigation system, and prevented guys like me from legitimately helping homeowners who needed help navigating the messy, and sometime corrupt loss mitigation system, their bad faith, and failure to deal fairly and honestly in cleaning up the mortgage meltdown has actually kept us in the game fighting to help owners wherever possible, including as we did today, filing a lawsuit to obtain an injunction to stop foreclosure where the foreclosure laws were not followed (in this case in regard to substitution of trustee) and where the lender sees these laws as a mere “technicality” that does not need to be followed where a loan is in default.
Is in not true that we let murderers out of jail for “technicalities”? Yet, a technicality such as a foreclosure law does not need to be followed because the bank is powerful with pockets full of bailout cash, while the homeowner is often broke. Is this really the way things should be? Is this justice?
At any rate, where a homeowner is fighting to do the right thing, and where the lender resists, we are here to help urge the courts to do “that which ought to be done.”
Today, the homeowner won…..tommorrow the battle over the preliminary injunction rages on. We will keep you posted.
KEEP FIGHTING THE GOOD FIGHT PEOPLE. TOUGH TIMES DO NOT LAST, BUT TOUGH PEOPLE DO.
It is music to my ears to learn I am not the only attorney suing Indymac and OneWest bank. These guys are amazing. Indymac goes out of business because it originates loans that cannot be repaid (yet, supposedly this is all the borrowers fault and not theirs). Then, the FDIC comes in like superman to SAVER THE DAY (receivership) and forms “Indymac Federal” (yeah, whatever the heck that means). Then OneWest sees a HUGE OPPORTUNITY to buy all of Indymacs junk loans and enters into a loan sale agreement with the FDIC. You can find the contact on the internet.
Then, OneWest says “we are not liable for any predatory lending……we are just investors who bought the good stuff.” I have a legal pleading (demurer) to show this is their position. All OneWest wants to do is to buy loans for cheap (get title from MERS – this is what the loan sale agreement says OneWest must do), and then start foreclosing on people. Okay, maybe they modify a few loans in the process, let’s be fair. But at the end of the day there is a “Loss-share agreement” with the FDIC that compensates OneWest for their “losses.”
Wow, to be a billionaire investment club in America…..must be nice. To have most of the banking laws on your side…..must be nice. To get the bailout……must be nice. Even though OneWest bank was apparently “born” in March, 2009, my records indicate they even had a share a bailout pie set aside for them. I know, it is hard o believe. Folks, this foreclosure process is a war on lenders. They are not your friends, and honestly, I do not think they care about anything other than racking up massive profits despite the financial crises they should take 3/4 credit in creating.
Maybe I am being cynical, but I have heard too many stories, and seen too many things, including some comical arguments by the lawyers hired by OneWest bank. I am not going to name any names, but there are some real interesting pleadings that come across my desk. At any rate, I could go on. Suffice it to say that I AM ECSTATIC TO LEARN THESE PREDATORY LENDING AND BAILOUT BOZOS ARE BEING EXPOSED FOR WHAT THEY ARE AND GETTING THEIR PANTS SUED OFF. AT THE END OF THE DAY, THIS IS JUSTICE FIGHTING BACK.
We are getting tired of all the nonsense in regard to loan modifications trial plan nonsense (see our website at www.trialplanfraud.com), short sales that don’t happen (yes, HAFA will likely be a flop like all the other programs) only to yield far less money in a private sale, deed-in-lieu of foreclosure that doesn’t happen, MERS nonsense (see our website at www.producethenoteattorney.com), substitution of trustee nonsense, false affidavits, false declarations, callous indifference to foreclosure laws. I wish I could say I was making all this up just to get business……unfortunately as too many of you know, I am telling it like it is.
We have sued major lenders such as IndyFlack, SWells Fargo, OneWest Stank, Aurora Loan Services and others. We will not stop fighting them where valid grounds exist. We have seen too many people crushed and destroyed in this process. We fight for people and call these banks out for their shennanigans. We perform forensic loan audits, send qualified written requests, send debt validation letters, we demand they identify the holder of the loan, we perform TILA audits and assert loan rescission rights, we do everything within our power to force these slug banks to DO SOMETHING FOR THE PEOPLE.
Oour neighborhoods are being destroyed, our values are being lost, we are watching our economy sink while watching their profits rise. What good is bailing out the banks so they can pay their big bonuses to each other (bonuses that are clearly not earned – they should have been forced to file bankruptcy) when the average person on main street has bad credit, suspect employment opportunities, no down payment, etc. What the heck is going on here.
At any rate, yes I am happy to see more foreclosure defense lawyers and predatory lending law firms calling these guys out the same way our firm is calling them out. They must answer and take accountability for the mess they have at least partially created. But if you asked a CEO at any major bank (Wells, Bank of America, Chase, etc.) none of them will take any accountability. Till that day, we keep fighting for every inch in the war on foreclosure.
Steve Vondran can be reached at (877) 276-50874. We appreciate your comments and questions. We can be emailed at steve@vondranlaw.com
We have been getting a good number of calls from California and Arizona homeowners who have option arm (negative amortization) loans, also called “pick-a-pay” (what we call “pick-a-prey”) loans who have not been given loan modifications, or meaningful loan modifications, and who are fed up with their lender/loan servicer, and the broker that put them into the toxic and exploding loan that many now consider to be predatory loan products.
If you have nowhere else to turn and are facing foreclosure (notice of default, notice of sale) and want to see if you may have any litigation options, FILL OUT OUR OPTION ARM LOAN LITIGATION QUESTIONNAIRE BY CLICKING ON THIS LINK: http://www.optionarmlawyer.com/2010/04/filing-a-lawsuit-on-option-arm-loans/.
We will review your case and discuss potential options with you. As we know, the State Attorney Generals of many states filed lawsuits against several lenders for originating these option arm loans. The lenders know this is their worst product, and has lead to many foreclosures. In fact, we consider the loan product itself to be the “hardship.”
Now, there are many different factors involved that will dictate whether or not an option arm loan lawsuit is viable (for example was the loan sold off or is it a portfolio loan? and is the Broker still in business? and were you a savvy real estate investor using the option arm loan as a cash-flow tool or an unsuspecting homeowner duped into the loan by false promises, excessive YSP, and deceptive disclosures, etc.).
Hi folks, if you have been around reading some of our blogs you may know we have another website called http://www.trialplanfraud.com where we discuss some issues relating to HAMP loan modifications, trial plan modifications, breach of contract, etc. One thing we cannot stand as a loss mitigation law firm helping homeowners is when some of the big lenders (who already got their bailout, and who are incentivized further to provide loan modification under HAMP) deliberately mislead people in regard to loan modifications.
Some of the misleading conduct involves:
(1) Pretending someone qualifies for a modification when under the HAMP guidelines they clearly don’t (ex. the homeowner has excessive debts that makes their “back-end” debt ratio such that the homeowner does not qualify for the modification). Why goof around with these people and send them a HAMP “trial plan”?
(2) Giving two or more trial plan modifications (i.e. stringing someone along one “trial plan” after another without actually providing the permanent HAMP modification
(3) Not honoring the HAMP trial plan modification after the homeowner, who qualifies, does everything they are asked to do. This failure to provide the permanent modification is a slap in the face to the homeowner who was lead to believe help was on the way.
(4) Foreclosing on a homeowner when they are in the middle of making their first, second, third trial plan payment, etc. (this is the case of the left hand not knowing what the right hand is doing and/or outright deceptive and unlawful behavior).
These are the types of scenarios we are fighting and situations in which we will write a “trial plan breach of contract” or “trial plan fraud” letter demanding that the lender or loan servicer pony up the loan modification or the homeowner reserves their right to sue for fraud, unfair competition, deception, elder abuse, breach of contract etc.
Click on the link to see a copy of a Wells Fargo letter we received that basically ponied up the promised loan modification after they received our letter. Our Client informed us in regard to our fee for the letter: “best money I ever spent.” This letter in no way guarantees a similar outcome in your case, but it does indicate lenders, at times, can be reasonable if called out on harsh, deceptive, and callous business practices that potentially violate the law.
HOMEOWNER WARNING: STOP TRUSTING THE BANKS – THEY WILL FORECLOSE ON YOU WITHOUT HESITATION, WITHOUT WARNING, AND WITHOUT FOLLOWING THE FORECLOSURE LAWS.
We have been getting a slew of calls from Arizona and California homeowners calling us after their house has been sold at a foreclosure sale. Here are a sample of the kinds of things we are CONSTANTLY hearing:
“Can you help me, they just sold my house without warning, I got no notice of the sale…..?”
“Can I sue my lender, I was in a trial plan modification agreement (on my second or third payment, etc.) and my lender just foreclosed on me. What’s the deal, I thought I was approved by HAMP….?”
“My house was sold but the lender did not follow the foreclosure laws….can you sue those &^!**#* to get my house back?”
“The lender has posted a notice of sale on my door, but I think they are trying to work out a modification with us so I am not going to do anything for the meantime hoping they will give me a modification that allows me to keep my house.”
“Truth in Lending (“TILA Audits”), what’s that? My loan was 2.5 years ago, and it was a refinance transaction but I will not deal with that issue right now, I have a “law center” working on my case, they are in control of everything.”
“I am just going to file for Chapter 7 Bankruptcy, that will save my house from foreclosure right?”
“I just made my final trial plan modification payment so that will stop the foreclosure sale right?”
“the lady on the phone at the lenders office told me to stop making payments and they will work out the loan modification for me, that should do the trick right?”
“my loan modification file has been submitted to a negotiator for review, therefore, I do not have to worry about them foreclosing on me.”
“the loan servicer said they were willing to work with me to save my home, and that after submitting financial information over the phone they said I qualify, that puts me in a good and safe position right?”
This is just a sample of the kinds of things we hear from callers to our law firm. We are a bit surprised of the gullibility and naieviety of some of the people who think the banks are their friends, and their to help them share in the bailout money. This couldn’t be further from the truth. In our experience, yes, there are loan modifications getting done, but NO, everyone does not qualify, and everyone will not be helped by HAMP, HAFA and similar programs.
THE “LENDER LENDER PLEASE DONT MAKE ME TENDER” PROBLEM
Here is the crux of the “having trust and faith in your banks, lenders, and loan servicers” of the problem, if a lender forecloses on your property, whether you were in the middle of HAMP review, HAFA review, etc., and regardless of whether the foreclosure laws in Arizona or California were followed, if your house is foreclosed, the first thing a lender will say when we file a lawsuit is “your client cannot tender the full balance of the loan so therefore you cannot challenge the foreclosure sale process.”
What? Say that again? OK, If your house is sold, and you want to try to set aside the sale challenging a wrongful foreclosure, and if you file a civil lawsuit, the lenders will cite several cases as precedent that you cannot challenge the unlawful acts of a lender, loan servicer, trustee, MERS (whatever the case may be) in an attempt to set aside the foreclosure sale UNLESS YOU CAN ALLEGE THAT YOU ARE READY, WILLING AND ABLE TO TENDER THE FULL BALANCE OF THE MORTGAGE YOU OWE.
Yes, I know that sounds a little strange, unfair, and inequitable. They will argue in their answer, motion for demurrer, motion in opposition to preliminary injunction etc., that you have no right to “ask for equity” (i.e. to quiet title or set aside a trustee sale) unless you “do equity.”
Does this hold up, well folks, it is the law, and judges are supposed to follow the law. Of course, there is at least one challenge, there is a 100 year old rule that says the Courts do not have to require a full tender “where it would be unjust to require such.” So, I suppose there is always hope, but perhaps the same chances of winning a lottery, who knows.
At any rate, the moral of this story is this: THINK CAREFULLY BEFORE YOU TRUST A SINGLE WORD YOUR LENDER OR LOAN SERVICER SAYS. THEM TELLING YOU THAT YOU ARE ELIGIBLE FOR HAMP OR HAFA (SHORT SALES) OR A LOAN MOD, OR THEM GIVING YOU A TRIAL PLAN, ETC., THIS DOES NOT MEAN THEY WILL NOT SECRETLY AND DECEPTIVELY SELL YOUR HOME UNDER A CLOUD OF DECEPTION AND THEN HAVE THEIR LAWYERS TELL THE JUDGE “YOUR HONOR, THEY CANNOT CHALLENGE MY CLIENT’S NONSENSE AND ILLEGAL ACTIVITIES UNDER THE FORECLOSURE LAWS BECAUSE THE BORROWER CANNOT TENDER.”
Just giving you a heads up. The minute you are facing foreclosure (i.e. you get a notice to accelerate or a notice of default, do yourself a favor, seek out the services of a foreclosure attorney. Have your loan reviewed for a TILA violation that may raise an extended three year rescission right, and/or find other predatory lending violations that may be compensible/actionable in a court of law. The lenders and loan servicers fear very little in this process, and they have lawyers working on their side telling them how they can use the law in their favor, avoid compliance with foreclosure laws, remove cases to federal court etc. You need someone on your side to see if you have any legal rights, see if you can rescind your loan, see if you can obtain an injunction to stop foreclosure where the lenders refuse to play by the rules, file bankruptcy where applicable, or pursue a short sale that may save your credit from the harmful effects of foreclosure, etc. In the war on foreclosure, you have to be decidedly proactive, rather than reactive. The house you save may be your own.
Steve Vondran, Esq. is an attorney licensed to practice law in California and Arizona. He is currently assisting homeowners in foreclosure defense cases, bankruptcy chapter 7, predatory lending litigation, TILA audits, Short sales, Deed-in-lieu of foreclosure, injunctions, lis pendens, and deficiency judgment issues.
Well, as we have been saying all along, the lenders (who got their happy meal bailout – BofA got 25 billion dollars – go red, white and blue) have been a bit too chintzy with loan modifications even where it pretends to be committed to applying federal bailout out funds to help homeowners. In Washington state, homeowners have had enough of the runaround. The class action lawsuit filed claims Bank of America is intentionally withholding funds provided under TARP and failing to modify loans. Apparently there are about 1 million loan that qualify for help under BofA, but only about 12,000 permanent modifications have been provided. It will be interesting to see what Bank of America does in regard to the lawsuit. In my experience, I am sure they will give the usual lip service: “we are doing everything possible to help Washington homeowners and this lawsuit has no merit.” That is typical of what you can expect to see.
We are getting more and more calls from people who have decided to give up on the hopes of principal loan balance reduction (we have always told people principal loan balance reductions are like a bigfoot sighting) and instead seek to short sell their property letting the bank deal with the property, especially where the stubborn bank (that got their bailout) refuses to help the homeowner save their home by providing a reasonable and meaningful loan modification.
Now, in the context of shot sales, there are a few things to consider:
(1) Will you be liable for a deficiency judgment (meaning if the lender allows you to sell your home for less than its worth, can the lender come back against you for a deficiency judgment?
We have talked about deficiency judgments in Arizona on one of our other websites: Click here for more general legal information: http://www.arizonadeficiencyjudgment.com/
(2) Are there tax implications involved with the lender forgiving debt owed?
(3) Are you entitled to $1,500 relocation expenses following a short sale under the HAFA (Short Sales Incentives law)?
(5) Can a forensic loan audit and letter to your lender help assist in them accepting a short sale over forcing you into foreclosure? Do you have any predatory lending violations that you can leverage? Is it better to file a lawsuit against your lender?
(6) What other options might you have if the lender refuses to accept your short sale? Options such as filing bankruptcy or pursuing a deed-in-lieu of foreclosure?
These are some of the loss mitigation and foreclosure defense questions/issues we deal with on a daily basis. If you are facing any of the above legal issues, you might want to think about retaining a real estate and foreclosure lawyer to protect your interests. The banks, lenders, and loan servicers have lawyers on their side and they are probably hoping you don’t take this step on your end. In California, the lenders backed SB94, a law that prevents any lawyer or broker from accepting any advance fees for loan modifications which has literally allowed lenders to force California homeowners to be unrepresented in the loan modification context. This is the way they wanted it done, and the California legislature went along with it. In Arizona, you may still hire a lawyer to assist you, at least for the time being.
For more information about hiring a Phoenix Short Sale Lawyer, please visit our website at www.PhoenixShortSaleLawyer.com
KEYWORDS: PHOENIX SHORT SALE LAWYER / SCOTTSDALE SHORT SALE LAWYER / ARIZONA SHORT SALE LAWYER / SHORT SALE ATTORNEY / PHOENIX SHORT SALE ATTORNEY / SCOTTSDALE SHORT SALE ATTORNEY / ARIZONA SHORT SALE ATTORNEY / ARIZONA FORECLOSURE LAWYER / PHOENIX REAL ESTATE LAWYER / SCOTTSDALE FORECLOSURE ATTORNEY / PHOENIX BANKRUPTCY LAWYER / PHOENIX BK LAWYER / REAL ESTATE LOSS MITIGATION / DEED-IN-LIEU OF FORECLOSURE / ARIZONA INJUNCTION / FILING LIS PENDENS / PHOENIX LOAN MODIFICATION / SCOTTSDALE LOAN MODIFICATION / ARIZONA LOAN MODIFICATION / TILA RESCISSION / RESPA QUALIFIED WRITTEN REQUEST
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FORECLOSURE ISSUES: CAN A LENDER PURSUE A DEFICIENCY JUDGMENT IN ARIZONA?
GENERAL LEGAL PRINCIPLES BY STEVE VONDRAN ATTORNEY. Mr. Vondran is licensed to practice law in California and Arizona and maintains an office in Newport Beach, California and Phoenix, Arizona. He currently practices in the area of Real Estate, Foreclosure Defense, and Bankruptcy. He can be reached at (877) 276-5084.
The following is general legal information only and is not to be relied upon as legal advice or a substitution for legal advice. As law frequently change, and as new cases interpret the law, the following may be inaccurate, out-of-date or missing law pertinent to you case. Therefore, do not rely on the following and seek the assistance of a qualified real estate and foreclosure attorney to assist you in your case. Where tax issues are involved, you should also seek the advice of a tax attorney or CPA.
WHAT IS A “DEFICIENCY JUDGMENT” IN ARIZONA?
Let’s say you have a first mortgage for $500,000 and your house is worth $350,000. If the lender/loan servicer refuses to provide a meaningful loan modification, or any modification for that matter, and if they will not permit a short sale (yes, lenders and loan servicers can and do frequently deny both), then your house gets scheduled for a foreclosure sale.
Most properties in California and Arizona are sold via a Private Trustee Sale (partially so they can get away with whatever they want), but let’s say the private sale only generates a bidder who bids $350,000 and let’s say this represents fair market value and the lender decides to sell the property for this amount.
Following the sale, the lender will recoup its $350,000, but will obviously be short $150,000 from the $500,000 it was originally owed. For most lenders, they want the homeowner to pay the difference (the $150,000), and if the lender persists they can seek to file a lawsuit seeking a “deficiency judgment” against you, as homeowner.
Obviously the only thing worse than being foreclosed on is having the lender try to come back after you for the $150,000 they feel they are owed pursuant to the terms of the note you signed.
As a homeowner, this can keep you up at night wondering “can they come back at me?” This is a question we get all the time as real estate foreclosure defense and loan modification counsel.
The routine answer we give is “the lenders can try anything they want and don’t be surprised to see them pull anything.” Now, we also tell them that in Arizona, if you have a “purchase money” loan there is a good chance the lender can get NOTHING from you following a foreclosure sale that does not net the full value of the outstanding loan balance owed. That is good news for you. But then, the big question becomes, what is a purchase money loan? And what if I have a first and second mortgage? Let’s take a look at these issues.
WHAT TYPES OF ARZIONA PROPERTY ARE PROTECTED FROM DEFICIENCY JUDGMENTS? A REVIEW OF A FEW OF THE ARIZONA CASE LAW DEALING WITH THE TOPIC OF DEFICIENCY JUDGMENT.
As we discussed above, purchase money loans in Arizona are protected against deficiency judgments. But does this cover residential AND investment properties or one or the other?
Arizona protects people who purchase property. If you had to worry about losing both your down payment, and facing a deficiency judgment if the loan goes bad, many potential Arizona home buyers may choose to rent instead. This would prohibit new developments.
Under the Arizona Revised Statutes (A.R.S. 33-729(A)), when a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price of a residential property TWO AND ONE HALF ACRES OR LESS that is limited to and utilized for either a SINGLE ONE FAMILY OR SINGLE TWO FAMILY RESIDENCE the mortgagee cannot collect a deficiency judgment out of any of the other assets of the homeowner (the lien of the property shall not extend to any other property of the judgment debtor).
Here is what this section says:
33-729. Purchase money mortgage; limitation on liability
A. Except as provided in subsection B, if a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.
B. The balance due on a mortgage foreclosure judgment after sale of the mortgaged property shall constitute a lien against other property of the judgment debtor, general execution may be issued thereon, and the judgment may be otherwise satisfied out of other property of the judgment debtor, if the court determines, after sale upon special execution and upon written application and such notice to the judgment debtor as the court may require, that the sale price was less than the amount of the judgment because of diminution in the value of such real property while such property was in the ownership, possession, or control of the judgment debtor because of voluntary waste committed or permitted by the judgment debtor, not to exceed the amount of diminution in value as determined by such court.
Note: this section says only the “judgment debtor” is not liable, but it does not mention any co-guarantors of the loan. Therefore, it is quite likely a guarantor on the loan could still be liable for a deficiency judgment.
What about investment properties? The statute above says there is no deficiency judgments if the property is a “single one family” or “single two family” but it says nothing about whether this property must be owner-occupied. In the case of Northern Arizona Properties v. Pinetop Properties Group, 151 Ariz. 9, P.2d 501 (App. 1986) the court held that an “investment condominium” was protected against a default judgment even though the unit was not utilized as a dwelling by borrower. The Court held that the investment condo unit was nevertheless a “shelter where people live.” This case is good for owners of residential investment property in Arizona that is deemed purchase money as there would be no deficiency judgment under these circumstances.
What about a “Blanket” Deed of Trust that secures the repayment of six individual condo units and their 6 separate promissory notes? The Court addressed this situation in PNL Credit v. Southwest Pacfiic Investments, Inc. 179 Ariz. 259, 877 P.2d 832 (App. 1994). In this case, the lender held ONE (1) blanket deed of trust over 6 individual condo units. The owner wanted to be deficiency judgment free and argued that the Arizona deficiency judgment statute protected him from personal liability for the deficiency balance. The Court disagreed saying that the plain meaning of the statute was to protect “single one family” and “single two family” dwellings, and that in this case, the owner was trying to protect “multiple single family dwellings” (which was not protected given the plain meaning of the statute. Had their been a deed of trust for each of the individual condo units, each would have been protected, but there was only one blanket deed of trust covering all 6 properties and this did not qualify for deficiency judgment protection.
Here is some language from the case for your reading enjoyment:
Applicability of the Arizona Anti-Deficiency Statute:
PNL argues that the trust property encumbered by its deed of trust is not protected under the anti-deficiency statute because it consists of four condominium units and is thus not limited to a single one-family or a single two-family dwelling. We agree. That statute reads in relevant part:
“If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.”
PNL’s loan to SW Pacific’s predecessor was secured by a single blanket deed of trust originally encumbering six separate condominium units. At the time of the trustee’s sale, four units remained encumbered by the deed of trust. Although the loan was evidenced by multiple promissory notes, A.R.S. section 33-814(G) focuses on the nature of the “trust property,” not the number of underlying obligations. Courts generally must follow a statute’s language when that language is plain and unambiguous. Mid Kansas, 167 Ariz. at 128, 804 P.2d at 1316.Thus, the anti-deficiency statute protects “trust property” that is “limited to and utilized” as “ single one-family or single two-family dwellings.”
In contrast to this case, in Mid Kansas the lender sought to waive its security and sue on four separate construction loans, each secured by four separate deeds of trust, and each encumbering a single substantially completed home. 167 Ariz. at 124-25, 804 P.2d at 1312-13. The lender had previously conducted a trustee’s sale on a second-position blanket deed of trust on the four properties. The borrower in Mid Kansas argued that the anti-deficiency statute prevented the lender from suing on the first-position notes after having non-judicially foreclosed the second-position blanket deed of trust. The supreme court held that the anti-deficiency statute did not apply because the uncompleted, unoccupied homes did not constitute “dwellings.” Because the court concluded that the borrower was not protected by the anti-deficiency statute, the court did not consider the issue of whether trust property consisting of multiple single-family homes falls within the protection of the anti-deficiency statute. In the court of appeals’ Mid Kansas opinion, however, this court did reject the lender’s argument that the four lots combined were not “trust property of two and one-half acres or less,” stating that, if the four lots had been owned by four individual homeowners as opposed to the one developer, this court would construe the anti-deficiency statute broadly enough to protect the homeowners from deficiency judgments. 163 Ariz. at 239, 787 P.2d at 138.
The Orians claim that there were in effect four separate but concurrent trustee’s sales. We do not agree. There was but one deed of trust and, consequently, one trustee’s sale. The Orians also claim that the trial court made specific findings that the four condominium units involved were four single family dwelling units. However, PNL does not challenge the finding that the condominium units constitute “dwellings,” which is what the trial court focused on. As PNL correctly argues, the anti-deficiency statute requires the trust property to not only be utilized as a dwelling, but also be limited to a single one-family or a single two-family dwelling. The trust property here consisted of four single-family condominium units. Interpreting the statute to protect trust property consisting of multiple single-family dwellingswould violate the language of the statute.
The Orians further argue that PNL is attempting to exclude commercial developers from the protection of the anti-deficiency statute. The supreme court in Mid Kansas held that the anti-deficiency statute’s protection extends to commercial owners of qualifying residential property. 167 Ariz. at 128, 804 P.2d at 1316. PNL’s argument correctly focuses on the type of property protected, not the type of borrower protected. The trust property here simply does not qualify as protected property.
What about mortgaging one home (a borrowers primary residence) to purchase another (second home in Oregon)? Many people have purchased second homes in the housing boom, especially given the availability of stated income loans, ARM loans, option arm loans with teaser rates, etc.. The case of Cely v. Deconcini, McDonald, Brammer, Yetwin, and Lacy, P.C., 166 Ariz. 500, 803 P.2d 911 (App. 1997) answered this question holding that the borrower who used their primary residence as collateral for a second home was not protected by the Arizona anti-deficiency statute. Here are a few golden nuggets from that case:
“In Baker v. Gardner, our supreme court held that the holder of a note and security device may not waive the security and sue on the note to hold the maker personally liable for the unpaid balance when the security falls within the limited class of purchase money mortgages and deeds of trust described in Arizona’s anti-deficiency statutes. We hold in this case that when one home is mortgaged to secure the purchase of a second home, the mortgage is not a purchase money security interest and the mortgage anti-deficiency statute does not apply.”
“Arizona’s mortgage anti-deficiency statute, A.R.S. § 33-729(A), restricts the remedy upon default of creditors with purchase money mortgages. The statute provides that a creditor may not foreclose on a purchase money mortgage and then pursue the debtor for a deficiency. Further, as the Arizona Supreme Court held in Baker v. Gardner, the creditor may not waive the mortgage altogether and sue the debtor personally on the note. 160 Ariz. at 104, 770 P.2d at 772.
A.R.S. § 33-729(A) provides:
Purchase money mortgage; limitation on liability:
If a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.”
THE GROPP MORTGAGE WAS NOT ORIGINALLY A PURCHASE MONEY MORTGAGE
Our supreme court has relied on the similarity between Arizona’s anti-deficiency statutes and those in California to interpret our statutes. Baker v. Gardner, 160 Ariz. at 102, 770 P.2d at 770. California case law indicates that in the standard purchase money transaction, the seller retains an interest in the land sold to secure payment of part of the purchase price. Roseleaf Corp. v. Chierighino, 59 Cal.2d 35, 41, 378 P.2d 97, 100 (1963). California’s anti-deficiency statute, Cal.Civ.Proc.Code § 580b (West 1976), provides in pertinent part as follows:
No deficiency judgment shall lie in any event after any sale of real property for failure of the purchaser to complete his contract of sale, or under a deed of trust or mortgage, given to the vendor to secure payment of the balance of the purchase price of real property….
Gropp did not retain an interest in the Oregon home to secure the Celys’ note; he took an interest in the Tucson home, an asset unrelated to the sale. Thus, if Arizona law should follow California in this respect, the mortgage was not a purchase money interest when the Celys gave it to Gropp.
The defendants argue, however, that the California cases discussed in Baker v. Gardner are inapposite because the origin and purposes of the California statute differ from the Arizona anti-deficiency statute. We disagree. The Baker court stated that it read the Arizona and California statutes as similar in purpose. 160 Ariz. at 102-03, 770 P.2d at 771. The California Supreme Court has explained the application and purposes of that state’s anti-deficiency statute as follows:
Section 580b was apparently drafted in contemplation of the standard purchase money mortgage transaction, in which the vendor of real property retains an interest in the land sold to secure payment of part of the purchase price. Variations on the standard are subject to section 580b only if they come within the purpose of that section.
Section 580b places the risk of inadequate security on the purchase money mortgagee. A vendor is thus discouraged from overvaluing the security. Precarious land promotion schemes are discouraged, for the security value of the land gives purchasers a clue as to its true market value. If inadequacy of the security results, not from overvaluing, but from a decline in property values during a general or local depression, section 580b prevents the aggravation of the downturn that would result if defaulting purchasers were burdened with large personal liability. Section 580b thus serves as a stabilizing factor in land sales. Roseleaf Corp. v. Chierighino, 59 Cal.2d at 41-42, 378 P.2d at 100-01 (citations omitted) (emphasis added).
In Roseleaf, buyers purchased a hotel from the plaintiff and financed the transaction with four notes, three of which were secured by a second deed of trust on property other than the hotel. 59 Cal.2d at 38, 378 P.2d at 98. The first note was secured by a purchase money trust deed and was not involved in the case. Id. The court, analyzing the purposes of California’s anti-deficiency statutes, determined that the second trust deed was not a purchase money interest and that the plaintiff could sue the buyers personally on all three notes. The court stated:
To apply section 580b here would mean that the [buyers] would acquire the hotel at less than the agreed price. Furthermore, if there is any merit in the theory that “the vendor knows the value of his security and assumes the risk of its inadequacy,” that theory does not apply here. There is no reason to assume that [seller] had any greater knowledge of the value of the [buyers'] land than did the [buyers].
59 Cal.2d at 43, 378 P.2d at 101.
The purposes served by Arizona’s mortgage anti-deficiency statute are identical to those served by California’s statute and are equally inapplicable to the transaction between Gropp and the Celys. When the Celys mortgaged their Tucson home, they were in a better position to know its value than Gropp. The anti-deficiency statute could not ensure that Gropp priced the Oregon home appropriately because the mortgage was not taken on that home. Nor did the Celys risk losing their residential purchase in Oregon through foreclosure while remaining liable for its purchase price. See Roseleaf, 59 Cal.2d at 41-43, 378 P.2d at 101. The Tucson home served in the Oregon transaction as non-purchase money collateral-no different conceptually than an art work or an heirloom or the family jewels. We conclude that the anti-deficiency statutes do not apply.
We conclude on the basis of these authorities that a purchase money mortgage is one that encumbers the property being sold. We accordingly conclude that the Celys did not give Gropp a purchase money interest when they bought Gropp’s Oregon home.”
What about a consolidated loan that originally consisted of $240,000 in purchase money funds (but later also adding $75,000 in non-purchase money funds) both of which were later the subject of a loan modification agreement? Can this loan be considered protected purchase money not subject to a deficiency judgment? The case of Bank One (Arizona) v. Beauvais, 188 Ariz. 245, 934 P.2d 809 (App. 1997) addressed this question. In this case the Court held that since most of the funds were purchase money funds (the $75,000 was for the purpose of exercising stock options) that the consolidated loan would be treated as purchase money and protected from a deficiency judgment. The property was a qualifying property as discussed above. The Court held that the loan workout was NOT A NEW LOAN as the bank argued, but that the workout note retained its characteristic as a purchase money loan. You want a fresh snippet? I though you would never ask, here you go:
“In summary, we hold that regardless of whether the workout note was an extension, renewal, or refinancing of the 1989 consolidated loan, it retained its character as a purchase-money note. See Lucky Invs., Inc. v. Adams, 183 Cal.App.2d 462, 7 Cal. Rptr. 57 (1960). (Cancellation and replacement with new notes, secured by the same property, transfers purchase-money status to new notes.). Accordingly, the Bank is prohibited from waiving the security under the deed of trust and suing on the note – Per Baker v. Gardner. We affirm the trial court’s dismissal of the Bank’s complaint.”
What about the Arizona borrower who has both a first and second mortgage? It appears if both the first and second mortgage were taken out at the same time, and the money was borrowed to secure all or part of the purchase price of a single one family, or single two family dwelling on two and a half acres or less, that both the first and second mortgage would be protected from a deficiency judgment. Let’s take a look at the cases.
Southwest Sav. and Loan Assn. v. Ludi, 122 Ariz. 226, 594 P.2d (1979). In this case the lender held a security interest on a purchase money first mortgage and a non-purchase money second mortgage. The borrower Ludi defaulted on both. The lender foreclosed on the purchase money first mortgage, and tried to waive the security and sue on the note (like a breach of contract action) on the second mortgage. In this case, the Arizona Supreme Court allowed this action holding that there was nothing wrong with suing on the non-purchase money second (and waiving the security). The Court likened this to an action on the second to enforce the debt, which was permitted. The key here is the 2nd mortgage was NOT PURCHASE MONEY!! The court held that the lender was not prohibited from pursuing for foreclosure on one note and suing on the debt on the second mortgage all in the same action.(2) Wells Fargo Credit Corp. v. Tolliver, 183 Ariz. 343, 903 P.2d 1101 (App. 1995). Wells Fargo was a junior lien holder that was permitted to sue on the note. The property in question was not protected by the Arizona anti-deficiency statutes. The Court held:
“The statute (Arizona anti-deficiency statute) does not apply because Wells Fargo’s action is on the note, not one for a deficiency. This Court has previously held that a junior lienholder who did not institute trustee’s sale proceedings may waive its security and sue directly on its note, provided that it is not precluded by the anti-deficiency statutes. Again, the anti-deficiency statutes protect purchase money mortgages. This holding is consistent with Baker v. Gardner.
(3) Nydam v. Crawford, 181 Ariz. 101, 887 P.2d 631 (App. 1994) – This case involved a second mortgagee (junior lien holder) trying to sue on the note following a foreclosure sale by the first mortgage holder. The Court declined to allow the sue on the note theory by the second mortgage lender because the second mortgage was also purchase money and protected in Arizona against a deficiency judgment or action on the note. Here the court held:
“Baker is nearly, but not quite, on all fours with this case. In Baker, defendants’ purchase was financed in part by a loan from ICA Mortgage Corporation (“ICA”), and the sellers took a note for the remainder. ICA had a first-position deed of trust, with the sellers’ deed of trust in second position. When the defendants defaulted on both notes, ICA noticed a trustee’s sale. Before the trustee’s sale took place, the second-position deed-holders filed suit on their promissory note. The trial court ruled the action prohibited by the anti-deficiency statute (then numbered A.R.S. § 33-814(F) and (E)), and our supreme court affirmed. The court concluded that the Legislature intended to take away from creditors the option of suing upon the note in [the specified type of] transaction. This construction of the statute not only prevents its evasion, but also gives effect to the Legislature’s intent. Baker, 160 Ariz. at 104, 770 P.2d at 772 (quoting Ross Realty Co. v. First Citizens Bank & Trust, 296 N.C. 366, 250 S.E.2d 271, 275 (1979)).”
“Like the Bakers, plaintiff is a second-position deed-holder, attempting to collect on her note in the face of the first-position deedholder’s trustee’s sale. Plaintiff attempts to distinguish Baker, however, because she filed her lawsuit after the trustee’s sale, whereas the Bakers sued the Gardners before the trustee’s sale. Plaintiff argues that, unlike the Bakers, she did not commit the forbidden act of waiving her security and suing on her note; instead, because the trustee’s sale extinguished her security, she had no security to waive. She adds that she did not seek a deficiency judgment because, in the absence of security, there could be no deficiency.”
“Plaintiff’s argument is defeated by the plain wording of the anti-deficiency statute. Although that statute covers cases under A.R.S. § 33-722 in which one has elected to waive security and sue directly on the debt, it is not restricted to such cases. Nor, as Baker illustrates, is it restricted to cases in which the person seeking the deficiency also conducted the trustee’s sale. Section 33-814(G) provides more comprehensively that no deficiency judgment may be obtained if qualifying “trust property … is sold pursuant to the trustee’s power of sale.” Because this qualifying property was sold pursuant to the trustee’s power of sale, it falls within the express wording of the statute. Section 33-722 provides: “If separate actions are brought on the debt and to foreclose the mortgage given to secure it, the plaintiff shall elect which to prosecute and the other shall be dismissed.”
“Plaintiff’s argument is also defeated by the reasoning of Baker. Our supreme court there defined the purpose of the anti-deficiency statute as protecting homeowners from “the financial disaster of losing their homes to foreclosure plus all their other nonexempt property on execution of a judgment for the balance of the purchase price.” Baker, 160 Ariz. at 101, 770 P.2d at 769. The Baker court expressly contemplated the tandem impact of a first-position deed-holder’s trustee’s sale followed by a second-position deed-holder’s suit on a second note:
“The Gardners presumably lost whatever equity they had in the house on the non-judicial sale noticed by ICA under the first trust deed. Under the court of appeals’ opinion, the Gardners would have faced sale of their other assets on execution of the judgment on the note secured by the Bakers’ second deed of trust. In our view, the legislature would not have protected homeowners from deficiency judgments but still permitted the holder of a mortgage or deed of trust to obtain essentially the same result by waiving the security and bringing action on the note. This statutory construction seems inconsistent with the patent legislative objective.
There are many other scenarios that can be analyzed under the Arizona Anti-Deficiency Statutes. I do not have time to review them all. Each foreclosure case and attempt to collect on the debt is fact-specific, but the foregoing should give you a flavor of Arizona law.
CONCLUSION
If you are an Arizona homeowner facing foreclosure, you need to think about whether your first mortgage and second mortgage (if you have one) will be treated as “purchase money” loans and protected from deficiency judgments under Baker v. Gardner.If your loans are purchase money, at least in my opinion, you are in a better position to negotiate a loan modification, deed-in-lieu-of-foreclosure or short sale. Why? Because the lender(s) can take your lousy upside-down property and do what they want with it, but they cannot come after you for the amount of the loan they do not recover following a foreclosure sale. This is one of the rare cases in foreclosure defense when something may be considered good for you and bad for them. Keep in mind, Baker v. Gardner does not prevent a non-purchase money junior lien holder from “waiving the security” and “suing you on the note” where the Arizona anti-deficiency statute does not apply. Another issue that arises often in Arizona is whether construction loans are protected. If you are unsure of your legal standing or the liability you may face, contact our office to discuss your situation. The price you pay for a consultation and some legal research consutling the recent case law could make a huge difference to your pocket-book and future plans.
Understanding the Short Sale Process and Deficiency Judgments – A General Overview
By Real Estate Attorney Steve Vondran. Our firm currently handles Real Estate, Foreclosure, and Chapter 7 Bankruptcy cases in California and Greater Phoenix Arizona. We can be reached at (877) 276-5084 or steve@vondranlaw.com
Sign a listing agreement between the real estate agent and the homeowner. Typically the listing agreement will be for 6 months, and will list the commission as 6%. A 60 day “broker protection period” is also a good idea to protect the short-sales agent.
The Property then needs to be listed in the local MLS. Once the listing agreement is signed, the property pictures get taken and the listing goes in the local MLS. It should be clearly disclosed that the sale is a short sale is subject to lender / lien-holder approval. The 6% commission might be stated to be split 50/50 – between buyers agent and seller’s agent – if the short sale deal is approved. In some circumstances, it may be possible to act as a “dual agent” in which case it might be wise to execute a dual agency amendment to escrow.
SHORT SALE LISTING TIP: It is probably a good idea to list the property 5-10% below current “comps” (comparative sales within last 6 months) in order to try to generate as many qualified offers as possible. Because there is usually a “sale date” (foreclosure sale date) pending when a short sale is being pursued, it is wise to have as many offers as possible that the lender/lien holders can consider if the first deal falls through. The lenders will often set a foreclosure sale date just a few days past the scheduled date for close of escrow after an offer is accepted, and if the accepted deal falls through, your Client will be staring a foreclosure sale date right in the face, and in that event you will want to be able to submit other qualified offers immediately, in the hopes of further extending the sale date.
Client needs to start thinking about getting financials together, preparing a hardship letter /affidavit and seeing if there are any legal financial maneuvers that may make the loss mitigation package look more attractive to the lender and/or may help facilitate the short sale. For example, this may be a good time to convert Trust Fund money or other cash assets into an IRA account, 401K, etc., (as these would not normally have to be disclosed on a lenders short sale or loss mitigation package). Most lenders will make you disclose all of our bank account, savings, money market, CD’s, stocks and bonds, etc., under penalty of perjury. Some items such as alimony, child support, separation maintenance, value of life insurance, retirement plans, etc., DO NOT NEED TO BE DISCLOSED. If you disclose 100,000k in assets, the lender may not be so willing to do a short sale (especially a second mortgage holder who may be facing the prospects of getting very little money for their lien), and instead, they may want you to sign a deficiency agreement as a condition to permitting a short sale. At this stage (before an offer comes in) it is a good time to examine the lenders loss mitigation application and see exactly what type of financial information they will be requiring you to disclose as part of the short sales process. Obtain all of the requested financial documentation, prepare the hardship letter/affidavit, and be ready to submit these materials when you receive an offer.
Once your short sales agent obtains a short-sale offer, you will need to prepare your short sale / loss mitigation package to the bank. Basically, you will want to include, at a minimum, the following items:
Copy of the Listing Agreement between homeowner and short sale agent disclosing the commission agreement;
Homeowner financials, hardship letter, and loss mitigation package required by the lender/lien holder;
Copy of the offer (purchase and sale agreement), typical is to put that the escrow should close 45 days after acceptance by the bank. Also include the short sale addendum;
Copy of Estimated HUD;
Broker Cover letter / Opinion of Value / Comps etc.
If Client has a refinance transaction within three years, you may also want to include a Truth in Lending (TILA) audit summary if a “material” truth in lending violation was found. This especially if the borrower has some ability to “tender” (see a foreclosure lawyer to discuss this point). If your Client has an ability to rescind their mortgage under TILA, this may provide additional motivation for the lender to accept the loan modification over pursuing a foreclosure sale.
There may be other documents to submit depending on the borrowers situation
SHORT SALE TIP: Make this submission as neat, complete, and comprehensive as possible. Time is of the essence and you do not want to have to spend all your time re-submitting missing or incomplete documents.
Once the lender receives your short sale submission package, usually a processor and/or negotiator will be assigned to the file. Your short sales agent will work with the representatives of the lender to get them what they need, and generally to try to get the deal accepted.
If the lender is inclined to accept the deal, the lender must accept in WRITING and the escrow period is then opened (as we mentioned, usually a 45 day escrow will allow time for inspections, appraisal, title search, seller disclosures, etc.).
At this point, it is a typical real estate transaction for the most part in that the financing must be arranged, inspections, appraisal, etc. and DONT FORGET a check with the Homeowner’s Association (“HOA”) should be made to ascertain whether the HOA is solvent or in litigation (if they are not solvent due to homeowners not paying their dues, or facing litigation over some other legal issue, then it may be impossible for the proposed short sale purchaser to obtain financing – mandating that only a full cash buyer will be able to close a short sale on the property). This is an important factor to look into at the early stages of a short sale. If you need an all cash buyer you might as well figure this out as soon as possible.
If the offer is accepted in writing, escrow opened, no HOA issues, and all other parts of the sales process are performed, and all lien holders agree to the short sale then the deal will close and commissions will be paid per the listing agreement and any dual agency addendums.
NOTE: Where agreeing to a short sale will result in a lender or lien holder in receiving less than they are owed (for example you owe $500,000 to Bank of America and the short sale offer is only for $250,000) Bank of America may try to get you to sign a deficiency agreement whereby you agree to pay them the $250,000 deficiency amount that you owed them under the terms of your note. This is where most people will want to consult with both a real estate lawyer to consult on the law of deficiency judgments, and a tax advisor or CPA to address issues of loan debt forgiveness being treated as income (thus creating a taxable event). These are very serious and important issues that should be reviewed in every short sale setting.
NOTE: What some short sales agents might do is to agree to contribute a portion of their commission for the short sale to pay a portion of a borrowers agreed deficiency if such is required and the homeowner agrees to sign such. This should be clearly disclosed in writing on the HUD closing statement.
As an example, in Arizona, if you have a “purchase money mortgage,” (topic of another blog posting) it is quite possible that you are NOT LIABLE FOR ANY DEFICIENCY LOAN BALANCE AND THE LENDER COULD NEVER COLLECT SUCH EVEN IF IT WANTED TO. In these circumstances, the homeowner should think carefully before signing any agreement to pay any portion of an alleged deficiency balance. Again, you should consider contacting a real estate or foreclosure lawyer to discuss this issue, and a separate advisor to discuss any tax ramifications of a short sale. PROTECT YOURSELVES – THE LENDERS ARE USING LAWYERS YOU MIGHT BE WELL ADVISED TO GET ONE FOR YOURSELF.
Another question we get quite frequently is what If I have two mortgages? Both a first mortgage and a second mortgage. For example, two loans with EMC / Chase Mortgage? In these cases the second lien holder normally wants to get cashed-out of its lien, and in many short sales the first mortgage will see if they can pay the holder of the second mortgage a certain amount of money (ex. $5,000) to release their lien and allow the short sale to proceed. Again, the second lien holder is concerned with getting something from the borrower for the second mortgage note that was signed. In these cases, depending on the assets and future income potential of the applicant, the second mortgage holder may want a deficiency agreement signed in order to proceed with the short sale and release its lien. This is again a good time to see a foreclosure or short sale lawyer.
Finally, it may be good to know whether your loan has any potential grounds for filing a lawsuit. This is where the forensic loan audit by a qualified real estate lawyer may help you in your short sale negotiation. If a lender was the original lender of your loan, and held the loan in its portfolio, there is a possible chance that explaining the lenders potential liability to them following an audit may compel them to accept a short sale they may not otherwise be interested in accepting. The situation becomes a bit more difficult where you are dealing with securitized loans and lenders claiming to be holders in due course. But again, these issues may be worth looking at to try to ensure your short sale is accepted. As a short sale will normally look better on your credit report than a foreclosure, there is incentive to look into these issues.
NOTE REGARDING: Home Affordable Foreclosure Alternatives Program (HAFA): make sure to check out our Blog on HAFA to see some of the recently enacted rules designed to make short sales more attractive to lenders and loan servicers. The process is different than that explained above. You can see the HAFA process, timelines, and forms at this blog post:
KEYWORDS: PHOENIX SHORT SALE / SCOTTSDALE SHORT SALE / ARIZONA SHORT SALE / GOODYEAR SHORT SALE / BUCKEYE SHORT SALE / FOUNTAIN HILLS SHORT SALE / PEORIA SHORT SALE / SHORT SALE LAWYER / DEFICIENCY JUDGMENT / HAFA SHORT SALE PROGRAM / PURCHASE MONEY LOANS / PHOENIX FORECLOSURE LAWYER / SCOTTSDALE LOAN MODIFICATION / LOSS MITIGATION / DEED-IN-LIEU OF FORECLOSURE.
NOTE: WE CONSIDER TAKING SOME CASES ON A CONTINGENCY FEE BASIS. SEE OUR PROFILE AT THE WWW.CONTINGENCYCASE.COM WEBSITE WHICH IS A WEBSITE DIRECTORY FOR CONTINGENCY CASE LAWYERS ACROSS THE UNITED STATES.
The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case, short sale, or loan modification case you should seek out the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. The Law Offices of Steven C. Vondran, P.C. is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).
FORECLOSURE DEFENSE BASICS: UNDERSTANDING THE HOME AFFORDABLE FORECLOSURE ALTERNATIVES PROGRAM (HAFA), SHORT SALES, DEED IN LIEU OF FORECLOSURE AND DEFICIENCY JUDGMENTS
So many homeowners are fighting for reasonable loan modifications that will save their homes from foreclosure. Other people are seeking refuge in a bankruptcy Court (Chapter 13 Bankruptcy, and Chapter 7 Bankruptcy). Still others are seeking a Deed-lieu-of-foreclosure strategy, while other homeowners who are completely upside down on their properties are either walking away, or seeking to short sale their property. This is the current state of affairs in the United States, and banks (who have been generously bailed out) are picking and choosing who gets what. It seems like if you want the bank to perform any loss mitigation for Arizona of California homeowners, you have to basically incentivize them to do something (e. HAMP – Making Home Affordable).
So now comes along yet another incentive program that may help some homeowners obtain short sale relief and deed-in-lieu-of-foreclosure relief (and of course stuff more cash into the pockets of the bankers and loan servicers). This new loss mitigation program is called HAFA – Home Affordable Foreclosure Alternatives Program. Pretty cool name! HAFA supplements HAMP. Servicers implementing HAMP must also comply with the HAFA directives and consider people for short sales and deed in lieu of foreclosure.
What is a short sale? A short sale is a transaction whereby a lender agrees to accept less as a payoff than is owed by the homeowner/borrower by allowing the property securing the debt to be sold for less than the lender is owed. In some cases the lender will forgive the outstanding debt owed and in other cases the lender may want an agreement from the borrower to pay the deficient loan balance.
What is a deed-in-lieu? This is basically where a homeowner/borrower hands over the deed to the property (with marketable title) to the lender who agrees to accept the deed, thereby eliminating the need to pursue a foreclosure sale. Sometimes a lender will require short sale efforts before they would accept the deed in lieu of foreclosure.
Why would a lender agree to a short sale or deed in lieu of foreclosure? It costs less for a lender to do a short sale or accept a deed in lieu than it does to pursue a foreclosure. So where it makes financial sense, the lenders will entertain these loss mitigation measures.
Ok, so let’s take a look at the major points under HAFA:
(1) Program is for HAMP-eligible borrowers who were (a) nevertheless denied under HAMP, (b) qualified but were not given a trial plan, (c) could not make 2 or more trial plan payments, or (d) completed trial plan but no permanent modification was given. To see what types of borrowers qualify for HAMP see this link: http://www.treas.gov/press/releases/reports/guidelines_summary.pdf(generally must be borrowers principle residence, first mortgage loan must not exceed 729,500, and payment must be in excess of 31% of borrowers gross monthly income).
(2) Program takes effect April 5, 2010 and “sunsets” December 31, 2012.
(3) The hardship letter and financials on file with the lender / loan servicer can be used for the short sale or deed-in-lieu. (Goal is to make easy for those denied under HAMP to be reviewed for the short sale or deed in lieu).
(4) HAFA allows borrowers to receive pre-approved terms (ex. minimum acceptable net proceeds) before listing their property for sale.
(5) All short sales must be at “arms length” (meaning, you cannot sell the property to any relatives or other persons with a close personal or business relationship). The buys of the property are bound to not re-convey the property – ex. back to the borrower – within 90 days.
(6) HAFA prohibits loan servicers from requiring a commission reduction in the agreed real estate listing agreement between the seller and agent (up to 6% is protected). However, Servicers may use short sale assistants on their end that must be paid a specified portion of the commission.
(7) Requires borrowers to be fully released from facing deficiency judgment liability judgments on the first mortgage (and on the second mortgage as well if the junior lien holder receives any incentives under HAFA). This means they cannot require a deficiency promissory note be signed, seek a deficiency judgment in a court of law, or demand any other cash contribution from the homeowner seeking the short sale.
(9) HAFA requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy consistent with investor guidelines. This means the servicer can have its own internal policies for implementing HAFA which policy can take into account local markets and the severity of financial loss, timing of pending foreclosure actions, etc. Yes, the discretion on all loss mitigation efforts is always left to the discretion of the servicers. Good for them, potentially bad for homeowners.
Other factors that may be taken into account in dealing with whether the homeowner will be permitted to seek a short sale or deed in lieu of foreclosure are (i) Expected recovery if foreclosure is pursued; (ii) current condition of title / encumbrances, (iii) borrowers financials submitted under HAMP, (iv.) property valuations, and (v.) effect of short sale/deed in lieu and perhaps (vi) predatory lending litigation and truth in lending (TILA) rescission risks.
(10) HAFA permits a 90-day timeline that gives homeowners the ability to sell their homes in a short sale without risk of foreclosure. See our timeline discussion below.
(11) HAFA provides financial incentives for borrower relocation assistance following the short sale ($1,500); incentives to the servicers to cover short sale processing costs ($1,000); and incentives for investors matching up to $1,000 for each lien holder ($3,000 total).
(12) Credit impact following a short sale or deed in lieu of foreclosure: following a short sale, the creditor will report to the credit reporting agencies that the mortgage was settled for less than full payment (this will still impact your credit score but should not impact as much as a foreclosure).
(13) Potential tax implications for debt forgiveness following a short sale or deed in lieu: Borrowers pursuing a short sale must investigate the potential tax ramifications involved, usually by discussing this with a tax accountant, CPA or tax lawyer prior to selling their property. In some cases, debt that is forgiven that does not exceed the amount borrowed to acquire, construct, or rehabilitate property may not be treated as taxable income. Again, contact a tax professional. We will be writing a separate blog on general overview of tax issues in the loss mitigation context.
GENERAL TIMELINE UNDER HAFA:
(1) BORROWER IS REVIEWED FOR HAMP LOAN MODIFICATION BUT IS DENIED, OR CANNOT COMPLY WITH TRIAL PLAN OR IS NOT OFFERED A TRIAL PLAN ETC. SEE CONDITIONS ABOVE;
(2) BORROWER EITHER REQUESTS A SHORT SALE OR DEED IN LIEU OF FORECLOSURE AND/OR THE LOAN SERVICER SENDS BORROWER NOTICE OF RIGHT TO BE REVIEWED FOR HAFA’S SHORT SALE AND DEED IN LIEU OPTIONS WITHIN 30 DAYS:
(3) IF BORROWER FAILS TO RESPOND WITHIN 14 DAYS, THE RIGHT TO BE REVIEWED UNDER HAFA IS LOST;
(4) IF REQUESTED, BORROWER RECEIVES A SHORT SALE AGREEMENT FROM LOAN SERVICER. THIS AGREEMENT DISCLOSES THAT BORROWER HAS AT LEAST 120 DAYS TO SELL PROPERTY FREE FROM FORECLOSURE RISK AND HAS SPACES FOR THE BORROWER AND REAL ESTATE BROKERS SIGNATURES. THE LISTING AGREEMENT SHOULD BE ATTACHED AND RETURNED WITH THIS DOUCMENT AS SHOULD THE HARDSHIP FORM AND INFORMATION ON JUNIOR LIEN HOLDERS AND THE PROGRESS OF ANY NEGOTIATIONS WITH THESE LIENHOLDERS.
NOTE: YOU WILL MOST LIKELY BE DENIED A SHORT SALE IF YOU HAVE NOT NEGOTIATED YOUR SECOND MORTGAGE AND GET THEM TO RELEASE YOUR LIEN. THIS SEEMS PRETTY BRUTAL BUT ALSO SEEMS TO BE A REQUIREMENT TO GET YOUR SHORT SALE APPROVED.
(5) BORROWER HIRES A SHORT SALES AGENT AND LISTS PROPERTY FOR SHORT SALE IN LOCAL MLS; (SHORT SALE BROKER MUST SIGN DOCUMENT LISTED ABOVE);
(6) SELLER GETS AN OFFER TO PURCHASE THE PROPERTY (MUST BE AN ARMS LENGTH TRANSACTION);
(7) BORROWER SUBMITS A COMPLETE SHORT SALE PACKAGE TO LENDER INCLUDING A REQUEST FOR APPROVAL OF SHORT SALE (RASS); LOAN PREQUALIFICATION LETTER FOR THE BUYER, AND MUST FILL OUT A FORM INDICATING THE TRANSACTION DETAILS. A COPY OF THE PURCHASE AND SALE AGREEMENT MUST ALSO BE ATTACHED AND CERTAIN REPRESENTATIONS, MADE UNDER PENALTY OF PERJURY, MUST ALSO BE GIVEN.
(8) THE LOAN SERVICER CONDUCTS AN EVALUATION OF THE SHORT SALES TRANSACTION USING THE FACTORS DESCRIBED ABOVE TO SEE IF BORROWER QUALIFIES FOR THE SHORT SALE OR DEED IN LIEU OF FORECLOSURE PROGRAM;
(9) THE LOAN SERVICER MUST ACCEPT OR DENY THE RASS WITHIN 10 BUSINESS DAYS OF RECEIVING THE RASS FORM AND ADVISE BORROWER ACCORDINGLY.
(10) IF LOAN SERVICER AGREES TO THE SHORT SALE IT MUST ALSO AGREE TO WAIVE ANY DEFICIENCY JUDGMENTS FOLLOWING THE RECEIPT OF SALE PROCEEDS AND CANNOT DEMAND ANY NOTES BE SIGNED AGREEING THE PAY THE DEFICIENCY;
(11) ESCROW IS OPENED – TYPICALLY A 45 DAY ESCROW – AND THE TYPICAL REAL ESTATE TRANSACTION FUNCTIONS PROCEED (APPRAISAL, FINANCING, SELLER DISCLOSURES, INSPECTIONS, ETC.);
(12) THE BUYER OF THE SHORT SALE MUST BE A BONA FIDE PURCAHSER (ARMS LENGTH TRANSACTION) AND THEY CANNOT RE-CONVEY THE PROPERTY FOR AT LEAST 90 DAYS AND CANNOT HAVE AN AGREEMENTIN PLACE TO LEASE THE PROPERTY TO THE FORMER HOMEOWNER AS A TENANT ON THE PROPERTY;
(13) FOLLOWING THE SHORT SALE RECEIPT OF FUNDS, THE SENIOR LIEN HOLDER MUST RELEASE THEIR FIRST MORTGAGE LIEN WITHIN 10 DAYS AND CANNOT PURSUE ANY DEFICIENCY JUDGMENTS.
(14) THE SELLER WILL THEN BE ENTITLED TO $1,500 RELOCATION ASSISTANCE PAID OUT OF ESCROW PROCEEDS.
(15) TAX AND CREDIT IMPLIACATIONS ARE DISCUSSED ABOVE AND IN OTHER BLOGS.
IF YOU ARE A CALIFORNIA OR ARIZONA HOMEOWNER INTERESTED IN PURSUING HAFA SHORT SALE OR DEED IN LIEU OF FORECLOSURE YOU NEED TO ACT FAST. CONTACT OUR OFFICE TO DISCUSS YOUR CASE AND DISCUSS IMPLICATIONS COCERNING DEFICIENCY JUDGMENTS AND NEGOTIATING WITH SECOND LIEN MORTGAGE HOLDERS AND JUNIOR LIEN HOLDERS.
KEYWORDS: Arizona deficiency judgment / Phoenix HAFA lawyer / Scottsdale HAFA lawyer / Short sale attorney / Short sales lawyer / HAMP short sale program / deed-in-lieu-of foreclosure / Arizona foreclosure lawyer / Phoenix Foreclosure Lawyer / Phoenix foreclosure attorney / Scottsdale loan modification lawyer / Phoenix loan modification lawyer / Phoenix loan modification attorney / Lis Pendens / Quiet Title / Injunction / Arizona loan modification lawyer
Google our other foreclosure defense blogs on Arizona Deficiency Judgments and HAMP Loan Servicer report Card and Tax Issues in Arizona Short Sales (use keyword Vondran).
HAMP REPORT CARD IS IN – PARTICIPATING HAMP LENDERS AND LOAN SERVICERS SIMPLY DONT MAKE THE GRADE WHEN IT COMES TO PROVIDING PERMANENT LOAN MODIFICATIONS. IS ANYONE SURPRISED HERE?
First let’s take a look at the official government spin on the progress made under HAMP. You can check out this link here http://www.makinghomeaffordable.gov/pr_03122010.html but let’s post below what it says:
March 12, 2010
ADMINISTRATION RELEASES FEBRUARY LOAN MODIFICATION REPORT
Number of permanent modifications increases by 45 percent
WASHINGTON – The U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today released February data for the Administration’s Home Affordable Modification Program (HAMP). As of the end of the month, more than one million borrowers were receiving a median savings of $500 each month – a 36 percent median monthly payment decrease. Permanent modifications have been granted to 170,000 homeowners and an additional 91,800 permanent modifications have been approved by servicers and are pending only borrower acceptance.
LET’S GO OVER SOME OF THE THINGS THEY ARE NOT SAYING IN THIS REPORT:
LOOK AT ALL OF THE TRIAL PLANS STARTED IN SEPTEMBER 2009 (553,031), AND OCTOBER 2009 (711,085). TOTAL IS APPROXIMATELY 1.26 MILLION TRIAL PLANS. THESE TRIAL PLANS ARE SUPPOSED TO BE THREE MONTHS IN LENGTH. IF THAT IS TRUE, WHERE ARE ALL THE PERMANENT MODS THAT ARE SUPPOSED TO BE COMING WHEN THERE IS NO MATERIAL CHANGE IN A BORROWERS FINANCIAL AND OTHER CONDITIONS? THE REPORT SAYS THERE ARE 170,000 PERMANENT MODS IN PLACE. DOES ANYONE ELSE SEE THE MAJOR GAP HERE? EVEN WITH THE “PENDING PERMANENT MODS” (91,800) THERE IS STILL MUCH LEFT TO BE DESIRED.
WE ARE FORCED TO CONTINUE ASKING THE QUESTION, THE BANKS (INCLUDING WALL STREET) GOT THEIR BAILOUT, NOW WHERE IS THE HONEST, GOOD FAITH HELP FOR MAIN STREET?
Here is a list of the loan servicers mentioned in the report, and you can see breakdowns by lender and state, etc. Check out the report, it is very interesting.
Allstate Mortgage Loans & Investments, Inc.
American Eagle Federal Credit Union
American Home Mortgage Servicing, Inc
AMS Servicing, LLC
Aurora Loan Services, LLC
Bank of America, N.A.1
Bank United
Bay Federal Credit Union
Bay Gulf Credit Union
BayviewLoan Servicing, LLC
Carrington Mortgage Services, LLC
CCO Mortgage
Central Florida Educators Federal Credit Union
Central Jersey Federal Credit Union
Chase Home Finance, LLC
CitiMortgage, Inc.
Citizens 1st National Bank
Citizens First Wholesale Mortgage Company
Community Bank & Trust Company
CUC Mortgage Corporation
Digital Federal Credit Union
DuPageCredit Union
Eaton National Bank & Trust Co
Farmers State Bank
Fidelity Homestead Savings Bank
First Bank
First Federal Savings and Loan
First Federal Savings and Loan Assn. of Lakewood
First Keystone Bank
First National Bank of Grant Park
Franklin Credit Management Corporation
Fresno County Federal Credit Union
Glass City Federal Credit Union
Glenview State Bank
GMAC Mortgage, Inc.
Golden Plains Credit Union
Grafton Suburban Credit Union
Great Lakes Credit Union
Greater Nevada Mortgage Services
Green Tree Servicing LLC
Harleysville National Bank & Trust Company
Hartford Savings Bank
Hillsdale County National Bank
Home Financing Center, Inc
HomEqServicing
HomeStarBank & Financial Services
Horicon Bank
Horizon Bank, NA
Iberiabank
IBM Southeast Employees’ Federal Credit Union
IC Federal Credit Union
Idaho Housing and Finance Association
iServeResidential Lending LLC
J.P.MorganChase Bank, NA2
Lake City Bank
Lake National Bank
Litton Loan Servicing
Los Alamos National Bank
MarixServicing, LLC
Members Mortgage Company, Inc
Metropolitan National Bank
Mission Federal Credit Union
MorEquity, Inc.
Mortgage Center, LLC
Mortgage Clearing Corporation
National City Bank
NationstarMortgage LLC
Oakland Municipal Credit Union
OcwenFinancial Corporation, Inc.
OneWestBank
ORNL Federal Credit Union
Park View Federal Savings Bank
PennyMacLoan Services, LLC
PNC Bank, National Association
Purdue Employees Federal Credit Union
QLending, Inc.
Quantum Servicing Corporation
Residential Credit Solutions
RG Mortgage Corporation
Roebling Bank
RoundPointMortgage Servicing Corporation
Saxon Mortgage Services, Inc.
Schools Financial Credit Union
SEFCU
Select Portfolio Servicing
ServisOne Inc., dbaBSI Financial Services, Inc.
ShoreBank
Silver State Schools Credit Union
Sound Community Bank
Specialized Loan Servicing, LLC
Spirit of Alaska Federal Credit Union
Stanford Federal Credit Union
Sterling Savings Bank
Technology Credit Union
Tempe Schools Credit Union
The Bryn MawrTrust Co.
The Golden 1 Credit Union
U.S. Bank National Association
United Bank of Georgia
United Bank Mortgage Corporation
VantiumCapital, Inc.
Verity Credit Union
Wachovia Mortgage, FSB3
Wells Fargo Bank, NA
WescomCentral Credit Union
Yadkin Valley Bank
BOTTOM LINE – BANKS NEED TO GIVE MORE RELIEF TO STRUGGLING HOMEOWNERS FIGHTING TO SAVE THEIR HOME FROM FORECLOSURE. FORECLOSURES HURT COMMUNITIES, AND EVEN HURT THE HOMEOWNERS WHO ARE PAYING THEIR MORTGAGES. WHAT GOOD DOES IT DO TO ARTIFICIALLY PROP UP FAILED BANKS (WHO SHOULD HAVE BEEN FORCED INTO BANKRUPTCY THEMSELVES) ONLY TO CREATE A SOCIETY WHERE THE BANKS HAVE ALL THE MONEY, AND 10-25% OF THE GENERAL PUBLIC HAS NO ABILITY TO ACCESS CREDIT DUE TO CREDIT SCORES THAT REFLECT BANKRUPTCIES, FORECLOSURES, AND LATE PAYMENTS, AND SHORT SALES?
MORE INFORMATION ABOUT THE HAMP TRIAL PLANS AND OTHER TRIAL PLAN FRAUD AND BREACH OF CONTRACT CAN BE FOUND ON OUR WWW.TRIALPLANFRAUD.COM WEBSITE.
There are a good number of cases (i.e. legal precedent) that come from bankruptcy courts that demand that “lenders” and beneficiaries who wish to assert their secured creditor status in a bankruptcy court, or to lift the automatic stay provided by a bankruptcy filing, that these entities do not get a free pass (like they do in non-judicial foreclosure sales) and are forced to provide documentation proving they are a “creditor,” (hold the note/assignments/endorsement) and where truth in lending rescission claims exist, that they are a “secured” creditor. Issues of “standing” (a constitutional question) and “real party in interest” also are raised in these types of proceedings.
arizona bk lawyer
You should never resort to a bankruptcy court to file a “produce the note” claim, but where you have legitimate unsecured debt that you wish to have discharged per Chapter 7 BK rules, and where you have a MERS loan, and other irregularities in your deed of trust, substitution of trustee, etc., these issues should be looked at with a fine tooth comb. You may have grounds to file an adversary proceeding (which is a mini lawsuit in a bankruptcy court) to make appropriate legal challenges. Visit our website at www.AdversaryProceeding.com for more information.
Indeed, all roads may lead to bankruptcy where MERS, the lenders, loan servicers, and Trustees of Securitized trusts refuse to share the bailout wealth.
The bankruptcy court may be the “court of last resort” for certain homeowners who fit the criteria for a Chapter 7 filing, meet the means test, have valid issues over the ownership of their loan, and/or have valid truth in lending (TILA) claims that raise extended three year rights to rescind, with the possibility of tender.
These are complicated issues not left to a broker or “attorney backed” loan modification company. Time is of the essence and statutes of limitations are always in effect. For more information contact us at (877) 276-5084.
WHAT LAWYERS WHO REPRESENT LENDERS AND LOAN SERVICERS REALLY THINK ABOUT YOUR ATTEMPT TO FIGHT TO SAVE YOUR HOME FROM FORECLOSURE
Here is a recent email exchange I had with one of the large lender/loan servicers in regard to asserting my Client’s Truth in Lending rescission rights.
This email allows you to get a little flavor of what the big bad bailed out banks think about helping other people who need a bailout.
HERE WAS HIS EMAIL QUESTION TO ME:
It is a mystery to me why lawyers get involved with clients simply to delay the inevitable. The only reason I’ve been able to fathom is that the lawyer gets paid instead of the bank, while the borrower continues to live in the house. Doesn’t seem like a good way to keep one’s malpractice insurance premiums down.
I’m not suggesting that is what you’re doing here. However, XXXXXXX must protect itself and the loan owner from such pointless shenanigans.
I’m not aware of a new date for the foreclosure sale, but this doesn’t mean that one hasn’t been set……
NOTICE HOW HE SEEMS INTENT ON LECTURING ME ABOUT MY MALPRACTICE INSURANCE AND ASSUMING EVERYTHING IS INEVITABLE. IN HIS WORLD, THERE IS NO TAKING ON THE BANKS, NO QUESTIONING THE BANKS, NO DEFIANCE THAT WILL BE TOLERATED BY THE BANKS, THEY GOT THEIR MODIFICATION BUT HOW DARE YOU TRY TO ASSERT YOUR LEGAL RIGHTS, ESPECIALLY WHERE VALID TRUTH IN LENDING RESCISION RIGHTS WERE PRESENTED AS PROOF TO THIS GUY. HERE IS MY RESPONSE TO THE GENTLEMAN.
XXXXXXXX,
I can appreciate your position here are a few mysteries I am looking for answers to:
(1) Why when banks get bailed out big time, do they act like no homeowner deserves a decent bailout?
(2) Why in all of my cases where I find a bona fide Truth in Lending (“TILA”) violation, does the lender always either (a) deny that the violation exists in the face of attached documentary evidence, or (b) refuse to even respond to a TILA rescission letter?
(3) Why do lenders/loan servicers routinely fail to address the question of who actually owns the loan? Or provide proof of such?
(4) Why do loan servicers routinely fail to respond, or fail to respond in a timely manner, to legitimate qualified written requests under RESPA?
(5) Why are lenders refusing to do short-sales at or near fair market values only to find that they get less at a foreclosure sale?
(6) Why are lenders/loan servicers routinely making blatantly false declarations under California Civil Code Section 2923.5?
(7) Why is California Civil code section 2923.6 routinely violated?
(8) Why do “lenders” continue to try to collect payments where the loan in question was already paid off via insurance, bailout money etc.?
(9) Why is it that MERS continues to try to pretend it is a beneficiary and foreclose on people?
(10) Why is it so many substitutions of trustee are invalid and the resulting Notice of Default invalid and not in compliance with California Foreclosure Laws?
(11) Why is it that other lawyers who represent banks (who are making out pretty nicely for their efforts) complaining about other lawyers who are fighting for Clients who want to keep their houses and exercise legal rights that they clearly have?
(12) Why won’t attorneys for lenders/investors be honest about sale dates? Is there truly something to hide or is it a total lack of respect for attorneys who represent deadbeat homeowners?
As a lawyer, I am sure you are aware there are two sides of the coin here. It is not a black and white issue. Can you send me proof of who the owner of this loan is in the form of an indorsed promissory note that your client is in possession of? I have not seen any proof. Seriously, do not fault us for fighting for the rights of homeowners who are often facing severe financial hardship (usually for reasons out of their control - like a bogus economy), and who are fighting to keep a roof over their head, and using the legal rights the law affords them to fight the system that was setup to defeat them.
To your malpractice claim assertion, it is malpractice NOT to identify, stand-up and assert my Client’s legal rights – whatever you may think of them.
If you do not want to be straight up and inform us of the new sale date, and if foreclosure is inevitable, why not just tell me there is nothing that is going to be done, and the sale will occur whenever your Client feels like it. I can live with that if you want to be honest. If that is the truth let’s talk honestly about it. I can handle the truth!
(parts omitted due to client confidentiality)
You are a beneficiary of this system partially created by your Clients, so I would not be flabbergasted by what you are dealing with.
This is a typical day in the life of dealing with big banks and fighting for our clients using every law that we can think of that may help in the fight to save a home from foreclosure.
Going hand in hand with this article, here is another post we posted discussing other reasons we work so hard to battle these banks:
Some people have asked me, why are you passionate about foreclosure defense and helping Arizona homeowners? One of the answers I like to give is the following:
OUR MISSION: “WE ARE FIGHTING FOR “TRUTH IN LENDING” (a strange concept, i know!):
(1) WE ARE FIGHTING FOR TRUE AND ACCURATE DISCLOSURE OF A LOAN PRODUCT, ITS NATURE, AND TERMS (TELL PEOPLE THE TRUTH ABOUT THE LOANS THEY ARE LOCKING INTO). GIVE THEM THE CHARMS BOOKLET AND CALIFORNIA ARM DISCLOSURES
(2) WE ARE FIGHTING FOR TRUE AND FAIR DISCLOSURE OF THE PRICE-TAG FOR THE LOAN (APR AND FINANCE CHARGES THAT ARE TRUE AND ACCURATE). ACCURATE TRUTH IN LENDING STATEMENTS
(3) WE ARE FIGHTING FOR FAIR AND ACCURATE DISCLOSURE OF THE RIGHT TO CANCEL THE LOAN WHEN APPLICABLE (GIVE PEOPLE THEIR REQUIRED COPIES AND GIVE TRUE DATES UPON WHICH LOANS CAN BE RESCINDED)
(4) WE ARE FIGHITNG FOR FAIR AND HONEST UNDERWRITING THAT IS BASED UPON A CLIENTS TRUE ABILITY TO REPAY A LOAN (WHICH MAY MEAN VERIFYING INCOME AND TELLING SOME PEOPLE THEY DON’T QUALIFY) AND TRUE AND ACURATE APPRAISAL OF PROPERTY THAT SUPPORTS THE UNDERWRITING.
(5) WE ARE FIGHTING FOR FULL DISLCOSURE OF THE HOLDER OF THE LOAN (INVESTOR) AND PROOF AS TO WHO OWNS THE RIGHT TO BE PAID, AND THE RIGHT TO FORECLOSE, AND WHO MUST BY LAW CONTACT CALIFORNIA HOMEOWNERS TO DISCUSS LOAN MODIFICATIONS AND ASSESS BORROWER FINANCES.
(6) WE ARE FIGHTING FOR FULLFULL AND FAIR ACCOUNTING FOR PAYMENTS, LATE FEES, ESCROW CHARGES, AND OTHER CHARGES IN THE LOAN SERVICER’S BACK-ROOM. ANSWER THOSE QWR’S ON TIME, AND IN UNDERSTANDABLE DETAIL. STOP REPORTING NEGATIVE CREDIT DURING THIS PERIOD.
(7) WE ARE FIGHTING FOR HONESTY AND “TRUTH IN TRIAL PLANS” – IF HOMEOWNERS DON’T QUALIFY FOR A MORTGAGE RESTRUCTING / LOAN MODIFICATION, DON’T SEND THEM A TRIAL PLAN THAT LEADS THEM TO BELEIVE THEY DO. IN ADDITION, BE TRUTHFUL ABOUT THE PRECISE TERMS OF THE LOAN MODFIICATIONS (DISCLOSE THE TERMS CLEARLY) AND HONOR YOUR TRIAL PLAN AGREEMENTS.
ITS TIME THE LENDERS OPEN THE BOOKS AND SHOW US WHERE THE BAIL-OUT MONEY HAS GONE. WE NEED SOME TRANSPARENCY. WE NEED SOME ACCOUNTABILITY TO SHOW WHAT HAS BEEN DONE WITH TAX-PAYER MONEY. WAS YOUR LOAN ALREADY PAID OFF VIA THE BAILOUT, AND NOW THEY WANT TO COLLECT MORE MONEY FROM YOU FROM A LOAN THAT MAY HAVE BEEN ALREADY PAID? IF YOUR LOAN WAS SECURITIZED INTO A “LOAN POOL” IS THERE ANY CHANCE YOUR ENTIRE POOL OF LOAN WAS BAILED OUT AND PAID OFF? IF SO, DOES THAT MEAN THEY STILL GET TO COLLECT FROM YOU AS WELL? WHAT IS THAT? ISN’T THAT A WINDFALL……..UNJUST ENRICHMENT?
PEOPLE DESERVE TO BE REPRESENTED BY A FORECLOSURE DEFENSE LAWYER WHEN TRYING TO RESOLVE ONE OF BIGGEST PROBLEMS MOST HOMEOWNERS WILL EVER FACE. IN MANY CASES, A FORECLOSURE DEFENSE LAWYER CAN EVALUATE YOUR LOAN, REVIEW YOUR MORTGAGE DOCUMENTS (FORENSIC AUDIT), DEMAND THAT DEBTS BE VALIDATED, SEND MODIFICATION PROPOSALS, REVIEW TRIAL PLAN AND OTHER LOAN MODFICATION AGREEMENTS, ADVISE ON DEFICIENCY JUDGMENTS, DISCUSS POTENTIAL BANKRUPTCY AND SHORT-SALE OPTIONS, AND ENSURE THAT YOUR RIGHTS UNDER THE FORECLOSURE LAWS ARE ADHERED TO AND PROTECTED. THE BANKS HAVE EXPENSIVE LAWYERS ON THEIR TIME, YOU DESERVE TO BE REPRESENTED DURING THIS CONFUSING AND STRESSFUL ORDEAL. THIS IS THEIR GAME AND THEIR BATTLEFIELD.
IF YOU ARE AN ARIZONA HOMEOWNER PLEASE CONTACT US (877) 276-5084 TO DISCUSS YOUR FORECLOSURE CASE.
The Law Offices of Steve Vondran in licensed to practice law in California and Arizona. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.
To see some of other other websites dealing with the financial crisis please review the following websites:
(1) www.OptionArmLawyer.com (potential attacks against the predatory option arm loan – aka “Pick-a-Prey”)
(2) www.TrialPlanFraud.com (tackling issues involved with what we call trial-plan shennanigans)
(3) www.BKAttorneyS.net (BK Attorney Steve – Chapter 7 Bankruptcy information for Arizona and California Homeowners)
(4) www.RescindMyLoan.net (website that discusses Truth in Lending Rescission information)
(5) www.LoanModRadio.com (site which features foreclosure defense issues in streaming audio)
(6) www.ProduceTheNoteAttorney.com (general information on the “Produce the Note” foreclosure defense strategy that is running rampant on the Internet)
Our profiles will also be listed on www.ContingencyCase.com an online legal directory for lawyers who will consider taking cases on a contingency fee basis in a variety of legal areas. I will be listed for our World Savings and Wachovia Option Arm loans.
THE LAW OFFICES OF STEVE VONDRAN IS LICENSED TO PRACTICE LAW IN ARIZONA AND CALIFORNIA. PLEASE DO NOT SEND US CONFIDENTIAL EMAILS OR POST CONFIDENTIAL CASE INFORMATION ON ANY OF OUR BLOGS OR WEBSITES. THERE IS NO GUARANTEE OF PRIVACY.
WE SERVE ARIZONA REAL ESTATE CLIENTS IN THE FOLLOWING CITIES: PEORIA, SURPRISE, SUN CITY, PHOENIX, GLENDALE, CASA GRANDE, SCOTTSDALE, TEMPE, MESA, CHANDLER, MARICOPA, BUCKEYE, GOODYEAR, AVONDALE AND OTHER SURROUNDING CITIES IN THE GREATER PHOENIX AREA.
THIS IS AN ADVERTISEMENT AND COMMUNICATION PURSUANT TO STATE BAR RULES.
There is no guarantee the following is correct. Law changes all the time. This is for attorneys only and you should assume the information is not correct. This is general legal information only.
_____
Unfortunately, court says “no way” and declares THERE IS NO REQUIREMENT THAT THE ANYONE PRODUCE THE ORIGINAL PROMISSORY NOTE AS A PRE-REQUISITE TO PURSUING A PRIVATE TRUSTEE SALE. Here are a few snipets from the case:
MY COMMENTS ARE IN BOLD AND MERELY REPRESENT MY OPINION.
Chilton v. Federal Nat. Mortg. Ass’n, Slip Copy, 2009 WL 5197869 (E.D.Cal.)
ORDER RE PROPOSED ORDER TO SHOW CAUSE AND MOTION FOR TEMPORARY RESTRAINING ORDER
Plaintiff filed a complaint on December 16, 2009, alleging that Defendant, Federal National Mortgage Association, violated unspecified provisions of federal law within “Title 15 U.S.C. and/or Title 18 U.S.C.” because Defendant initiated non-judicial foreclosure on her property, located in Clovis, California, without possessing the genuine original note.” She advances no other bases for relief.
Plaintiff has also filed an “order to show cause and motion for temporary restraining order,” in an attempt to block the foreclosure process.
To obtain temporary or permanent injunctive relief, a plaintiff must demonstrate likelihood of success on the merits. Here, Plaintiff’s only legal theory has been resoundingly rejected as a basis for relief. It is well-established that non-judicial foreclosures can be commenced without producing the original promissory note.
THAT’S THE PART THAT HURTS. I SUPPOSE ANYONE WHO SHOWS UP ON FORECLOSURE DAY CLAIMING TO BE THE HOLDER OF THE LOAN (WHETHER IT IS MERS PRETENDING TO BE THE BENEFICIARY OR THE NOMINEE OF THE LENDER, THE LOAN SERVICER PRETENDING TO BE THE HOLDER OF THE LOAN OR SOME OTHER THIRD PARTY, LIKE WALLMART FOR EXAMPLE, CLAIMING TO BE THE HOLDER OF THE LOAN) GETS AN UNFETTERED RIGHT TO FORECLOSE, AND A FREE PASS FROM ANY JUDICIAL SCRUTINY WHATSOEVER.
The Court went on to state:
“Non-judicial foreclosure under a deed of trust is governed by California Civil Code Section 2924 which relevant section provides that a “trustee, mortgagee or beneficiary or any of their authorized agents” may conduct the foreclosure process.” California courts have held that the Civil Code provisions “cover every aspect” of the foreclosure process, (case cited), and are “intended to be exhaustive,”(another case cited). There is no requirement that the party initiating foreclosure be in possession of the original note.
AFTER LEVELING THIS BLOW THE COURT CITED A FEW OTHER CASES THAT RESULTED IN THE SAME OUTCOME FOR PLAINTIFFS ASSERTING THE “PRODUCE THE NOTE” FORECLOSURE DEFENSE STRATEGY (OBVIOUSLY IN AN ATTEMPT TO TELL FUTURE LITIGANTS IN CALIFORNIA “GIVE UP TRYING TO VERIFY ANYONES CREDENTIALS”):
(1) See, e.g., Nool v. HomeQ Servicing, — F.Supp.2d —-, 2009 WL 2905745 (Sep. 4 2009) (“There is no requirement that the party initiating foreclosure be in possession of the original note.”);
(2) Candelo v. NDEX West, LLC, 2008 WL 5382259, at *4 (E.D.Cal. Dec.23, 2008) (“No requirement exists under statutory framework to produce the original note to initiate non-judicial foreclosure.”);
(3) Putkkuri v. ReconTrust Co., 2009 WL 32567, *2 (S.D.Cal. Jan.5, 2009) (“Production of the original note is not required to proceed with a non-judicial foreclosure.”);
(4) Phillips v. MERS Mortgage Electronic Registration Systems, 2009 WL 3233865, 9 (E.D.Cal.2009); Vargas v. Reconstruction Co., 2008 U.S. Dist. LEXIS 100115, at *8-9 (E.D.Cal. Dec. 1, 2008).
WE HAVE PREVIOUSLY DISCUSSED THE KANSAS SUPREME COURT CASE THAT DISCUSSED THE ROLE OF MERS IN WHICH THE COURT SEEMED TO SUGGEST THAT MERS WAS NOT A BENEFICIARY UNDER THE DEED OF TRUST JUST BECAUSE THEY SAY THEY ARE IN THE DOCUMENT. THE COURT ADDRESSED PLAINTIFF’S RELIANCE ON THAT CASE:
“Plaintiff’s reliance on Landmark National Bank v. Kessler, 216 P.3d 158, 2009 Kan. LEXIS 834 (Kan.2009), is misplaced. That case concerned a company, Mortgage Electronic Registration Systems, Inc. (“MERS”), that acted on behalf of a lender to finalize a second mortgage on Kessler’s home. For procedural reasons not relevant to the present case, it became necessary for the Kansas court to determine whether MERS possessed an interest in the second mortgage, eventually concluding that under the specific facts of that case, MERS was more like an agent than a buyer/owner of the note.”
THE COURT CONTINUED:
“In reaching this conclusion, the Landmark court noted: Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable. “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).”
THE COURT CHIMED IN ON THIS LEGAL REQUIREMENT:
“This language merely stands for the proposition that one possessing the deed of trust cannot foreclose on a mortgage without (1) also possessing some interest in the promissory note, or (2) obtaining permission to act as agent of the note-holder. This has nothing whatsoever to do with possession of the “original” promissory note document, i.e., the original piece of paper with original signatures, etc., the possession of which is not required to initiate non-judicial foreclosure in California. Because Plaintiff cannot possibly establish any likelihood of success on her current claim for relief, it is not necessary to set her motion for temporary injunctive relief for hearing. Her motion is DENIED. IT IS SO ORDERED.”
There you have it friends, as we have been telling callers to our office seeking foreclosure defense, DO NOT RELY ON “PRODUCE THE NOTE” AS A SILVER BULLET FORECLOSURE DEFENSE THAT IS GOING TO STOP YOUR FORECLOSURE WITH AN INJUNCTION AND GET YOUR HOUSE FOR FREE. IF THERE ARE GLARING IRREGULARITIES, AND OTHER LEGAL GROUNDS TO GET YOU INTO COURT VALIDLY, THEN YOU MAY WANT TO TAG ON THIS CLAIM AND SEE IF YOU CAN GET A DIFFERENT OUTCOME FROM A DIFFERENT JUDGE, BUT SUFFICE IT TO SAY AS A STAND-ALONE LEGAL THEORY, THERE IS SIMPLY NOT MUCH TEETH TO THE THEORY. MOST OF THE CASES WHERE YOU HEAR OF SOME SUCCESS COME FROM FLORIDA AND OHIO AND OTHER “JUDICIAL FORECLOSURE” STATES WHERE THE LENDER IS FORCED TO FILE IN COURT TO START THE FORECLOSURE PROCESS. IN THESE CASES, THE ISSUE BECOMES A QUESTION OF “STANDING” AND “REAL PARTY IN INTEREST.” THERE IS ALSO THE BANKRUPTCY ANGLE THAT WE WILL BE EXPLORING IN GREATER DETAIL IN FUTURE POSTS.
In a similar case, NEWBECK v. WASHINGTON MUTUAL BANK, Slip Copy, 2010 WL 291821 (N.D.Cal.), the Court essentially held the same way when a Plaintiff tried to argue “produce the original note” as a strategy to set aside a foreclosure sale that had already occurred. In this case the Court first discussed the dreaded issue of challenging a foreclosure sale that had already been finalized, and the Court’s comments shed light on how one-sided the laws are when you dare take on a “lender” in Court
“Plaintiffs ask the Court to set aside Washington Mutual’s foreclosure sale of their property. They assert that Washington Mutual did not have possession of the original mortgage note or the deed of trust under which it was secured and, as a result, it was not entitled to foreclose. A plaintiff seeking to set aside a foreclosure sale must first allege tender of the amount of the secured indebtedness. Abdallah v. United Savings Bank, 43 Cal.App.4th 1101, 1109, 51 Cal.Rptr.2d 286 (1996) (citing FPCI RE-HAB 01 v. E & G Investments, Ltd., 207 Cal.App.3d 1018, 1021-22, 255 Cal.Rptr. 157 (1989)); Smith v. Wachovia, 2009 WL 1948829, at *3 (N.D.Cal.). Without pleading tender or the ability to offer tender, a plaintiff cannot state a cause of action to set aside a foreclosure sale. Karlsen v. Am. Savings & Loan Ass’n, 15 Cal.App.3d 112, 117, 92 Cal.Rptr. 851 (1971) (citing Copsey v. Sacramento Bank, 133 Cal. 659, 662 (1901)); Smith, 2009 WL 1948829, at * 3 (citing Karlsen ). Plaintiffs allege neither tender nor their ability to offer tender. Thus, they do not state a claim to set aside the foreclosure sale.
THIS MEANS, IF YOU ARE CHALLENGING A FORECLOSURE SALE AND SEEK TO SET IT ASIDE (ON WHATEVER PROPER GROUNDS YOU MAY HAVE) YOU NEED TO AT LEAST ALLEGE A WILLINGNESS AND ABILITY TO TENDER. IF ALL ELSE FAILS, YOU MAY WANT TO TELL THE JUDGE THAT YOU WILL TENDER THE FULL BALANCE DUE AFTER YOU COLLECT ON YOUR FRAUD JUDGEMENT. SOMETIMES THIS MAY BE ALL YOU HAVE WHEN YOU ARE WAY UPSIDE DOWN ON YOUR PROPERTY.
THE COURT THEN WENT ON TO DISCUSS WHAT MIGHT HAPPEN EVEN IF YOU COULD TENDER:
“Even if they alleged tender, the basis on which they appear to seek relief does not support their claim. In California, there is no requirement that a trustee produce the original promissory note prior to a non-judicial foreclosure sale. See, e.g., Pantoja v. Countrywide Home Loans, Inc., 640 F.Supp.2d 1177, 1186 (N.D.Cal.2009); Smith, 2009 WL 1948829, at *3; Neal v. Juarez,2007 WL 2140640, *8 (S.D.Cal.) (citing R.G. Hamilton Corp. v. Corum, 218 Cal. 92, 94, 97, 21 P.2d 413 (1933); Cal. Trust Co. v. Smead Inv. Co., 6 Cal.App.2d 432, 435, 44 P.2d 624 (1935)).California Civil Code Sections 2924 through 2924k “provide a comprehensive framework for the regulation of a non-judicial foreclosure sale pursuant to a power of sale contained in a deed of trust.” Knapp v. Doherty, 123 Cal.App.4th 76, 86, 20 Cal.Rptr.3d 1 (2004) (quoting Moeller v. Lien, 25 Cal.App.4th 822, 830, 30 Cal.Rptr.2d 777 (1994)). Knapp explains the non-judicial foreclosure process as follows: Upon default by the trustor [under a deed of trust containing a power of sale], the beneficiary may declare a default and proceed with a nonjudicial foreclosure sale. The foreclosure process is commenced by the recording of a notice of default and election to sell by the trustee. After the notice of default is recorded, the trustee must wait three calendar months before proceeding with the sale. After the 3-month period has elapsed, a notice of sale must be published, posted and mailed 20 days before the sale and recorded 14 days before the sale. Knapp, 123 Cal.App.4th at 86, 20 Cal.Rptr.3d 1 (citation omitted).
I SUPPOSE YOU ARE NEVER ALLOWED TO ASK WHO THE “BENEFICIARY” IS OR MAKE ANYONE PROVE THAT POINT BEFORE THEY TAKE YOUR HOUSE. ARE YOU ALSO ALLOWED TO ASK WHO THE BENEFICIARY IS FOR PURPOSES OF COMPLIANCE WITH CALIFORNIA CIVIL CODE SECTION 2923.5 AND THE DECLARATION THAT IS MADE UNDER THIS SECTION? WE WILL DISCUSS THIS ISSUE IN ANOTHER BLOG POST.
ANYWAY, I DIGRESS, THE COURT CONTINUED:
“A properly conducted nonjudicial foreclosure sale constitutes a final 13 adjudication of the rights of the borrower and lender.” Plaintiffs have not pointed to controlling authority to show that this statutory scheme requires production of the original promissory note or deed of trust. Thus, even if they alleged tender, to the extent that they allege irregularities in the foreclosure sale based on Washington Mutual’s failure to produce the original promissory note or deed of trust, they do not state a claim.
AS DISCUSSED ABOVE, ONLY OUT OF STATE CLAIMS FOR PRODUCE THE NOTE WERE CITED (THESE COME FROM THE JUDICIAL FORECLOSURE STATES).
“Plaintiffs cite various out-of-state cases, which apply non-California law to judicial foreclosure actions. See In re Foreclosure Actions, 2007 WL 4034554 (N.D.Ohio); In re Foreclosure Cases, 2007 WL 3232430 (N.D.Ohio); Landmark Nat’l Bank v. Kessler, 289 Kan. 528, 216 P.3d 158 (2009); U.S. Bank Nat’l Ass’n v. Ibanez, 2009 WL 3297551 (Mass.Land Ct.). Because these cases do not apply California’s non-judicial foreclosure sale statutes, they do not support Plaintiffs’ position.”
SO THERE YOU HAVE IT, MORE PROOF OF THE MOUNTAIN YOU MUST CLIMB TO GET TO THE PROMISED LAND. AS WE TELL OUR CLIENTS, FORECLOSURE DEFENSE IS NOT AN EASY BUSINESS.
AUTHORS NOTE: IF THE CALIFORNIA FORECLOSURE STATUTES GOVERN THE FORECLOSURE SALE PROCESS, AND IF NOTHING ELSE REALLY MATTERS, THEN YOU NEED TO TAKE A CLOSE LOOK AT WHETHER THAT STATUTE IS BEING COMPLIED WITH WHEN LOOKING TO OBTAIN AN INJUNCTION TO HALT FORECLOSURE.
AN UPDATE ON CALIFORNIA LOAN MODIFICATION SCAMS AND SB 94 – CONSUMERS MUST REMAIN ALERT AND VIGILANT
Well the last year has been pretty crazy in the loan modification business. We have seen lots of companies being shut down by the California Department of Real Estate and California State bar (ex. brokers, attorneys, “attorney-backed” and “attorney-based” law centers and fictional “law groups” etc.) who were found out as being nothing more than scams, shams, and ripoff artists.
Some of the reasons these companies were the subject of cease and desist (or desist and refrain) letters is the following:
They held themselves out as loan modification specialists and loan modification experts when in fact they had no special skill, training, experience, or track record.
They took advance fees without the proper advance fee agreement that received a letter of non-objection from the DRE.
They collected advance fees but failed to properly place funds in a Client trust account.
They failed to properly provide verified accountings as required by the California Department of Real Estate.
They failed to have all of the loan modification advertising approved by the DRE.
They took files that were in notice of default (this applies to the non-attorneys) in violation of the Foreclosure Consultant Law.
The committed other acts of outright fraud, misrepresentation, deceit and false advertising.
In the case of Loan Modification Attorneys they may have illegally partnered with non-attorneys (such as brokers and foreclosure consultants) that would not only tout the attorneys services – taking the form of an illegal runner or capper – but also illegally splitting what could be construed as a legal fee, and engaging in other shady conduct that violates an attorneys code of ethics.
In addition, Post SB94, some entities accepted an advance fee in violation of SB94 which prohibits both attorneys, brokers, and foreclosure consultants from accepting any type of advance fee for loan modification or foreclosure forbearance work.
They failed to provide refunds when their contracts stated they would, or where verbal representations of 100% money back guarantee were given.
Yes, there were a whole lot of callous and cavalier people/companies raking homeowners over the coals for their own personal gain, and without any morals or scruples. I guess you could say there were a bunch of Bernie Madoff’s in the loan modification business.
From what we could tell, the Attorney loan mod scammers often were either the “newbie” Attorneys who had no clue what was going on and didn’t care (and may have had a hard time finding legal jobs in the tough economic climate following law school) and/or 20 or 30 year attorneys who could care less whether or not the State bar stripped their license to practice law (I think some of these attorney violators were racking up so much money, and trying to ship it off-shore for their retirement purposes). In fact, we heard one Southern California Attorney, who was disbarred for his loan modification shennanigans, had over 1,700 loan files that he had charged over $6,000 a piece to help modify their loans (yes, that is about 11 million dollars). This information was relayed to our office by the Federal Trade Commission (FTC) who helped stopped the attorneys scam, and put the joker out of business.
Other attorney/brokers that we have seen have been callous and calculating, and when approached with demands for loan modification refunds, have simply said “if you sue me I will file bankruptcy…” This is the attitude of a lot of scammers.
There was one scammer that our office dealt with, Mr. Jason Adelman of Bakersfield (we believe he was runnning a Nevada Company), who agreed to settle his loan modification scam suit, but then disappeared starting up a new “Investment” company in the Bakersfield area. Our information also shows that this guy is a youth football coach and/or little league coach in the Bakersfield area. This guy failed to have an approved advance fee agreement, and failed to perform reasonable services or provide refunds upon demand.
This is just a flavor of the things we saw from the loan modification side of life in 2010. Taking this for what it is, and given the large number of complaints from California homeowners dealing with these types of heartless vultures, it is no wonder SB 94 was passed.
Now some “enterprising” lawyers (one in particular in southern california) have broken their loan modification contract into THREE PIECES (charging for each service after it is performed) in an effort to snub their noses at SB 94. This particular firm is also bringing in about 200 files per month, or so we are told. This is the nature of the loan modification beast in California, and homeowners are advised to be very suspect and wary when dealing with a loan modification company. Do not pay any advance fees for loan modification work to either an attorney, “law center,” “law group,” “Attorney-based” company, foreclosure consultant etc.
In many cases, as a homeowner, you can try to do your own loan modification. Yes, it will most likely not be an easy task as most will testify. However, you should try to contact your lender and see if they are willing to work with you, and submit your financial documentation and see if they will provide you any type of loan modification assistance. Loans are getting modified, but not always on the terms the homeowner wants. If you are lucky, and if you have a bona fide hardship, and meet the financial criteria, you may be able to save yourself some money by doing your own modification.
Our firm has offices in Newport Beach, California, and Phoenix, Ariozna. We still help select clients in Arizona who are seeking various loss mitigation solutions including loan modifications, deed-in-lieu of foreclosure, short sales, and bankruptcy – Chapter 7. As for California, we take Wachovia and World Savings Option Arm Loans on a “no-up-front-fee basis (Contingency if you will) meaning you really have nothing to lose.
The Law Offices of Steven C. Vondran, P.C. is licensed to practice law in the States of California and Arizona. Mr. Vondran is a licensed real estate broker in both states as well. Currently the firm handles Real Estate, Bankruptcy, and Foreclosure Defense work in addition to assisting real estate brokers in the area of Broker Law. He can be reached at steve@vondranlaw.com or by phone at (877) 276-5084. Emails are not confidential and create no attorney-client relationship. This is an advertisement and communication pursuant to state bar rules. We only seek to solicit and serve homeowners, real estate investors, and brokers in California and Arizona.
COMMERCIAL LOAN MODIFICATION ADVANCE FEE AGREEMENT FOR SALE
Okay, so SB 94 was passed preventing California DRE brokers (and Attorneys and others) from taking advance fees for loan modification and mortgage forbearance work. This has literally run many loan modification companies (both the loan mod scammers and legitimate loan modification companies) right out of business. As loan modifications can take anywhere from 3-15 months to complete, most companies cannot afford to operate financially in this type of environment.
Keep in mind, SB94 only prohibits the collection of advance fees for residential loan modifications. California licensed DRE brokers may start, or continue serving commercial clients in the area of loan modification / loan workouts / loan restructuring. I recently contacted the California Department of Real Estate (DRE) and learned they are still approving commercial loan modification advance fee agreements.
During the early days of the residential loan modification business, I did have the privilege of helping roughly 50+ companies get approved with a DRE approved advanced fee agreement (“approved” really means the advance fee agreement had received a “letter of non-objection” from the department).
During this period, I was also able to get a COMMERCIAL ADVANCE FEE AGREEMENT APPROVED, WHICH AGREEMENT RECEIVED A LETTER OF NON-OBJECTION FROM THE CALIFORNIA DEPARTMENT OF REAL ESTATE.
It is fairly common knowledge that the commercial market lags behind the residential market and will be facing their own financial issues, including the need for loan modification, loan workout, loan restructuring, and short sale work. If you have commercial real estate and commercial loan experience, you may want to investigate the commercial loan modification arena.
If you feel you are a good fit, and want to serve this segment of commercial real estate clients in financial distress, contact us to discuss our previously approved commercial loan modification agreement.
For those of you who have previously tried to draft your own residential and commercial loan modification agreements, and present it to the department for approval, you probably realize what a difficult task it can often be to get your agreement approved. If you make one tiny mistake (and their are lots of potential grounds for denial of your commercial advance fee agreement) you are basically denied and must make the edits, and re-submit the advance fee agreement, costing you lost time, and potential lost sales.
IF YOU ARE LOOKING TO GET INTO THE COMMERCIAL LOAN MODIFICATION MARKET AND SERVED FINANCIALLY STRAPPED COMMERCIAL PROPERTY OWNERS AND INVESTORS, AND YOU INTEND ON COLLECTING ADVANCE FEES FOR YOUR SERVICES, YOU WILL NEED AN ADVANCE FEE AGREEMENT THAT HAS BEEN PREVIOUSLY APPROVED BY THE DEPARTMENT OF REAL ESTATE.
DISCLAIMER / CAVEAT: Please note that although our commercial advance fee agreement has been previously approved for usage in the State of California (it received a letter of non-objection) the DRE is always permitted to impose new requirements, and/or not comply with previous approved versions of the advance fee agreement. Therefore, although our commercial loan modification agreement has been previously approved, the DRE has the inherent power and authority to require new or updated criteria, and re-submission of our commercial advance fee agreement may be required. We have had this happen in the past.
The Law Offices of Steven C. Vondran, P.C. is licensed to practice law in the States of California and Arizona. Mr. Vondran is a licensed real estate broker in both states as well. Currently the firm handles Real Estate, Bankruptcy, and Foreclosure Defense work in addition to assisting real estate brokers in the area of Broker Law. He can be reached at steve@vondranlaw.com or by phone at (877) 276-5084. Emails are not confidential and create no attorney-client relationship. This is an advertisement and communication pursuant to state bar rules. We only seek to solicit and serve homeowners, real estate investors, and brokers in California and Arizona.
RUNNING OUT OF TIME FOR WACHOVIA AND WORLD SAVINGS OPTION ARM LOANS
This is an update for all of our Clients who have World Savings and Option Arm Loans. As you may have heard on our radio show www.LoanModRadio.com (The Foreclosure Defense Show), we have been successful helping many homeowners who have World Savings and Option Arm Loans get loan modifications without charging any advance fees. Please note, our program may only be last another month or so for reasons beyond our control.
We have documentable principal reduction (however this is no guarantee of such) in a good number of cases where the Wachovia or World Savings Homeowner was upside-down in their properties and a principal loan balance reduction was needed to make the modification work.
THIS MAY BE OUR LAST CALL FOR LOAN MODIFICATIONS FOR WORLD SAVINGS OPTION ARM LOANS AND WACHOVIA OPTION ARM LOANS. IF YOU HAVE ONE OF THESE TYPES OF LOANS CALL US TO DISCUSS OUR FANTASTIC LOAN MODIFICATION PROGRAM.
PART OF THE REASON FOR OUR SUCCESS ON THE OPTION ARM LOANS COMES FROM OUR UNDERSTAND OF THESE PREDATORY LOANS. YOU CAN LEARN MORE ABOUT NEGATIVE AMORTIZATION OPTION ARM LOANS AT WWW.OPTIONARMLAWYER.COM
QUIET TITLE ACTIONS IN CALIFORNIA – A BASIC OVERVIEW
The following is general legal information and is not to be construed as legal advice or a substitute for legal advice. The information below many not be complete, accurate, or up-to-date as law can, and does frequently change. For specific questions about your quiet title case, contact a real estate or foreclosure defense attorney to review the facts of your case.
Steve Vondran, Esq. practices Real Estate, Foreclosure Defense & Bankruptcy Law in Phoenix, Arizona, and California where he is licensed to practice law. He can be reached atsteve@vondranlaw.com or (877) 276-5084.
CALIFORNIA QUIET TITLE LAW – A GENERAL OVERVIEW
The statutory provisions for Quiet Title in California can be found in the California Code of Civil Procedure Sections 760.10-760.060. A Quiet Title action is basically a legal action that seeks to “quiet title” to property where adverse claims are made against the property. For example, where a lender wrongfully forecloses on a property and claims the property as their own, but the homeowner challenges this.
Here is the California Quiet Title Statutory Law(there are also cases interpreting these quiet title provisions). Bolded and italics material are provided by me:
760.010. As used in this chapter:
(a) “Claim” includes a legal or equitable right, title, estate, lien, or interest in property or cloud upon title.
(b) “Property” includes real property, and to the extent
applicable, personal property.
760.020. (a) An action may be brought under this chapter to establish title against adverse claims to real or personal property or any interest therein.
(b) An action may be brought under this chapter by parties to an agreement entered into pursuant to Section 6307 or 6357 of the Public Resources Code to confirm the validity of the agreement.
(c) Nothing in this section shall be construed to limit the right of members of the public to bring or participate in actions challenging the validity of agreements entered into pursuant to Section 6307 or 6357 of the Public Resources Code.
760.030. (a) The remedy provided in this chapter is cumulative and not exclusive of any other remedy, form or right of action, or proceeding provided by law for establishing or quieting title to property.
(b) In an action or proceeding in which establishing or quieting title to property is in issue the court in its discretion may, upon motion of any party, require that the issue be resolved pursuant to the provisions of this chapter to the extent practicable.
760.040. (a) The superior court has jurisdiction of actions under this chapter.
(b) The court has complete jurisdiction over the parties to the action and the property described in the complaint and is deemed to have obtained possession and control of the property for the purposes of the action with complete jurisdiction to render the judgment provided for in this chapter.
(c) Nothing in this chapter limits any authority the court may have to grant such equitable relief as may be proper under the circumstances of the case.
760.050. Subject to the power of the court to transfer actions, the proper county for the trial of an action under this chapter is:
(a) Where the subject of the action is real property or real and personal property, the county in which the real property, or some part thereof, is located.
(b) Where the subject of the action is personal property, the county in which the personal property is principally located at the commencement of the action or in which the defendants, or any of them, reside at the commencement of the action.
760.060. The statutes and rules governing practice in civil actions generally apply to actions under this chapter except where they are inconsistent with the provisions of this chapter.
CALIFORNIA QUIET TITLE LAW SUMMARY
So, in short, the main purpose of a quiet title action is to establish title against adverse claims to real property or personal property. As set forth above, the remedy of quiet title can be combined with other causes of action or other remedies. And, in any action or proceeding in which establishing or quieting title to property is in issue, the court may, in its discretion and on the motion of any party, require that the issue be resolved pursuant to the California Code Of Civil Procedure provisions relating to quiet title actions.
In regards to proper jurisdiction for a California quiet title lawsuit, the quiet title lawsuit must be brought in the superior court of the county where the real property is located. Once the Quiet Title Action is before the court, the court has complete power to determine title issues.
NOTE: SECTION 761.020-761.040 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE SETS FORTH SPECIFIC PLEADING REQUIREMENTS AND LIS PENDES RULES WHEN FILING A QUIET TITLE LAWSUIT. THE RULES CAN BE FOUND HERE:
761.010. (a) An action under this chapter is commenced by filing a complaint with the court.
(b) Immediately upon commencement of the action, the plaintiff shall file a notice of the pendency (THIS IS THE “LIS PENDENS” WE HAVE TALKED ABOUT THIS IN OTHER BLOG ARTICLES) of the action in the office of the county recorder of each county in which any real property described in the complaint is located.
LIS PENDENS NOTE (NOW CALLED THE NOTICE OF PENDENCY OF ACTION): This lis pendens puts other parties on notice of your claim to real property and usually stops anyone from buying or selling your real property while the lawsuit is pending. The lis pendens can later be removed, or dissolved by Court order. Please note, there are very specific requirements for filing a lis pendens that you will need to be familiar with (google “vondran lis pendens” for more information).
761.020. The complaint shall be verified and shall include all of the following:
(a) A description of the property that is the subject of the action. In the case of tangible personal property, the description shall include its usual location. In the case of real property, the description shall include both its legal description and its street address or common designation, if any.
(b) The title of the plaintiff as to which a determination under this chapter is sought and the basis of the title. If the title is based upon adverse possession, the complaint shall allege the specific facts constituting the adverse possession.
(c) The adverse claims to the title of the plaintiff against which a determination is sought.
(d) The date as of which the determination is sought. If the determination is sought as of a date other than the date the complaint is filed, the complaint shall include a statement of the reasons why a determination as of that date is sought.
(e) A prayer for the determination of the title of the plaintiff against the adverse claims.
REQUIREMENTS OF THE DEFENDANTS ANSWER TO A CALIFORNIA QUIET TITLE LAWSUIT:
761.030. (a) The answer shall be verified and shall set forth:
(1) Any claim the defendant has.
(2) Any facts tending to controvert such material allegations of the complaint as the defendant does not wish to be taken as true.
(3) A statement of any new matter constituting a defense.
(b) If the defendant disclaims in the answer any claim, or suffers judgment to be taken without answer, the plaintiff shall not recover costs.
761.040. (a) The defendant may by cross-complaint seek affirmative relief in the action.
(b) If the defendant seeks a determination of title as of a date other than the date specified in the complaint, the cross-complaint shall include the date and a statement of the reasons why a determination as of that date is sought.
PARTIES IN A CALIFORNIA QUIET TITLE ACTION (PARTY ISSUES).
California Code of Civil Procedure Section 762.010-762.090 states that the when filing the Quiet Title Lawsuit, the Plaintiff must name as defendants all persons known or unknown claiming an interest in the property and other rules regarding proper parties in a quiet title action are addressed in these sections.
Here are those Sections:
762.010. The plaintiff shall name as defendants in the action the persons having adverse claims to the title of the plaintiff against which a determination is sought.
762.020. (a) If the name of a person required to be named as a defendant is not known to the plaintiff, the plaintiff shall so state in the complaint and shall name as parties all persons unknown in the manner provided in Section 762.060.
(b) If the claim or the share or quantity of the claim of a person required to be named as a defendant is unknown, uncertain, or contingent, the plaintiff shall so state in the complaint. If the lack of knowledge, uncertainty, or contingency is caused by a transfer to an unborn or un-ascertained person or class member, or by a transfer in the form of a contingent remainder, vested remainder subject to defeasance, executory interest, or similar disposition, the plaintiff shall also state in the complaint, so far as is known to the plaintiff, the name, age, and legal disability (if any) of the person in being who would be entitled to the claim had the contingency upon which the claim depends occurred prior to the commencement of the action.
762.030. (a) If a person required to be named as a defendant is dead and the plaintiff knows of a personal representative, the plaintiff shall join the personal representative as a defendant.
(b) If a person required to be named as a defendant is dead, or is believed by the plaintiff to be dead, and the plaintiff knows of no personal representative:
(1) The plaintiff shall state these facts in an affidavit filed with the complaint.
(2) Where it is stated in the affidavit that such person is dead, the plaintiff may join as defendants “the testate and intestate
successors of ____ (naming the deceased person), deceased, and all persons claiming by, through, or under such decedent,” naming them in that manner.
(3) Where it is stated in the affidavit that such person is believed to be dead, the plaintiff may join the person as a defendant, and may also join “the testate and intestate successors of ____ (naming the person) believed to be deceased, and all persons claiming by, through, or under such person,” naming them in that manner.
762.040. The court upon its own motion may, and upon motion of any party shall, make such orders as appear appropriate:
(a) For joinder of such additional parties as are necessary or proper.
(b) Requiring the plaintiff to procure a title report and designate a place where it shall be kept for inspection, use, and copying by the parties.
762.050. Any person who has a claim to the property described in the complaint may appear in the proceeding. Whether or not the person is named as a defendant in the complaint, the person shall appear as a defendant.
762.060. (a) In addition to the persons required to be named as defendants in the action, the plaintiff may name as defendants “all persons unknown, claiming any legal or equitable right, title, estate, lien, or interest in the property described in the complaint adverse to plaintiff’s title, or any cloud upon plaintiff’s title thereto,” naming them in that manner.
(b) In an action under this section, the plaintiff shall name as defendants the persons having adverse claims that are of record or known to the plaintiff or reasonably apparent from an inspection of the property.
(c) If the plaintiff admits the validity of any adverse claim, the complaint shall so state.
762.070. A person named and served as an unknown defendant has the same rights as are provided by law in cases of all other defendants named and served, and the action shall proceed against unknown defendants in the same manner as against other defendants named and served, and with the same effect.
762.080. The court upon its own motion may, and upon motion of any party shall, make such orders for appointment of guardians ad litem as appear necessary to protect the interest of any party.
762.090. (a) The state may be joined as a party to an action under this chapter.
(b) This section does not constitute a change in, but is
declaratory of, existing law.
WHO BEARS THE BURDEN OF PROOF IN A CALIFORNIA QUIET TITLE ACTION? THE ANSWER WILL USUALLY DEPEND ON WHETHER DEFENDANT HOLDS LEGAL TITLE OR WHETHER TITLE IS DISPUTED.
In a California Quiet Title lawsuit (WHERE LEGAL TITLE VESTS IN DEFENDANTS), the Plaintiff must bear the burden of proof (this is the case in most civil lawsuits). The normal burden of proof in a civil lawsuit is “preponderance of the evidence.” However, in a Quiet Title action, the standard of proof is higher and the Plaintiff must establish its right to title by “CLEAR AND CONVINCING” proof. See California Evidence Code Section 662 which discusses the burden of proof in a Quiet Title case:
662. The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.
IF TITLE TO REAL PROPERTY IS “DISPUTED” (AS OPPOSED TO HAVING LEGAL TITLE HELD BY A DEFENDANT) THEN THE TYPICAL “PREPONDERANCE OF THE EVIDENCE” STANDARD WILL APPLY.
A JUDGEMENT IN A QUIET TITLE ACTION IS NORMALLY CONCLUSIVE ON ALL PARTIES KNOWN OR UNKNOWN WHO WERE PARTIES TO THE ACTION.
California Code of Civil Procedure Section 764.030 States:
764.030. The judgment in the action is binding and conclusive on all of the following persons, regardless of any legal disability:
(a) All persons known and unknown who were parties to the action and who have any claim to the property, whether present or future, vested or contingent, legal or equitable, several or undivided. Except as provided in Section 764.045, all persons who were not parties to the action and who have any claim to the property which was not of record at the time the lis pendens was filed or, if none was filed, at the time the judgment was recorded.
HOWEVER, A QUIET TITLE ACTION WILL NOT NORMALLY AFFECT TITLE TO PARTIES WHO WERE NOT A PARTY TO THE ACTION IF THEIR CLAIM WAS KNOWN, OR REASONABLY SHOULD HAVE BEEN KNOWN.
California Code of Civil Procedure Section 764.045 states:
764.045. Except to the extent provided in Section 1908, the judgment does not affect a claim in the property or part thereof of any person who was not a party to the action if any of the following conditions is satisfied:
(a) The claim was of record at the time the lis pendens was filed or, if none was filed, at the time the judgment was recorded.
(b) The claim was actually known to the plaintiff or would have been reasonably apparent from an inspection of the property at the time the lis pendens was filed or, if none was filed, at the time the judgment was entered. Nothing in this subdivision shall be construed to impair the rights of a bona fide purchaser or encumbrancer for value dealing with the plaintiff or the plaintiff’s successors in interest.
THERE ARE NO DEFAULT JUDGMENTS – EVIDENCE IS REQUIRED IN A QUIET TITLE LAWSUIT:
California Code of Civil Procedure Section 764.010 States:
764.010. The court shall examine into and determine the plaintiff’s title against the claims of all the defendants. The court shall not enter judgment by default but shall in all cases require evidence of plaintiff’s title and hear such evidence as may be offered respecting the claims of any of the defendants, other than claims the validity of which is admitted by the plaintiff in the complaint. The court shall render judgment in accordance with the evidence and the law.
Quiet Title Case:Mangindin v. Washington Mutual Bank, 637 F. Supp.2d 700, (N.D. Cal.) 2009.
QUIET TITLE IN THE FORECLOSURE CONTEXT: TENDER ISSUES
Under California law, a plaintiff seeking to quiet title in the face of a foreclosure must allege tender or an offer of tender of the amount borrowed. See Arnolds Management Corp v. Eischen, 158 Cal.App.3d 575, 578, 205 Cal.Rptr. 15 (1984). This may make Quiet Title a more difficult proposition in a foreclosure case.
QUICK SUMMARY OF CALIFORNIA QUIET TITLE LAW
(1) THE COMPLAINT AND ANSWER TO A QUIET TITLE ACTION MUST BE VERIFIED (ESSENTIALLY MEANING MADE UNDER OATH) AND NAME ALL KNOWN OR UNKNOWN PARTIES CLAIMING AN INTEREST IN THE PROPERTY.
(2) THE QUIET TITLE COMPLAINT MUST DESCRIBE THE PROPERTY WITH A LEGAL DESCRIPTION AND COMMON ADDRESS DESCRIPTION.
(3) PLAINTIFF IN A CALIFORNIA QUIET TITLE ACTION MUST SET FORTH WHAT THE ADVERSE CLAIMS (SETTING FORTH SPECIFIC FACTS) ARE AND WHAT TYPE OF DETERMINATION IS SOUGHT.
(4) QUIET TITLE ACTION MUST SET FORTH THE DATE THE DETERMINATION IS SOUGHT AND A PRAYER FOR RELIEF TO DETERMINE PLAINTIFF’S TITLE AGAINST THE ADVERSE CLAIMS.
(5) A QUIET TITLE LAWSUIT MUST BE BROUGHT IN THE PROPER COUNTY.
(6) ANY PERSON WHO CLAIMS AN ADVERSE INTEREST IN THE PROPERTY MAY JOIN IN THE LAWSUIT EVEN IF THEY WERE NOT NAMED AS A A DEFENDANT.
(7) A QUIET TITLE LAWSUIT REQUIRES PROPER USE OF THE LIS PENDENS PROCEDURE (NOTICE OF PENDENCY OF ACTION).
(8) IN A QUIET TITLE ACTION, THE OWNER OF LEGAL TITLE (CHECK THE TITLE REPORT) IS PRESUMED TO BE THE OWNER, AND THIS CAN ONLY BE REBUTTED BY A SHOWING OF CLEAR AND CONVINCING EVIDENCE TO THE CONTRARY.
(9) GENERALLY SPEAKING, THERE ARE NO JURY TRIALS IN A QUIET TITLE ACTION AS THESE ACTIONS ARE “EQUITABLE” IN NATURE (NOT SEEKING MONEY DAMAGES) SO THE COURT WILL DECIDE PLAINTIFF’S CLAIM AND EQUITABLE DEFENSES MAY BE ASSERTED BY OPPOSING PARTIES. THE EXCEPTION WOULD BE IF PLAINTIFF IS OUT OF POSSESSION OF THE PROPERTY AND IS FILING THE QUIET TITLE ACTION TO REGAIN POSSESSION – IN THESE CIRCUMSTANCES THE CLAIM MAY BE DEEMED “LEGAL” IN NATURE AND A JURY TRIAL MAY BE REQUESTED. SEE MEDEIROS V. MEDEIROS, 177 CAL APP. 2d 69, (1960). THE PRUDENT PRACTICE IS TO ALWAYS REQUEST A JURY TRIAL WHEN FILING A PLEADING IF THAT IS WHAT YOU WANT. RAISE IT OR WAIVE IT IS THE GENERAL RULE.
(10) GENERALLY SPEAKING, A JUDGMENT IN A QUIET TITLE LAWSUIT IS CONCLUSIVE AND BINDING ON ALL PARTIES TO THE LITIGATION, BUT MAY NOT BE BINDING ON PARTIES NOT INVOLVED IN THE QUIET TITLE LAWSUIT BUT WHOS CLAIMS WERE KNOWN OR REASONABLY APPARENT. THERE ARE NO DEFAULT JUDGMENTS – CLEAR EVIDENCE IS REQUIRED.
(11) IN A QUIET TITLE ACTION IN THE FORECLOSURE OF A RESIDENCE, THE COURT MAY REQUIRE THE PLAINTIFF TO “DO EQUITY” OR TENDER AMOUNTS OWED OR IN ARREARS OR PAY THE ENTIRE BALANCE. A PARTY CANNOT USUALLY “GET EQUITY” IF THEY DON’T “DO EQUITY”.
KEYWORDS: CALIFORNIA LIS PENDENS / PENDENCY OF ACTION / QUIET TITLE ACTION / CALIFORNIA QUIET TITLE LAWSUIT / BURDEN OF PROOF IN QUIET TITLE CASE / QUIET TITLE IN FORECLOSURE CASE / LAWSUIT TO QUIET TITLE / CALIFORNIA FORECLOSURE DEFENSE LAWYER / PHOENIX FORECLOSURE LAWYER.
ATTORNEY FEES - IN MOST CASES WE CHARGE AN UP-FRONT RETAINER AND HOURY FEE. IN SOME CASES, HOWEVER, WE MAY BE ABLE TO CHARGE A CONTINGENCY FEE OR FLAT RATE FEE. FOR MORE INFORMATION ABOUT CONTINGENCY FEES YOU CAN CHECK US OUT AT WWW.CONTINGENCYCASE.COM AN ONLINE DATABASE OF CONTINGENCY LAWYERS WHO MAY AGREE TO TAKE YOUR CASE ON A CONTINGENCY FEE BASIS.
THIS IS AN ADVERTISEMENT AND COMMUNICATION PURSUANT TO STATE BAR RULES. COPYRIGHT 2010 ALL RIGHTS RESERVED. WE ONLY SEEK TO SOLICIT CLIENTS IN ARIZONA AND CALIFORNIA WHERE THE LAW OFFICES OF STEVEN C. VONDRAN IS LICENSED TO PRACTICE LAW.
OUR GOAL HERE IS TO PROVIDE YOU GENERAL LEGAL INFORMATION, TIPS, STRATEGIES, AND INSIGHTS THAT MAY HELP YOU SAVE YOUR HOME OR INVESTMENT PROPERTY FROM FORELOSURE. SOME TOPICS THAT WILL BE DISCUSSED ON THIS WEBSITE ARE AS FOLLOWS:
Truth In Lending Law including rescission rights
Bankruptcy with a focus on Chapter 7 and Chapter 13
Forensic Loan Audits
Predatoy Lending
Mortgage Litigation
Foreclosure Timelines
Tenants Rights facing foreclosure of subject property
Seeking injunctions to stop foreclosure of your property
Lis Pendens
Quiet Title
RESPA law
Option Arm Loans
Subprime Slime Loans
Produce the Note issues
Rescinding Loans through bnkruptcy
Unlawful Detainer Timelines
SB 94 issues
Commercial loan modification
Residential Loan Modification
Deficieny Judgments
Trial Plan Modifications
Real Estate lawsuits
Loan Modification Scams
Real Estate and Foreclosure Cases
DRE broker issues includijg DRE audits
Advance Fee and Foreclosure Consultant Issues
More
If you have special requests for topics you would like us to cover please do not hesitate to email us at steve@vondranlaw.com Please keep in mind any posts you make to this wwebsite are NOT private and can be read by anyone, so please do not submit confidential information. In addition, submitting information to us or posting information on this website does NOT create an Attorney-Client relationship. Only signing a retainer can do that. All information provided on this website is of general legal nature only and is not intended to be construed as lgal advice or a substitute for legal advice. For specific questions about your case or your property, please contact a foreclosure defense lawyer or bankruptcy attorney. Articles may be missing certain information, and the law may not be complete, current, or up-to-date. Please conduct your own reasearch and do not rely on information contained on this website. Steve Vondran, Attorney is licensed to practice law only in the States of California and Arizona and only seeks to solicit and serve Clients in these two states. This blog can be construed as an advertisement and communication pursuat to state bare rules. All articles are copyright to the law offices of Steve Vondran, P.C. All rights reserved.
Arizona Legislature passes Law Regulating Loan Modification Companies – Arizona House Bill 2145 – Will it stop Mod Scams?
The Arizona State Legislature passed a law effective October 1, 2009 that provides that any person wishing to negotiate with lenders or note holders to obtain a temporary or permanent modification in an existing residential mortgage loan agreement become licensed as a Mortgage Loan Originator (MLO) and be employed by an Arizona licensed mortgage broker or mortgage banker. Such licensing must occur no later than July 2010.
Arizona Loan Originator Statutes: Under Arizona’s loan originator statutes, (http://www.azleg.gov/ArizonaRevisedStatutes.asp?Title=6 ), Article 4, all individuals meeting the definition of a loan originator (LO) must meet licensing requirements that are in compliance with the SAFE Act.
The new Arizona Loan Modification Licensing Law brings Arizona into compliance with the requirements of the Federal SAFE ACT (Secure and Fair Enforcement for Mortgage Licensing Act.
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) established requirements for the licensing and registration of all Mortgage Loan Originators (MLOs). MLOs who work for an insured depository or its owned or controlled subsidiary that is regulated by a federal banking agency, or for an institution regulated by the Farm Credit Administration, are registered. All other MLOs are to be licensed by the states.
Safe act sets minimum licensing requirements:
The SAFE Act requires state-licensed MLO’s to do the following:
(1) Pass a written qualified national test with at least a 75% pass rate
The Loan Originator Test is comprised of two components; a National and a State Component.
(3) All MLO’s must submit fingerprints to the Nationwide Mortgage Licensing System (NMLS) for submission to the FBI for a criminal background check
(4) State-licensed MLO’s must also provide authorization for NMLS to obtain an independent credit report (Applicants must show financial responsibility. Having a bankruptcy will not automatically disqualify an applicant as applications will be reviewed on a case-by-case basis.
(5) MLO’s must post a $200,000 bond or pay into the mortgage recovery fund.
Information regarding NMLS, loan originator licensing and course requirements can be found at the Arizona Department of Financial Institution website at: http://www.azdfi.gov/Licensing/NMLSLO/nmlslo.html.
(6) In addition, all loan originators must file a form (MU4) with the Arizona Department of Financial Institutions.
(7) The employing broker/company must file a mortgage call report and report of condition through the NMLS.
Perhaps these requirements will stem the rash of loan modification scams perpetrated in and around the Phoenix, Arizona area and stop these so-called “attorney backed” and “attorney based” loan modification companies from victimizing Arizona homeowners.
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Steve Vondran, Esq., is a real estate, bankruptcy, and foreclosure defense lawyer practicing in Phoenix, Arizona. He is also licensed to practice law in California. He can be reached at steve@vondranlaw.com or www.vondranlegal.com
(1) are there are grounds for an injunction (wrongful foreclosure / failure to follow foreclosure laws / truth in lending rescission grounds with ability to tender) See our website at www.rescindmyloan.net for more information on truth in Lendin Rescisssion cases;
(2) Are there grounds for a preadtory lending lawsuit? (ex. predatory lending claims against a brooker who may have been insured at the time of the transaction). For example, if a broker made over $20,000 by steering a homeowner into a worse loan than they qualfied for – given their credit scores and ability to repay – this may result in a breach of fiduciary duty and provide grounds for a lawsuit for money damages. Note that this may not stop your foreclosure sale;
(3) Did your loan servicer fail to respond to a qualified writen request or debt validaton letter?;
(4) has the lender or loan servicer failed to identify the true holder or benefiaicy of the loan following a proper request for such? Can someone tell why it has become a secret in America who you owe your money to, or who you would have to contact if you wanted to pay off your mortgage in full and ensure the proper party received the money? See our website at www.producehthenoteattorney.com for more information about the “produce the note” foreclosure defense theory;
(5) Do you have a truly predatory lending case that is worthy of presenting to a judge and/or jury who are hearing thousands of these types of cases? See our website at www.optionarmlawyer.com for more information.
(6) Did the lender or loan servicer breach a trial plan agreement or final modification agreement? See our website at www.trialplanfraud.com for more information.
(7) Are there better options if a loan modification cannot be achieved such as filing for bankruptcy, pursuing a short-sale or seeking deed-in-lieu of foreclosure? See www.BKAttorneys.net for more information about filing for Bankruptcy protection in California or Arizona.
These are just a few considerations. For specific questions about your case contact a foreclosure defense lawyer at (877) 276-5074.
When you are considering filing for bankruptcy in the Greater Phoenix Arizona region (Phoenix, Scottsdale, Tempe, Mesa, etc.), you will likely be filing your case in the United States Bankruptcy Court for the District of Arizona.
The address for the United States Bankruptcy Court for the District of Arizona is 230 N. First Ave, Suite 101, Phoenix, AZ 85003. The general telephone numbers are 602-682-4000 / 800-556-9230.
Here is a link to common forms and publications that may assist you in filing for bankruptcy in Phoenix Arizona with or without a Phoenix bankruptcy Lawyer http://www.azb.uscourts.gov/default.aspx?PID=73.
THE OVERLAP OF BANKRUPTCY AND TRUTH IN LENDING LAW
Bankruptcy is an option for some California or Arizona homeowners who are facing foreclosure. Basically there are two types of Bankruptcy that most homeowners wind up considering.
Chapter 7 Bankruptcy – which normally eliminates unsecured debts but which may not save the home from foreclosure and;
Chapter 13 Bankruptcy – which usually involves a homeowner getting into a 3-5 year repayment plan that seeks to pay back the creditors (including mortgage note-holders) over a period of time and in an agreed-upon manner. Some people use Chapter 13 bankruptcy to “lien strip” second mortgages, and sometimes Chapter 13 can save the house (especially where past due loan payments can be brought in to get the account current).
TRUTH IN LENDING AND BANKRUPTCY RESCISSION STRATEGY: During bankruptcy, some homeowners are seeking to exercise their Truth in Lending (TILA) rights by listing their property as “unsecured” debt following their exercise of rescission. See In re Jaaskelainen a 2008 case out of the Federal District Court in Eastern District of Massachusetts (Adversary proceeding No. 07-01242).
In this case, the debtor (homeowner) listed their property as unsecured following their exercise of rescission rights under Federal Truth in Lending Law (they argued they did not receive two copies of their notice of right to cancel for each borrower), a technical violation, but nevertheless a material violation triggering an extended three year right to rescind their loan.
NOTE: The house may be listed as an unsecured asset because under Truth in Lending law, once you exercise your TILA rescission rights, the security instrument is supposed to be automatically terminated by operation of law. If this is true, then the house would be transformed into an unsecured asset.
By listing the property as unsecured on the bankruptcy petition, the homeowner seeks to accomplish two things:
(1) FORCE THE LENDER TO PROVE THERE IS NO RESCISSION RIGHT, AND THUS THEY REMAIN A SECURED CREDITOR: The “lender” or creditor would be compelled to show up and fight your TILA rescission case and basically defend their position that there was no TILA violation and/or that they have the “good faith error” defense to TILA.
If the creditor loses the TILA battle, then the Creditor’s claim (at least according to one federal bankruptcy court) would be unsecured, AND, as the Court held in the Jaaskelainen case, THERE IS NO OBLIGATION TO TENDER AND THE CREDITOR IS MERELY TREATED EQUALLY WITH ALL OTHER “UNSECURED” CREDTIROS. This means, they get in line with all the other unsecured creditors and have no special claim as secured creditors normally have. This is profund in the sense that the Creditor may be left with nothing but a partial interest in their previously secured claim.
Also, if they cannot succeed on the TILA claim, they will likely be on the hook to pay the debtor’s Attorney fees (as provided for under TILA) incurred by the Bankruptcy petitioners counsel. Actual damages, and other statutory damages may also be available.
(2) EVEN IF THE CREDITOR CAN PREVAIL ON THE TRUTH IN LENDING CLAIM (I.E. PRESERVE THEIR “SECURED” STATUS) THE DEBTOR MAY ALSO FIND THIS TO BE AN OPPOTUNE TIME TO MAKE THE PARTY THAT IS BEFORE THE COURT PROVE THEY ARE ACTUALLY THE “CREDITOR” TO WHOM THE DEBT IS OWED (This involves the Produce the Note Strategy you may have heard of). After all, if they are not a true “creditor” then why are they in Court in the first place?
At any rate, this is one of the ways Truth in Lending law is intersecting with Bankruptcy law.
As you can see, this sets up a legal challenge that may be raised in an “adversary proceeding.”
Under Bankruptcy Rule 7001, An adversary proceeding is a proceeding:
(1) to recover money or property, except a proceeding to compel the debtor to deliver property to the trustee, or a proceeding under Sec. 554(b) or Sec. 725 of the Code, Rule 2017, or Rule 6002,
(2) to determine the validity, priority, or extent of a lien or other interest in property, other than a proceeding under Rule 4003(d),
(3) to obtain approval pursuant to Sec. 363(h) for the sale of both the interest of the estate and of a co-owner in property,
(4) to object to or revoke a discharge,
(5) to revoke an order of confirmation of a chapter 11, chapter 12, or chapter 13 plan,
(6) to determine the dischargeability of a debt, (7) to obtain an injunction or other equitable relief,
(8) to subordinate any allowed claim or interest, except when subordination is provided in a chapter 9, 11, 12, or 13 plan, (9) to obtain a declaratory judgment relating to any of the foregoing, or (10) to determine a claim or cause of action removed pursuant to 28 U.S.C. Sec. 1452.
Truth in Lending law is one of the most powerful rights consumers have to fight predatory lending and to potentially save ones home from foreclosure.
WHAT IS TRUTH IN LENDING LAW? Truth in lending law (essentially) is a law that demands that financial institutions make certain “material disclosures” in a loan transaction such as disclosing the annual percentage rate (APR), finance charge, amount financed, and total of payments and payment schedule to borrowers. The law was designed to force lenders to put the “TRUTH” in the “LENDING.” There is, of course, a whole lot to TIL law than this, but for our purposes here suffice it say these are the important items as far as foreclosure defense is concerned.
In a perfect world we would not need these kinds of lawS that simply request that lenders to be truthful. However, sprinkle in a little GREED and of a crazy real estate market and all sorts of things can get fouled up and these types of consumer protection laws are needed to try to protect homeowners from what must simply be called “UNTRUTHFUL LENDERS.”
WHAT IS THE THREE YEAR EXTENDED RIGHT TO CANCEL UNDER TRUTH IN LENDING LAW?
Under federal truth in lending law, in a transaction subject to rescission (ex. a refinance loan typically qualifies) EACH BOROWER or person with ownership interest in a property must be provided TWO COPIES EACH of the notice of right to cancel (NRTC) disclosure document.
Now, you might be asking, why does every person get two copies each of this NRTC? The idea was that any of the parties should have the right to cancel the loan, which cancellation would be effective as to all, and they could keep a copy for their records, and mail the other one in.
If you see this as important – getting two copies each of the NRTC – then you understand why this concept is protected in Federal Truth in Lending Law.
You should also realize that in addition to each party getting two copies of this essential legal document (it tells you when and where you must cancel your loan) THE DATES ON THE NOTICE OF RIGHT TO CANCEL MUST BE FILLED IN AND THE DATES MUST BE ACCURATE. After all, what good is a disclosure document if it doesn’t actually disclose anything useful?
What we see in a good number of cases is that the originating lender did not take care to see that each borrower received copies of the NRTC and that the dates were accurately filled in. Part of this is due to the use of mobile notaries who may not have ensured that Truth in Lending requirements were strictly adhered to. After all, it is not the job of the Notary to ensure TILA compliance.
WHAT HAPPENS WHEN A BORROWER DOES NOT GET THEIR TWO COPIES OF THE NOTICE OF RIGHT TO CANCEL UNDER TILA?
If there are any deficiencies in the above stated requirements (keep in mind there are other material TILA violations not mentioned in this article) it triggers a strange anomoly, an EXTENDED THREE YEAR RIGHT TO RESCIND YOUR LOAN. This is strange, because it essentially opens the door back up for rescission even three years after the borrower became obligated on the loan.
WHAT HAPPENS WHEN YOU EXERCISE YOUR EXTENDED THREE YEAR RESCISSION RIGHT UNDER TRUTH IN LENDING LAW?
(1) The security instrument is supposed to be automatically voided by operation of law. I say “supposed” to because there are ways the lenders try to work around this.
(2) The lender is supposed to “tender” all payments, costs, fees, etc. that they received in connection with the loan, ALONG WITH, all the money all other parties received in connection with the loan at issue. In theory, it means they would have to send you a check for all benefits received in connection with the loan. This would be great if it were actually the STEP 2 the lenders had to follow.
(3) Theoretically, after steps ONE and TWO are performed, the Borrower is THEN supposed to “tender” back to the bank the difference between the loan balance and what Plaintiff is owed from the Lender as part of their tender obligation (discussed as step 2).
Please note that IF this is how rescission acted in REAL LIFE then there would be a lot loss foreclosures, because if the security interest was voided by operation of law as written (as discussed at step 1 above) then the lender’s would have nothing to foreclose on, the security interest (ex. Deed of Trust) would be void.
But, I sense you figured it out, it doesn’t happen that way in real life what normally happens from my experience is the following:
(1) The lender denies its role in a Truth in Lending violation, basically by claiming there was no violation.
(2) The Client tries to work out a loan modification and the Client is denied (sometimes for a reason that seems valid and other times not)
(3) As the countdown to foreclosure sale begins, a Client will inevitably contact an attorney (sometimes for the first time) and assert that they need an injunction against foreclosure and/or argue they want to rescind their loan.
(4) If the file review (sometimes called a forensic loan audit) verifies the material truth in lending violation exists the Client will want to send in a rescission letter exercising, in most cases, the extended three year right to rescind your loan
(5) The lender will refuse to honor your TILA request for rescission and will basically tell you to “pound sand.”
(6) The homeowner, now infuriated by the lender and their callous response, wants to sue to rescind.
(7) The next discussion with the Client usually involves the “tender” obligation imposed by Tender. The: “After you get back what they owe you, you are going to owe them” talk.
(8) If litigation is the chosen path to pursue, (and assuming the issue of tender has been sufficiently addressed), the next step is to send in the rescission letter to the lender – and all their predecessors. The letter will set forth your grounds for rescission and demand that they honor our demand or face a lawsuit. We typically also put a QWR in there to get a life of loan accounting (so we know more about the final tender obligations)
(9) A lawsuit is filed by the homeowner because the lender or loan servicer would NOT HONOR your TILA notice of exercise of rescission rights letter, or, they would not recognize your stated TILA violation.
(10) At this point, the lender may remove the case to federal court since you are raising a Federal Claim. There are pros and cons to this.
(11) The lender will undoubtedly demand that the Judge require the borrower to “tender” on the spot (notice how the lender is asking the judge to modify the 1,2,3 step process mentioned above). The borrower may then be required to discuss the issue of tender.
(12) If it is determined that the borrower cannot tender, or the judge is otherwise unwilling to agree to the homeowners tender strategy, then this would likely thwart the defense and the Lender would be able to foreclose on the property (and may not have to pay attorney fees as is normally required for TILA violations that trigger the extended three year right of cancellation).
(13) However, if the judge agrees to the TILA tender plan, then the loan can be rescinded and the lender may be required to tender to you, and to pay your attorney fees.
(14) So, as you see, the lender will try to have the judge modify the statutorily proscribed steps, and get the borrower to prove their TILA violation and ability to tender before they will release the security instrument. Under TILA that judge has the power and authority to “modify the steps” of the rescission transaction.
When people say that your “loan was sold on the secondary market” usually they mean that your loan was immediately sold off after it was originated. The financial institution that purchases the loan is purchasing a negotiable instrument and since they were “assigned” the loan and the right to receive payment, they are known as the loan “assignee.”
Now, sometimes the party that purchases the loan, (the loan assignee) seeks to securitize the loan which basically involves taking your promissory note and “pooling” your note with about a thousand other loans, for example. These loan pools are then usually managed by a Trustee and an agreement is entered into between the trustee and loan servicer as to rights and duties in regard to servicing the loan and dealing with the money collected.
These loan pools are then divided into tranches, or products that may wet the appetite of individual investors such as hedge funds, insurance companies, foreign investors and others who purchase “asset backed securities” that were supposedly secured by the loan pools.
So, in many cases, you get a loan and that loan is sold off to another party (financial institution) who purchases your loan and may securitize the loan to be sold to Wall Street investors, who are the party entitled to ultimate payment on the loan.
Note, the Secondary market may therefore consist of Fannie Mae and Freddie Mac (a quasi-governmental agency that securitizes loans) or a “Private label” loan securitizer that uses Investment bankers / loan aggregators to help them securitize the loans.
The one major draw-back of having a loan securitized is that the Trustee (who is appointed to manage the trust) and the Loan Assignee (which is the owner of the loan – ex. investor who funded the loan) will claim they are “holders in due course” and not liable for any predatory lending practices of the loan assignor. We discuss the holder in due course in more detail below. In the context of seeking a loan modification, this may make it a tougher case to muster legal leverage following a mortgage file review, or forensic loan audit that identifies predatory lending practices of a loan originator.
DO YOU HAVE AN FHA LOAN THAT NEEDS MODIFICATION? NEW PROGRAM ALLOWS PRINCIPAL LOAN BALANCE REDUCTIONS AND FIXED INTEREST RATES.
The following is general information. Steve Vondran practices real estate, bankruptcy and foreclosure defense and can be reached at steve@vondranlaw.com or (877) 276-5084. He helps homeowners in California and Arizona where he is licensed to practice law.
Effective August 15, 2009 HUD announced a new loan modification program that would allow homeowners with an FHA loan, who could not qualify for any other loan modification, to apply for a FHA HAMP program (making home affordable), that may allow borrowers with FHA loans to keep their homes and avoid foreclosure. The general details of this FHA loan modification program are as follow (additional terms and conditions may apply, please contact an Attorney or a HUD Counselor at www.HUD.gov)
BASIC QUALIFICATION GUIDELINES:
(1) You must be at least 30 days late on your mortgage, but no more than 12 months delinquent. However, you cannot force a delinquency merely by failing to make loan or mortgage payments
(2) Seasoning requirement: the FHA loan must be at least 4 months old
(3) The property must be the primary residence of the borrower, owner-occupied and a single family dwelling 104 units
(4) The borrower must currently be paying more that 31% of their gross monthly income toward their mortgage payment (front-end DTI more than 31% of their gross monthly income)
(5) The maximum back-end ratio (ratio of all expenses against gross monthly income) cannot exceed 55%. So if you make $10,000 gross monthly income, you cannot have more than $5,500 in total debt following the loan modification
(6) Your loan servicer must be FHA approved and participating in the program (note: the fha loan servicer can be incentivized up to $1,250 to provide you with the modification
DETAILS OF THE FHA LOAN MODIFICATION:
(1) The servicer may write down your mortgage to 31% of your gross monthly income (so if you make $10,000 per month, and your current mortgage payment is $4,000, the fha loan servicer can write you down to $3,100 monthly payment – which payment will include TAX, INSURANCE, PRINCIPAL AND INTEREST). What they call “PITI.”
(2) The amount of principal that gets written down is placed in a HUD partial Claim account. The amount placed into the HUD account would only be payable by the borrower if the house is sold or refinanced or at the end of the HAMP modification term.
(3) If you have a second mortgage, the second mortgage holder will have to agree to subordinate their lien to the partial claim of HUD in order for the modification to work
(4) The interest rate on the loan will be a fixed interest rate.
(5) Impounding for tax and insurance is required.
(6) OTHER IMPORTANT FEATURES: THERE ARE NO MAXIMUM LOAN LIMITS AND NO MAXIMUM MORTGAGE AMOUNTS AS THE OBAMA MAKING HOME AFFORDABLE PROGRAM HAS, AND IN ADDITION, YOU DO NOT HAVE TO HAVE A FANNIE OR FREDDIE LOAN AS THE CURRENT HAMP PROGRAM REQUIRES.
(7) There are no credit application fees, no costs for the program, no mortgage insurance premiums, and no appraisal required.
(8) You will be required to submit true and accurate financials, and an affidavit of hardship (yes, a true hardship is required (loss of job, loss of income, divorce, medial issues, etc.)
(9) GROSS MONTHLY INCOME: In determining your gross monthly the lender or loan servicer may consider many different sources of income such as: wages/salaries, overtime, commissions, tips and bonuses, pension income, retirement income, unemployment income and rental income.
BOTTOM LINE: The FHA loan modification program is pretty darn cool if you qualify. Contact HUD for more details, or contact an attorney to discuss your foreclosure defense case. More information on the underwriting guidelines for the program can be found here: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-23mlatach.doc
A few ways (ideas) to try to seek an injunction against foreclosure in Arizona
The following is general legal information only and is not to be construed as legal advice or a substitute for legal advice. These are a few things to look at when investigating whether or not you have a defense to foreclosure.
Steve Vondran, Esq. is an attorney practicing Real Estate, Bankruptcy and Foreclosure Defense in Phoenix, Arizona and California. He can be reached at (877) 276-5084 or emailed atSteve@VondranLaw.com
POTENTIAL STRATEGIES TO SEEK AN INJUNCTION AGAINST FORECLOSURE IN PHOENIX, SCOTTSDALE, AND SURROUNDING AREAS IN ARIZONA.
(1) Tort of Wrongful Foreclosure: For example, one way to try to seek an injunction to stop a foreclosure sale would be to argue that you received a loan modification or loan workout, and performed the agreement and thus, cured the breach. See the case of Herring v. Countrywide Home Loans, 2007 WL 2051394 (D. Ariz. 2007). This is a foreclosure defense grounds that definitely needs to be explored with the explosion of loan modifications in Phoenix, Arizona and elsewhere. Under the Obama Making Home Affordable program (HAMP), and under some FHA HAMP modification programs, the lenders and loan servicers are giving out “three month trial plan” offers.
These agreements typically state that the borrower does, or may, qualify for a loan modification. The borrower, induced into believing they qualify for a loan modification, typically makes the three payments, and may also submit financial documentation to be reviewed. In at least some of these trial plan modification agreements we have reviewed, the lender promises that if the three trial plan payments are made on time, and if the borrower’s financial condition (and some other “material representations” made by the borrower) do not change by the time the third payment is made, then the lender, in some of these agreements, agrees to provide the final and permanent loan modification which is supposed to be in line with the the trial plan payment was. What we are seeing is lenders and loan servicers not honoring what appears to be a valid agreement, and instead either denying the modification, and in some cases, selling the house from underneath the borrower. If you feel duped by a trial plan offer that was not honored, check out our website at www.TrialPlanFraud.com
The court may reach the conclusion that the lender / beneficiary is not exercising the power of sale in good faith in violation of its statutory duty.
(2) Failure to Comply with Arizona Foreclosure Statutes:
There can be no valid foreclosure in the State of Arizona without complying with the rules and regulations set forth in the Arizona foreclosure statutes.
For example, if there is a failure to follow the Notice of Sale Procedures this could provide proper grounds to enjoin the foreclosure sale in Phoenix, Scottsdale, and other surrounding Arizona cities. Here are the statutory requirements under Arizona Revised Statutes Section 33-808.
33-808. Notice of trustee’s sale
A. The trustee shall give written notice of the time and place of sale legally describing the trust property to be sold by each of the following methods:
1. Recording a notice in the office of the recorder of each county where the trust property is situated.
2. Giving notice as provided in section 33-809 to the extent applicable.
3. Posting a copy of the notice of sale, at least twenty days before the date of sale in some conspicuous place on the trust property to be sold, if posting can be accomplished without a breach of the peace. If access to the trust property is denied because a common entrance to the property is restricted by a limited access gate or similar impediment, the property shall be posted by posting notice at that gate or impediment. Notice shall also be posted at one of the places provided for posting public notices at any building that serves as a location of the superior court in the county where the trust property is to be sold. Posting is deemed completed on the date the trust property is posted. The posting of notice at the superior court location is deemed a ministerial act.
4. Publication of the notice of sale in a newspaper of general circulation in each county in which the trust property to be sold is situated. The notice of sale shall be published at least once a week for four consecutive weeks. The last date of publication shall not be less than ten days prior to the date of sale. Publication is deemed completed on the date of the first of the four publications of the notice of sale pursuant to this paragraph.
B. The sale shall be held at the time and place designated in the notice of sale on a day other than a Saturday or legal holiday between 9:00 a.m. and 5:00 p.m. mountain standard time at a specified place on the trust property, at a specified place at any building that serves as a location of the superior court or at a specified place at a place of business of the trustee, in any county in which part of the trust property to be sold is situated.
C. The notice of sale shall contain:
1. The date, time and place of the sale. The date, time and place shall be set pursuant to section 33-807, subsection D. The date shall be no sooner than the ninety-first day after the date that the notice of sale was recorded.
2. The street address, if any, or identifiable location as well as the legal description of the trust property.
3. The county assessor’s tax parcel number for the trust property or the tax parcel number of a larger parcel of which the trust property is a part.
4. The original principal balance as shown on the deed of trust. If the amount is not shown on the deed of trust, it shall be listed as “unspecified”.
5. The names and addresses, as of the date the notice of sale is recorded, of the beneficiary and the trustee, the name and address of the original trustor as stated in the deed of trust, the signature of the trustee and the basis for the trustee’s qualification pursuant to section 33-803, subsection A, including an express statement of the paragraph under subsection A on which the qualification is based. The address of the beneficiary shall not be in care of the trustee.
6. The telephone number of the trustee.
7. The name of the state or federal licensing or regulatory body or controlling agency of the trustee as prescribed by section 33-803, subsection A.
D. The notice of sale shall be sufficient if made in substantially the following form:
Notice of Trustee’s Sale
The following legally described trust property will be sold, pursuant to the power of sale under that certain trust deed recorded in docket or book _______________________ at page __________ records of ______________ county, Arizona, at public auction to the highest bidder at (specific place of sale as permitted by law) _______________, in _______________ county, in or near _______________, Arizona, on ________, ____, at ___________ o’clock ___m. of said day:
(street address, if any, or identifiable
location of trust property)
(legal description of trust property)
Tax parcel number _______________
Original principal balance $________________________
Name and address of beneficiary ______________________________
______________________________
______________________________
Name and address of original trustor _________________________
_________________________
_________________________
Name, address and telephone number of trustee ________________
__________________________________
__________________________________
Signature of trustee _____________________________
Manner of trustee qualification ___________________________
Name of trustee’s regulator _______________________________
Dated this _____________ day of ______________, ____.
(Acknowledgement)
E. Any error or omission in the information required by subsection C or D of this section, other than an error in the legal description of the trust property or an error in the date, time or place of sale, shall not invalidate a trustee’s sale. Any error in the legal description of the trust property shall not invalidate a trustee’s sale if considered as a whole the information provided is sufficient to identify the trust property being sold. If there is an error or omission in the legal description so that the trust property cannot be identified, or if there is an error in the date, time or place of sale, the trustee shall record a cancellation of notice of sale. The trustee or any person furnishing information to the trustee shall not be subject to liability for any error or omission in the information required by subsection C of this section except for the wilful and intentional failure to provide such information. This subsection does not apply to claims made by an insured under any policy of title insurance.
F. The notice of trustee sale may not be rerecorded for any reason. This subsection does not prohibit the recording of a new or subsequent notice of sale regarding the same property.
Also note, where the deed of trust or mortgage calls for a certain plan or procedure for foreclosure, that plan must be followed. Therefore, you need to check the procedures set forth in the deed of trust or mortgage instrument and see if they complied with the procedures that may be called for therein.
There are other sections relating to foreclosure that must also be reviewed. For example, substitution of Trustees is covered in this section:
33-804. Appointment of successor trustee by beneficiary
A. If a person appointed as trustee fails to qualify, is unwilling or unable to serve or resigns as trustee or if a trustee was not designated in the deed of trust, the beneficiary may appoint a successor trustee, and such appointment shall constitute a substitution of trustee.
B. The beneficiary may at any time remove a trustee for any reason or cause and appoint a successor trustee, and such appointment shall constitute a substitution of trustee.
C. A notice of substitution of trustee shall be recorded in the office of the county recorder of each county in which the trust property or some part of the trust property is situated at the time of the substitution. The beneficiary shall give written notice through registered or certified mail, with postage prepaid, to the trustor.
D. A notice of substitution of trustee shall contain a description of the basis for the successor trustee’s qualification pursuant to section 33-803, subsection A. A notice of substitution of trustee shall be sufficient if acknowledged by all beneficiaries under the trust deed or their agents as authorized in writing and if prepared in substantially the following form:
Notice of Substitution of Trustee
The undersigned beneficiary hereby appoints ___________ _______________________________________________________________ _______________________________________________________________ _______________________________________________________________ successor trustee under the trust deed executed by ____________________ as trustor, in which _____________ is named beneficiary and _____________ as trustee, and recorded ________________, _____, in _________________ county in book or docket _________________, page ______________, and legally describing the trust property as:
(legal description of trust property)
The successor trustee appointed herein qualifies as a trustee of the trust deed in the trustee’s capacity as a ______________________ as required by Arizona Revised Statutes section 33-803, subsection A.
Dated this _______________ day of ________________, ____.
____________________
Signature
(Acknowledgement)
E. A notice of substitution of trustee is effective immediately on execution as prescribed by subsection D of this section.
F. A person appointed as a trustee under a deed of trust may resign as trustee at any time. Any such resignation shall be without liability, provided the person has not agreed in writing or by the person’s conduct to act in such capacity. If the trustee has agreed in writing or by the person’s conduct to act in such capacity, the person may only resign in accordance with the terms of the trust deed and this chapter. If a trustee fails to qualify or is unwilling or unable to serve or resigns, it does not affect the validity of the deed of trust, except that no action required to be performed by the trustee under this chapter or under the deed of trust may be taken until a successor trustee is appointed by the beneficiary or the beneficiary’s agent as authorized in writing pursuant to this section. Resignation by a trustee is made by recordation of a notice of resignation in the office of the county recorder of each county in which the trust property or some part of the trust property is situated at the time of the resignation. Written notice shall be given through registered or certified mail, with postage prepaid, to the trustor and the beneficiary. A notice of resignation of trustee is sufficient if acknowledged by the trustee and prepared in substantially the following form:
Notice of Resignation of Trustee
The undersigned trustee hereby resigns as trustee under the deed of trust executed by ________________, as trustor, in which ________________ is named beneficiary, and recorded ________________, ____, in ________________ county, in book or docket __________, page __________, and legally describing the trust property as:
(legal description of trust property)
Dated this _______________ day of _______________, ____.
_________________
Signature
(Acknowledgement)
Other Sections to look at (that may allow an Arizona homeowner to enjoin and/or set aside a foreclosure sale in Arizona) might relate to irregularities in the foreclosure sale/bidding process.
33-810. Sale by public auction; postponement of sale
A. On the date and at the time and place designated in the notice of sale, the trustee shall offer to sell the trust property at public auction for cash to the highest bidder. The trustee may schedule more than one sale for the same date, time and place. The attorney or agent for the trustee may conduct the sale and act at such sale as the auctioneer for the trustee. Any person, including the trustee or beneficiary, may bid at the sale. Only the beneficiary may make a credit bid in lieu of cash at sale. The trustee shall require every bidder except the beneficiary to provide a ten thousand dollar deposit in any form that is satisfactory to the trustee as a condition of entering a bid. The trustee or auctioneer may control the means and manner of the auction. Every bid shall be deemed an irrevocable offer until the sale is completed, except that a subsequent bid by the same bidder for a higher amount shall cancel that bidder’s lower bid. To determine the highest price bid, the trustor or beneficiary present at the sale may recommend the manner in which the known lots, parcels or divisions of the trust property described in the notice of sale be sold. The trustee shall conditionally sell the trust property under each recommendation, and, in addition, shall conditionally sell the trust property as a whole. The trustee shall determine which conditional sale or sales result in the highest total price bid for all of the trust property. The trustee shall return deposits to all but the bidder or bidders whose bid or bids result in the highest bid price. The sale shall be completed on payment by the purchaser of the price bid in a form satisfactory to the trustee. The subsequent execution, delivery and recordation of the trustee’s deed as prescribed by section 33-811 are ministerial acts. If the trustee’s deed is recorded in the county in which the trust property is located within fifteen business days after the date of the sale, the trustee’s sale is deemed perfected at the appointed date and time of the trustee’s sale. If the highest price bid at a completed sale is less than the amount of that bidder’s deposit, the amount of the deposit in excess of the bid price shall be refunded by the trustee at the time of delivery of the trustee’s deed.
B. The person conducting the sale may postpone or continue the sale from time to time or change the place of the sale to any other location authorized pursuant to this chapter by giving notice of the new date, time and place by public declaration at the time and place last appointed for the sale. Any new sale date shall be a fixed date within ninety calendar days of the date of the declaration. After a sale has been postponed or continued, the trustee, on request, shall make available the date and time of the next scheduled sale and, if the location of the sale has been changed, the new location of the sale until the sale has been conducted or canceled and providing this information shall be without obligation or liability for the accuracy or completeness of the information. No other notice of the postponed, continued or relocated sale is required except as provided in subsection C of this section.
C. A sale shall not be complete if the sale as held is contrary to or in violation of any federal statute in effect because of an unknown or undisclosed bankruptcy. A sale so held shall be deemed to be continued to a date, time and place announced by the trustee at the sale and shall comply with subsection B of this section or, if not announced, shall be continued to the same place and at the same time twenty-eight days later, unless the twenty-eighth day falls on a Saturday or legal holiday, in which event it shall be continued to the first business day thereafter. In the event a sale is continued because of an unknown or undisclosed bankruptcy, the trustee shall notify by registered or certified mail, with postage prepaid, all bidders who provide their names, addresses and telephone numbers in writing to the party conducting the sale of the continuation of the sale.
D. A sale is postponed by operation of law to the next business day at the same scheduled time and place if an act of force majeure prevents access to the sale location for the conduct of the sale.
NOTE: See also In re Kahn, 203 Ariz. 205 (2002) where a Court held that gross inadequacy of sale price may be grounds to set aside a foreclosure sale. In regard to the question of what constitutes “gross inadequacy” the court held:
Determining gross inadequacy
“Gross inadequacy” cannot be precisely defined in terms of a specific percentage of fair market value. Generally, however, a court is warranted in invalidating a sale where the price is less than 20 percent of fair market value and, absent other foreclosure defects, is usually not warranted in invalidating a sale that yields in excess of that amount. The Court also cited to the RESTATEMENT § 8.3 (emphasis added) and stated: In Fenton, our court of appeals noted, “even assuming that the price was inadequate, that fact standing alone would not justify setting aside the trustee’s sale…………..there must be in addition proof of some element of fraud, unfairness, or oppression as accounts for and brings about the inadequacy of price.”
THESE ARE JUST A FEW OF THE FORECLOSURE LAW SECTIONS THAT NEED TO BE LOOKED AT IN DETERMINING WHETHER THE FORECLOSURE PROCESS IN ARIZONA IS VALID. CONTACT AN ARIZONA FORECLOSURE DEFENSE LAWYER TO REVIEW YOUR CASE.
(3) Oppressive and unconscionable conduct of beneficiary/mortgagee or their agents (ex. loan servicers) in regard to loan acceleration and/or foreclosure tactics:
For example, pursuing the power of sale on trivial breaches, accepting late payments yet still foreclosing, etc. Review the case of Vork v. Dunn, 161 Ariz. 24, 775 (1989) for more information on possible challenges in this regard.
(4) TILA (truth in lending) Violations that trigger an extended three year right to rescind. Some general principles illuminating portions of TILA can be found in the case of Smith v. Wells Fargo Credit Corp., 713 F. Supp. 354, D.Ariz. 1989. In this case the court outlined the following TILA principles:
“In the case of closed-end credit, the material disclosures required of the lender are as follows: annual percentage rate, the finance charge, the amount financed, total of payments, and the payment schedule. TILA Sec. 103(u), 15 U.S.C. Sec. 1602(u). “Payment schedule” is defined as the number, amounts, and timing of payments scheduled to repay the obligation. Reg. Z, 12 C.F.R. Sec. 226.18(g); TILA Sec. 128(a)(6). The payment amount (which was stated incorrectly) on the original disclosure form is considered a “material” disclosure.
The consumer may exercise the right to rescind until midnight of the third business day following the latest of the following events:
1) consummation of the transaction;
2) delivery of notice of the right to rescind, or
3) delivery of all material disclosures.
See TILA Sec. 125(a), 15 U.S.C. Sec. 1635(a)
The consumer has a continuing right to rescind until the creditor provides the rescission notice and also supplies a copy of the TIL disclosure statement with all material information correctly disclosed. National Consumer Law Center, Truth in Lending (1986), para. 6.3.2 at 137.
Technical or minor violations of TILA, or Regulation Z, as well as major violations impose liability on the creditor and entitle the borrower to rescind. Semar v. Platte Valley Fed. S & L Assoc., 791 F.2d 699, 704 (9th Cir.1986) (notice to rescind was in error because it did not list the actual day *356 of expiration, but said “three business days after July 16”).
Congress made it clear that rescission suits are allowed after disclosure suits, and explicitly provided a statutory damages penalty for rescission violations. Aquino v. Public Finance Consumer Discount Co. 606 F.Supp 504, 511 (E.D.Pa.1985), based on S.Rep. No. 96-368, reprinted in 1980 U.S.Code Cong. & Admin.News at 236, 267.
If a mathematical error occurs with regard to a material disclosure, the three day rescission period will not commence, and thus the right to rescind will not expire three days later. Indeed, it will not expire until three business days after the correct disclosure is finally provided or until the earlier of three years after consummation. Rohrer, The Law of Truth in Lending (1984) at 8-33.
The rescission form that Wells Fargo had the Smiths sign at closing was not sufficient because the correct date of rescission must be stated. Reg. Z Sec. 226.23(b); TILA Sec. 125(a, f). To comply with this regulation, Wells Fargo was required to provide new rescission forms with the correct expiration date when the corrected material disclosure was made. Rohrer at 8-43.
There is a continuing right to rescind the transaction when the creditor makes an error regarding a material disclosure on the disclosure statement. In re Underwood, 66 B.R. 656 (Bkrtcy.W.D.Va.1986). In the Underwood case, the plaintiffs never received rescission forms-not when they initially closed, nor when the new finance charge data arrived. The court said “they would have had a continuing right to rescind the transaction even if they had initially been given copies of the Notice of the Right to Cancel because the defendant failed to make what now appears an admittedly erroneous and material disclosure on the disclosure statement.” Id. at 662. The court further stated that the Underwoods were entitled to rescind the transaction at any time within three years of the consummation of the transaction unless provided a statement containing the correct finance charge along with rescission forms. Id.
It is apparent that the courts have interpreted the right to rescind as being a continuing one in situations such as this. Here, Wells Fargo stated an incorrect payment amount (a material disclosure), and when the corrected amount was disclosed, they should have provided new rescission forms in compliance with the Truth in Lending Act. Because the Smiths were not given the new forms, they have a continuing right to rescind, within the statute of limitations of three years. 15 U.S.C. Sec. 1635(f).
Several defenses against TILA actions are available to creditors. There are three types of defenses: the TILA itself, common law, and standard procedural and jurisdictional defenses. NCLC at 146. The interpretation of the TILA defenses lies exclusively with the courts; Regulation Z and the Commentary of the Federal Reserve Board do not interpret them. Id.
[2] As to the right to rescind, Wells Fargo raises the defense of good faith conformity with the FRB rules, regulations, or interpretations. TILA Sec. 130(f), 15 U.S.C. Sec. 1640(f). Under the New Act, the creditor’s good-faith conformity is limited to the Regulations and the Commentary which supersede all previous formal and informal FRB staff interpretations, and the defense provides no protection for reliance on court decisions. Hamilton v. Southern Discount Co., 656 F.2d 150 (5th Cir.1981).
A creditor may not merely allege good faith conformity; it must point to the specific regulation, ruling, or interpretation with which it claims conformity. Valencia v. Anderson Bros. Ford, 617 F.2d 1278, 1287 (7th Cir.1980), rev’d on other grounds, 452 U.S. 205, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981). Wells Fargo relies on the lack of a requirement for a new rescission form in the regulations as its defense, but fails to cite any specific authority to support its position. In this situation, courts have concluded that if a creditor misreads or misconstrues the provision, it is not entitled to the defense, even if the mistake is a reasonable one. Id. at 1278 *357 (creditor’s mistaken interpretation of Regulation Z, even if honest and reasonable, is not a defense under Sec. 1640(f); see also Kessler v. Associates Fin. Services Co., 573 F.2d 577, 579 (9th Cir.1977).
However, where the provision is ambiguous and the creditor reasonably construes the provision as applying to its act or omission, it may be entitled to the conformity defense. Charles v. Krauss Co., 572 F.2d 544 (5th Cir.1978) (creditor’s good faith belief that its contract form complied with the literal language of Sec. 226.801 forms exception provided a good faith defense). A case by case interpretation is required. NCLC at 147.
TILA is not ambiguous with regard to the right to rescind in this instance, and courts have made clear the continuing right to rescind in situations such as these. A new rescission form should have been provided, and Wells Fargo’s mistaken interpretation of Regulation Z is not a defense.
This may give you a general idea of TILA law and how the Courts may look at these issues. We have posted other Truth in Lending blogs that you can search for online. There is a radio show we did which also discussed Truth in Lending, in general terms on one show. You can visit that site atwww.LoanModRadio.com
TILA extended rescission rights may prove a nice foreclosure defense strategy where the borrower can put together a “tender” plan.
(5) Certain second mortgages containing a “balloon” payment may not be foreclosed upon (generally junior mortgages less than $10,000). Here is an Arizona statutory section that deals with that topic.
A. A person engaged in the business of lending money or negotiating a loan between parties shall not make or arrange a loan in violation of this section.
B. On a loan in an amount of ten thousand dollars or less for a term up to three years which is secured by a lien on real property comprising an owner-occupied dwelling, an installment payment, whether providing for payment of principal, interest or principal and interest, shall not be greater than twice the amount of the smallest installment.
C. This section applies only to mortgages, trust deeds or other evidences of indebtedness secured by a lien other than a primary or first lien on real property.
D. This section does not apply to transactions involving the purchase or sale or the proposed purchase or sale of real property or to a financial institution licensed or chartered by this state or the federal government.
E. Pursuant to the provisions of 12 United States Code section 3804, this section shall not be superseded by the provisions of 12 United States Code section 3803.
(6) Failure of Consideration (question of fact for the jury)
See the case of Sepo v. First National Bank of Arizona, 21 Ariz. App. 606, (1974) where the Court held:
“Failure of consideration consists in failure to perform, or carry out, or make good a promise given as consideration for an instrument……whether or not a failure of consideration has occurred may be a question of fact for a jury to determine…..where several promises are made by one party the question whether breach of one such promise results in a complete or a partial failure of consideration, or no failure at all, is determined under the doctrine of substantial performance…..the parties raising the defense of failure of consideration with reference to a note have the burden of proving it.”
It is not entirely clear how far this holding can stretch. For example, in the case of securitized loans, where MERS or a Trustee of a Trust claims it is the owner of the loan / loan beneficiary, but yet they gave no consideration to the transaction, can this be a grounds to raise to prevent foreclosure? For more general information about issues raised by securitized loans, and the so-called “produce the note” foreclosure defense strategy that has been successful in some states see our website atwww.ProduceTheNoteAttorney.com where we discuss some of these issues and potential legal challenges. Note, many of these produce-the-note strategies are in the “test-phase.”
(7) Filing Bankruptcy (may temporarily stay a foreclosure, and in some cases may prevent a foreclosure). See our website at www.BKAttorneyS.net (BK Attorney Steve)
The preceding are some of the grounds that can be reviewed by a foreclosure defense attorney in Phoenix, Scottsdale, and surrounding cities in Arizona to see of you may have a right to seek an injunction against foreclosure. There maybe other grounds to review given the facts and circumstances of your case. For example where qualified written requests are not responded to and legitimate questions as to whether payments were properly paid and applied may raise a defense warranting at least a temporary restraining order stopping the foreclosure sale. Reverse Redlining – Financial Discrimination may also be another ground worth pursuing.
In addition, if you have an option arm loan it may be possible to argue that the loan is unconscionable and therefore unenforceable (see more discussion on our website www.OptionArmLawyer.com. Again, certain facts have to be ferreted out to see if you truly have a valid good faith defense to assert that might stop your foreclosure. The Courts will not likely treat you favorably where frivolous claims are filed (especially where loan payments are seriously delinquent), which tenuous claims are also prohibited from being filed by attorney ethics. Again, have your case reviewed by a real estate lawyer / foreclosure defense attorney.
ABOUT US:
The Law Offices of Steve Vondran in licensed to practice law in California and Arizona. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.
FORECLOSURE TIPS: OVERVIEW OF TENANTS RIGHTS FOLLOWING EVICTION (NEW HOPE FOR MODIFYING INVESTMENT PROPERTIES?)
Hi again, we have posted information on previous blogs about tenants rights following eviction. Here is an overview of what we are looking at. The following is general legal information only and is not legal advice, or to be construed as legal advice. For specific questions please contact a real estate or foreclosure defense Attorney. Steve Vondran, Esq. practices law in the areas of Real Estate, Bankruptcy, and Foreclosure Defense. He assists homeowners in California and Arizona where he is licensed to practice law. He also holds a real estate broker’s license in both states. He can be emailed at Steve@VondranLaw.com or called at (877) 276-5084.
(1) IF YOU HAVE A FANNIE MAE LOAN THAT IS BEING THREATENED WITH FORECLOSED, FANNIE MAE, THROUGH THE LOAN SERVICER, MAY ACCEPT A DEED IN LIEU OF FORECLOSURE AND ALLOW A “DEED FOR LEASE” PROGRAM THAT ALLOWS UP TO A ONE YEAR LEASE AND POSSIBLE EXTENSIONS TO THE HOMEOWNER.
Here were some of the General Guidelines we discussed:
GENERAL GUIDELINES FOR FANNIE MAE DEED FOR LEASE RENT-BACK PROGRAM:
•(2) Contact your loan servicer and see if you are eligible for the program and eligible to execute a “deed-in-lieu” of foreclosure (this means you sign over the deed to the loan holder in lieu of being foreclosed on). The owner of the loan, through the loan servicer, must agree to accept the deed-in-lieu of foreclosure. This is a requirement of the program. In some cases, you may only qualify for Deed in Lieu if you only have a first mortgage. In other instances, you may qualify if the second mortgagee releases your lien.
•(3) The property must be primary residence / owner occupied (landlord-owner may qualify if tenant uses property as primary residence).
•(4) Borrower must be able to pay market rent for the lease (which is a one year lease and option to extend by term or month-to -month). A property management company will determine market rate.
•(5) Rent payment cannot exceed 31% of Gross Monthly Income (yes, you will be required to submit financials).
•(6) Borrower cannot have had more than 12 late payment s on loan and cannot be in Bankruptcy.
•(7) FHA and VA loans do NOT qualify.
•(8) Borrower must have made at least three payments on loan.
•(9) House remains for sale and any new owner of the home would take “subject to” the lease.
(2) FREDDIE MAC HAS A SIMILAR LEASE-BACK PROGRAM (CALLED THE REO RENTAL INITIATIVE) BUT IT DOES NOT INVLOVE THE DEED IN LIEU OF FORECLOSURE. ONCE THE FREDDIE LOAN IS FORECLOSED ON, THE LOAN SERVER MAY GRANT THE HOMEOWNER, OR REMAINING TENANT OF A RESIDENTIAL INVESTMENT PROPERTY TO STAY OVER ON A MONTH TO MONTH BASIS.
(3) UNDER THE HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009, PURSUANT TO THE PROTECTING TENANTS AT FORECLOSURE ACT OF 2009, ANY BONA FIDE LEASE HOLDER MUST BE GIVEN AT LEAST 90 DAYS NOTICE BEFORE THEY C AN BE EVICTED.
Here is a look at the text of the law (the bold, italics, caps and underlines are my own-doing). Note the law expires (“sunsets”) on December 31, 2012.:
TITLE VII–PROTECTING TENANTS AT FORECLOSURE ACT
SEC. 701. SHORT TITLE. This title may be cited as the `Protecting Tenants at Foreclosure Act of 2009′.
SEC. 702. EFFECT OF FORECLOSURE ON PRE-EXISTING TENANCY.
(a) In General- In the case of any foreclosure on a federally-related mortgage loan or on any dwellingor residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—
(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and
(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure—
(A) under any bona fide leaseentered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or
(B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),
except that nothing under this section shall affect the requirements for termination of any Federal or State subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.
NON-LEGAL EASE TRANSLATION: (but this is not legal advice please check with your attorney): Where a residential property sold in foreclosure, the remaining tenant (who must be a BONA FIDE TENANT – See Below for definition) is entitled to receive notice of their rights: mainly, that they have the right to live out the term of their lease – ASSUMING THE LEASE WAS ENTERED INTO PRIOR TO THE FORECLOSURE SALE, HOWEVER, the Successor in interest to the property (i.e. the bank that could not dump the property at a foreclosure sale, or, a successful bidder at the foreclosure auction) MAY TRY TO SELL THE PROPERTY, AND MAY EVICT THE TENANT WITH 90 DAYS NOTICE, BUT ONLY IF THE PERSON BUYING THE HOUSE PLANS ON LIVING THERE (AS OPPPOSED TO USING IT AS AN INVESTMENT PROPERTY OR SIMPLY “FLIPPING” THE PROPERTY).
If there is no lease in effect at the time of foreclosure (let’s say a tenant was living in the property under an oral lease, or month to month lease terminable at will) the tenant must be given the 90 day notice to vacate before they can be evicted. That is a mouthful, I know. The end result is adding the three months along with the time needed to evict a tenant (assuming they do not voluntarily vacate) adds more frustration to lenders and third-party purchasers of the property and creates rules they must comply with.
WHAT IS A BONA FIDE TENANT UNDER THE HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009 / PROTECTING TENANTS AT FORECLOSURE ACT OF 2009?
Only a bona fide tenant is entitled to the 90 day notice and the possibility to exercise the full term of any existing lease. Here is how the law defines bona fide tenants:
(b) Bona Fide Lease or Tenancy - For purposes of this section, a lease or tenancy shall be considered bona fide only if:
(1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;
(2) the lease or tenancy was the result of an arms-length transaction; and
(3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit’s rent is reduced or subsidized due to a Federal, State, or local subsidy.
(c) Definition- For purposes of this section, the term `federally-related mortgage loan’ has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).
TRANSLATION: DO NOT TRY TO ENTER INTO A SHAM LEASE PRIOR TO BEING FORECLOSED UPON IN ORDER TO TRY TO GET AN EXTRA 90 DAYS IN THE HOUSE. BUT THEN AGAIN, I SUPPOSE THE LENDER WOULD BE FORCED TO LITIGATE THIS ISSUE IN AN EVICTION PROCEEDING AND PROVE IT IS A SHAM.
NOTE: There is also a section of the law that discuss tenants rights regarding Section 8 Housing. This Section states:
SEC. 703. EFFECT OF FORECLOSURE ON SECTION 8 TENANCIES. Section 8(o)(7) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(7)) is amended–
(1) by inserting before the semicolon in subparagraph (C) the following: `and in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the term of the lease vacating the property prior to sale shall not constitute other good cause, except that the owner may terminate the tenancy effective on the date of transfer of the unit to the owner if the owner-
(i) will occupy the unit as a primary residence; and
(ii) has provided the tenant a notice to vacate at least 90 days before the effective date of such notice, and
(2) by inserting at the end of subparagraph (F) the following: `In the case of any foreclosure on any federally-related mortgage loan (as that term is defined in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602)) or on any residential real property in which a recipient of assistance under this subsection resides, the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit, except that this provision and the provisions related to foreclosure in subparagraph (C) shall not shall not affect any State or local law that provides longer time periods or other additional protections for tenants.
BOTTOM LINE ON FEDERAL TENANTS RIGHTS FOLLOWING FORECLOSURE
What might this mean in practice? In one case, recently we tried to perform a loan workout a major lender on an investment property. They were not willing to work-out or modify the loan. I think they were confident the property will sell at a public auction, and the house (and compliance with the Tenants Rights Law set forth herein) would be somebody else’s problem to deal with. After there were no bidders at the foreclosure sale, and the property reverted back to the lender, NOW THEY ARE MOTIVATED TO MODIFY THE LOAN AND WILL TAKE A BETTER LOOK AT A MODIFICATION. So the end result may be increased change of loan modification for investment properties. I do not believe lenders want to get into the “landlord business.” Being a landlord carries its own inherent risks. Note: Although this is a federal law (“law of the land”) individual states are free to provide even greater protections to tenants. Please consult with an attorney before making any decisions.
TOP FIVE TIPS TO LOOK OUT FOR IN AVOIDING LOAN MODIFICATION SCAMS:
Beware of any company that promises principal loan balance reduction. Although most borrowers are seeking principal reduction, any company that guarantees this should be seriously scrutinized. Don’t be fooled by their claims “if we are not successful we will give you your money back.” By the time you go to get your money back they may no longer be around.
Don’t be fooled by offers of “100% money-back guarantees.” This is the best way for a company to get your money. By offering you a full refund if the loan modification company is not successful, many California and Arizona homeowners part with their money with the belief that these scam loan mod companies will return their money upon request. We are finding that 100% guarantees are often not honored, and in fact, the company may claim they would return the money except for the fact that the Client breached the contract (usually they concoct some bogus claim, like “you never sent us all your loan documents for the loan audit). Other times, you find out the company simply refuses to return your calls and emails.
Beware of the “attorney-backed” or “attorney-based” firms. What exactly does this mean? Have you ever heard this type of advertising before out of any type of company (ex. “we are an attorney-backed mortgage loan company?). What we are seeing is that brokers and non-brokers will make these types of claims in order to lure you in with the hopes that an attorney will be handling your case (i.e they are trading off the power of an attorney). At the end of the day we find often times there is no attorney whatsoever doing any work, and/or you are told that an attorney does a forensic loan audit (but the customer mysteriously never receives a copy of the audit or receives a shoddy audit). If you want the attorney clout, you should just find a reasonably priced attorney shouldn’t you? Also, these types of companies will often specifically disclaim in their agreements that “we are not a law firm and do not provide legal services.” If this is the case, then what exactly does the “attorney-backed” mean to you, the homeowner? Ask to read their contract before you sign up, and ask them what you are getting. We see these types of companies in Phoenix and California.
Beware of Companies that advertise on TV and Radio. This may seem like a strange tip. However, this is what we are seeing, companies that advertise on TV and Radio are generally seeking to draw a large number of Clients to their firms (whether it be broker or non-broker, attorney or non-attorney). Their intentions may or may not be benevolent. What we have learned about the loan modification business is this IT TAKES ALOT OF TIME TO ANSWER ALL OF THE QUESTIONS OF EACH HOMEOWNER, AND TO CONTACT LENDERS ON THEIR BEHALF AND TO PROVIDE STATUS UDATES. Companies that take in a large number of loan modification files may not be staffed to handle the volume. We have personally dealt with companies that have simply failed to contact lenders on behalf of their clients, failed to return client calls, and failed to keep clients informed as to status. Moreover, we have seen some companies simply implode and seek the protection of Bankruptcy. Meanwhile, your file sits on their desk, and your requests for a refund go completely ignored. Prosecutors and District Attorneys are also very busy, and may not have the time to seek any recourse on your behalf. End result: no modification for you, no refund, no recourse. We deal with many of these types of Clients who have been burned by these types of scams or lack of realistic business planning.
California Homeowners who are seeking to hire Brokers or Attorneys to help them negotiate loan modifications with the lenders are advised NOT to pay ANY money before the loan modification is complete. SB 94 was passed and signed into law on October 11, 2009. As of that date, no one may charge advance fees for loan modification services. If someone is seeking to charge you in advance to submit your documentation to the lenders, they are not complying with the law, and you should stop speaking with the company that is trying to get your business.
If you feel you have been a victim of loan modification scam, please fill out our form on www.LoanModificationRipoff.net we will contact you to discuss your case. We are seeking refunds and damages for California and Arizona homeowners who have fallen victim to loan modification con-artists. You can also call us at (877) 276-5084
The following is general legal information only and should not be relied upon as legal advice. From the years 2001-2008 most loans originated by so called ìlendersî (who lent none of their own money as can usually be verified by looking at the ìlenderísî financials) were securitized and sold on WALL STREET to investors such as mutual funds, municipal funds, hedge funds, insurance companies and foreign investors.
When Wall Street stepped into the picture during these years, the underwriting standards for most, if not all originating ìlendersî dropped significantly as the originating ìlenderî was more incentivized to produced as many assignable loans (or better yet, Security instruments) as it could in order to feed the Wall Street money-making machine that financially craved as many as these loans as could be produced.
The original ìlendersî rarely lent their own money which can be proved by looking at the originating ìlenderísî balance sheet. In fact, the originating ìlenderî had already contracted to sell the loan to a loan aggregator, investment banker or other entity and was to be paid back for the full loan amount plus typically a 2.5% return on the loan originated (i.e. these ìmiddlemenî in the securities transaction were all paid in full and had no interest in the loan and could not be deemed a ìlenderî but rather a conduit in a single securities transaction). Thus, it is clear the ìoriginating lenderî was doing nothing more than using borrower to issue unregulated negotiable securities (certificates of asset backed securities) on behalf of the Wall Street investors who were the true ìlendersî who funded the loan and who are entitled to any payment that may be due on the loan.
To state it another way, the activities of the originating ìlenderî in creating the negotiable security, along with the coordinated and contracted participation of the middlemen loan aggregators, investment bankers and others, was a SINGLE TRANSACTION that was literally designed to encourage predatory loans to be originated by the ìstraw manî or ìstand-inî originating ìlenderî that resulted in providing and issuing negotiable securities for literally anyone that could fog a mirror. Moreover, the more predatory the loan/security (ex. deceptive teaser rates, obscured negative amortization products, balloon payments, YSP, onerous pre-payment penalties, failure to properly underwrite, bait and switch tactics at the signing table, false assertions of a right to refinance, appraisal fraud, unverified stated income loans, etc.) often the more that was paid – higher yields – to both the originating ìlender,î the securities middlemen, and the ultimate investor-beneficiary.
What this created was a system wherein literally anyone with a pulse and FICO score over 500, was able to obtain a mortgage loan in the form and issue the negotiable security that would be sold on Wall Street. For the originating ìlender,î knowing that Wall Street would fund the loan through its investors, incentivized the originating ìlenderî to cut corners on proper underwriting and instead produce as many assignable notes as possible without regard to the ramifications.
The Securitization system was further set up in such a way as to eliminate the risks caused by predatory lending, defaulting loans, and other risks by insuring and cross-collateralizing thousands of loans in a loan pool. In fact, if foreclosure is pursued, we will show that the above referenced loan has in fact been paid-off in full by insurance proceeds, money from various guarantors, by the investors, and/or by the federal government. If the loan has been paid, there is no right to foreclose or threaten foreclosure.
The promissory notes and deeds of trust were separated making the notes unenforceable. MERS was used to track ownership of loan servicing rights and ownership rights and even pretends, at times, to be the beneficiary of many loans even though they do not collect any loan payments, have no right to collect such, and have no other financial interest other than being paid its ordinary fees for the tracking and registration service. MERS typically fails to record any assignments of the loans in the property County Recorderís office. This was done to avoid the paying of fees, among other reasons.
At the end of the day, in many cases a predatory loan was originated by the ìoriginating lenderî who was financed by the Wall Street investor in an elaborate unregistered security scheme. The loans were sliced and diced into loan pools, and many different investors are known to be the so-called ìowners of the noteî although no one, (including MERS, the originating ìlenderî, the Mortgage Loan Aggregators, Investment Bankers and the final Wall Street Investors) can produce a copy of the original promissory note that proves ownership of the ìloanî obligation and right to collect payments and ultimately foreclose.
If there is no note, and/or no properly recorded assignments of such, there can be no enforceable debt obligations. This is not a new principle, but rather embodies age-old principles and requirements of commercial law such as the Uniform Commercial Coded (U.C.C.).
Failure to provide validation of the debt or proof of ownership of the note/recorded assignments SHOULD MAKE A LENDER, LOAN SERVICER, INVESTOR, AND/OR TRUSTEE THINK TWICE BEFORE attempting, or undertaking any of the following acts ñ WHICH MAY BE WORTH CHALLENGING IN THE PROPER CASE (Note: we believe a proper case normally requires other more firmly established legal rights, such as a federal truth in lending violation raising extended rescission rights, fraud, or some other historically recognized ground for filing a lawsuit, rather than merely asserting a bare ìproduce the noteî defense):
No foreclosure should be permitted where the California Foreclosure statutes are not followed. Under California Law (California Civil Code Section 2923-2924 et seq. ñ California Foreclosure Law) the ìbeneficiary or their authorized agentî is required to contact the borrower to assess their financial information and discuss modification options. This statutory section requires, it would seem, the TRUE AND ACTUAL BENEFICIARY (I.E. THE TRUE HOLDER OF THE NOTE) to make contact and certify such contacts with the homeowner/borrower prior to making the required declaration in the Notice of Default. Failure to have the TRUE AND ACTUAL BENEFICIARY, AND/OR THEIR AUTHORIZED AGENT (who shall be required to prove first that they are complying with California Foreclosure law on behalf of the TRUE AND ACTUAL BENEFICIARY) precludes and nullifies any attempted foreclosure, and makes any assertion of such, and filing of the Notice of Default with the California County Recorder, fraudulent.
No one other than the TRUE AND ACTUAL BENEFICIARY, OR THEIR DULY AUTHORIZED AGENT SHOULD BE ABLE TO ASSERT PROPER STANDING AND PROVE THAT IT IS A REAL PARTY IN INTEREST IN ANY LEGAL PROCEEDING, INCLUDING RESPONDING TO A TEMPORARY RESTRAINING ORDER (TRO); PRELIMINARY INJUNCTION; BANKRUPTCY; OR EVICTION ACTION. As discussed above, without proof of ownership of the note and all required recorded assignments, any attempt to show up and defend any of the above actions (by the ìpretender lendersî and/or their ìagentsî who cannot prove their right to engage in any of the herein referenced activities) will result in attempting to perpetrate a ìfraud on the courtî and might wind up the subject of a motion for sanctions and other proper judicial relief. Moreover, any attorney/trustee attempting to pursue any of the herein referenced actions on behalf of a beneficiary or their agent, who cannot satisfy and prove ownership, would be well advised to consider all of the legal ramifications.
No one other than the TRUE AND ACTUAL BENEFICIARY, OR THEIR DULY AUTHORIZED AGENT SHOULD BE ABLE TO ASSERT a right to collect Loan payments (including principal and interest), late fees, attorney fees, etc., and may not legally demand or collect such. All funds illegally collected from California Homeowners might be subject to the appointment of a receiver or the imposition of a constructive trust in a lawsuit demanding a full refund along with damages and attorney fees.
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NOTES: These are just a few basic ideas to consider in regard to debt validation and produce the note theories. Again, it would seem the case might be better if you have a traditional and historically recognized legal theory (aside from commercial code) to bring and to basically try to bend the judges ear on the PRODUCE THE NOTE STRATEGY, as a side issue, rather than the focal point of the lawsuit. Judges may be reluctant to having their courts used as a grounds for testing somewhat novel legal theories where some might see it as an attempt to ìget your home for free when you are in default of the loan documents.î If granted, this may also lead to ìfloodgate litigation.î
As referenced, above, many loan servicers try to keep it secret who the real ìlenderî or ìbeneficiaryî of a loan is. I suppose the securitization process demands secrecy in debt collection to make it work. Of course, this seems counter-intuitive that a person is not entitled to know who their debt is actually owed to. Steve Vondran can be reached at steve@vondranlaw.com or (877) 276-5084.
A qualified written request is a WRITTEN request that every homeowner can send to their loan servicers to protest billing and accounting issues and to request other relevant information. The rights arises under Section 6 of the Real Estate Settlement and Procedures Act (“RESPA” as they call it).
RESPA: What we do in just about every case is to send in a Qualified Written Request (“QWR”) to the loan servicer and we have them address our legitimate billing and servicing disputes.
INFORMATION WE MAY DEMAND IN OUR QUALIFIED WRITTEN REQUEST: We may ask for information such as: (1) life of loan accounting for all payments, including loan payments and escrow payments (a lot of disputes arise here as borrowers often have no idea when or how interest rates on their loan will adjust and they want proof of when the loan actually adjusted, what loan index figure was used in calculating the rate change, and they want to ensure the adjusting of the loan otherwise corresponds with the promissory note they signed).
This should not be too much to ask out of these sophisticated financial organizations.
(2) We may also ask for a copy of your loan documents, such as a copy of the promissory note, deed of trust, adjustable rate riders, truth in lending statements, good faith estimates, loan program disclosures, and other loan documents
(3) We might also seek other information depending upon the nature of your case.
WHAT IS THE GOAL OF THE QUALIFIED WRITTEN REQUEST: The main objective in sending out a QWR is: (a) clarify your billing and accounting issues involving your loan payments, (b) put the loan servicer on notice of your legal rights and let them know they have some work they are legally required to perform (sometimes defense can be a good offense), and (3) make them potential defendants if they fail to comply with our lawful demands and we are forced to file for an injunction to stop the foreclosure (of course, there must be valid good faith grounds for filing the lawsuit and you may not want to file on RESPA grounds alone – discuss this with your foreclosure defense lawyer).
WHAT MUST THE LOAN SERVICER OR LENDER TO DO COMPLY WITH A QUALIFIED WRITTEN REQUEST?:
(1) The lender or loan servicer must “acknowledge” your qualified written request (QWR) within 20 days.
(2) They must respond to your inquiry in 60 days (for example, clarify the issues you put in dispute and provide your requested accounting).
(3) They must NOT report NEGATIVE CREDIT during the period of the investigation.
HOW OFTEN WITH THE LENDERS OR LOAN SERVICERS RESPOND TO A QUALIFIED WRITTEN REQUEST AND WHAT TPYES OF RESPONSES CAN YOU EXPECT TO A QWR?
What I have seen is what I would call “general” compliance in the area of responding to QWR’s. In a good number of cases you will get a 20 day acknowledgment letter. In most cases, you will get a lackluster response to your QWR, and in my case, they complain that I ask for too much documentation. I usually point out that I have not seen a case that documents limits to what you can demand out of your loan servicer. Finally, from time to time we do have loan servicers that report negative credit information to the major credit bureaus (Trans Union, Equifax, and Experian) during the QWR process which we also reserve the right to sue for in the event litigation is required to vindicate the predatory loan.
Some people have asked me, why are you passionate about foreclosure defense and helping Arizona homeowners? One of the answers I like to give is the following:
OUR MISSION: “WE ARE FIGHTING FOR “TRUTH IN LENDING” (a strange concept, i know!):
(1) WE ARE FIGHTING FOR TRUE AND ACCURATE DISCLOSURE OF A LOAN PRODUCT, ITS NATURE, AND TERMS (TELL PEOPLE THE TRUTH ABOUT THE LOANS THEY ARE LOCKING INTO). GIVE THEM THE CHARMS BOOKLET AND CALIFORNIA ARM DISCLOSURES
(2) WE ARE FIGHTING FOR TRUE AND FAIR DISCLOSURE OF THE PRICE-TAG FOR THE LOAN (APR AND FINANCE CHARGES THAT ARE TRUE AND ACCURATE). ACCURATE TRUTH IN LENDING STATEMENTS
(3) WE ARE FIGHTING FOR FAIR AND ACCURATE DISCLOSURE OF THE RIGHT TO CANCEL THE LOAN WHEN APPLICABLE (GIVE PEOPLE THEIR REQUIRED COPIES AND GIVE TRUE DATES UPON WHICH LOANS CAN BE RESCINDED)
(4) WE ARE FIGHITNG FOR FAIR AND HONEST UNDERWRITING THAT IS BASED UPON A CLIENTS TRUE ABILITY TO REPAY A LOAN (WHICH MAY MEAN VERIFYING INCOME AND TELLING SOME PEOPLE THEY DON’T QUALIFY) AND TRUE AND ACURATE APPRAISAL OF PROPERTY THAT SUPPORTS THE UNDERWRITING.
(5) WE ARE FIGHTING FOR FULL DISLCOSURE OF THE HOLDER OF THE LOAN (INVESTOR) AND PROOF AS TO WHO OWNS THE RIGHT TO BE PAID, AND THE RIGHT TO FORECLOSE, AND WHO MUST BY LAW CONTACT CALIFORNIA HOMEOWNERS TO DISCUSS LOAN MODIFICATIONS AND ASSESS BORROWER FINANCES.
(6) WE ARE FIGHTING FOR FULLFULL AND FAIR ACCOUNTING FOR PAYMENTS, LATE FEES, ESCROW CHARGES, AND OTHER CHARGES IN THE LOAN SERVICER’S BACK-ROOM. ANSWER THOSE QWR’S ON TIME, AND IN UNDERSTANDABLE DETAIL. STOP REPORTING NEGATIVE CREDIT DURING THIS PERIOD.
(7) WE ARE FIGHTING FOR HONESTY AND “TRUTH IN TRIAL PLANS” – IF HOMEOWNERS DON’T QUALIFY FOR A MORTGAGE RESTRUCTING / LOAN MODIFICATION, DON’T SEND THEM A TRIAL PLAN THAT LEADS THEM TO BELEIVE THEY DO. IN ADDITION, BE TRUTHFUL ABOUT THE PRECISE TERMS OF THE LOAN MODFIICATIONS (DISCLOSE THE TERMS CLEARLY) AND HONOR YOUR TRIAL PLAN AGREEMENTS.
ITS TIME THE LENDERS OPEN THE BOOKS AND SHOW US WHERE THE BAIL-OUT MONEY HAS GONE. WE NEED SOME TRANSPARENCY. WE NEED SOME ACCOUNTABILITY TO SHOW WHAT HAS BEEN DONE WITH TAX-PAYER MONEY. WAS YOUR LOAN ALREADY PAID OFF VIA THE BAILOUT, AND NOW THEY WANT TO COLLECT MORE MONEY FROM YOU FROM A LOAN THAT MAY HAVE BEEN ALREADY PAID? IF YOUR LOAN WAS SECURITIZED INTO A “LOAN POOL” IS THERE ANY CHANCE YOUR ENTIRE POOL OF LOAN WAS BAILED OUT AND PAID OFF? IF SO, DOES THAT MEAN THEY STILL GET TO COLLECT FROM YOU AS WELL? WHAT IS THAT? ISN’T THAT A WINDFALL……..UNJUST ENRICHMENT?
PEOPLE DESERVE TO BE REPRESENTED BY A FORECLOSURE DEFENSE LAWYER WHEN TRYING TO RESOLVE ONE OF BIGGEST PROBLEMS MOST HOMEOWNERS WILL EVER FACE. IN MANY CASES, A FORECLOSURE DEFENSE LAWYER CAN EVALUATE YOUR LOAN, REVIEW YOUR MORTGAGE DOCUMENTS (FORENSIC AUDIT), DEMAND THAT DEBTS BE VALIDATED, SEND MODIFICATION PROPOSALS, REVIEW TRIAL PLAN AND OTHER LOAN MODFICATION AGREEMENTS, ADVISE ON DEFICIENCY JUDGMENTS, DISCUSS POTENTIAL BANKRUPTCY AND SHORT-SALE OPTIONS, AND ENSURE THAT YOUR RIGHTS UNDER THE FORECLOSURE LAWS ARE ADHERED TO AND PROTECTED. THE BANKS HAVE EXPENSIVE LAWYERS ON THEIR TIME, YOU DESERVE TO BE REPRESENTED DURING THIS CONFUSING AND STRESSFUL ORDEAL. THIS IS THEIR GAME AND THEIR BATTLEFIELD.
IF YOU ARE AN ARIZONA HOMEOWNER PLEASE CONTACT US (877) 276-5084 TO DISCUSS YOUR FORECLOSURE CASE.
