By Steve Vondran, Esq. who is practicing Real Estate, Bankruptcy, and Foreclosure Defense in Arizona and California where he is licensed to practice law.  He also holds a real estate broker’s license in both states as well.  Prior to becoming an attorney, Mr. Vondran also was a mortgage loan officer which has given him insight into the current financial crises.  He can be reached at steve@vondranlaw.com or (877) 276-5084.  The following is general legal information only, and is not to be construed as legal advice, or a substitute for legal advice.  The following information may not be updated or accurate, and is simply provided as general information and things to think about if you are facing foreclosure in California or Arizona.  For specific questions, please contact a foreclosure defense attorney on your area.  Please do not post confidential information on my blogs and do not send us confidential information in emails as we cannot guarantee the confidentiality of such.  No attorney-client relationship is formed until a retainer agreement is signed.

One of the key things we must figure out as foreclosure defense lawyers is whether or not your loan was “sold-off on the secondary market” and/or “securitized” and sold to investors on wall street (ex. hedge funds, pension funds, foreign investors, insurance companies, etc.).

Common Scenario: Your sub-prime ARM was originated by Countrywide.  Countrywide then sells the loan to Wells Fargo and Wells Fargo works either holds the note, and/or sells it off to an investment banker to securitize the loan.  Countrywide, as loan originator, knowing it was going to sell off your loan, may not have cared much about any predatory lending issues such as:

(1) Ability to afford the payment after the loan adjusts (ex. option ARM loans / pick-a-pay); See our website discussing Option ARMS / Pick-a-Pay Loans atwww.OptionArmLawyer.com

(2) Inflated appraisals that helped get the loan funded;

(3) Lack of full, fair, and conspicuous disclosures as required under RESPA, Truth in Lending law (TILA), required ARM disclosures (Ex. CHARMS booklet), and Credit score / FICO disclosures;

(4) Failure to provide two completed copies of a notice of right to cancel to each borrower with the dates for recsission accurate and filled in (note failure to provide proper copies of this critical disclosure document can create an EXTENDED THREE YEAR RIGHT TO RESCIND YOUR LOAN (you can learn more about loan rescission at www.RescindMyLoan.net);

(5) Stated income that may be false, trumped up, and/or not properly verified when the circumstances suggest it would be prudent to verify;

(6) Excessive (and perhaps hidden) fees, including yield spread premiums (YSP);

(7) Failure to provide contracts in the foreign language of the borrower (California Civil Code Section 1632)

(8)   Reverse Redlining / Discriminatory Lending

(9)  Steering borrowers into sub-prime loans (ex. 2/28 or 3/27 ARM loans).

(10)  Violations of HOEPA

And the list goes on – check your facts with your lawyer.

Countrywide, and other “originating lenders” may not have cared much about the consequences of the loan they underwrote (i.e. whether or not the toxic and predatory loan would be affordable after the interest rate adjusted, and whether or not the loan would land you foreclosure in next few years) mainly because the originating lenders, in many cases, were committed to selling the loan literally before you signed the loan documents.  They knew they were going to be paid by a third party to buy the loan, and either hold it for an investment, or securitize it sell it off on wall street.

Again, these originating “lenders” in many cases were not even “lending” their own money, and may have funded the loan out of a credit line provided by a third party, such as an investment bank.  Whatever the case, loans were originated by the droves, and sold off and securitized loans, while the originating “lender” was simply “cashed-out” by being paid the balance of the loan plus a fee.

This creates the potential for an originating lender to care more about volume,  than quality of loans.   IN many cases, investment bankers set the standards for the types of loans they would purchase, and the originating lender literally mass-produced loans that would wind up securitized in loan pools and sold to Wall Street investors.

Once your loan is sold off, the third party buying the loan will claim they took the note in good faith with no notice of claims and defenses, and therefore, under the eyes of the law, they should be deemed a HOLDER IN DUE COURSE (which in most cases, immunizes the purchasing lender from facing a whole host of claims and defenses a borrower may want to raise, including predatory lending claims – the claims and defenses a holder in due course must answer to are discussed below).

The end result then, is that the originating, as we have seen, can merely file for bankruptcy if the ‘heat gets too hot in the kitchen’ (i.e. if they are the subject of potentially expensive class action lawsuits challenging their predatory loans).

What this creates is a situation where the originating lender manufactures and creates the “garbage in” loans (loans that are destined for a loan pool) and the purchasing lender who buys the loan from the originating lender winds up securitizing these loans into loan pools, having them rated, and eventually pitching this “garbage out” to Wall Street Investors who are lead to believe these loan pools represent sound investments in Americas strength in the housing market.

Meanwhile, the borrower, the victim of predatory lending, has literally nowhere to turn to seek redress for loan non-compliance and predatory lending (at least that is the lenders and loan servicer’s position).  The broker and/or originating lender may be bankrupt, and the Trustee of the Loan Trust, Loan Servicer, and Wall Street Investors all claim they have no liability because they had nothing to do with the original predatory lending issues.  This is the situation many people face when trying to get a loan modification.   Although forensic audits are being done, many homeowners will run up against the “holder in due course” issue.

The loan servicer is, in many cases, servicing the loan on behalf of the Wall Street Investor (note that the loan is likely in a Special Purpose Vehicle (SPV) with a bunch of other notes, and the Trustee of a Trust, in most cases, is speaking on behalf of the Investors.  The Investors do not want any part of coming forward and claiming ownership of the notes, and they do not want to get involved in the foreclosure process.  They want their income stream, and NOT to fight predatory lending lawsuits that they know (at least they NOW know) are predatory in many cases.

As many of you realize, the loan servicer is often the entity you must contact to seek a loan modification.  The loan servicer too, claims no liability or responsibility for any predatory lending that may have occurred during the origination of the loan.  They will claim “we are just servicing the loan on behalf of the investor.”

Again, in securitized loans, the investor is the Wall Street Investor who is seeking a portion of the income stream from the loan pool of which your loan is a part of.  Of course they didn’t tell you about this loan pool when your loan was originated, or that your note would comprise part of the loan pool.   All you knew is that the loan “might” be sold off to a third party.

So the question becomes, when seeking a loan modification, and following a loan audit, which parties, if any, can be held liable for predatory lending detected at the loan origination stage?

Again, the lender who purchased your loan will usually assert that they have no liability, as will the investment banker (who in many cases set the guidelines for the loans to be purchased and often gave credit lines to originating sub-prime lenders), nor will the Wall Street Investor or Loan Servicer.  Simply put, everyone will point fingers at the originating lender and will claim you have no lawsuit to leverage against them as they are “holders in due course” and not liable for any other parties mortgage lending loan violations.

What then do we try to accomplish as Foreclosure Attorneys trying to halt foreclosure of your property?

(1)      We review your loan file and look for predatory lending violations against the broker and/or originating lender. The broker (assuming you used one in the transaction) owed you a fiduciary duty that requires, among other things, that they fairly disclose material loan terms to you and to look out for your best interest (instead of theirs) and basically put you into the best loan for you given your financial condition.  The lender, who “backs” the broker, at least in our opinion, has a duty to properly underwrite your loan to ensure that you will be able to pay it back.  To us, a lender arguably “aids and abets” the broker by providing products designed to fail (ex. the option arm loan), and by allowing other predatory lending practices listed above to be perpetrated against a borrower.  Note however, that Courts have generally held that a lender, as opposed to broker, owes you NO FIDUCIARY DUTY in a loan transaction.

(2)      We ascertain to whom the loan may have been  sold-off to and ascertain whether or not the loan was securitized, as many loans were over the last several years.  If the loan was sold off (as many were), we realize we will be dealing with a “holder in due course” argument that the lender will maintain, but normally won’t discuss during the loan modification stage.  At this point, we must determine what claims, if any, can be made against the loan assignee.

The best claim is where the originating lender never sold off the loan, and rather, services its own loan in its portfolio (called a “portfolio loan”).  In these cases, the originating lender is responsible for its own garbage and cannot point fingers at other entities, such as a loan broker.  You should note, that this is the precise reason why loans get sold off in the first place (why not transfer the loan, and the liability to someone else and get “cashed out” for your efforts).

Another type of claim that we think may have some viability is the situation where, for example, Countrywide originates the loan (ex. option arm loan), then sells off the loan on the secondary market, yet RETAINS the right to Service the Loan. In these cases, it is our opinion that Countrywide continues to “enjoy the fruits” of what may be a predatory loan (ex. the option ARM loan – aka “pick-a-pay”).  In these circumstances, should Countrywide be deemed a holder in due course (HDC) and be permitted to avoid liability by claiming it is no longer the owner of the loan and that they are just a loan servicer for the new investor of the loan?  We do not see that as a fair outcome.

Another good scenario for applying the findings in a forensic loan audit, is the situation where you can make some type of connection between the secondary market and the predatory lender and/or where you have Truth in Lending (TILA) or HOEPA material violations that allow you to make some type of Claim against the loan assignee, whether a major lending institution or trustee claiming ownership of a loan under a trust.  Potential causes of action such as civil conspiracy, joint venture liability, aiding and abetting tort violations, and TILA and HOEPA are discussed below.

NOTE: One way to find out whether or not your loan was sold off and securitized on the secondary market is to use some free online search tools.  Here are some tools for you to look up your property to see if Freddie or Fannie (Government Sponsored Enterprises – Quasi Private Companies) own your loan:

Does Freddie Mac own your loan?

https://ww3.freddiemac.com/corporate/

Does Fannie Mae own your loan?

http://loanlookup.fanniemae.com/loanlookup/

Freddie and Fannie typically securitized conventional loans, and they claim to be the holder / owner of the certain loans they securitize.  You can also try to call your lender and just ask them: “do you own the loan or are you just servicing it on behalf of an investor” (sometimes they will tell you, and sometimes, strangely enough, they will keep the owner of your loan a SECRET if you can believe that).

You may also want to send in a Qualified Written Request under RESPA and/or a request under 15 U.S.C. 1641(f) to demand that the loan servicer produce the name, address, and telephone number of the holder of the loan or master loan servicer.  They are required to tell you this under Federal Law (that being said, do not be surprised if they blow you off – this is the response we get in many cases, again, if you can believe it).  Why is that?  Because they do not want you to know who owns your loan, in some cases, because they cannot “produce the note” and prove they have the right to collect loan payments and/or foreclosure on your property.   In some cases they would prefer to simply keep you ignorant.

You can also send out “debt validation letters” following the lender / loan servicer / collection companies attempts to collect a debt (i.e. calling you to discuss your past-due mortgage payments).

(3)  We send out legal demand letters highlighting the best case possible for liability against the lender and/or loan servicer and/or trustee of a trust acting on behalf of Wall Street Investors.  This may be to assert a TILA rescission claim and discussing a potential tender strategy, to outlining a HOEPA violation triggering rescission, or arguing for “aiding and abetting” liability, etc.  Again, keep in mind, if there is not some type of connection to the originating lender (ex. the original lender sold off the loan and is now profiting from it by acting as loan servicer) it may be tough to raise a strong legal claim against the loan assignee or trustee of a trust, aside from TILA extended rescission rights or other grounds for rescission or the filing of an injunction.

NOTE:  Some possible grounds for filing for an injunction (which may get the attention of a loan servicer acting on behalf of the investors) that can result from a loan audit are:

(1)       TILA right of rescission (for “material” TILA violations)

(2)       HOEPA (hi cost loan) violations

(3)       Failure to follow Arizona or California foreclosure laws (ex. 2923.5 declarations in CA)

(4)       Wrongful Foreclosure (ex. failure to clarify amounts owed pursuant to a Qualified Written Request which disputes such; or where the breach was already cured through a loan modification agreement (see our website at www.TrialPlanFraud.com for more information on Trial Plan scams and bad faith dealing we are seeing in conjunction with loan modifications)

(5)       Unconscionable Loans that should not be enforced (ex. predatory option arm pick-a-pay monthly adjustable loans)

(6)       Fraud in the origination of the loan which can be tied to the lender (especially a portfolio loan)

(7)       Violations of California Civil Code Section 1632 – Foreign language contracts)

(8)       Other equitable grounds for enjoining your foreclosure sale (contact a foreclosure defense attorney to discuss).

These are just a few sample grounds that can be reviewed, and raised where applicable to seek an injunction.  In other cases, the aggrieved borrower may be have nothing more than a claim against the originating broker/lender who may now be defunct following a BK during the mortgage meltdown.

Note: Some borrower’s want to assert fraud against “the whole system” (broker, originating lender, investment banker that securitizes loan, trustee of the trust, loan servicer, etc.).  This approach should be thought through to make sure you actually have good-faith claims to assert against each party.  A frivolous “sue everybody” approach is not without consequence.

(4) In addition to trying to “audit” (look-for) for predatory lending and foreclosure violations, we also try to “create” legal violations (that’s right, if the loan servicer cannot comply with simple legal requirements they too can become potential defendants).  To do this we send out qualified written requests; demands to validate debts; and demands to identify the holder of the loan.

While we would concede that in many cases the loan servicers had nothing to do with the origination of the loan and the predatory lending practices that may have occurred, however, there are legal rights that California and Arizona homeowners facing foreclosure have, that the loan servicers (who can also be predatory themselves) must comply with upon making proper requests.  Two of the main things they are required to do are:

(a) They must respond to Qualified Written Requests.  They are fairly good at this in our opinion, but their responses are often late, or often lacking in detail.  They must acknowledge the QWR within 20 days, and address any valid issues within 60 days.  They must also cease reporting negative credit during this period.  Failure to comply creates legal violations against the loan servicer, and,

(b) They must identify the holder of the loan or master loan servicer (name, address, and phone number) as set forth above.  Note that they rarely comply with this request.  Given that many loans were securitized and managed by a “trustee of the trust” they will rarely provide you any meaningful information in this regard.  Again, they seem to prefer to keep this a secret.

(c) There are some other items that arguably must do including following foreclosure laws, rules, and regulations when they are working with other parties seeking to foreclose on behalf of the “investor” of the loan.  For example, they may be required to give (or may voluntarily give) declarations in the Notice of Default (ex. the California Civil Code Section 2923.5 declaration that certifies that the “beneficiary” of the loan, or their “authorized” agent – for example, the loan servicer claiming to be the authorized agent of the beneficiary –  has contacted the borrower to assess their financial situation, and discussed loan modification options).  In securitized loans, this may raise issues involving who the true beneficiary is.  If you do not know who the true and real beneficiary is (ex. the true lender who is entitled to loan payments) then how can you ascertain who the “authorized agent of the beneficiary” is?  And if you do not know the answer to that questions, how can you confirm there was any compliance with 2923.5?  If there is no compliance with 2923.5 (or it least if the loan servicer, trustee, and lender cannot prove who the true owner of the loan is) then why should the foreclosure be allowed to proceed where compliance with California Foreclosure laws cannot be proved where challenged?  We discuss more about this issue at our www.ProduceTheNoteAttorney.com website.

The bottom line is, that despite the fact that your loan was sold off, and potentially securitized, and despite the fact that the lenders, loan, servicers, and/or trustees will claim they are “holders in due course” we nevertheless attempt to identify, assert, and stand up for our clients legal rights.  This is not to say there are absolute rights to stop foreclosure in every case.  Some loans may be simply too old, or may be non-predatory in nature, that finding and asserting legal leverage may be tough.  Not all loans are predatory.  But the point is to approach every foreclosure defense case as setting up a case for potential litigation.

Too many times people come to us after hiring loan modification companies, or even other attorneys who did nothing more than submit tax returns and pay stubs (i.e. they did nothing or very little to investigate whether a legal case can be made to stop foreclosure, if necessary, and to present their findings to a loan servicer).  While the servicer may not care much about potential litigation (again, they see themselves as innocent parties to the transaction and to securitization in general) nevertheless we believe it makes sense to approach these cases as if preparing for a lawsuit, for no other reason than that it may actually be required.

We have seen people squander their TILA rescission rights because they thought they had hired a loan modification company or loan modification law firm to assist them.  However, not protecting your TILA rescission rights (of course you have to find these rights first) especially where you had a legal right to rescind against the loan assignee, and where you had an ability to “tender” as required under TILA, is truly a shame to see, and in my opinion creates malpractice liability exposure for the attorney who did nothing but send in a hardship letter and patted himself on the back for helping a homeowner in distress.  Both the real estate broker posing as a loan modification company, and the “foreclosure defense law firm” both assume legal liability for not investigating and protecting a homeowners TILA, and/or other rescission rights.  If for no other reason, that is justification for having your loan file audited, especially where you have equity, or near-equity in the property or some other means to tender following rescission.  For more information about tender and rescission see our website at www.RescindMyLoan.net

At any rate, this list goes on.  The point is, as Foreclosure Defense Attorneys, we are looking to see if there is any way to leverage a loan modification (or at times a short sale) against the subsequent purchasers of the loan, and/or the loan servicers and final investors of the loan (which may be largely insulated from lawsuits under the holder in due course doctrine discussed below).

HOLDER IN DUE COURSE OVERVIEW

Generally speaking, a holder in due course (in the mortgage loan context) is a subsequent purchaser of a loan (ex. Wells Fargo who buys a loan from Countrywide or Fannie / Freddie who buys a loan from a direct lender) and who buys in good faith, without knowledge of any claims, defenses, or defects in the underlying instrument.  This is merely a general statement of the law.

BENEFITS OF BEING A HOLDER IN DUE COURSE: In general terms, a holder in due course will only be liable for the “REAL” defenses of a potential plaintiff (ex. infancy, duress, lack of capacity, illegality of transaction, fraud in the inducement where no opportunity to discover essential contract terms was permitted).   A holder in due course is generally NOT liable for any “PERSONAL” defenses (such as undue influence, less than total competence, fraud and misrepresentation that does not prevent discovery of material contract terms, etc.).

Obviously, this creates a powerful incentive to obtain holder in due course status under the holder in due course doctrine (HDC) as there are less legal claims that can be made against you.

GENERAL REQUIREMENTS TO OBTAIN HOLDER IN DUE COURSE STATUS FOR MORTGAGE LOANS:

Generally speaking, under U.C.C. 3-302 a holder in due course is a:

(1) “Holder” of an “instrument;”

(2) Who has no apparent evidence of forgery or alteration of the instrument;

(3) Who otherwise has no notice of any other irregularity that may call into question the authenticity of the instrument;

(4) Which Holder took the instrument for value (paid consideration);

(5) And in good faith (honesty in fact and in observation of commercially reasonable standards of good faith and fair dealing);

(6)  Who took without notice that the instrument may be overdue or that it has been dishonored, or that there is an uncured default with respect to payment of another instrument in the same series;

(7)  And which holder took the instrument without notice of any claims under UCC 3-305(a) (“real defense”) or 3-306

(8)  And which holder took the instrument without notice that the instrument contains unauthorized signatures or has been altered.

Note: the “notice” requirement seems to be more of an “objective standard” in that the Courts may look to whether or not the holder of the instrument “should have realized” any of the above items which would preclude HDC status.

Also note: Article 3 of the UCC underwent a re-writing in 1990.  It should come as little surprise that the drafting process was largely dominated by the banks, clearinghouses, and federal reserve board.

So, this section indicates that if a subsequent purchaser of a loan pays value for the loan, and takes it in good faith with no notice of claims or defects listed above, generally speaking then they may be considered a holder in due course subject to the limited claims and defenses of the potential plaintiff (i.e. an aggrieved homeowner) as stated above.

NOTE:  The key then is to either defeat the subsequent parties claim of HDC status, and if that cannot be done, find some other type of claim that may make them liable even though they fancy themselves as holders in due course.

If the facts of a case allows you to claim that either: (1) there is no holder, (2) there is no instrument, (3) there was no good faith, (4) there was no value paid for the loan, and/or (5) there were other noticeable claims and/or defects that should have been detected, etc., then you may be able to argue the subsequent purchaser of the loan deserves no HDC status.  These are some things to look into.

NOTE: We will be updating this section with caselaw in this area as time permits.  I did not have time to add to this section.

WHAT LEGAL CLAIMS, IF ANY, CAN BE MADE AGAINST A “HOLDER IN DUE COURSE?”

Now, even where the loan is owned by a subsequent lender, and/or Wall Street investors – who invest in mortgage backed securities (and where these loans are being serviced by a designated loan servicer, who may or may not be a major lender themselves) and the holder in due course issue arises, there still MAY be some claims that you MAY be able to assert against these loan assignees.

Here are a few arguments that can be looked into when trying to see if there is any way to threaten a lawsuit against the loan assignee  / innocent investor / trustee under a trust / loan servicer, etc where a reasonable and meaningful loan modification is not provided to the borrower.

Please keep in mind, these can be TOUGH theories to prevail on, but homeowners should at least consider some of these theories if the lender is literally forcing foreclosure on the homeowner, and where a predatory loan is present - (typically, the option ARM loan which most people agree is predatory, including the lenders themselves who are entering into various settlement agreements with state Attorney Generals, all but conceding the predatory nature of these types of loans and the 2/28 and 3/27 Sub-prime ARMS which may also be predatory, but  possibly in more limited circumstances).

Here are the theories we will be looking at in very general terms: (1) Civil Conspiracy, (2) Joint Venture Liability, (3) Aiding and abetting tort violations, (4) TILA and HOEPA rescission rights.  These claims, where applicable, can be raised against loan assignees, and should be presented to the loan servicer when attempting to leverage a loan modification.

(1) Civil Conspiracy

The following highlight some general principles in the State of California that highlight the elements required to show a civil conspiracy.

In the context of securitized loans, the question would be whether or not a borrower of an alleged predatory loan (ex. an option arm loan that was not fully explained, disclosed, or that has harsh, oppressive, and confusing and conflicting terms) can sue more than just the original broker and lender, but rather, can he sue the broker, lender, loan servicer, trustee of the trust, etc., by arguing they are involved in a system or process designed to defraud California borrowers or in disregard of whether or not the borrower would wind up in foreclosure given the underwriting and other predatory practices involved in the loan origination process.

A general review of the California case law highlights what might be legally required to assert a civil conspiracy claim against the players in the “structured predatory financing” system created by the major financial institutions (my comments are set forth in italics), the requirements are taken from actual cases involving civil conspiracy claims in California.

(1) Civil Conspiracy is not cause of action, but legal doctrine that imposes liability on persons who, although not actually committing tort themselves, share with immediate tort-feasors common plan or design in its perpetration.  (One could argue that the common plan or design is to originate predatory loans that have high costs and fees, and which are likely to result in foreclosure, and to securitize these loans in a manner in which everyone would profit).

(2) Elements of action for civil conspiracy are formation and operation of conspiracy and damage resulting to plaintiff from act or acts done in furtherance of common design; the major significance of civil conspiracy lies in fact that it renders each participant in wrongful act responsible as joint tort (whether or not he was a direct actor and regardless of degree of activity).  Formation of a conspiracy normally requires some type of agreement as set forth below.  The damage would be the resulting foreclosure that is a foreseeable consequence of some types of option arm loans.

(3) Actual knowledge of planned tort, without more, is insufficient to serve as basis for conspiracy claim as the knowledge must be combined with intent to aid in tort’s commission.Again, this seems to require some type of intent to aid the other parties.  This may be a bit difficult to prove.  For example, does a loan servicer have the intent to aid the original lender in originating an option arm loan?

(4) To prove claim for civil conspiracy, plaintiff must show: (1) formation and operation of conspiracy; (2) wrongful conduct in furtherance of conspiracy; and (3) damages arising from wrongful conduct. This is a general recitation of the rule.

(5) A civil conspiracy to commit tortious acts can only be formed by parties who are already under a statutory or common law duty to plaintiff, the breach of which will support a cause of action against them individually, rather than as conspirators.  Stated another way, where plaintiff alleges existence of civil conspiracy he must allege allege the preexisting legal duty and its breach.

(7) Because civil conspiracy is so easy to allege, plaintiffs have a weighty burden to prove it.  To prove the claim, Plaintiff’s must show that each member of conspiracy acted in concert and came to a mutual understanding to accomplish a common and unlawful plan, and that one or more of them committed an overt act to further it. Again, the cases indicate that Plaintiff must PROVE the mutual understanding……this may not be so easy to do, and must prove that each acted in concert to put Plaintiff into a predatory loan that was designed to result in foreclosure.

(8) There is no separate tort of civil conspiracy, but rather, conspirators must agree to do some act which is classified as “civil wrong. In the context of setting up a system to securitize loans, the “wrongful act” may be argued as setting up the chain of financing whereby the original broker and lender gets cashed out for their participation in essentially creating the security, while the other parties (the investment banker, loan aggregator and trustee) get immediately cashed out by the wall street investors who invest in the loan pools, and the servicer collects its fees for any and all loans that it gets to service. Note: If proper underwriting guidelines were followed, it would seem there would be a WHOLE LOT LESS LOANS TO SERVICE (meaning, less profits to the servicers).  Again, proving the common plan and scheme may be the hurdle.

(9) Mere knowledge, acquiescence, or approval of an act, without cooperation or agreement to cooperate is insufficient to establish liability based on conspiracy.

NOTE: This is not an exhaustive analysis of the cases, and may be missing some recent cases involving securitized financing.  These are just some general ideas to think about when determining whether there are proper grounds to assert against the parties to a securitized loan.

(2) Joint Venture liability

A joint venture is basically an agreement between two or more persons (which includes corporations) who agree to work together toward a common plan in the pursuit of profits.  There must be an agreement to work together.  The joint venture agreement may be oral or informal.  Whether a joint venture agreement is created is a question of fact depending upon the intention of the parties.

The essential element of a joint venture is an undertaking by two or more persons to carry out a single business enterprise jointly for profit. The rights and liabilities of joint adventurers, as between themselves, are governed by the same rules which apply to partnerships. See Pellegrini v. Weiss, 165 Cal.App.4th 515, (2008).

In Smith v. Wells Fargo, 401 F.Supp.2d 549, (2005), a Plaintiff was challenging the actions of a loan originator.  Countrywide and Wells Fargo claimed they were “holders in due course” and thus, could not be liable for the actions of the  loan originator or its agents.  The Court disagreed, and denied Defendant’s motion for summary judgment (Defendant’s claimed Plaintiffs could not prove that there was a joint venture agreement).    In denying Defendants motion for Summary judgment on the joint venture issues, the Court held:

“As between the parties, a contract, written or verbal, is essential to create the relation of joint adventurers……..to constitute a joint adventure the parties must combine their property, money, efforts, skill, or knowledge, in some common undertaking of a special or particular nature, but the contributions of the respective parties need not be equal or of the same character. There must, however, be some contribution by each party of something promotive of the enterprise…….an agreement, express or implied, for the sharing of profits is generally considered essential to the creation of a joint adventure, and it has been held that, at common law, in order to constitute a joint adventure, there must be an agreement to share in both the profits and the losses. It has also been held, however, that the sharing of losses is not essential, or at least that there need not be a specific agreement to share the losses, and that, if the nature of the undertaking is such that no losses, other than those of time and labor in carrying out the enterprise, are likely to occur, an agreement to divide the profits may suffice to make it a joint adventure, even in the absence of a provision to share the losses.”

In applying this, the Court held:

“In the case sub judice, after reviewing the PSA, it appears that there was an agreement to pool and service (PSA) mortgages between Delta Funding Corporation, as seller; Countrywide, as servicer; and Norwest Bank Minnesota, National Association or Wells Fargo, as trustee. It also appears that Delta Funding provided the mortgage loans, Countrywide provided servicing the loans and Wells Fargo provided the financing or money. Finally, it appears from sections 2.04(b), 2.05, 3.08, 7.01 and 9.05 of the PSA that there was an agreement on the fees each party could collect as well as their liability for losses.

Moreover, in section 4 of the expert report by Kevin P. Byers, Mr. Byers notes that Delta Funding’s revenues result primarily from “the sale of mortgage loans (through securitization and on a whole loan basis and sale of its servicing right on newly originated or purchased pools of home-equity loans.”)…..(quoting Delta Funding’s 10-K annual report to the Security and Exchange Commission).) Therefore, taking the evidence in the light most favorable to the plaintiff, it would not be unreasonable for a jury to conclude that Delta Funding, Countrywide and Wells Fargo entered into a joint venture. As there is a genuine issue of material fact, the Court denies summary judgment.”

Potential Argument for Joint Venture Liability in the Securitization of Loans:

The pooling and servicing agreement(used when loans are securitized) is an express written agreement that basically sets the stage for the participants in loan securitization to realize a profit:

(1) The Servicer is appointed to collect loan payments and receive a profit from the collection of such from the borrower.  The Servicer therefore commits its time, talent, resources, and services in an attempt to profit from the securitized loan;

(2) The Trustee agrees to perform certain duties to manage and administer payment streams for the benefit of the investors of the securitized loan;

(3) MERS may be appointed to receive a fee to track ownership and servicing rights (which may be transferred at the Trustees discretion);

(4) The seller of the security and investment banker / underwriter cannot profit “but for” the pooling and servicing agreement.  In essence, it could be argued they are third party beneficiaries under this agreement;

(5) As part of the agreement, some originating lenders may agree to “buy-back” non-performing loans, keeping them on the hook under the terms of the contract (sharing in the profits and losses of the joint venture).

Obviously this is just one example, you would want to review the pooling and servicing agreement and SEC filings to see what the exact set-up is in your situation.

(3) Aiding and Abetting Liability – Creating the Marketplace for Predatory Option Arm loans.

Under the common law of many states, it is against the law to aid and abet another in the commission of a tort (ex. fraud / misrepresentation are two types of torts).  For example, where you have a broker that broker’s a loan through a “direct lender” and the direct lender is “pricing out” the loan and reviewing the guidelines of the “purchasing lender” (i.e. the loan assignee who will claim they are a holder in due course) the question arises who is liable, for example, for making false statements of fact to induce a borrower to enter into an option arm loan?

It would seem appropriate that the broker (who took the loan application and made false statements of fact – in breach of their fiduciary duty to the borrower – should be held liable.  But what about the “direct lender” who is funding the loan only to turn around and sell it to the “purchasing lender”?  Did the direct lender aid and abet the broker by not verifying certain disclosures are made?  Do they aid and abet by underwriting the predatory loan product (usually these option arm loans are underwritten to wind up in foreclosure – the borrower can afford the “teaser rate” but not the payment that would result after the loan hits is principal balance cap and recasts into a fully amortized loan at the note rate?

Did the direct lender “aid and abet” the broker?  It would seem an argument could be made since the direct lender knows, or should know the details of the loan, and was in a good position to ensure proper underwriting and to ensure proper disclosures (ex. a CHARMS adjustable rate disclosure and other truth in lending disclosures are clear, conspicuous and accurate).

Taking it to the next level, even assuming you can create a case for liability against a direct lender (using our scenario above) can you then extend liability to the entity that purchases the loan from the direct lender (i.e. a private investor, private bank, investment banker, fannie mae or freddie mac, etc.?).  Can you impart this level of knowledge and wrongdoing against these parties that are even more remote in the chain of things?

These are the tough questions.  Again, it seems even these “purchasing lenders” are complicit, and have knowledge about the types of loans they are purchasing (in this case the option arm loan) and know, or should know that these loans are predatory, toxic, and likely to wind up in foreclosure.

In a recent predatory lending lawsuit, in the case of Plascencia v. Lending 1st Mortgage, the Defendant, EMC, claimed it could not be held liable under California’s Unfair Competition Law, (2008 WL 4544357 (583 F.Supp.2d 1090, N.D. Cal. Sept. 30, 2008)), since it was not the party that originated the loan in question (EMC purchased, and securitized loans from Lending 1st Mortgage that often had truth in lending violations).

The Plaintiff sought to hold EMC liable since they were “engaged in the business of promoting, marketing, distributing, selling, servicing, owning, or are and were the assignees of the Option ARM loans that are the subject of this Complaint.”  They argued EMC was engaged in a “fraudulent scheme” with Lending 1st.

The court denied Defendant EMC’s motion to dismiss on this ground holding that essentially it was possible that Defendant could be held liable for aiding and abetting.  Specifically, the Court stated:

“By showing that EMC purchased Lending 1st’s Option ARM loans with knowledge of Lending 1st’s TILA violations, Plaintiffs may be able to establish that EMC gave Lending 1st a financial incentive to continue to commit those violations, and therefore may be subjected to liability for aiding and abetting violations of the UCL. Moreover,      EMC’s profiting from loans featuring oppressive terms that were not fully disclosed in compliance      with TILA could itself be an unfair business practice under the UCL. EMC may    therefore be liable for UCL violations in its own right. Accordingly, the UCL claim will not be dismissed.”

NOTE: This case may be limited to cases where the borrower was unaware they had a negative amortization option arm loan and/or where Plaintiff can prove that the Purchasing lender has knowledge of TILA defects in the loans they are purchasing.  This is a good case that talks about fraud and the Unfair Competition Law in regard to Mortgage Loans and creates some “hope” for lender liability.

NOTE 2: The Plascencia Case also discussed / cited another case, the In re First Alliance Mortgage Co. case which citation can be found at 471 F.3d, 977, 994-995 (9th Cir.2006).  In this case, a California Federal Court imposed aiding and abetting liability on Lehman Brothers for predatory loans made by First Alliance which targeted senior citizens with false and misleading loans representations.  Lehman purchased the predatory loans and securitized them – while First Alliance remained as the loan servicer earning additional profits off what were found to be predatory and fraudulent loans. Again, the case indicated that Lehman had knowledge of Alliance’s lending practices and even provided a warehouse line of credit so that First Alliance could continue to originate these types of loans.  Again, which indicates some level of knowledge of the predatory loan origination practices may have to be shown as a pre-requisite to filing suit.

This case is important because companies like Countrywide often originated predatory option arm loans (or “backed” brokers who pitched these loans) and often sold them off on the secondary market, and retained the servicing rights.  We have been saying that in these cases, Countywide (now BofA) should not be able to claim they are an innocent party, or that they have some type of “holder in due course status” when they are continuing to profit from their dirty laundry.

A separate question to consider is whether a Plaintiff can attack what may appear to be a truly innocent “loan servicer” (without proof of predatory knowledge), with aiding and abetting liability where a loan servicer refuses to modify a loan that was a product of fraud at the loan origination stage.  It seems that some level of knowledge of the predatory loan origination may be required (although some would argue all loan servicers are implicit as to the true nature and quality of loans securitized and pooled into trusts).  Where a loan servicer is appointed / hired to collect loan payments on behalf of a trustee of a trust, it is not clear whether or not a predatory knowledge can be established, but should be investigated in each case.

NOTE 3: Another case that may help in analyzing and aiding and abetting liability claim against a loan purchaser / loan assignee who may have securitized your loan or a loan servicer with knowledge of predatory loan origination is Schulz v. Neovi Data Corp., 152 Cal.App.4th 86 (2007).  This is the case where an online payment processing company allowed an illegal online lottery site accept payments for its business.  The Plaintiff made a claim under the California Business and Professions Code Section 17200 (California’s unfair competition law) and argued that the payment processing company had  “aided and abetted” the illegal lottery site.  The Court held:

Liability may be imposed on one who aids and abets the commission of an intentional tort if the person knows the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act……..this is consistent with Restatement Second of Torts Section 876, which recognizes a cause of action for aiding and abetting in a civil action when the wrongdoer knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself.

The rationale is that advice or encouragement to act operates as a moral support to a tortfeasor and if the act encouraged is known to be tortious it has the same effect upon the liability of the adviser as participation or physical assistance.

Under this theory, at least for California loans, it appears a borrower may be able to sue a purchasing lender of a predatory loan who securitizes and profits off the loan, and potentially a loan servicer who profits off a predatory loan (even though the Schulz case does not involve the holder in due course argument) where it appears the lender or servicer has knowledge that the originator of the loan was committing a tort by breaching a legal duty (ex. making fraudulent representations to induce a borrower into entering into an option arm loan) AND, where the lender or loan servicer gives substantial aid, assistance, and/or encouragement.

Under this theory, it would seem you would need to prove two tough things, (1) knowledge of the tortious breach of duty by the loan originator, and (2) active participation in encouraging the predatory practice.  This may be an easier case to make against a purchasing lender who is looking to securitize loans, than it is a loan servicer seeking to profit off its servicing of virtually any loan (the servicer does not care what the loan is, they will service any loan).

At any rate, the facts of the case should be looked at to determine which, if any, parties may be proper parties to file a lawsuit against.  Remember, filing false and frivolous claims can result in sanctions and other unfavorable responses by the Court.  There needs to be good faith grounds to file a lawsuit against any party.

(4) HOEPA (high cost loans) and TILA Extended Right of Rescission Claims apply to assignees of loans even those claiming Holder in Due Course Status.

Note: MATERIAL TRUTH IN LENDING VIOLATIONS THAT CREATE AN EXTENDED THREE YEAR RIGHT TO RESCIND APPLY TO ALL LOAN ASSIGNEES EVEN TO ANY PARTY DEEMED A HOLDER IN DUE COURSE.  THAT IS WHY A TILA LOAN AUDIT IS SO POWERFUL BECAUSE IF YOU HAVE AN ABILITY TO “TENDER” THIS CLAIM WILL SURVIVE EVEN TO A HOLDER IN DUE COURSE.

More about these types of rescission claims can be found at our website www.RescindMyLoan.net

CONCLUSION

Although the financial giants have created an elaborate system of securitizing loans – which arguably encouraged, facilitated, and assisted the originating lender to loosen up the underwriting standards and create as many loans as possible that were designed to be bought up, securitized,  and ultimately sold-off to wall street investors – they also helped draft the UCC Holder in Due Course rules which they seek to hide behind whenever they are sued.

Although it can be difficult to make credible claims against a loan assignee, trustee of a trust, loan servicer or other entity that was intended to profit off securitized loans, there are some claims and defenses that should be explored.

Foreclosure defense is a difficult line of business because often times loan payments are not being made by the borrower, and at times the loan servicer may even offer some type of a loan modification that can be used to show good faith in a Court of Law in the event a lawsuit is filed.  In addition, judges are literally inundated with foreclosure defense lawsuits, and where a judge is paying his or her mortgage, they may not look favorably on others who don’t pay their mortgage, and it is possible that only the worst of the worst predatory lending practices will ever see the light of a jury.  Of course, judges are bound to follow the law, and it is our job as foreclosure defense lawyers to try to make a persuasive case for predatory lending, injunctions, damages, assignee liability, and rescission rights.

Sure the deck is stacked against you, but why take foreclosure lying down?  If you are denied a loan modification, and believe you may be the victim of predatory lending, have your case reviewed to see if you have any proper grounds to challenge the assertion of HDC status, or to lay claim against the parties to loan securitization for aiding and abetting legal violations and engaging in civil conspiracy’s and joint ventures that seek profit at the expense of legal compliance and at the expense of the homeowner.

Where you have valid good-faith legal claims that you can assert material TILA violations raising extended rescission rights against ANY loan assignee (ex. civil conspiracy, joint venture liability, aiding and abetting, TILA rescission rights, HOEPA recsission rights, etc.), this might be the best time to raise the “produce the note” defense and make them prove that: (a) they have the legal right to foreclosure on you (i.e. that their is some entity/beneficiary holding the note that has a legal right to foreclosure on your property) and that (b) this beneficiary,     or their authorized agent, has complied with all required aspects of foreclosure law in California)?

If the “wrong lender” or “pretender lender” (as this term is used by Neil Garfield) forecloses on you, how can you be certain the “real lender” (i.e. the entity/beneficiary that may be holding your original promissory note and all properly recorded assignments) won’t come knocking on your door  – wherever that door may be – and calling its loan due.

Should a homeowner / mortgagor be required to risk “financial double jeopardy” where it is not clear who owns your loan given the nature of securitized loans and given the tendency of loan servicers to keep this fact a secret?

Again, no one is saying this is an easy battle.   These are just some things to think about and issues to explore when your house is on the line.  This article is not to imply success on any of the theories outlined above.  For specific legal questions, please contact a foreclosure defense attorney in your area.  We are only licensed to practice law in the states of California and Arizona, and only seek to solicit clients in these states.  This is an advertisement and communication pursuant to state  bar rules.

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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)

www.LoanModSolutions.net (Submit your Wachovia / World Savings Loans)

www.LoanModificationRipoff.net (Submit your Loan Mod Scam – we may be able to take your case on contingency).

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.

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Offices:

Arizona Office (Esplanade): 2415 E. Camelback Road, Suite 700, Phoenix, AZ, 85020.

California Office (Fashion Island): 620 Newport Center Drive, Suite 1100, Newport Beach, CA 92660

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Our Real Estate Law Services:

1. Loan Modifications / Loan Workouts (World Savings and Wachovia Loans)

2. Commercial Lease Modifications

3. DRE audits, hearings and investigations

4. Real Estate Broker admissions cases

5. Foreclosure Defense

6. Mortgage Law & Predatory Law

7. Phoenix Real Estate Zoning Attorney – Greater Phoenix (Scottsdale, Goodyear, Buckeye, Casa Grande etc.)

8. Phoenix Eminent Domain Attorney / Inverse Condemnation / Prop 207 (Greater Phoenix)

9. Real Estate Arbitration, Litigation and Mediation

10. Foreclosure Consultant Contracts / Loan Modification Contracts

11. Real Estate LLC’s & Incorporations

12. Real Estate Partnership Law

13. Quiet Title Actions

14. Forensic Loan Audits – Greater Phoenix (Truth in Lending (TILA), RESPA, HOEPA, Fraud, etc.)

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KEYWORDS: ARIZONA FORECLOSURE DEFENSE / CALIFORNIA FORECLOSURE DEFENSE / SUING ON A OPTION ARM LOAN / PREDATORY LENDING LAWSUIT / INJUNCTION AGAINST FORECLOSURE / STOPPING A FORECLOSURE SALE / FORENSIC LOAN AUDIT / PHOENIX FORECLOSURE LAWYER / PHOENIX FORECLOSURE ATTORNEY / ORANGE COUNTY FORECLOSURE ATTORNEY / ORANGE COUNTY FORECLOSURE LAWYER.

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Because most of our foreclosure defense work is done by phone fax and email between we are able to serve our California clients in the following California Counties and Cities

Alameda
Albany
Berkeley
Dublin
Emeryville
Fremont
Hayward
Livermore
Newark
Oakland
Piedmont
Pleasanton
San Leandro
Union City
Amador
Amador City
Ione
Jackson
Plymouth
Sutter Creek
Chico
Gridley
Oroville
Paradise
Angels Camp
Colusa
Colusa
Williams
Antioch
Brentwood
Clayton
Concord
Danville
El Cerrito
Hercules
Lafayette
Martinez
Moraga
Orinda
Pinole
Pittsburg
Pleasant Hill
Richmond
San Pablo
San Ramon
Walnut Creek
Crescent City
Placerville
South Lake Tahoe
Clovis
Coalinga
Firebaugh
Fowler
Fresno
Huron
Kerman
Kingsburg
Mendota
Orange Cove
Parlier
Reedley
San Joaquin
Sanger
Selma
Orland
Willows
Humboldt
Arcata
Blue Lake
Eureka
Ferndale
Fortuna
Rio Dell
Trinidad
Imperial
Brawley
Calexico
Calipatria
El Centro
Holtville
Westmorland
Inyo
Bishop
Kern
Arvin
Bakersfield
California City
Delano
Kern County
Maricopa
McFarland
Ridgecrest
Shafter
Taft
Tehachapi
Wasco
Avenal
Corcoran
Hanford
Lemoore
Lake
Clearlake
Lakeport
Susanville
Los Angeles
Agoura Hills
Alhambra
Arcadia
Artesia
Azusa
Baldwin Park
Bell
Bell Gardens
Bellflower
Beverly Hills
Bradbury
Burbank
CalabasCarson
Cerritos
Claremont
Commerce
Compton
Covina
Cudahy
Culver City
Diamond Bar
Downey
Duarte
El Monte
El Segundo
Gardena
Glendale
Glendora
Hawaiian Gardens
Hawthorne
Hermosa Beach
Hidden Hills
Huntington Park
Industry
Inglewood
Irwindale
La Canada-Flintridge
La Habra Heights
La Mirada
La Puente
La Verne
Lakewood
Lancaster
Lawndale
Lomita
Long Beach
Lynwood
Malibu
Manhattan Beach
Maywood
Monrovia
Montebello
Monterey Park
Norwalk
Palmdale
Palos Verdes Estates
Paramount
Pasadena
Pico Rivera
Pomona
Rancho Palos Verdes
Redondo Beach
Rolling Hills
Rolling Hills Estates
Rosemead
San Dimas
San Fernando
San Gabriel
San Marino
Santa Clarita
Santa Fe Springs
Santa Monica
Sierra Madre
Signal Hill
South El Monte
South Gate
South Pasadena
Temple City
Torrance
Vernon
Walnut
West Covina
West Hollywood
Westlake Village
Whittier
Chowchilla
Madera
Marin
Belvedere
Corte Madera
Fairfax
Larkspur
Mill Valley
Novato
Ross
San Anselmo
San Rafael
Sausalito
Tiburon
Mariposa
Mendocino
Fort Bragg
Point Arena
Ukiah
Willits
Merced
Atwater
Dos Palos
Gustine
Livingston
Los Banos
Merced
Modoc
Alturas
Mono
Mammoth Lakes
Monterey
Carmel
Del Rey Oaks
Gonzales
Greenfield
King City
Marina
Monterey
Pacific Grove
Salinas
Sand City
Seaside
Soledad
Napa
American Canyon
Calistoga
Napa
St. Helena
Yountville
Nevada
Grass Valley
Nevada City
Truckee
Orange
Anaheim
Brea
Buena Park
Costa Mesa
Cypress
Dana Point
Fountain Valley
Fullerton
Garden Grove
Huntington Beach
Irvine
La Habra
La Palma
Laguna Beach
Laguna Hills
Laguna Niguel
Lake Forest
Los Alamitos
Mission Viejo
Newport Beach
Orange
Placentia
San Clemente
San Juan Capistrano
Santa Ana
Seal Beach
Stanton
Tustin
Villa Park
Westminster
Yorba Linda
Placer
Auburn
Colfax
Lincoln
Loomis
Rocklin
Roseville
Plumas
Portola
Riverside
Banning
Beaumont
Blythe
Calimesa
Canyon Lake
Cathedral City
Coachella
Corona
Desert Hot Springs
Hemet
Indian Wells
Indio
La Quinta
Lake Elsinore
Moreno Valley
Murrieta
Norco
Palm Desert
Palm Springs
Perris
Rancho Mirage
Riversi
San Jacinto
Temecula
Folsom
Galt
Isleton
Sacramento
San Benito
Hollister
San Juan Bautista
San Bernardino
Adelanto
Apple Valley
Barstow
Big Bear Lake
Chino
Chino Hills
Colton
Fontana
Grand Terrace
Hesperia
Highland
Loma Linda
Montclair
Needles
Ontario
Rancho Cucamonga
Redlands
Rialto
Twentynine Palms
Upland
Victorville
Yucaipa
Yucca Valley
San Diego
Carlsbad
Chula Vista
Coronado
Del Mar
El Cajon
Encinitas
Escondido
Imperial Beach
La Mesa
Lemon Grove
National City
Oceanside
Poway
San Marcos
Santee
Solana Beach
Vista
San Francisco
San Joaquin
Escalon
Lathrop
Lodi
Manteca
Ripon
Stockton
Tracy
Arroyo Grande
Atascadero
Grover Beach
Morro Bay
Paso Robles
Pismo Beach
San Luis Obispo
San Mateo
Atherton
Belmont
Brisbane
Burlingame
Colma
Daly City
East Palo Alto
Foster City
Half Moon Bay
Hillsborough
Menlo Park
Millbrae
Pacifica
Portola Valley
Redwood City
San Bruno
San Carlos
San Mateo
South San Francisco
Woodside
Santa Barbara
Buellton
Carpinteria
Guadalupe
Lompoc
Santa Barbara
Santa Maria
Solvang
Santa Clara
Campbell
Cupertino
Gilroy
Los Altos
Los Altos Hills
Los Gatos
Milpitas
Monte Sereno
Morgan Hill
Mountain View
Palo Alto
San Jose
Santa Clara
Saratoga
Sunnyvale
Santa Cruz
Capitola
Santa Cruz
Scotts Valley
Watsonville
Shasta
Anderson
Redding
Shasta Lak
Sierra
Loyalton
Siskiyou
Dorris
Dunsmuir
Etna
Fort Jones
Montague
Mount Shasta
Tulelake
Weed
Yreka
Solano
Benicia
Dixon
Fairfield
Rio Vista
Suisun City
Vacaville
Vallejo
Sonoma
Cloverdale
Cotati
Healdsburg
Petaluma
Rohnert Park
Santa Rosa
Sebastopol
Sonoma
Windsor
Stanislaus
Ceres
Hughson
Modesto
Newman
Oakdale
Patterson
Riverbank
Turlock
Waterford
Sutter
Live Oak
Yuba City
Tehama
Corning
Red Bluff
Tehama
Trinity
Tulare
Dinuba
Exeter
Farmersville
Lindsay
Porterville
Tulare
Tulare
Visalia
Woodlake
Tuolumne
Sonora
Ventura
Camarillo
Fillmore
MoorpaOjai
Oxnard
Port Hueneme
Santa Paula
Simi Valley
Thousand Oaks
Ventura
Yolo
Davis
West Sacramento
Winters
Woodland
Yuba
Marysville
Wheatland

Note: Our Foreclosure Defense work is primarily driven by phone, fax and email with you and the lenders.

As a consequence we are able to serve Arizona loan modification clients in the following Arizona 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
Somerton
Safford
Coolidge
Globe
Page
Bisbee
Tolleson
Youngtown
Wickenburg
South Tucson
Guadalupe
Holbrook
Snowflake
Cave Creek
Benson
Thatcher
Litchfield Park
Eagar
Pinetop-Lakeside
Taylor
Colorado City
Dewey-Humboldt
Willcox
St. Johns
Carefree
Clarkdale
Quartzsite
Parker
Superior
Williams
Clifton
Kear
Pima
Springerville
Star Valley
Gila Bend
Wellton
Miami
Huachuca City
Mammoth
Tombstone
Fredonia
Patagoni
Hayden
Dunca
Winkelman
Jerome

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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, 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 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).

(1) Under California Civil Code Section 2924.8 the following must be posted where the lender knows a tenant is in possession of residential real property subject to eviction

(a) Upon posting a notice of sale pursuant to Section 2924f, a trustee or authorized agent shall also post the following notice, in the manner required for posting the notice of sale on the property to be sold, and a mortgagee, trustee, beneficiary, or authorized agent shall mail, at the same time in an envelope addressed to the “Resident of property subject to foreclosure sale” the following notice in English and the languages described in Section 1632: “Foreclosure process has begun on this property, which may affect your right to continue to live in this property. Twenty days or more after the date of this notice, this property may be sold at foreclosure. If you are renting this property, the new property owner may either give you a new lease or rental agreement or provide you with a 60-day eviction notice. However, other laws may prohibit an eviction in this circumstance or provide you with a longer notice before eviction. You may wish to contact a lawyer or your local legal aid or housing counseling agency to discuss any rights you may have.”

The following provisions also apply:

(b) It shall be an infraction to tear down the notice described in subdivision:

• within 72 hours of posting. Violators shall be subject to a fine of one hundred dollars ($100).
• A state government entity shall make available translations of the notice described in subdivision
• which may be used by a mortgagee, trustee, beneficiary, or authorized agent to satisfy the requirements of this section.
• This section shall only apply to loans secured by residential real property, and if the billing address for the mortgage note is different than the property address.
• This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.

(2) Under California Code of Civil Procedure Section 1161(b) the following provisions apply in regard to foreclosed property wherein a tenant resides in the subject property:

1161b. (a) Notwithstanding Section 1161a, a tenant or subtenant in possession of a rental housing unit at the time the property is sold in foreclosure shall be given 60 days’ written notice to quit pursuant to Section 1162 before the tenant or subtenant may be removed from the property as prescribed in this chapter. (b) This section shall not apply if any party to the note remains in the property as a tenant, subtenant, or occupant. (c) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.

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.

He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084

Offices:

Our Real Estate Law Services:

1. Loan Modifications / Loan Workouts (World Savings and Wachovia Loans
2. Commercial Lease Modifications
3. DRE audits, hearings and investigations
4. Real Estate Broker admissions cases
5. Foreclosure Defense
6. Mortgage Law & Predatory Law
7. Phoenix Real Estate Zoning Attorney – Greater Phoenix (Scottsdale, Goodyear, Buckeye, Casa Grande etc.)
8. Phoenix Eminent Domain Attorney / Inverse Condemnation / Prop 207 (Greater Phoenix)
9. Real Estate Arbitration, Litigation and Mediation
10. Foreclosure Consultant Contracts / Loan Modification Contracts
11. Real Estate LLC’s & Incorporations
12. Real Estate Partnership Law
13. Quiet Title Actions
14. Forensic Loan Audits – Greater Phoenix (Truth in Lending (TILA), RESPA, HOEPA, Fraud, etc).

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KEYWORDS: ARIZONA FORECLOSURE DEFENSE ATTORNEY / CALIFORNIA FORECLOSURE DEFENSE ATTORNEY / PHOENIX FORECLOSURE DEFENSE ATTORNEY / PHOENIX FORECLOSURE DEFENSE LAWYER / SCOTTSDALE FORECLOSURE DEFENSE ATTORNEY / SCOTTSDALE FORECLOSURE DEFENSE LAWYER / ORANGE COUNTY PREDATORY LENDING LAWYER / ORANGE COUNTY FORECLOSURE DEFENSE ATTORNEY / ORANGE COUNTY FORECLOSURE DEFENSE LAYWER / TRUTH IN LENDING LAWYER / TRUTH IN LENDING ATTORNEY / SOUTHER CALIFORNIA MORTGAGE LAW ATTORNEY / MORTGAGE LAWYER / RIVERSIDE FORECLOSURE ATTORNEY / RIVERSIDE FORECLOSURE LAWYER / RESPA LAWYER / RESPA ATTORNEY / FORECLOSURE DEFENSE LAW / PHOENIX LOAN MODIFICATION ATTORNEY / PHOENIX FORECLOSURE DEFENSE LAWYER / ORANGE COUNTY REAL ESTATE LAWYER / ORANGE COUNTY PREDATORY LENDING AND MORTGAGE LITIGATION ATTORNEY / NEWPORT BEACH FORECLOSURE DEFENSE LAWYER / NEWPORT BEACH FORECLOSURE DEFENSE ATTORNEY / CALIFORNIA FORECLOSURE DEFENSE LAWYER / PREDATORY LENDING LAWYER / LOAN RESCISSION ATTORNEY / TILA RESCISSION LAWYER / WACHOVIA OPTION ARM LOAN / WORLD SAVINGS OPTION ARM LOAN / RESCIND MY LOAN

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HELPFUL FORECLOSURE DEFENSE LINKS:

1. SUBMIT YOUR FORECLOSURE / LOAN SCENARIO: WWW.LOANMODSOLUTIONS.NET
2. SUBMIT YOUR LOAN MODIFICATION SCAM SCENARIO: WWW.LOANMODIFICATIONRIPOFF.NET
3. LITIGATING OPTION ARM LOANS WWW.OPTIONARMLAWYER.COM
4. CALIFORNIA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM
5. ARIZONA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM
6. STEVE VONDRAN REAL ESTATE WEBSITE WWW.VONDRANLAW.COM
7. INFORMATION ON TRIAL PLAN FRAUD: WWW.TRIALPLANFRAUD.COM
8. FORECLOSURE DEFENSE RADIO SHOW: WWW.LOANMODRADIO.COM
9. INFORMATION ON TRUTH IN LENDING LOAN RESCISSION: WWW.RESCINDMYLOAN.NET
10. INFORMATION ON PRODUCE THE NOTE: WWW.PRODUCETHENOTEATTRORNEY.COM

SOME OF THE ABOVE WEBSITES CAN BE VIEWED AT WWW.CUSTOMLAWNBLOGS.COM (CREATOR OF MY LEGAL BLOGS). THEY ARE OPERATED BY WWW.CONTINGENCYCASE.COM WEBSITE WHICH IS A WEBSITE DIRECTORY FOR CONTINGENCY CASE LAWYERS ACROSS THE UNITED STATES).

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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, 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 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).

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 (9^th 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 (11^th 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

A common violation we find (and you can check your loan documents to see if you have such a violation) is that in a refinance transaction each borrower or person with ownership interest in the property did not receive two copies each of the federally required notice of right to cancel. If this is true, and your loan was originated within the statutory three year period (note that arguments for equitable tolling may exist) then this violation, although appearing technical in nature, can trigger an extended three year right to cancel your loan.

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))

See Meyer v. Argent Mortgage Co., (In re Meyer), 379 B.R. 529 (Bankr. E.D. Pa. 2007). If the notice is subject to more than one sensible reading, and different results ensue depending upon which of the readings is adopted, the creditor has not met the “clear and conspicuous standard.” SeeHandy v. Anchor Mortgage Corp., 464 F.32 760, 764 (7^th Cir. 2006).

TWO KEY POINTS WE WILL ARGUE (when the two copies each are received but the rescission dates are not filled in – a common TILA violation)

(1) The Lender must fill in the form and dates (not the borrower) – If the creditor uses the proper model form, properly completed………and fulfills all other requirements, the borrower has no rescission right. This position is supported by the actual text of the law – See 15 U.S.C. §1635(h) – which states:

Limitation on rescission:

“An obligor shall have no rescission rights arising solely from the form of written notice used by the creditor to inform the obligor of the rights of the obligor under this section, if the creditor provided the obligor the appropriate form of written notice published and adopted by the Board, or a comparable written notice of the rights of the obligor, that was properly completed by the creditor, and otherwise complied with all other requirements of this section regarding notice.”

The plain-meaning implication of this statutory provision SEEMS TO BE 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 usually set forth the requirement that the dates be inserted before the borrower is asked to sign all copies. We will present credible testimony on this point as well. For now, please see attached Exhibit “A” which sets forth the evidence currently in our possession, of which we will rely on, and will build our discovery foundation upon.

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). Placing this burden on the borrower strips the “truth” from the transaction.

Finally, adding yet more support that the lender, not the borrower, must fill in the dates of the TILA right to rescind notice is a holding from another court which held: “Under both TILA and Regulation Z, the test for disclosure of the rescission right is whether the form of notice that the lender provided constitutes a clear notice of that right. See Porter v. Mid-Penn Consumer Discount Co., 961 F.2d 1066, 1076 (3d Cir.1992) (“the law does not require an ideal notice of rescission rights, just a clear, accurate and conspicuous one.”)………the right to rescind can be clearly disclosed only ifthose two dates are filled in.” See Meyer v. Argent Mortgage Co., (In re Meyer), 379 B.R. 529 (Bankr. E.D. Pa. 2007).

(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).

HERE IS ANOTHER WAY TO GET THE EXTENDED THREE YEAR RESCISSION RIGHT (USUALLY A LOAN AUDIT IS REQUIRED) The material disclosures required in a closed-end transaction, (APR, including the existence of a variable rate feature, Finance Charge, Amount Financed, Total of Payments, and Payment schedule) the failure of which to disclose results in an extended three year right to rescind. See Gaono v. Town & Country Credit, 324 F.3d 1050, 1053, (8th Cir. 2003).

Where only one copy of the notice of right to cancel is received, or where each borrower does not receive two signed and completed copies of the required right to cancel an extended three year right to rescind will apply.

Note: the lender will argue “the borrower signed an acknowledgement that they received two copies each, and therefore there is no TILA violation, sorry case closed.” It seems these lenders and loan servicers forget to read the following section of the law which we will frequently have to raise.

REBUTTABLE PRESUMPTIONS UNDER TILA

Even assuming for the sake of argument that there are two signed, dated, and accurately completed notice of right to cancel documents in the lender’s possession (or the consumer’s acknowledgment of receipt of two completed copies), this merely raises a rebuttable presumption that the lender delivered two copies to the borrower. See 15 U.S.C. § 1635(c), and Johnson v, New Century Mortgage Corp., 320 F. Supp. 2D 606, 611 (E.D. Mich. 2004). Courts permit competent testimony to rebut this assertion of the lender.

The critical factor is not whether the creditor has two signed and completed copies of the notice, but whether the borrower has possession of two signed, dated, and completed copies of the notice of right to cancel. Whether borrowers were delivered a blank notice of right to cancel is a question of fact that will not be decided on a motion to dismiss. See Clay v. Johnson, 77 F.Supp. 2D 879 (N.D. Ill. 1999). The debtor’s denial of receipt of the notices and disclosures creates a question of fact that will not be decided on summary judgment even where the borrower signed acknowledgement of having received two copies of the notice. See Moore v. Mortgagestar, Inc. 2002 U.S. Dist. LEXIS 27457, (W.D. W. Va. Dec. 18, 2002). Once the borrower rebuts the presumption of delivery (through competent testimony, affidavits, etc.) the burden shifts to the creditor to prove the delivery of the documents. See Bell v. Parkway Mortgage, Inc., 309 B.R. 139, 157 (Bankr. E.D. Pa 204).

In addition, where the debtors testify that they did not receive the disclosures (even if not “totally convincing”), the debtor’s should prevail if the credit cannot produce from its own records any copy of the disclosures. See In re Pinder, 83 B.R. 905, 913.

In most cases, especially where the borrower has credibility and kept track of all their loan documents (and where a mobile notary was used to sign the loan docs) the borrower can normally make a fair argument to rebut any assertion that the lender complied with the clear and conspicuous notice requirements and can counter any such assertion with competent testimonial evidence.

THE FOLLOWING IS SOME GENERAL INFORMATION ON EXERCISING RESCISSION RIGHTS:

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:

1. 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).
2. 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.” There is also legal precedence for the proposition that filing a lawsuit demanding to exercise rescission rights is also sufficient notice. See Garedakis v. Indymac Bank, 2004 WL 2254676 (N.D. Cal. Oct. 4, 2004) and Jones v. Saxon Mortgage, Inc. 161 F.2d 2 (table), 1988 WL 614150 (4^th Cir. Sept. 9, 1998).

EFFECTS OF RESCISSION UNDER TILA (IN GENERAL):

I. STEP ONE:

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.

THIS MEANS THE SECURITY INTEREST BECOMES VOID BY OPERATION OF LAW.

Following the 2003 Yamamoto decision (discussed below) the FRB added language to the commentary, (Section 226.23 of Regulation Z implements § 1635(b)). Which stated:

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.
3. If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor….
4. The procedures outlined in paragraphs (d)(2) and (3) of this section may be modified by court order.

Note: This suggests section (1) above is NOT altered, and so when a consumer rescinds, “the security interest becomes void.” Unless the Court alters the procedure, the Courts have the discretion.

Where the TILA statute is clear it must be followed. Courts only have the power to alter whether the lender has to tender first, or the borrower has to tender first. See Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir. 2003), but see Semar v. Platte Valley Federal Savings & Loan Association, 791 F.2d 699, 705-06 (9th Cir.1986) (which stands for the proposition that the Court can alter the “procedure” of TILA but not the “substance” of TILA). The substance of TILA, as described above, is that the security interest becomes void upon the exercise of rescission, (although the Court can alter this procedure by requiring the borrower to tender first).

In Yamamoto, the Court held:

“There is no reason why a court that may alter the sequence of procedures after deciding that rescission is warranted, may not do so before deciding that rescission is warranted when it finds that, assuming grounds for rescission exist, rescission still could not be enforced because the borrower cannot comply with the borrower’s rescission obligations no matter what. Such a decision lies within the court’s equitable discretion, taking into consideration all the circumstances including the nature of the violations and the borrower’s ability to repay the proceeds. If … it is clear from the evidence that the borrower lacks capacity to pay back what she has received (less interest, finance charges, etc.), the court does not lack discretion to do before trial what it could do after. Determinations regarding rescission procedures shall be made on a “case-by-case basis, in light of the record adduced.”

This case illustrates that the Courts hold the ultimate power to exercise their discretion in any TILA rescission case, and does not NECESSARILY require that the borrower prove its ability to tender as a pre-condition to exercising rescission rights.

In fact, a California Court, in Pelayo v. Home Capital Funding, Slip Copy, 2009 WL 1459419, S.D.Cal.,2009, recently denied a lenders motion to dismiss a TILA rescission claim where the Defendant argued that the borrower was required to tender before rescission could be allowed (the Defendant essentially arguing that the security instrument was not automatically void), and where the Defendant argued the Court could not hear the case until the lender made its decision within 20 days (essentially arguing the TILA claim was not ripe for review). The Court held that the case could be heard and denied Defendant’s motion to dismiss. This ruling suggests that although the Court is permitted to modify the rescission procedure and require proof of tender by the Borrower first, it was also free NOT to modify the procedure and essentially treat the security instrument as being void (as the TILA statute requires), thus making the rescission case ripe for review.

There is also legal precedent which suggests that a Court could exercise its “equitable discretion” under TILA and allow the borrower to make payments over time as part of meeting the borrower’s tender requirement (essentially reducing the monthly payment over time). See. In re Stuart, 367 B.R. 541, 552 (Bankr.E.D.Pa.2007); Shepeard v. Quality Sliding & Window Factory, Inc., 730 F.Supp. 1295 (D.Del.1990) (allowing borrower to satisfy tender obligation by making monthly payments); Mayfield v. Vanguard Sav. & Loan Ass’n, 710 F.Supp. 143, 149 (E.D.Pa.1989) (allowing borrower to satisfy tender obligation by making monthly payment).

Also note, SOMETIMES (THIS IS PULLED OFF ONE LOAN) the Notice of Right to Cancel Form given to the borrower states:

“If you cancel the transaction, the mortgage/lien/security interest is also canceled. Within 20 CALENDAR DAYS after we receive your notice, we must take the steps necessary to reflect the fact that the mortgage/lien/security interest on your home has been cancelled, and we must return to you any money or property you have given us or to anyone else in connection with this transaction.

You may keep any money or property we have given you until we have done the things mentioned above, but you must then offer to return the money or property. If it is impractical or unfair for you to return the property, you must offer its reasonable value. You may offer to return the property at your home or at the location of the property. Money must be returned to the address below. If we do not take possession of the money or property within 20 CALENDAR DAYS of your offer, you may keep it without further obligation.”

This SEEMS TO BE a legal assertion, in the form of an admission, that the security interest is automatically void upon the consumer’s exercise of rescission. Upon the consumers act of “cancelling the transaction” the “mortgage/lien/security interest is also cancelled.” A creditor should not be permitted to renege on this assertion (estoppels applies) and the lender is bound by law to honor it.

II. STEP TWO

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.

Note: THE LENDER /SERVICER WILL NOT WANT TO DO THIS SO DON’T COUNT IT. In most cases, they would rather face a judge and see if you can prove your ability to tender.

III. STEP THREE

If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value. At the consumer’s option, tender of property may be made at the location of the property or at the consumer’s residence. Tender of money must be made at the creditor’s designated place of business. If the creditor does not take possession of the money or property within 20 calendar days after the consumer’s tender, the consumer may keep it without further obligation.

Again, the Court may alter only steps two and step three per the Federal Reserve Board’s commentary set forth above. Such FRB opinion should be seen as persuasive legal authority.

THE OTHER NICE THING ABOUT A TRUTH IN LENDING RESCISSION CLAIM IS THAT IT IS APPLICABLE AGAINST ANY AND ALL LOAN ASSIGNEES WITHOUT FEAR OF A HOLDER IN DUE COURSE ARGUMENT.

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:

Right of rescission by consumer unaffected

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.” See 15 U.S.C. §1641(f)(1). Please see our request to identify the holder of the loan obligation or master loan servicer below.

As a final note, in regard to reviewing whether any additional damages may be levied against an assignee of a loan, in the Meyer case cited above the Court held:

“TILA Section 1641 addresses the circumstances under which an assignee may be liable for violations committed by the prior holder. For loans-such as this one-which are secured by real estate, the statute provides as follows:

Liability of assignee for consumer credit transactions secured by real property

Except as otherwise specifically provided in this subchapter, any civil action against a creditor for a violation of this subchapter, and any proceeding under section 1607 of this title against a creditor, with respect to a consumer credit transaction secured by real property may be maintained against any assignee of such creditor only if -

(A) the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement provided in connection with such transaction pursuant to this subchapter; and the assignment to the assignee was voluntary.

For the purpose of this section, a violation is apparent on the face of the disclosure statement if the disclosure can be determined to be incomplete or inaccurate by a comparison among the disclosure statement, any itemization of the amount financed, the note, or any other disclosure of disbursement….”

We hereby reserve our rights and will seek to hold any assignees liable for any other violations uncovered following discovery.

Also note there is case law that dictates an injunction against foreclosure is also permitted even in the absence of a tender ability at the outset of the litigation. “Rescission premised upon tender is not mandatory but an option within the equitable powers of the court.” Avila v. Stearns Lending, 2008 WL 1378231 (C.D. Cal April 7, 2008).

Also note, the Courts have recognized the right to seek an injunction against foreclosure where this right (rescission) is ignored by the lender or assignee. See Horton v. California Credit Corp., 2009 WL 700223 (S.D.Cal.) 2009. Note, that the 9^th Circuit Court did not require an initial “tender” obligation from the borrower in granting the injunction where missing dates on the TILA notice of right to cancel were found.

CONCLUSION

If you have a refinance loan within the last three years (meaning it has not been more than three years since your last refinance, you may want to look at your previous loan file and determine whether or not you have a right to rescind the loan. In some cases, you will need to perform a mortgage loan audit to detect under-disclosure of APR and finance charges and other material disclosure violations. In other cases, look at your notice of right to cancel documents and see if you got two completed copies of the notice of right to cancel document (for each borrower or person with ownership interest in the property) and see if the rescission dates are filled in and otherwise accurate. If not, you may have an extended three year right to rescind your loan, and if so, you need to send in a rescission letter to protect your rights. If the lender refuses to acknowledge your legal rights under Truth in Lending Law (TILA) you may have grounds to file for an injunction to halt any slated foreclosures. In many cases, you will need to show some ability to tender back to the lender, the amounts which you would owe them (your loan balance) minus the amounts they owe you pursuant to their TILA tender obligation.

This area of the law can be tricky, so you may want to meet with an Attorney to discuss your case. In California, no attorney or other persona may accept advance fees for loan modifications pursuant to SB 94.

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Introduction: Many of the major lenders have been implementing President Obama’s Making Home Affordable Loan Modification Program (HAMP). The details of the program provide that lenders who believe that California and Arizona homeowners (these are the two states I am licensed to practice law in but the program applies in other states as well) qualify for loan modification programs should provide the homeowner with a three month “trial plan” modification program.

The lenders have been rolling out HAMP and have been sending homeowners these three month trial plan agreements.

For the purposes of this article I will refer to these agreements as “contracts” for the simple reason that they look like contracts (they have terms and conditions like a contract and signature blocks for both parties). The homeowner typically performs as if they are adhering in good faith to the terms of the contract, and the lender is accepting payments on the stated understanding that of the homeowner makes the three required payments set forth in the “contract” that the “lender” (see our produce the note articles) will provide the homeowner the badly needed loan modification that the lender has agreed to give if all payments are made under the trial plan, and assuming no material representations of the homeowner have changed.

Everything sounds groovy so far. The lenders appear to be working out loan modifications and saving neighborhoods from financial disaster, and the bailout money appears to be put to a worthwhile use.

What might/could happen next is interesting, yet disturbing at the same time:

1. The borrower typically makes all of their three scheduled trial plan payments on time
2. The borrower also submits all of the requested financial documentation in complying with the terms of the contract
3. After the third and supposedly final payment is made, we are learning some homeowners are told that either (a) they do not qualify for the loan modification (b) there are missing documents and more must be submitted before a “final decision” can be reached, and or (c) they get a whole new trial plan offer as if the homeowner is supposed to start all over again.
4. Another variation is getting the final loan mod and being asked to submit all the final documentation on the very next day (which is literally impossible to do, but which raises a “mailbox rule” issue for contract lawyers).

Bottom line, the promised final mod seems to be getting stuck in the loan modification pipeline. Is this being intentionally done? Are the lenders simply overloaded? Are they playing games with homeowners so they can simply “suck” more payments out of California and Arizona homeowners who may not be making their mortgage payments in the hopes of a loan modification (some people are told you will not be considered for a loan modification unless you are late on your payments – there is some truth to that but “imminent threat of being late” on the mortgage is supposed to be considered as well).

So we are left with a bunch of homeowners scratching their heads as to what is happening with the federal bailout money and communities that seek rising foreclosure stripping away their equity asking the same questions. Are the lenders engaged in fraud? Is this a bad faith breach of contract? Are the lenders required to follow-through with the loan modification when the borrower complies with the terms of the modification trial plan agreement?

LET’S DISCUSS SOME BASIC LEGAL INFORMATION AND ATTACKS THAT MAY BE USED TO FORCE THE LENDER TO COMPLY WITH THE AGREEMENTS (SPECIFIC PERFORMANCE OF THE CONTRACT).

(1) Fraud / Negligent Misrepresentation

Generally speaking, the elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity; (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damages. Lazar v. Superior Court, 12 Cal. 4th 631, 638, 49 Cal. Rptr. 2d 377 (1996).

The elements of negligent misrepresentation are similar to intentional fraud except for knowledge that the representation is false. Charnay v. Cobert, 145 Cal. App. 4th 170, 184-85, 51 Cal. Rptr. 3d 471, 482 (2006). In a claim for negligent misrepresentation, the elements are: (1) the misrepresentation of a past or existing material fact; (2) without reasonable ground for believing it to be true; (3) with intent to induce another’s reliance on the fact misrepresented; (4) justifiable reliance on the misrepresentation; and (5) resulting damages. Id.; see also Alliance Mortgage Co. v. Rothwell, 10 Cal. 4th 1226, 1239, fn. 4, 44 Cal. Rptr. 2d 352 (1995) (negligent misrepresentation is a species of the tort of deceit and like fraud, requires a misrepresentation, justifiable reliance, and damages).

In the loan modification trial plan offer setting the lender purports (depending upon the language of the trial plan offer – each document must be reviewed to make an accurate determination), the lender is acting as if the borrower applies for a loan modification. If the lender / loan servicer have absolutely no intent to provide a loan modification at all, (legal discovery would be required in most cases to try to prove this) then it would appear the lender is doing nothing more than to try to obtain additional loan payments from the borrower, and to ultimately “time release” the foreclosure of the property onto the marketplace.

These are items that may be tough to prove, but as some of the article on our website indicate, lenders are aware that not all loan modification trial plans will result in a successful loan modification. Where the lender/servicer has absolutely no intent to provide a modification, the trial plan offer may be fraudulent, and as discussed below, violate the duty of good faith and fair dealing implied in every contract.

Again, however, the lenders/servicers will probably try to argue that the trial plan agreement is not really a contract at all, but rather an offer to negotiate or some type of preliminary negotiation. Again, you are well advised to have an attorney review your trial plan agreement.

(2) Fraudulent Inducement

This is a claim which is like a hybrid claim of breach of contract and tort. The essence of the claim is that the defendant fraudulently induced a party to enter into a contract.

This cause of action generally requires knowing and intentional false statements of material fact (a material factual omission may not be sufficient but should be explored) which reasonably induce a homeowner to rely on the statements, and which false statements were relied upon to their detriment.

Where this action lies, the Courts may allow specific performance of the contract as a remedy and where fraud is clearly shown, punitive damages may be available.

(3) Breach of Covenant of Good Faith and Fair Dealing

Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 Cal.4th 342, 371, 6 Cal.Rptr.2d 467, 826 P.2d 710 (1992) (quoting Restatement (Second) of Contracts § 205). “The covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith. See Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, C.A.9 (Cal.),1999.

The Cause of action for tortious breach of implied covenant of good faith and fair dealing exists if special relationship between parties is characterized by elements of public interest, adhesion, and fiduciary responsibility. Kittredge Sports Co. v. Superior Court, 213 Cal.App.3d 1045, 261 Cal.Rptr. 857

The duty of good faith and fair dealing arises from every contract as an implied covenant generating both a contractual obligation and a duty in tort. Hess v. Transamerica Occidental Life Ins. Co., 235 Cal.Rptr. 715. The Implied covenant of good faith and fair dealing is an equitable doctrine which may validate otherwise unenforceable agreements. It is a doctrine of equity that the courts may use to achieve a just result when a contract (ex. The loan modification trial plan agreement) is unclear regarding a party’s obligations and the doctrine can then allow the court to enforce what might otherwise be deemed an unenforceable agreement.

The implied promise requires each contracting party to refrain from doing anything to injure the right of the other to receive the benefits of the agreement Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p. 818, 169 Cal.Rptr. 691, 620 P.2d 141.

A “breach of a specific provision of the contract is not a necessary prerequisite” to a breach of an implied covenant of good faith and fair dealing. Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 Cal.4th 342, 371, 6 Cal.Rptr.2d 467, 826 P.2d 710 (1992) “[T]he covenant is implied to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenant) frustrates the other party’s rights of the benefits of the contract.” See Los Angeles Equestrian Ctr., Inc. v. City of Lose Angeles, 17 Cal.App.4^th, 434, 447, 21 Cal.Rptr.2d 313 (1993).

As a general principle, there can be no breach of the implied promise or covenant of good faith and fair dealing where the contract expressly permits the actions being challenged, and the defendant acts in accordance with the express terms of the contract. See Clark v. America’s Favorite Chicken Co., 110 F.3d 295 (5th Cir. 1997) (applying Louisiana law)

This is so even where the contractual provision at issue is one that purports to grant to the defendant absolute discretion to take certain actions or engage in certain conduct under the contract; such a provision, stated simply, permits the defendant substantial latitude, and as long as the discretion is exercised as permitted under the contract, and without evident bad faith motive or malice, its exercise cannot be a breach of the more general implied promise of good faith and fair dealing. See Clark v. America’s Favorite Chicken Co., 110 F.3d 295 (5th Cir. 1997).

Yet, even where a defendant is given absolute discretion, it must exercise that discretion in good faith. See Travellers Intern., A.G. v. Trans World Airlines, Inc., 41 F.3d 1570 (2d Cir. 1994) . Thus, a party who “evades the spirit of the contract,” willfully renders imperfect performance, or interferes with performance by the other party, may be liable for breach of the implied covenant of good faith and fair dealing. See Paul v. Howard University, 754 A.2d 297, 145 Ed. Law Rep. 702 (D.C. 2000).

Some courts have focused on the reasonable expectations of the parties, (See Savers Federal Sav. and Loan Ass’n v. Home Federal Sav. and Loan Ass’n, 721 F. Supp. 940, 945 (W.D. Tenn. 1989) while others have focused on whether the action taken by the breaching party was arbitrary and capricious. See Coles Dept. Store v. First Bank (N.A.)–Billings, 240 Mont. 226, 783 P.2d 932, 936, 11 U.C.C. Rep. Serv. 2d 1074 (1989).

In determining whether a party has breached the obligation or covenant of good faith and fair dealing, a court must examine not only the express language of the parties’ contract, but also any course of performance or course of dealing that may exist between the parties. See Sanpete Water Conservancy Dist. v. Carbon Water Conservancy Dist., 226 F.3d 1170 (10th Cir. 2000) (applying Utah law). Note: The court may be unwilling to imply any duty that the parties could not reasonably expect from the terms of their contract). Hejmadi v. Amfac, Inc., 202 Cal. App. 3d 525, 547-549, 249 Cal. Rptr. 5, (1st Dist. 1988).

Generally speaking, a Breach of the covenant is a breach of contract. Tort recovery for breach of the covenant of good faith and fair dealing is available only in limited circumstances, generally involving a special relationship between the contracting parties, such as the relationship between an insured and its insurer.

Potential Damages: In general, contract damages are available (not including pain and suffering or emotional damages) but the “benefit of the bargain” damages (consequential damages and perhaps specific performance of the contract – forcing the other party to provide the loan modification as agreed in the trial plan modification offer). See Pasadena Live, LLC v. City of Pasadena, 114 Cal. App. 4th 1089, 8 Cal. Rptr. 3d 233 (2d Dist. 2004), reh’g denied, (Feb. 4, 2004).

(4) Violation of California Civil Code Section 17200

California’s unfair competition law (Business and Professions Code Section 17200 et seq.) defines “unfair competition” to mean and include “any unlawful, unfair or fraudulent business act or practice.” See Kasky v. Nike, Inc., 27 Cal. 4th 939, 949, 119 Cal. Rptr. 2d 296 (2002). By defining unfair competition to include any unlawful business act or practice, “the UCL permits violations of other laws to be treated as unfair competition that is independently actionable.” In essence, an action based on the UCL to redress an unlawful business practice “borrows” violations from other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under Section 17200 and subject to the distinct remedies provided there under. See Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal. 4th 553, 566-67, 71 Cal. Rptr. 2d 731 (1998).

There is no single definition for the phrase “unfair business practices.” It is an evolving concept reflecting the ingenuity of unscrupulous business persons in concocting new schemes to gain advantage at someone else’s expense. The existence of an unfair business practice is a question of fact determined in light of all the circumstances surrounding a case. See People ex rel. Bill Lockyer v. Fremont Life Ins. Co., 104 Cal.App.4th 508, 128 Cal.Rptr.2d 463, Cal.App. 2 Dist.,2002.

Sperry & Hutchinson, supra, 405 U.S. 233, 92 S.Ct. 898, 31 L.Ed.2d 170, describes the test for fairness as one developed by the Federal Trade Commission to determine “whether a practice that is neither in violation of the antitrust laws nor deceptive is nonetheless unfair.” The test as stated by the court is as follows: “ ‘(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other businessmen).’

It is not necessary that all three components of this standard be satisfied; a practice may be unfair because of the degree to which it meets one of these criteria, or because to a lesser extent it meets all three. Expert testimony may be used to prove that business conduct is unfair. The court must determine on a case-by-case basis whether the alleged conduct is unethical, oppressive, or unscrupulous, or whether it was an appropriate exercise of good business judgment. This is a balancing test, whereby the fact finder weighs the utility of the offending party’s conduct against the gravity of harm to the injured party or the public at large.

(5) Violation of California Consumer Legal remedies Act (Cal Civ. Code Section 1770 et seq.)

California’s Consumers Legal Remedies Act (CLRA) establishes a nonexclusive statutory remedy for unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the SALE OR LEASE OF GOODS OR SERVICES to any consumer. See Gonzalez v. Proctor and Gamble Co., S.D.Cal.2007, 247 F.R.D. 616.

Purpose of California Consumers Legal Remedies Act (CLRA) is to attempt to alleviate social and economic problems stemming from deceptive business practices. See America Online, Inc. v. Superior Court (App. 1 Dist. 2001) 108 Cal.Rptr.2d 699.

I. Loan transactions are “goods or services” under the Act.

California Civil Code section 1754 provides that the CLRA “shall not apply to any transaction which provides for the construction, sale, or construction and sale of an entire residence or … for the sale of a lot or parcel of real property, including any site preparation incidental to such sale.” However, this provision bars application of the CLRA only to transactions for the sale or construction of real property; it does not also exclude financial services related to such transactions.

Cases in support of this proposition include:

1. Jefferson v. Chase Home Finance LLC, No. C06-6510, 2007 WL 1302984 (N.D.Cal. May 3, 2007) (concluding that the loan transactions between a mortgage finance company and the plaintiff involved “more than the provision of a loan; they also include the financial services of managing the loan.”)
2. Knox v. Ameriquest Mortgage Co., No. C05-00240, 2005 WL 1910927 (N.D.Cal. Aug. 10, 2005) (finding that, in the context of predatory lending allegations and after a review of the case law, “California courts generally find financial transactions to be subject to the CLRA.”);
3. In re Ameriquest Mortgage Co., No 05-CV-7097, 2007 WL 1202544, (N.D.Ill. Apr. 23, 2007) (stating, in dicta, that “it is not inconceivable that Plaintiffs could prove the existence of tangential ‘services’ associated with their residential mortgages and establish that these transactions were covered by the CLRA.”).
4. In an unreported decision (Jefferson v. Chase Home Finance, LLC – 2007 WL 1302984, N.D.Cal., 2007.) the Court stated:

“the arranging of the loan, including but not limited to its origination, processing, documentation, wire-transmittal and underwriting constitutes ‘services’ within the meaning of subsection(b) of § 1761 of the CLRA……Plaintiffs did not seek just a loan; they sought defendants’ services in developing an acceptable refinancing plan by which they could remain in possession of their home. Thus, unlike the Berry case cited above……the present case involves more than the mere extension of a credit line. Instead, the circumstances here deal not just with the mortgage loan itself, but also with the services involved in developing, securing and maintaining plaintiffs’ loan…..in fact, in an effort to create an appropriate refinancing package, plaintiffs met with defendants’ agent three times before finally agreeing on a payment plan that plaintiffs and defendants found acceptable.”

II. Prohibited Acts

Section 1770 prohibits, (among other things), the following:

Knowingly misrepresenting the character, uses and benefits of its products and services; Knowingly misrepresenting the standard and quality of products and services; Advertising goods or services with intent not to sell them as advertised; Misrepresenting that the consumer will receive…..an economic benefit if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction and, inserting an unconscionable provision in the contract (the Court will look to California Civil Code section 1670.5 in making the unconscionability determination).

CASES ILLUMINATING THE UNCONSCIONABILITY PRINCIPLE INCLUDE THE FOLLOWING:

Civil Code section 1670.5 follows the law developed primarily in the sale of goods, governed by the Uniform Commercial Code, in enabling courts to grant relief from unconscionable contracts or clauses. “The principle is one of the prevention of oppression and unfair surprise.” Whether a contract is unconscionable or not is a question of law for the Court. Shadoan v. World Savings & Loan Assn., 219 Cal.App.3d 97, 268 Cal.Rptr. 207 (1990).

As stated by the court in the seminal case of Williams v. Walker-Thomas Furniture Company (D.C.Cir.1965) 350 F.2d 445, 449, “Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.”

Absence of meaningful choice occurs when a party to a bargain has little choice but to accept the terms stated by the other party. Hidden Terms in an agreement may qualify to show absence of meaningful terms.” See A & M Produce Co. v. FMC Corp. 135 Cal.App.3d 473, 486 (1982).

A contract may be procedurally unconscionable under California law when the party with substantially greater bargaining power presents a take-it-or-leave it contract to a customer, even if the customer has a meaningful choice as to service providers. Shroyer v. New Cingular Wireless Services, Inc., C.A.9 (Cal.)2007, 498 F.3d 976.

Discussion: California and Arizona homeowners (greater phoenix area) who are lead to believe that they qualify for a loan modification given the representations made by and concerning the trial plan modification program, may have a claim to assert for damages. It is not certain you can prove that the lenders loan modification services are covered by the act, but it does appear to be a claim worth investigating at any rate.

III. DAMAGES AVAILABLE

(A) Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to recover or obtain any of the following:

1. Actual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000 minimum).
2. An order enjoining the methods, acts, or practices.
3. Restitution of property.
4. Punitive damages.
5. Any other relief that the court deems proper.

(B) Any consumer who is a senior citizen or a disabled person, as defined in subdivisions (f) and (g) of Section 1761, as part of an action under subdivision (a), may seek and be awarded, in addition to the remedies specified therein, up to five thousand dollars ($5,000) where the trier of fact does all of the following:

(C) Finds that the consumer has suffered substantial physical, emotional, or economic damage resulting from the defendant’s conduct.

NOTE: GENERALLY, WHEN ASSERTING A CLAIM UNDER THE CALIFORNIA LEGAL REMEDIES ACT, A POTENTIAL PLAINTIFF MUST GIVE THE LENDER A 30 DAY RIGHT TO CURE NOTICE THAT GIVES THEM THE OPPORTUNITY TO REMEDY THEIR VIOLATION PRIOR TO FILING A LAWSUIT.

CONSLUSION:

If you were given a trial plan loan modification offer, agreement, or other documents, and you made payments under the trial plan as agreed in the loan mod document, and any material representations that you made pursuant to the agreement DID NOT CHANGE from the time you entered into the contract, to the time your final payment was made; and if the lender or loan servicer refused to follow through with the trial plan, said you don’t qualify for a loan modification, or sold you house from underneath you, you may need to see a real estate, predatory lending, and foreclosure attorney to review whether or not you have a valid legal case to assert for either specific performance of the contract, or potentially money damages, including potentially punitive damages.

There are causes of action that may be applied in the loan modification trial plan context such as fraud, deceit, fraudulent inducement to contract, breach of implied covenant of good faith and fair dealing, and/or violation of the California Legal Remedies Act. Lenders and loan servicers, who were well financed by the federal bailout, should not be preying in California and Arizona homeowners in the greater Phoenix area by trying to “trick” them into making additional loan payments were foreclosure is inevitable given the lender/loan servicer’s mindset as to whether or not you are truly a loan modification candidate.

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Attorney Steve Vondran can be reached at steve@vondranlaw.com or toll free at (877) 276-5084. Information about trial plan fraud can be found at www.TrialPlanFraud.com

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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.

He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084

Offices:

Our Real Estate Law Services:

1. Loan Modifications / Loan Workouts (World Savings and Wachovia Loans
2. Commercial Lease Modifications
3. DRE audits, hearings and investigations
4. Real Estate Broker admissions cases
5. Foreclosure Defense
6. Mortgage Law & Predatory Law
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8. Phoenix Eminent Domain Attorney / Inverse Condemnation / Prop 207 (Greater Phoenix)
9. Real Estate Arbitration, Litigation and Mediation
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KEYWORDS: ARIZONA FORECLOSURE DEFENSE ATTORNEY / CALIFORNIA FORECLOSURE DEFENSE ATTORNEY / PHOENIX FORECLOSURE DEFENSE ATTORNEY / PHOENIX FORECLOSURE DEFENSE LAWYER / SCOTTSDALE FORECLOSURE DEFENSE ATTORNEY / SCOTTSDALE FORECLOSURE DEFENSE LAWYER / ORANGE COUNTY PREDATORY LENDING LAWYER / ORANGE COUNTY FORECLOSURE DEFENSE ATTORNEY / ORANGE COUNTY FORECLOSURE DEFENSE LAYWER / TRUTH IN LENDING LAWYER / TRUTH IN LENDING ATTORNEY / SOUTHER CALIFORNIA MORTGAGE LAW ATTORNEY / MORTGAGE LAWYER / RIVERSIDE FORECLOSURE ATTORNEY / RIVERSIDE FORECLOSURE LAWYER / RESPA LAWYER / RESPA ATTORNEY / FORECLOSURE DEFENSE LAW / PHOENIX LOAN MODIFICATION ATTORNEY / PHOENIX FORECLOSURE DEFENSE LAWYER / ORANGE COUNTY REAL ESTATE LAWYER / ORANGE COUNTY PREDATORY LENDING AND MORTGAGE LITIGATION ATTORNEY / NEWPORT BEACH FORECLOSURE DEFENSE LAWYER / NEWPORT BEACH FORECLOSURE DEFENSE ATTORNEY / CALIFORNIA FORECLOSURE DEFENSE LAWYER / PREDATORY LENDING LAWYER / LOAN RESCISSION ATTORNEY / TILA RESCISSION LAWYER / WACHOVIA OPTION ARM LOAN / WORLD SAVINGS OPTION ARM LOAN / RESCIND MY LOAN

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HELPFUL FORECLOSURE DEFENSE LINKS:

1. SUBMIT YOUR FORECLOSURE / LOAN SCENARIO: WWW.LOANMODSOLUTIONS.NET
2. SUBMIT YOUR LOAN MODIFICATION SCAM SCENARIO: WWW.LOANMODIFICATIONRIPOFF.NET
3. LITIGATING OPTION ARM LOANS WWW.OPTIONARMLAWYER.COM
4. CALIFORNIA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM
5. ARIZONA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM
6. STEVE VONDRAN REAL ESTATE WEBSITE WWW.VONDRANLAW.COM
7. INFORMATION ON TRIAL PLAN FRAUD: WWW.TRIALPLANFRAUD.COM
8. FORECLOSURE DEFENSE RADIO SHOW: WWW.LOANMODRADIO.COM
9. INFORMATION ON TRUTH IN LENDING LOAN RESCISSION: WWW.RESCINDMYLOAN.NET
10. INFORMATION ON PRODUCE THE NOTE: WWW.PRODUCETHENOTEATTRORNEY.COM

SOME OF THE ABOVE WEBSITES CAN BE VIEWED AT WWW.CUSTOMLAWNBLOGS.COM (CREATOR OF MY LEGAL BLOGS). THEY ARE OPERATED BY WWW.CONTINGENCYCASE.COM WEBSITE WHICH IS A WEBSITE DIRECTORY FOR CONTINGENCY CASE LAWYERS ACROSS THE UNITED STATES).

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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, 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 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).

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Introduction: Many of the major lenders have been implementing President Obama’s Making Home Affordable Loan Modification Program (HAMP). The details of the program provide that lenders who believe that California and Arizona homeowners (these are the two states I am licensed to practice law in but the program applies in other states as well) qualify for loan modification programs should provide the homeowner with a three month “trial plan” modification program.

The lenders have been rolling out HAMP and have been sending homeowners these three month trial plan agreements.

For the purposes of this article I will refer to these agreements as “contracts” for the simple reason that they look like contracts (they have terms and conditions like a contract and signature blocks for both parties). The homeowner typically performs as if they are adhering in good faith to the terms of the contract, and the lender is accepting payments on the stated understanding that of the homeowner makes the three required payments set forth in the “contract” that the “lender” (see our produce the note articles) will provide the homeowner the badly needed loan modification that the lender has agreed to give if all payments are made under the trial plan, and assuming no material representations of the homeowner have changed.

Everything sounds groovy so far. The lenders appear to be working out loan modifications and saving neighborhoods from financial disaster, and the bailout money appears to be put to a worthwhile use.

What happens next is interesting, yet disturbing at the same time:

1. The borrower typically makes all of their three scheduled trial plan payments on time
2. The borrower also submits all of the requested financial documentation in complying with the terms of the contract
3. After the third and supposedly final payment is made, we are learning some homeowners are told that either (a) they do not qualify for the loan modification (b) there are missing documents and more must be submitted before a “final decision” can be reached, and or (c) they get a whole new trial plan offer as if the homeowner is supposed to start all over again.
4. Another variation is getting the final loan mod and being asked to submit all the final documentation on the very next day (which is literally impossible to do, but which raises a “mailbox rule” issue for contract lawyers).

Bottom line, the promised final mod seems to be getting stuck in the loan modification pipeline. Is this being intentionally done? Are the lenders simply overloaded? Are they playing games with homeowners so they can simply “suck” more payments out of California and Arizona homeowners who may not be making their mortgage payments in the hopes of a loan modification (some people are told you will not be considered for a loan modification unless you are late on your payments – there is some truth to that but “imminent threat of being late” on the mortgage is supposed to be considered as well).

So we are left with a bunch of homeowners scratching their heads as to what is happening with the federal bailout money and communities that seek rising foreclosure stripping away their equity asking the same questions. Are the lenders engaged in fraud? Is this a bad faith breach of contract? Are the lenders required to follow-through with the loan modification when the borrower complies with the terms of the modification trial plan agreement?

LET’S DISCUSS SOME BASIC LEGAL INFORMATION AND ATTACKS THAT MAY BE USED TO FORCE THE LENDER TO COMPLY WITH THE AGREEMENTS (SPECIFIC PERFORMANCE OF THE CONTRACT).

(1) Fraud / Negligent Misrepresentation

Generally speaking, the elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity; (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damages. Lazar v. Superior Court, 12 Cal. 4th 631, 638, 49 Cal. Rptr. 2d 377 (1996).

The elements of negligent misrepresentation are similar to intentional fraud except for knowledge that the representation is false. Charnay v. Cobert, 145 Cal. App. 4th 170, 184-85, 51 Cal. Rptr. 3d 471, 482 (2006). In a claim for negligent misrepresentation, the elements are: (1) the misrepresentation of a past or existing material fact; (2) without reasonable ground for believing it to be true; (3) with intent to induce another’s reliance on the fact misrepresented; (4) justifiable reliance on the misrepresentation; and (5) resulting damages. Id.; see also Alliance Mortgage Co. v. Rothwell, 10 Cal. 4th 1226, 1239, fn. 4, 44 Cal. Rptr. 2d 352 (1995) (negligent misrepresentation is a species of the tort of deceit and like fraud, requires a misrepresentation, justifiable reliance, and damages).

In the loan modification trial plan offer setting the lender purports (depending upon the language of the trial plan offer – each document must be reviewed to make an accurate determination), the lender is acting as if the borrower applies for a loan modification. If the lender / loan servicer have absolutely no intent to provide a loan modification at all, (legal discovery would be required in most cases to try to prove this) then it would appear the lender is doing nothing more than to try to obtain additional loan payments from the borrower, and to ultimately “time release” the foreclosure of the property onto the marketplace.

These are items that may be tough to prove, but as some of the article on our website indicate, lenders are aware that not all loan modification trial plans will result in a successful loan modification. Where the lender/servicer has absolutely no intent to provide a modification, the trial plan offer may be fraudulent, and as discussed below, violate the duty of good faith and fair dealing implied in every contract.

Again, however, the lenders/servicers will probably try to argue that the trial plan agreement is not really a contract at all, but rather an offer to negotiate or some type of preliminary negotiation. Again, you are well advised to have an attorney review your trial plan agreement.

(2) Fraudulent Inducement

This is a claim which is like a hybrid claim of breach of contract and tort. The essence of the claim is that the defendant fraudulently induced a party to enter into a contract.

This cause of action generally requires knowing and intentional false statements of material fact (a material factual omission may not be sufficient but should be explored) which reasonably induce a homeowner to rely on the statements, and which false statements were relied upon to their detriment.

Where this action lies, the Courts may allow specific performance of the contract as a remedy and where fraud is clearly shown, punitive damages may be available.

(3) Breach of Covenant of Good Faith and Fair Dealing

Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 Cal.4th 342, 371, 6 Cal.Rptr.2d 467, 826 P.2d 710 (1992) (quoting Restatement (Second) of Contracts § 205). “The covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith. See Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, C.A.9 (Cal.),1999.

The Cause of action for tortious breach of implied covenant of good faith and fair dealing exists if special relationship between parties is characterized by elements of public interest, adhesion, and fiduciary responsibility. Kittredge Sports Co. v. Superior Court, 213 Cal.App.3d 1045, 261 Cal.Rptr. 857

The duty of good faith and fair dealing arises from every contract as an implied covenant generating both a contractual obligation and a duty in tort. Hess v. Transamerica Occidental Life Ins. Co., 235 Cal.Rptr. 715. The Implied covenant of good faith and fair dealing is an equitable doctrine which may validate otherwise unenforceable agreements. It is a doctrine of equity that the courts may use to achieve a just result when a contract (ex. The loan modification trial plan agreement) is unclear regarding a party’s obligations and the doctrine can then allow the court to enforce what might otherwise be deemed an unenforceable agreement.

The implied promise requires each contracting party to refrain from doing anything to injure the right of the other to receive the benefits of the agreement Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p. 818, 169 Cal.Rptr. 691, 620 P.2d 141.

A “breach of a specific provision of the contract is not a necessary prerequisite” to a breach of an implied covenant of good faith and fair dealing. Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 Cal.4th 342, 371, 6 Cal.Rptr.2d 467, 826 P.2d 710 (1992) “[T]he covenant is implied to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenant) frustrates the other party’s rights of the benefits of the contract.” See Los Angeles Equestrian Ctr., Inc. v. City of Lose Angeles, 17 Cal.App.4^th, 434, 447, 21 Cal.Rptr.2d 313 (1993).

As a general principle, there can be no breach of the implied promise or covenant of good faith and fair dealing where the contract expressly permits the actions being challenged, and the defendant acts in accordance with the express terms of the contract. See Clark v. America’s Favorite Chicken Co., 110 F.3d 295 (5th Cir. 1997) (applying Louisiana law)

This is so even where the contractual provision at issue is one that purports to grant to the defendant absolute discretion to take certain actions or engage in certain conduct under the contract; such a provision, stated simply, permits the defendant substantial latitude, and as long as the discretion is exercised as permitted under the contract, and without evident bad faith motive or malice, its exercise cannot be a breach of the more general implied promise of good faith and fair dealing. See Clark v. America’s Favorite Chicken Co., 110 F.3d 295 (5th Cir. 1997).

Yet, even where a defendant is given absolute discretion, it must exercise that discretion in good faith. See Travellers Intern., A.G. v. Trans World Airlines, Inc., 41 F.3d 1570 (2d Cir. 1994) . Thus, a party who “evades the spirit of the contract,” willfully renders imperfect performance, or interferes with performance by the other party, may be liable for breach of the implied covenant of good faith and fair dealing. See Paul v. Howard University, 754 A.2d 297, 145 Ed. Law Rep. 702 (D.C. 2000).

Some courts have focused on the reasonable expectations of the parties, (See Savers Federal Sav. and Loan Ass’n v. Home Federal Sav. and Loan Ass’n, 721 F. Supp. 940, 945 (W.D. Tenn. 1989) while others have focused on whether the action taken by the breaching party was arbitrary and capricious. See Coles Dept. Store v. First Bank (N.A.)–Billings, 240 Mont. 226, 783 P.2d 932, 936, 11 U.C.C. Rep. Serv. 2d 1074 (1989).

In determining whether a party has breached the obligation or covenant of good faith and fair dealing, a court must examine not only the express language of the parties’ contract, but also any course of performance or course of dealing that may exist between the parties. See Sanpete Water Conservancy Dist. v. Carbon Water Conservancy Dist., 226 F.3d 1170 (10th Cir. 2000) (applying Utah law). Note: The court may be unwilling to imply any duty that the parties could not reasonably expect from the terms of their contract). Hejmadi v. Amfac, Inc., 202 Cal. App. 3d 525, 547-549, 249 Cal. Rptr. 5, (1st Dist. 1988).

Generally speaking, a Breach of the covenant is a breach of contract. Tort recovery for breach of the covenant of good faith and fair dealing is available only in limited circumstances, generally involving a special relationship between the contracting parties, such as the relationship between an insured and its insurer.

Potential Damages: In general, contract damages are available (not including pain and suffering or emotional damages) but the “benefit of the bargain” damages (consequential damages and perhaps specific performance of the contract – forcing the other party to provide the loan modification as agreed in the trial plan modification offer). See Pasadena Live, LLC v. City of Pasadena, 114 Cal. App. 4th 1089, 8 Cal. Rptr. 3d 233 (2d Dist. 2004), reh’g denied, (Feb. 4, 2004).

(4) Violation of California Civil Code Section 17200

California’s unfair competition law (Business and Professions Code Section 17200 et seq.) defines “unfair competition” to mean and include “any unlawful, unfair or fraudulent business act or practice.” See Kasky v. Nike, Inc., 27 Cal. 4th 939, 949, 119 Cal. Rptr. 2d 296 (2002). By defining unfair competition to include any unlawful business act or practice, “the UCL permits violations of other laws to be treated as unfair competition that is independently actionable.” In essence, an action based on the UCL to redress an unlawful business practice “borrows” violations from other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under Section 17200 and subject to the distinct remedies provided there under. See Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal. 4th 553, 566-67, 71 Cal. Rptr. 2d 731 (1998).

There is no single definition for the phrase “unfair business practices.” It is an evolving concept reflecting the ingenuity of unscrupulous business persons in concocting new schemes to gain advantage at someone else’s expense. The existence of an unfair business practice is a question of fact determined in light of all the circumstances surrounding a case. See People ex rel. Bill Lockyer v. Fremont Life Ins. Co., 104 Cal.App.4th 508, 128 Cal.Rptr.2d 463, Cal.App. 2 Dist.,2002.

Sperry & Hutchinson, supra, 405 U.S. 233, 92 S.Ct. 898, 31 L.Ed.2d 170, describes the test for fairness as one developed by the Federal Trade Commission to determine “whether a practice that is neither in violation of the antitrust laws nor deceptive is nonetheless unfair.” The test as stated by the court is as follows: “ ‘(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other businessmen).’

It is not necessary that all three components of this standard be satisfied; a practice may be unfair because of the degree to which it meets one of these criteria, or because to a lesser extent it meets all three. Expert testimony may be used to prove that business conduct is unfair. The court must determine on a case-by-case basis whether the alleged conduct is unethical, oppressive, or unscrupulous, or whether it was an appropriate exercise of good business judgment. This is a balancing test, whereby the fact finder weighs the utility of the offending party’s conduct against the gravity of harm to the injured party or the public at large.

(5) Violation of California Consumer Legal remedies Act (Cal Civ. Code Section 1770 et seq.)

California’s Consumers Legal Remedies Act (CLRA) establishes a nonexclusive statutory remedy for unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the SALE OR LEASE OF GOODS OR SERVICES to any consumer. See Gonzalez v. Proctor and Gamble Co., S.D.Cal.2007, 247 F.R.D. 616.

Purpose of California Consumers Legal Remedies Act (CLRA) is to attempt to alleviate social and economic problems stemming from deceptive business practices. See America Online, Inc. v. Superior Court (App. 1 Dist. 2001) 108 Cal.Rptr.2d 699.

I. Loan transactions are “goods or services” under the Act.

California Civil Code section 1754 provides that the CLRA “shall not apply to any transaction which provides for the construction, sale, or construction and sale of an entire residence or … for the sale of a lot or parcel of real property, including any site preparation incidental to such sale.” However, this provision bars application of the CLRA only to transactions for the sale or construction of real property; it does not also exclude financial services related to such transactions.

Cases in support of this proposition include:

1. Jefferson v. Chase Home Finance LLC, No. C06-6510, 2007 WL 1302984 (N.D.Cal. May 3, 2007) (concluding that the loan transactions between a mortgage finance company and the plaintiff involved “more than the provision of a loan; they also include the financial services of managing the loan.”)
2. Knox v. Ameriquest Mortgage Co., No. C05-00240, 2005 WL 1910927 (N.D.Cal. Aug. 10, 2005) (finding that, in the context of predatory lending allegations and after a review of the case law, “California courts generally find financial transactions to be subject to the CLRA.”);
3. In re Ameriquest Mortgage Co., No 05-CV-7097, 2007 WL 1202544, (N.D.Ill. Apr. 23, 2007) (stating, in dicta, that “it is not inconceivable that Plaintiffs could prove the existence of tangential ‘services’ associated with their residential mortgages and establish that these transactions were covered by the CLRA.”).
4. In an unreported decision (Jefferson v. Chase Home Finance, LLC – 2007 WL 1302984, N.D.Cal., 2007.) the Court stated:

“the arranging of the loan, including but not limited to its origination, processing, documentation, wire-transmittal and underwriting constitutes ‘services’ within the meaning of subsection(b) of § 1761 of the CLRA……Plaintiffs did not seek just a loan; they sought defendants’ services in developing an acceptable refinancing plan by which they could remain in possession of their home. Thus, unlike the Berry case cited above……the present case involves more than the mere extension of a credit line. Instead, the circumstances here deal not just with the mortgage loan itself, but also with the services involved in developing, securing and maintaining plaintiffs’ loan…..in fact, in an effort to create an appropriate refinancing package, plaintiffs met with defendants’ agent three times before finally agreeing on a payment plan that plaintiffs and defendants found acceptable.”

II. Prohibited Acts

Section 1770 prohibits, (among other things), the following:

Knowingly misrepresenting the character, uses and benefits of its products and services; Knowingly misrepresenting the standard and quality of products and services; Advertising goods or services with intent not to sell them as advertised; Misrepresenting that the consumer will receive…..an economic benefit if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction and, inserting an unconscionable provision in the contract (the Court will look to California Civil Code section 1670.5 in making the unconscionability determination).

CASES ILLUMINATING THE UNCONSCIONABILITY PRINCIPLE INCLUDE THE FOLLOWING:

Civil Code section 1670.5 follows the law developed primarily in the sale of goods, governed by the Uniform Commercial Code, in enabling courts to grant relief from unconscionable contracts or clauses. “The principle is one of the prevention of oppression and unfair surprise.” Whether a contract is unconscionable or not is a question of law for the Court. Shadoan v. World Savings & Loan Assn., 219 Cal.App.3d 97, 268 Cal.Rptr. 207 (1990).

As stated by the court in the seminal case of Williams v. Walker-Thomas Furniture Company (D.C.Cir.1965) 350 F.2d 445, 449, “Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.”

Absence of meaningful choice occurs when a party to a bargain has little choice but to accept the terms stated by the other party. Hidden Terms in an agreement may qualify to show absence of meaningful terms.” See A & M Produce Co. v. FMC Corp. 135 Cal.App.3d 473, 486 (1982).

A contract may be procedurally unconscionable under California law when the party with substantially greater bargaining power presents a take-it-or-leave it contract to a customer, even if the customer has a meaningful choice as to service providers. Shroyer v. New Cingular Wireless Services, Inc., C.A.9 (Cal.)2007, 498 F.3d 976.

Discussion: California and Arizona homeowners (greater phoenix area) who are lead to believe that they qualify for a loan modification given the representations made by and concerning the trial plan modification program, may have a claim to assert for damages. It is not certain you can prove that the lenders loan modification services are covered by the act, but it does appear to be a claim worth investigating at any rate.

III. DAMAGES AVAILABLE

(A) Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to recover or obtain any of the following:

1. Actual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000 minimum).
2. An order enjoining the methods, acts, or practices.
3. Restitution of property.
4. Punitive damages.
5. Any other relief that the court deems proper.

(B) Any consumer who is a senior citizen or a disabled person, as defined in subdivisions (f) and (g) of Section 1761, as part of an action under subdivision (a), may seek and be awarded, in addition to the remedies specified therein, up to five thousand dollars ($5,000) where the trier of fact does all of the following:

(C) Finds that the consumer has suffered substantial physical, emotional, or economic damage resulting from the defendant’s conduct.

NOTE: GENERALLY, WHEN ASSERTING A CLAIM UNDER THE CALIFORNIA LEGAL REMEDIES ACT, A POTENTIAL PLAINTIFF MUST GIVE THE LENDER A 30 DAY RIGHT TO CURE NOTICE THAT GIVES THEM THE OPPORTUNITY TO REMEDY THEIR VIOLATION PRIOR TO FILING A LAWSUIT.

CONSLUSION:

If you were given a trial plan loan modification offer, agreement, or other documents, and you made payments under the trial plan as agreed in the loan mod document, and any material representations that you made pursuant to the agreement DID NOT CHANGE from the time you entered into the contract, to the time your final payment was made; and if the lender or loan servicer refused to follow through with the trial plan, said you don’t qualify for a loan modification, or sold you house from underneath you, you may need to see a real estate, predatory lending, and foreclosure attorney to review whether or not you have a valid legal case to assert for either specific performance of the contract, or potentially money damages, including potentially punitive damages.

There are causes of action that may be applied in the loan modification trial plan context such as fraud, deceit, fraudulent inducement to contract, breach of implied covenant of good faith and fair dealing, and/or violation of the California Legal Remedies Act. Lenders and loan servicers, who were well financed by the federal bailout, should not be preying in California and Arizona homeowners in the greater Phoenix area by trying to “trick” them into making additional loan payments were foreclosure is inevitable given the lender/loan servicer’s mindset as to whether or not you are truly a loan modification candidate.

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Attorney Steve Vondran can be reached at steve@vondranlaw.com or toll free at (877) 276-5084. Information about trial plan fraud can be found at www.TrialPlanFraud.com

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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.

He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084

Offices:

Our Real Estate Law Services:

1. Loan Modifications / Loan Workouts (World Savings and Wachovia Loans
2. Commercial Lease Modifications
3. DRE audits, hearings and investigations
4. Real Estate Broker admissions cases
5. Foreclosure Defense
6. Mortgage Law & Predatory Law
7. Phoenix Real Estate Zoning Attorney – Greater Phoenix (Scottsdale, Goodyear, Buckeye, Casa Grande etc.)
8. Phoenix Eminent Domain Attorney / Inverse Condemnation / Prop 207 (Greater Phoenix)
9. Real Estate Arbitration, Litigation and Mediation
10. Foreclosure Consultant Contracts / Loan Modification Contracts
11. Real Estate LLC’s & Incorporations
12. Real Estate Partnership Law
13. Quiet Title Actions
14. Forensic Loan Audits – Greater Phoenix (Truth in Lending (TILA), RESPA, HOEPA, Fraud, etc).

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KEYWORDS: ARIZONA FORECLOSURE DEFENSE ATTORNEY / CALIFORNIA FORECLOSURE DEFENSE ATTORNEY / PHOENIX FORECLOSURE DEFENSE ATTORNEY / PHOENIX FORECLOSURE DEFENSE LAWYER / SCOTTSDALE FORECLOSURE DEFENSE ATTORNEY / SCOTTSDALE FORECLOSURE DEFENSE LAWYER / ORANGE COUNTY PREDATORY LENDING LAWYER / ORANGE COUNTY FORECLOSURE DEFENSE ATTORNEY / ORANGE COUNTY FORECLOSURE DEFENSE LAYWER / TRUTH IN LENDING LAWYER / TRUTH IN LENDING ATTORNEY / SOUTHER CALIFORNIA MORTGAGE LAW ATTORNEY / MORTGAGE LAWYER / RIVERSIDE FORECLOSURE ATTORNEY / RIVERSIDE FORECLOSURE LAWYER / RESPA LAWYER / RESPA ATTORNEY / FORECLOSURE DEFENSE LAW / PHOENIX LOAN MODIFICATION ATTORNEY / PHOENIX FORECLOSURE DEFENSE LAWYER / ORANGE COUNTY REAL ESTATE LAWYER / ORANGE COUNTY PREDATORY LENDING AND MORTGAGE LITIGATION ATTORNEY / NEWPORT BEACH FORECLOSURE DEFENSE LAWYER / NEWPORT BEACH FORECLOSURE DEFENSE ATTORNEY / CALIFORNIA FORECLOSURE DEFENSE LAWYER / PREDATORY LENDING LAWYER / LOAN RESCISSION ATTORNEY / TILA RESCISSION LAWYER / WACHOVIA OPTION ARM LOAN / WORLD SAVINGS OPTION ARM LOAN / RESCIND MY LOAN

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HELPFUL FORECLOSURE DEFENSE LINKS:

1. SUBMIT YOUR FORECLOSURE / LOAN SCENARIO: WWW.LOANMODSOLUTIONS.NET
2. SUBMIT YOUR LOAN MODIFICATION SCAM SCENARIO: WWW.LOANMODIFICATIONRIPOFF.NET
3. LITIGATING OPTION ARM LOANS WWW.OPTIONARMLAWYER.COM
4. CALIFORNIA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM
5. ARIZONA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM
6. STEVE VONDRAN REAL ESTATE WEBSITE WWW.VONDRANLAW.COM
7. INFORMATION ON TRIAL PLAN FRAUD: WWW.TRIALPLANFRAUD.COM
8. FORECLOSURE DEFENSE RADIO SHOW: WWW.LOANMODRADIO.COM
9. INFORMATION ON TRUTH IN LENDING LOAN RESCISSION: WWW.RESCINDMYLOAN.NET
10. INFORMATION ON PRODUCE THE NOTE: WWW.PRODUCETHENOTEATTRORNEY.COM

SOME OF THE ABOVE WEBSITES CAN BE VIEWED AT WWW.CUSTOMLAWNBLOGS.COM (CREATOR OF MY LEGAL BLOGS). THEY ARE OPERATED BY WWW.CONTINGENCYCASE.COM WEBSITE WHICH IS A WEBSITE DIRECTORY FOR CONTINGENCY CASE LAWYERS ACROSS THE UNITED STATES).

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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, 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 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).

CIVIL CODE
SECTION 2920-2944.5

2920.  (a) A mortgage is a contract by which specific property,
including an estate for years in real property, is hypothecated for
the performance of an act, without the necessity of a change of
possession.
(b) For purposes of Sections 2924 to 2924h, inclusive, “mortgage”
also means any security device or instrument, other than a deed of
trust, that confers a power of sale affecting real property or an
estate for years therein, to be exercised after breach of the
obligation so secured, including a real property sales contract, as
defined in Section 2985, which contains such a provision.<p>

Note: This Section indicates there must be a “breach of the obligation” before foreclosure is proper.  Where a lender cannot prove there was a breach of the obligation OWED TO THEM, then a foreclosure by that party or its agents should not be permitted.  Therefore, a foreclosing party should be forced to prove (a) that there was an obligation owed to them (i.e. show us the original promissory note) and (b) that there was a breach of the note (ex. non-payment of scheduled payments and proper accounting of all payments received).  If we send a qualified written request under RESPA Section 6 to produce a copy of the note properly endorsed, assigned and recorded, and the lender fails to comply (i.e. they cannot show possession of the note), how are we to know for sure that the obligation is owed to them, and not some other entity that claims an interest in the note?<p>

2921.  A mortgage may be created upon property held adversely to the
mortgagor.

2922.  A mortgage can be created, renewed, or extended, only by
writing, executed with the formalities required in the case of a
grant of real property.

2923.  The lien of a mortgage is special, unless otherwise expressly
agreed, and is independent of possession.

2923.5.  (a) (1) A mortgagee, trustee, beneficiary, or authorized
agent may not file a notice of default pursuant to Section 2924 until
30 days after contact is made as required by paragraph (2) or 30
days after satisfying the due diligence requirements as described in
subdivision (g).<p>

Note: It seems that this section of the code would require that only the TRUE beneficiary of the Loan, and/or the TRUE Trustee of the loan (or other proper agent) be permitted to execute a file a notice of default and thus initiate the foreclosure action.  In order to be able to file the NOD, and start the foreclosure clock running, the Beneficiary should be required, if requested, to prove that they hold the obligation and the note that entitles them to payment.  In other words, they should be required to prove that they are in lawful possession of the promissory note (just like if you were suing someone in small claims court for not paying you on a IOU, you would certainly want to produce the IOU (show possession of) as proof of the debt owed.  Unlike an IOU, in real property transactions, all interests in real estate (including the promissory note and deed of trust, are required to be in writing under the statute of frauds). <p>

(2) A mortgagee, beneficiary, or authorized agent shall contact
the borrower in person or by telephone in order to assess the
borrower’s financial situation and explore options for the borrower
to avoid foreclosure. During the initial contact, the mortgagee,
beneficiary, or authorized agent shall advise the borrower that he or
she has the right to request a subsequent meeting and, if requested,
the mortgagee, beneficiary, or authorized agent shall schedule the
meeting to occur within 14 days. The assessment of the borrower’s
financial situation and discussion of options may occur during the
first contact, or at the subsequent meeting scheduled for that
purpose. In either case, the borrower shall be provided the toll-free
telephone number made available by the United States Department of
Housing and Urban Development (HUD) to find a HUD-certified housing
counseling agency. Any meeting may occur telephonically.<p>

Note:  Again, this seems to require the REAL and TRUE “Mortgagee, Beneficiary, or Authorized Agent” to contact the borrower and discuss loan modification options.  This begs the question,who is the TRUE beneficiary of the loan?  First, what is a “beneficiary.”  According to caselaw, the beneficiary must be the person entitled to performance of the promised activity, usually repayment under a note. See Watkins v. Bryant (1891) 91 C 492, 27P.775.  It seems you would only be entitled to repayment if you can show possession of the promissory note that entitles you to such.  Otherwise, what’s to say that your next door neighbor cannot make a claim for repayment of your note and call themselves the beneficiary of your note?  Again, if someone is the beneficiary of the obligation, shouldn’t there be a legal requirement to prove it?  And if the “agent of the beneficiary” is contacting your (i.e. a loan servicer) shouldn’t they be required to prove both their agency status, and the fact that they are working on behalf of the TRUE beneficiary entitled to repayment?  If there is no promissory note in proper possession of a party seeking to enforce an obligation (i.e. to foreclose), and which TRUE beneficiary has the obligation to contact a defaulting lender under California law, but where this is not being properly performed by a TRUE beneficiary or their agent, doesn’t there seem to be some defects in the threatened foreclosure? <p>

(b) A notice of default filed pursuant to Section 2924 shall
include a declaration from the mortgagee, beneficiary, or authorized
agent that it has contacted the borrower, tried with due diligence to
contact the borrower as required by this section, or the borrower
has surrendered the property to the mortgagee, trustee, beneficiary,
or authorized agent.<p>

NOTE: Again, if the TRUE and ACTUAL beneficiary (the one in lawful possession of the promissory note) is not the one contacting the defaulting borrower to assess their finances and discuss loan modification solutions) is not the party making the declaration in the Notice of Default, doesn’t this also cast defects on the foreclosure process being sought against the borrower?<p>

(c) If a mortgagee, trustee, beneficiary, or authorized agent had
already filed the notice of default prior to the enactment of this
section and did not subsequently file a notice of rescission, then
the mortgagee, trustee, beneficiary, or authorized agent shall, as
part of the notice of sale filed pursuant to Section 2924f, include a
declaration that either:<p>

Note: I think you are getting the idea.  We need proper parties doing taking the required action under the California Foreclosure Statutes.  Why should the proper documentation not be available especially from sophisticated financial entities and investors who should know the need to comply with formal requirements that are needed to protect their investment?  Should a homeowner not be permitted to challenge these sophisticated financial persons to ensure they are the proper parties to initiate the threatened foreclosure?  Does a court exceed it powers if it requires such documentation, when a legal challenge is made to protect ones home from foreclosure in an action seeking an injunction?  When something as serious as someones home is on the line is it too much to require proper documentation?<p>

(1) States that the borrower was contacted to assess the borrower’
s financial situation and to explore options for the borrower to
avoid foreclosure.
(2) Lists the efforts made, if any, to contact the borrower in the
event no contact was made.
(d) A mortgagee’s, beneficiary’s, or authorized agent’s loss
mitigation personnel may participate by telephone during any contact
required by this section.
(e) For purposes of this section, a “borrower” shall include a
mortgagor or trustor.
(f) A borrower may designate a HUD-certified housing counseling
agency, attorney, or other advisor to discuss with the mortgagee,
beneficiary, or authorized agent, on the borrower’s behalf, options
for the borrower to avoid foreclosure. That contact made at the
direction of the borrower shall satisfy the contact requirements of
paragraph (2) of subdivision (a). Any loan modification or workout
plan offered at the meeting by the mortgagee, beneficiary, or
authorized agent is subject to approval by the borrower.
(g) A notice of default may be filed pursuant to Section 2924 when
a mortgagee, beneficiary, or authorized agent has not contacted a
borrower as required by paragraph (2) of subdivision (a) provided
that the failure to contact the borrower occurred despite the due
diligence of the mortgagee, beneficiary, or authorized agent. For
purposes of this section, “due diligence” shall require and mean all
of the following:
(1) A mortgagee, beneficiary, or authorized agent shall first
attempt to contact a borrower by sending a first-class letter that
includes the toll-free telephone number made available by HUD to find
a HUD-certified housing counseling agency.
(2) (A) After the letter has been sent, the mortgagee,
beneficiary, or authorized agent shall attempt to contact the
borrower by telephone at least three times at different hours and on
different days.  Telephone calls shall be made to the primary
telephone number on file.
(B) A mortgagee, beneficiary, or authorized agent may attempt to
contact a borrower using an automated system to dial borrowers,
provided that, if the telephone call is answered, the call is
connected to a live representative of the mortgagee, beneficiary, or
authorized agent.
(C) A mortgagee, beneficiary, or authorized agent satisfies the
telephone contact requirements of this paragraph if it determines,
after attempting contact pursuant to this paragraph, that the
borrower’s primary telephone number and secondary telephone number or
numbers on file, if any, have been disconnected.
(3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
mortgagee, beneficiary, or authorized agent shall then send a
certified letter, with return receipt requested.
(4) The mortgagee, beneficiary, or authorized agent shall provide
a means for the borrower to contact it in a timely manner, including
a toll-free telephone number that will provide access to a live
representative during business hours.
(5) The mortgagee, beneficiary, or authorized agent has posted a
prominent link on the homepage of its Internet Web site, if any, to
the following information:
(A) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options.
(B) A list of financial documents borrowers should collect and be
prepared to present to the mortgagee, beneficiary, or authorized
agent when discussing options for avoiding foreclosure.
(C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgagee, beneficiary,
or authorized agent.
(D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
(h) Subdivisions (a), (c), and (g) shall not apply if any of the
following occurs:
(1) The borrower has surrendered the property as evidenced by
either a letter confirming the surrender or delivery of the keys to
the property to the mortgagee, trustee, beneficiary, or authorized
agent.
(2) The borrower has contracted with an organization, person, or
entity whose primary business is advising people who have decided to
leave their homes on how to extend the foreclosure process and avoid
their contractual obligations to mortgagees or beneficiaries.
(3) The borrower has filed for bankruptcy, and the proceedings
have not been finalized.
(i) This section shall apply only to loans made from January 1,
2003, to December 31, 2007, inclusive, that are secured by
residential real property and are for owner-occupied residences. For
purposes of this subdivision, “owner-occupied” means that the
residence is the principal residence of the borrower.
(j) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.

2923.52.  (a) Notwithstanding paragraph (3) of subdivision (a) of
Section 2924, a mortgagee, trustee, or other person authorized to
take sale shall not give notice of sale until at least 90 days after
the lapse of three months as set forth in paragraph (2) of
subdivision (a) of Section 2924, in order to allow the parties to
pursue a loan modification to prevent foreclosure, if all of the
following conditions exist:
(1) The loan was recorded during the period of January 1, 2003, to
January 1, 2008, inclusive, and is secured by residential real
property.
(2) The loan at issue is the first mortgage or deed of trust that
the property secures.
(3) The borrower occupied the property as the borrower’s principal
residence at the time the loan became delinquent.
(4) The notice of default has been recorded on the property.
(b) This section does not apply to loans serviced by a mortgage
loan servicer if that mortgage loan servicer has obtained a temporary
or final order of exemption pursuant to Section 2923.53 that is
current and valid at the time the notice of sale is given.
(c) This section does not apply to loans made, purchased, or
serviced by:
(1) A California state or local public housing agency or
authority, including state or local housing finance agencies
established under Division 31 (commencing with Section 50000) of the
Health and Safety Code and Chapter 6 (commencing with Section 980) of
Division 4 of the Military and Veterans Code.
(2) Loans that are collateral for securities purchased by an
agency or authority described in paragraph (1).
(d) This section shall become operative 14 days after the issuance
of regulations, which shall include the form of the application for
mortgage loan servicers, by the commissioner pursuant to subdivision
(d) of Section 2923.53.
(e) This section shall remain in effect only until January 1, 2011,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2011, deletes or extends that date.

2923.52.  (a) Notwithstanding paragraph (3) of subdivision (a) of
Section 2924, a mortgagee, trustee, or other person authorized to
take sale shall not give notice of sale until at least 90 days after
the lapse of three months as set forth in paragraph (2) of
subdivision (a) of Section 2924, in order to allow the parties to
pursue a loan modification to prevent foreclosure, if all of the
following conditions exist:
(1) The loan was recorded during the period of January 1, 2003, to
January 1, 2008, inclusive, and is secured by residential real
property.
(2) The loan at issue is the first mortgage or deed of trust that
the property secures.
(3) The borrower occupied the property as the borrower’s principal
residence at the time the loan became delinquent.
(4) The notice of default has been recorded on the property.
(b) This section does not apply to loans serviced by a mortgage
loan servicer if that mortgage loan servicer has obtained a temporary
or final order of exemption pursuant to Section 2923.53 that is
current and valid at the time the notice of sale is given.
(c) This section does not apply to loans made, purchased, or
serviced by:
(1) A California state or local public housing agency or
authority, including state or local housing finance agencies
established under Division 31 (commencing with Section 50000) of the
Health and Safety Code and Chapter 6 (commencing with Section 980) of
Division 4 of the Military and Veterans Code.
(2) Loans that are collateral for securities purchased by an
agency or authority described in paragraph (1).
(d) This section shall become operative 14 days after the issuance
of regulations, which shall include the form of the application for
mortgage loan servicers, by the commissioner pursuant to subdivision
(d) of Section 2923.53.
(e) This section shall remain in effect only until January 1, 2011,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2011, deletes or extends that date.

2923.53.  (a) A mortgage loan servicer that has implemented a
comprehensive loan modification program that meets the requirements
of this section shall have the loans that it services exempted from
the provisions of Section 2923.52, upon order of the commissioner. A
comprehensive loan modification program shall include all of the
following features:
(1) The loan modification program is intended to keep borrowers
whose principal residences are homes located in California in those
homes when the anticipated recovery under the loan modification or
workout plan exceeds the anticipated recovery through foreclosure on
a net present value basis.
(2) The loan modification program targets a ratio of the borrower’
s housing-related debt to the borrower’s gross income of 38 percent
or less, on an aggregate basis in the program.
(3) The loan modification program includes some combination of the
following features:
(A) An interest rate reduction, as needed, for a fixed term of at
least five years.
(B) An extension of the amortization period for the loan term, to
no more than 40 years from the original date of the loan.
(C) Deferral of some portion of the principal amount of the unpaid
principal balance until maturity of the loan.
(D) Reduction of principal.
(E) Compliance with a federally mandated loan modification
program.
(F) Other factors that the commissioner determines are
appropriate.  In determining those factors, the commissioner may
consider efforts implemented in other jurisdictions that have
resulted in a reduction in foreclosures.
(4) When determining a loan modification solution for a borrower
under the loan modification program, the servicer seeks to achieve
long-term sustainability for the borrower.
(b) (1) A mortgage loan servicer may apply to the commissioner for
an order exempting loans that it services from Section 2923.52. If
the mortgage loan servicer elects to apply for an order, the
application shall be in the form and manner determined by the
commissioner.
(2) Upon receipt of an initial application for exemption under
this section, the commissioner shall immediately notify the applicant
of the date of receipt of the application and shall issue a
temporary order, effective from that date of receipt, exempting the
mortgage loan servicer from the provisions of subdivision (a) of
Section 2923.52. The temporary order shall remain in effect until a
final order has been issued by the commissioner pursuant to paragraph
(3). If the initial application for exemption is denied pursuant to
paragraph (3), the temporary order shall remain in effect for 30 days
after the date of denial.
(3) Within 30 days of receipt of an initial or revised
application, the commissioner shall make a final determination on
whether the application meets the criteria of subdivision (a). If,
after review of the application, the commissioner concludes that the
mortgage loan servicer has a comprehensive loan modification program
that meets the requirements of subdivision (a), the commissioner
shall issue a final order exempting the mortgage loan servicer from
the requirements of Section 2923.52. If the commissioner concludes
that the loan modification program does not meet the requirements of
subdivision (a), the application for exemption shall be denied and a
final order shall not be issued.
(4) A mortgage loan servicer may submit a revised application if
its application for exemption is denied.
(c) The commissioner may revoke a final order, upon reasonable
notice and an opportunity to be heard, if the mortgage loan servicer
has submitted a materially false or misleading application or if the
approved loan modification program has been materially altered from
the loan modification program on which the exemption was based. A
revocation by the commissioner shall not be retroactive.
(d) The commissioner shall adopt, no later than 10 days after the
date this section takes effect, emergency and final regulations to
clarify the application of this section and Section 2923.52,
including the creation of the application for mortgage loan servicers
and requirements regarding the reporting of loan modification data
by mortgage loan servicers.
(e) Three months after the first exemption is issued pursuant to
subdivision (b) by order of any commissioner specified in paragraph
(1) of subdivision (j), the Secretary of Business, Transportation and
Housing shall submit a report to the Legislature regarding the
details of the actions taken to implement this section and the
numbers of applications received and orders issued. The secretary
shall submit an additional report six months from the date of the
submission of the first report and every six months thereafter.
Within existing resources, the commissioners shall collect, from some
or all mortgage loan servicers, data regarding loan modifications
accomplished pursuant to this section and shall make the data
available on an Internet Web site at least quarterly.
(f) The Secretary of Business, Transportation and Housing shall
maintain on an Internet Web site a publicly available list disclosing
the final orders granting exemptions, the date of each order, and a
link to Internet Web sites describing the loan modification programs.

(g) Until January 1, 2010, the commissioner is authorized to
contract for goods and services necessary to implement the provisions
of this section and Section 2923.52, and any such contract shall be
exempt from Chapter 2 (commencing with Section 10290) of Part 2 of
Division 2 of the Public Contract Code. Not less than 30 days prior
to awarding any contract under this section, the commissioner shall
provide the pending contract documents to the Joint Legislative
Budget Committee.
(h) Any person who violates any provision of this section or
Section 2923.52 shall be deemed to have violated his or her license
law as it relates to these provisions.
(i) Nothing in this section or Section 2923.52 shall require a
servicer to violate contractual agreements for investor-owned loans
or provide a modification to a borrower who is not willing or able to
pay under the modification.
(j) The submission of an application for an exemption under this
section, the reliance upon such an exemption, or the provision to the
commissioner of data related to the loan modification program shall
not confer on the commissioner visitorial authority over a federally
chartered financial institution. Nothing in this subdivision is
intended to affect the authority of the commissioner over a federally
chartered financial institution pursuant to federal law or
regulation.
(k) For purposes of this section and Sections 2923.52 and 2923.54:

(1) “Commissioner” means any of the following:
(A) The Commissioner of Corporations for licensed residential
mortgage lenders and servicers and licensed finance lenders and
brokers servicing mortgage loans and any other entities servicing
mortgage loans that are not described in subparagraph (B) or (C).
(B) The Commissioner of Financial Institutions for commercial and
industrial banks and savings associations and credit unions organized
in this state servicing mortgage loans.
(C) The Real Estate Commissioner for licensed real estate brokers
servicing mortgage loans.
(2) “Housing-related debt” means debt that includes loan
principal, interest, property taxes, hazard insurance, flood
insurance, mortgage insurance, and homeowner association fees.
(3) “Mortgage loan servicer” means a person or entity that
receives or has the right to receive installment payments of
principal, interest, or other amounts placed in escrow, pursuant to
the terms of a mortgage loan or deed of trust, and performs services
relating to that receipt or enforcement as the holder of the note or
on behalf of the holder of the note evidencing that loan.
(l) This section shall remain in effect only until January 1, 2011,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2011, deletes or extends that date.

2923.53.  (a) A mortgage loan servicer that has implemented a
comprehensive loan modification program that meets the requirements
of this section shall have the loans that it services exempted from
the provisions of Section 2923.52, upon order of the commissioner. A
comprehensive loan modification program shall include all of the
following features:
(1) The loan modification program is intended to keep borrowers
whose principal residences are homes located in California in those
homes when the anticipated recovery under the loan modification or
workout plan exceeds the anticipated recovery through foreclosure on
a net present value basis.
(2) The loan modification program targets a ratio of the borrower’
s housing-related debt to the borrower’s gross income of 38 percent
or less, on an aggregate basis in the program.
(3) The loan modification program includes some combination of the
following features:
(A) An interest rate reduction, as needed, for a fixed term of at
least five years.
(B) An extension of the amortization period for the loan term, to
no more than 40 years from the original date of the loan.
(C) Deferral of some portion of the principal amount of the unpaid
principal balance until maturity of the loan.
(D) Reduction of principal.
(E) Compliance with a federally mandated loan modification
program.
(F) Other factors that the commissioner determines are
appropriate.  In determining those factors, the commissioner may
consider efforts implemented in other jurisdictions that have
resulted in a reduction in foreclosures.
(4) When determining a loan modification solution for a borrower
under the loan modification program, the servicer seeks to achieve
long-term sustainability for the borrower.
(b) (1) A mortgage loan servicer may apply to the commissioner for
an order exempting loans that it services from Section 2923.52. If
the mortgage loan servicer elects to apply for an order, the
application shall be in the form and manner determined by the
commissioner.
(2) Upon receipt of an initial application for exemption under
this section, the commissioner shall immediately notify the applicant
of the date of receipt of the application and shall issue a
temporary order, effective from that date of receipt, exempting the
mortgage loan servicer from the provisions of subdivision (a) of
Section 2923.52. The temporary order shall remain in effect until a
final order has been issued by the commissioner pursuant to paragraph
(3). If the initial application for exemption is denied pursuant to
paragraph (3), the temporary order shall remain in effect for 30 days
after the date of denial.
(3) Within 30 days of receipt of an initial or revised
application, the commissioner shall make a final determination on
whether the application meets the criteria of subdivision (a). If,
after review of the application, the commissioner concludes that the
mortgage loan servicer has a comprehensive loan modification program
that meets the requirements of subdivision (a), the commissioner
shall issue a final order exempting the mortgage loan servicer from
the requirements of Section 2923.52. If the commissioner concludes
that the loan modification program does not meet the requirements of
subdivision (a), the application for exemption shall be denied and a
final order shall not be issued.
(4) A mortgage loan servicer may submit a revised application if
its application for exemption is denied.
(c) The commissioner may revoke a final order, upon reasonable
notice and an opportunity to be heard, if the mortgage loan servicer
has submitted a materially false or misleading application or if the
approved loan modification program has been materially altered from
the loan modification program on which the exemption was based. A
revocation by the commissioner shall not be retroactive.
(d) The commissioner shall adopt, no later than 10 days after the
date this section takes effect, emergency and final regulations to
clarify the application of this section and Section 2923.52,
including the creation of the application for mortgage loan servicers
and requirements regarding the reporting of loan modification data
by mortgage loan servicers.
(e) Three months after the first exemption is issued pursuant to
subdivision (b) by order of any commissioner specified in paragraph
(1) of subdivision (j), the Secretary of Business, Transportation and
Housing shall submit a report to the Legislature regarding the
details of the actions taken to implement this section and the
numbers of applications received and orders issued. The secretary
shall submit an additional report six months from the date of the
submission of the first report and every six months thereafter.
Within existing resources, the commissioners shall collect, from some
or all mortgage loan servicers, data regarding loan modifications
accomplished pursuant to this section and shall make the data
available on an Internet Web site at least quarterly.
(f) The Secretary of Business, Transportation and Housing shall
maintain on an Internet Web site a publicly available list disclosing
the final orders granting exemptions, the date of each order, and a
link to Internet Web sites describing the loan modification programs.

(g) Until January 1, 2010, the commissioner is authorized to
contract for goods and services necessary to implement the provisions
of this section and Section 2923.52, and any such contract shall be
exempt from Chapter 2 (commencing with Section 10290) of Part 2 of
Division 2 of the Public Contract Code. Not less than 30 days prior
to awarding any contract under this section, the commissioner shall
provide the pending contract documents to the Joint Legislative
Budget Committee.
(h) Any person who violates any provision of this section or
Section 2923.52 shall be deemed to have violated his or her license
law as it relates to these provisions.
(i) Nothing in this section or Section 2923.52 shall require a
servicer to violate contractual agreements for investor-owned loans
or provide a modification to a borrower who is not willing or able to
pay under the modification.
(j) The submission of an application for an exemption under this
section, the reliance upon such an exemption, or the provision to the
commissioner of data related to the loan modification program shall
not confer on the commissioner visitorial authority over a federally
chartered financial institution. Nothing in this subdivision is
intended to affect the authority of the commissioner over a federally
chartered financial institution pursuant to federal law or
regulation.
(k) For purposes of this section and Sections 2923.52 and 2923.54:

(1) “Commissioner” means any of the following:
(A) The Commissioner of Corporations for licensed residential
mortgage lenders and servicers and licensed finance lenders and
brokers servicing mortgage loans and any other entities servicing
mortgage loans that are not described in subparagraph (B) or (C).
(B) The Commissioner of Financial Institutions for commercial and
industrial banks and savings associations and credit unions organized
in this state servicing mortgage loans.
(C) The Real Estate Commissioner for licensed real estate brokers
servicing mortgage loans.
(2) “Housing-related debt” means debt that includes loan
principal, interest, property taxes, hazard insurance, flood
insurance, mortgage insurance, and homeowner association fees.
(3) “Mortgage loan servicer” means a person or entity that
receives or has the right to receive installment payments of
principal, interest, or other amounts placed in escrow, pursuant to
the terms of a mortgage loan or deed of trust, and performs services
relating to that receipt or enforcement as the holder of the note or
on behalf of the holder of the note evidencing that loan.
(l) This section shall remain in effect only until January 1, 2011,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2011, deletes or extends that date.

2923.54.  (a) A notice of sale filed pursuant to Section 2924f shall
include a declaration from the mortgage loan servicer stating both
of the following:
(1) Whether or not the mortgage loan servicer has obtained from
the commissioner a final or temporary order of exemption pursuant to
Section 2923.53 that is current and valid on the date the notice of
sale is filed.
(2) Whether the timeframe for giving notice of sale specified in
subdivision (a) of Section 2923.52 does not apply pursuant to Section
2923.52 or 2923.55.
(b) Failure to comply with Section 2923.52 or 2923.53 shall not
invalidate any sale that would otherwise be valid under Section
2924f.
(c) This section shall remain in effect only until January 1, 2011,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2011, deletes or extends that date.

2923.54.  (a) A notice of sale filed pursuant to Section 2924f shall
include a declaration from the mortgage loan servicer stating both
of the following:
(1) Whether or not the mortgage loan servicer has obtained from
the commissioner a final or temporary order of exemption pursuant to
Section 2923.53 that is current and valid on the date the notice of
sale is filed.
(2) Whether the timeframe for giving notice of sale specified in
subdivision (a) of Section 2923.52 does not apply pursuant to Section
2923.52 or 2923.55.
(b) Failure to comply with Section 2923.52 or 2923.53 shall not
invalidate any sale that would otherwise be valid under Section
2924f.
(c) This section shall remain in effect only until January 1, 2011,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2011, deletes or extends that date.

2923.55.  Section 2923.52 shall not apply if any of the following
occurs:
(a) The borrower has surrendered the property, as evidenced by
either a letter confirming the surrender or delivery of the keys to
the property to the mortgagee, trustee, beneficiary, or authorized
agent.
(b) The borrower has contracted with an organization, person, or
entity whose primary business is advising people who have decided to
leave their homes regarding how to extend the foreclosure process and
avoid their contractual obligations to mortgagees or beneficiaries.

(c) A case has been filed by the borrower under Chapter 7, 11, 12,
or 13 of Title 11 of the United States Code, and the bankruptcy
court has not entered an order closing or dismissing the bankruptcy
case or granting relief from a stay of foreclosure.
(d) This section shall remain in effect only until January 1, 2011,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2011, deletes or extends that date.

2923.55.  Section 2923.52 shall not apply if any of the following
occurs:
(a) The borrower has surrendered the property, as evidenced by
either a letter confirming the surrender or delivery of the keys to
the property to the mortgagee, trustee, beneficiary, or authorized
agent.
(b) The borrower has contracted with an organization, person, or
entity whose primary business is advising people who have decided to
leave their homes regarding how to extend the foreclosure process and
avoid their contractual obligations to mortgagees or beneficiaries.

(c) A case has been filed by the borrower under Chapter 7, 11, 12,
or 13 of Title 11 of the United States Code, and the bankruptcy
court has not entered an order closing or dismissing the bankruptcy
case or granting relief from a stay of foreclosure.
(d) This section shall remain in effect only until January 1, 2011,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2011, deletes or extends that date.

2923.6.  (a) The Legislature finds and declares that any duty
servicers may have to maximize net present value under their pooling
and servicing agreements is owed to all parties in a loan pool, not
to any particular parties, and that a servicer acts in the best
interests of all parties if it agrees to or implements a loan
modification or workout plan for which both of the following apply:
(1) The loan is in payment default, or payment default is
reasonably foreseeable.
(2) Anticipated recovery under the loan modification or workout
plan exceeds the anticipated recovery through foreclosure on a net
present value basis.
(b) It is the intent of the Legislature that the mortgagee,
beneficiary, or authorized agent offer the borrower a loan
modification or workout plan if such a modification or plan is
consistent with its contractual or other authority.
(c) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.

2924.  (a) Every transfer of an interest in property, other than in
trust, made only as a security for the performance of another act, is
to be deemed a mortgage, except when in the case of personal
property it is accompanied by actual change of possession, in which
case it is to be deemed a pledge. Where, by a mortgage created after
July 27, 1917, of any estate in real property, other than an estate
at will or for years, less than two, or in any transfer in trust made
after July 27, 1917, of a like estate to secure the performance of
an obligation, a power of sale is conferred upon the mortgagee,
trustee, or any other person, to be exercised after a breach of the
obligation for which that mortgage or transfer is a security, the
power shall not be exercised except where the mortgage or transfer is
made pursuant to an order, judgment, or decree of a court of record,
or to secure the payment of bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations, or is made by a public utility subject to the
provisions of the Public Utilities Act, until all of the following
apply:
(1) The trustee, mortgagee, or beneficiary, or any of their
authorized agents shall first file for record, in the office of the
recorder of each county wherein the mortgaged or trust property or
some part or parcel thereof is situated, a notice of default. That
notice of default shall include all of the following:
(A) A statement identifying the mortgage or deed of trust by
stating the name or names of the trustor or trustors and giving the
book and page, or instrument number, if applicable, where the
mortgage or deed of trust is recorded or a description of the
mortgaged or trust property.
(B) A statement that a breach of the obligation for which the
mortgage or transfer in trust is security has occurred.
(C) A statement setting forth the nature of each breach actually
known to the beneficiary and of his or her election to sell or cause
to be sold the property to satisfy that obligation and any other
obligation secured by the deed of trust or mortgage that is in
default.
(D) If the default is curable pursuant to Section 2924c, the
statement specified in paragraph (1) of subdivision (b) of Section
2924c.
(2) Not less than three months shall elapse from the filing of the
notice of default.
(3) Except as provided in Section 2923.52, after the lapse of the
three months described in paragraph (2), the mortgagee, trustee or
other person authorized to take the sale shall give notice of sale,
stating the time and place thereof, in the manner and for a time not
less than that set forth in Section 2924f.
(b) In performing acts required by this article, the trustee shall
incur no liability for any good faith error resulting from reliance
on information provided in good faith by the beneficiary regarding
the nature and the amount of the default under the secured
obligation, deed of trust, or mortgage. In performing the acts
required by this article, a trustee shall not be subject to Title
1.6c (commencing with Section 1788) of Part 4.
(c) A recital in the deed executed pursuant to the power of sale
of compliance with all requirements of law regarding the mailing of
copies of notices or the publication of a copy of the notice of
default or the personal delivery of the copy of the notice of default
or the posting of copies of the notice of sale or the publication of
a copy thereof shall constitute prima facie evidence of compliance
with these requirements and conclusive evidence thereof in favor of
bona fide purchasers and encumbrancers for value and without notice.

(d) All of the following shall constitute privileged
communications pursuant to Section 47:
(1) The mailing, publication, and delivery of notices as required
by this section.
(2) Performance of the procedures set forth in this article.
(3) Performance of the functions and procedures set forth in this
article if those functions and procedures are necessary to carry out
the duties described in Sections 729.040, 729.050, and 729.080 of the
Code of Civil Procedure.
(e) There is a rebuttable presumption that the beneficiary
actually knew of all unpaid loan payments on the obligation owed to
the beneficiary and secured by the deed of trust or mortgage subject
to the notice of default. However, the failure to include an actually
known default shall not invalidate the notice of sale and the
beneficiary shall not be precluded from asserting a claim to this
omitted default or defaults in a separate notice of default.
(f) This section shall remain in effect only until January 1, 2011,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2011, deletes or extends that date.

2924.  (a) Every transfer of an interest in property, other than in
trust, made only as a security for the performance of another act, is
to be deemed a mortgage, except when in the case of personal
property it is accompanied by actual change of possession, in which
case it is to be deemed a pledge. Where, by a mortgage created after
July 27, 1917, of any estate in real property, other than an estate
at will or for years, less than two, or in any transfer in trust made
after July 27, 1917, of a like estate to secure the performance of
an obligation, a power of sale is conferred upon the mortgagee,
trustee, or any other person, to be exercised after a breach of the
obligation for which that mortgage or transfer is a security, the
power shall not be exercised except where the mortgage or transfer is
made pursuant to an order, judgment, or decree of a court of record,
or to secure the payment of bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations, or is made by a public utility subject to the
provisions of the Public Utilities Act, until all of the following
apply:
(1) The trustee, mortgagee, or beneficiary, or any of their
authorized agents shall first file for record, in the office of the
recorder of each county wherein the mortgaged or trust property or
some part or parcel thereof is situated, a notice of default. That
notice of default shall include all of the following:
(A) A statement identifying the mortgage or deed of trust by
stating the name or names of the trustor or trustors and giving the
book and page, or instrument number, if applicable, where the
mortgage or deed of trust is recorded or a description of the
mortgaged or trust property.
(B) A statement that a breach of the obligation for which the
mortgage or transfer in trust is security has occurred.
(C) A statement setting forth the nature of each breach actually
known to the beneficiary and of his or her election to sell or cause
to be sold the property to satisfy that obligation and any other
obligation secured by the deed of trust or mortgage that is in
default.
(D) If the default is curable pursuant to Section 2924c, the
statement specified in paragraph (1) of subdivision (b) of Section
2924c.
(2) Not less than three months shall elapse from the filing of the
notice of default.
(3) After the lapse of the three months described in paragraph
(2), the mortgagee, trustee, or other person authorized to take the
sale shall give notice of sale, stating the time and place thereof,
in the manner and for a time not less than that set forth in Section
2924f.
(b) In performing acts required by this article, the trustee shall
incur no liability for any good faith error resulting from reliance
on information provided in good faith by the beneficiary regarding
the nature and the amount of the default under the secured
obligation, deed of trust, or mortgage. In performing the acts
required by this article, a trustee shall not be subject to Title
1.6c (commencing with Section 1788) of Part 4.
(c) A recital in the deed executed pursuant to the power of sale
of compliance with all requirements of law regarding the mailing of
copies of notices or the publication of a copy of the notice of
default or the personal delivery of the copy of the notice of default
or the posting of copies of the notice of sale or the publication of
a copy thereof shall constitute prima facie evidence of compliance
with these requirements and conclusive evidence thereof in favor of
bona fide purchasers and encumbrancers for value and without notice.

(d) All of the following shall constitute privileged
communications pursuant to Section 47:
(1) The mailing, publication, and delivery of notices as required
by this section.
(2) Performance of the procedures set forth in this article.
(3) Performance of the functions and procedures set forth in this
article if those functions and procedures are necessary to carry out
the duties described in Sections 729.040, 729.050, and 729.080 of the
Code of Civil Procedure.
(e) There is a rebuttable presumption that the beneficiary
actually knew of all unpaid loan payments on the obligation owed to
the beneficiary and secured by the deed of trust or mortgage subject
to the notice of default. However, the failure to include an actually
known default shall not invalidate the notice of sale and the
beneficiary shall not be precluded from asserting a claim to this
omitted default or defaults in a separate notice of default.
(f) This section shall become operative on January 1, 2011.

2924.  (a) Every transfer of an interest in property, other than in
trust, made only as a security for the performance of another act, is
to be deemed a mortgage, except when in the case of personal
property it is accompanied by actual change of possession, in which
case it is to be deemed a pledge. Where, by a mortgage created after
July 27, 1917, of any estate in real property, other than an estate
at will or for years, less than two, or in any transfer in trust made
after July 27, 1917, of a like estate to secure the performance of
an obligation, a power of sale is conferred upon the mortgagee,
trustee, or any other person, to be exercised after a breach of the
obligation for which that mortgage or transfer is a security, the
power shall not be exercised except where the mortgage or transfer is
made pursuant to an order, judgment, or decree of a court of record,
or to secure the payment of bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations, or is made by a public utility subject to the
provisions of the Public Utilities Act, until all of the following
apply:
(1) The trustee, mortgagee, or beneficiary, or any of their
authorized agents shall first file for record, in the office of the
recorder of each county wherein the mortgaged or trust property or
some part or parcel thereof is situated, a notice of default. That
notice of default shall include all of the following:
(A) A statement identifying the mortgage or deed of trust by
stating the name or names of the trustor or trustors and giving the
book and page, or instrument number, if applicable, where the
mortgage or deed of trust is recorded or a description of the
mortgaged or trust property.
(B) A statement that a breach of the obligation for which the
mortgage or transfer in trust is security has occurred.
(C) A statement setting forth the nature of each breach actually
known to the beneficiary and of his or her election to sell or cause
to be sold the property to satisfy that obligation and any other
obligation secured by the deed of trust or mortgage that is in
default.
(D) If the default is curable pursuant to Section 2924c, the
statement specified in paragraph (1) of subdivision (b) of Section
2924c.
(2) Not less than three months shall elapse from the filing of the
notice of default.
(3) After the lapse of the three months described in paragraph
(2), the mortgagee, trustee, or other person authorized to take the
sale shall give notice of sale, stating the time and place thereof,
in the manner and for a time not less than that set forth in Section
2924f.
(b) In performing acts required by this article, the trustee shall
incur no liability for any good faith error resulting from reliance
on information provided in good faith by the beneficiary regarding
the nature and the amount of the default under the secured
obligation, deed of trust, or mortgage. In performing the acts
required by this article, a trustee shall not be subject to Title
1.6c (commencing with Section 1788) of Part 4.
(c) A recital in the deed executed pursuant to the power of sale
of compliance with all requirements of law regarding the mailing of
copies of notices or the publication of a copy of the notice of
default or the personal delivery of the copy of the notice of default
or the posting of copies of the notice of sale or the publication of
a copy thereof shall constitute prima facie evidence of compliance
with these requirements and conclusive evidence thereof in favor of
bona fide purchasers and encumbrancers for value and without notice.

(d) All of the following shall constitute privileged
communications pursuant to Section 47:
(1) The mailing, publication, and delivery of notices as required
by this section.
(2) Performance of the procedures set forth in this article.
(3) Performance of the functions and procedures set forth in this
article if those functions and procedures are necessary to carry out
the duties described in Sections 729.040, 729.050, and 729.080 of the
Code of Civil Procedure.
(e) There is a rebuttable presumption that the beneficiary
actually knew of all unpaid loan payments on the obligation owed to
the beneficiary and secured by the deed of trust or mortgage subject
to the notice of default. However, the failure to include an actually
known default shall not invalidate the notice of sale and the
beneficiary shall not be precluded from asserting a claim to this
omitted default or defaults in a separate notice of default.
(f) This section shall become operative on January 1, 2011.

2924.3.  (a) Except as provided in subdivisions (b) and (c), a
person who has undertaken as an agent of a mortgagee, beneficiary, or
owner of a promissory note secured directly or collaterally by a
mortgage or deed of trust on real property or an estate for years
therein, to make collections of payments from an obligor under the
note, shall mail the following notices, postage prepaid, to each
mortgagee, beneficiary or owner for whom the agent has agreed to make
collections from the obligor under the note:
(1) A copy of the notice of default filed in the office of the
county recorder pursuant to Section 2924 on account of a breach of
obligation under the promissory note on which the agent has agreed to
make collections of payments, within 15 days after recordation.
(2) Notice that a notice of default has been recorded pursuant to
Section 2924 on account of a breach of an obligation secured by a
mortgage or deed of trust against the same property or estate for
years therein having priority over the mortgage or deed of trust
securing the obligation described in paragraph (1), within 15 days
after recordation or within three business days after the agent
receives the information, whichever is later.
(3) Notice of the time and place scheduled for the sale of the
real property or estate for years therein pursuant to Section 2924f
under a power of sale in a mortgage or deed of trust securing an
obligation described in paragraphs (1) or (2), not less than 15 days
before the scheduled date of the sale or not later than the next
business day after the agent receives the information, whichever is
later.
(b) An agent who has undertaken to make collections on behalf of
mortgagees, beneficiaries or owners of promissory notes secured by
mortgages or deeds of trust on real property or an estate for years
therein shall not be required to comply with the provisions of
subdivision (a) with respect to a mortgagee, beneficiary or owner who
is entitled to receive notice pursuant to subdivision (c) of Section
2924b or for whom a request for notice has been recorded pursuant to
subdivision (b) of Section 2924b if the agent reasonably believes
that the address of the mortgagee, beneficiary, or owner described in
Section 2924b is the current business or residence address of that
person.
(c) An agent who has undertaken to make collections on behalf of
mortgagees, beneficiaries or owners of promissory notes secured by
mortgages or deeds of trust on real property or an estate for years
therein shall not be required to comply with the provisions of
paragraph (1) or (2) of subdivision (a) if the agent knows or
reasonably believes that the default has already been cured by or on
behalf of the obligor.
(d) Any failure to comply with the provisions of this section
shall not affect the validity of a sale in favor of a bona fide
purchaser or the rights of an encumbrancer for value and without
notice.

2924.5.  No clause in any deed of trust or mortgage on property
containing four or fewer residential units or on which four or fewer
residential units are to be constructed or in any obligation secured
by any deed of trust or mortgage on property containing four or fewer
residential units or on which four or fewer residential units are to
be constructed that provides for the acceleration of the due date of
the obligation upon the sale, conveyance, alienation, lease,
succession, assignment or other transfer of the property subject to
the deed of trust or mortgage shall be valid unless the clause is set
forth, in its entirety in both the body of the deed of trust or
mortgage and the promissory note or other document evidencing the
secured obligation.  This section shall apply to all such deeds of
trust, mortgages, and obligations secured thereby executed on or
after July 1, 1972.

2924.6.  (a) An obligee may not accelerate the maturity date of the
principal and accrued interest on any loan secured by a mortgage or
deed of trust on residential real property solely by reason of any
one or more of the following transfers in the title to the real
property:
(1) A transfer resulting from the death of an obligor where the
transfer is to the spouse who is also an obligor.
(2) A transfer by an obligor where the spouse becomes a coowner of
the property.
(3) A transfer resulting from a decree of dissolution of the
marriage or legal separation or from a property settlement agreement
incidental to such a decree which requires the obligor to continue to
make the loan payments by which a spouse who is an obligor becomes
the sole owner of the property.
(4) A transfer by an obligor or obligors into an inter vivos trust
in which the obligor or obligors are beneficiaries.
(5) Such real property or any portion thereof is made subject to a
junior encumbrance or lien.
(b) Any waiver of the provisions of this section by an obligor is
void and unenforceable and is contrary to public policy.
(c) For the purposes of this section, “residential real property”
means any real property which contains at least one but not more than
four housing units.
(d) This act applies only to loans executed or refinanced on or
after January 1, 1976.

2924.7.  (a) The provisions of any deed of trust or mortgage on real
property which authorize any beneficiary, trustee, mortgagee, or his
or her agent or successor in interest, to accelerate the maturity
date of the principal and interest on any loan secured thereby or to
exercise any power of sale or other remedy contained therein upon the
failure of the trustor or mortgagor to pay, at the times provided
for under the terms of the deed of trust or mortgage, any taxes,
rents, assessments, or insurance premiums with respect to the
property or the loan, or any advances made by the beneficiary,
mortgagee, or his or her agent or successor in interest shall be
enforceable whether or not impairment of the security interest in the
property has resulted from the failure of the  trustor or mortgagor
to pay the taxes, rents, assessments, insurance premiums, or
advances.
(b) The provisions of any deed of trust or mortgage on real
property which authorize any beneficiary, trustee, mortgagee, or his
or her agent or successor in interest, to receive and control the
disbursement of the proceeds of any policy of fire, flood, or other
hazard insurance respecting the property shall be enforceable whether
or not impairment of the security interest in the property has
resulted from the event that caused the proceeds of the insurance
policy to become payable.

2924.8.  (a) Upon posting a notice of sale pursuant to Section
2924f, a trustee or authorized agent shall also post the following
notice, in the manner required for posting the notice of sale on the
property to be sold, and a mortgagee, trustee, beneficiary, or
authorized agent shall mail, at the same time in an envelope
addressed to the “Resident of property subject to foreclosure sale”
the following notice in English and the languages described in
Section 1632: “Foreclosure process has begun on this property, which
may affect your right to continue to live in this property. Twenty
days or more after the date of this notice, this property may be sold
at foreclosure. If you are renting this property, the new property
owner may either give you a new lease or rental agreement or provide
you with a 60-day eviction notice. However, other laws may prohibit
an eviction in this circumstance or provide you with a longer notice
before eviction. You may wish to contact a lawyer or your local legal
aid or housing counseling agency to discuss any rights you may have.”

(b) It shall be an infraction to tear down the notice described in
subdivision (a) within 72 hours of posting. Violators shall be
subject to a fine of one hundred dollars ($100).
(c) A state government entity shall make available translations of
the notice described in subdivision (a) which may be used by a
mortgagee, trustee, beneficiary, or authorized agent to satisfy the
requirements of this section.
(d) This section shall only apply to loans secured by residential
real property, and if the billing address for the mortgage note is
different than the property address.
(e) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.

2924a.  If, by the terms of any trust or deed of trust a power of
sale is conferred upon the trustee, the attorney for the trustee, or
any duly authorized agent, may conduct the sale and act in the sale
as the auctioneer for the trustee.

2924b.  (a) Any person desiring a copy of any notice of default and
of any notice of sale under any deed of trust or mortgage with power
of sale upon real property or an estate for years therein, as to
which deed of trust or mortgage the power of sale cannot be exercised
until these notices are given for the time and in the manner
provided in Section 2924 may, at any time subsequent to recordation
of the deed of trust or mortgage and prior to recordation of notice
of default thereunder, cause to be filed for record in the office of
the recorder of any county in which any part or parcel of the real
property is situated, a duly acknowledged request for a copy of the
notice of default and of sale. This request shall be signed and
acknowledged by the person making the request, specifying the name
and address of the person to whom the notice is to be mailed, shall
identify the deed of trust or mortgage by stating the names of the
parties thereto, the date of recordation thereof, and the book and
page where the deed of trust or mortgage is recorded or the recorder’
s number, and shall be in substantially the following form:

“In accordance with Section 2924b, Civil Code,
request is hereby
made that a copy of any notice of default and a
copy of any notice of sale
under the deed of trust (or mortgage) recorded
______, ____, in Book
_____ page ____ records of ____ County, (or
filed for record with
recorder’s serial number ____, _______County)
California, executed
by ____ as trustor (or mortgagor) in which
________ is named as
beneficiary (or mortgagee) and ______________ as
trustee be mailed to
________________  at ___________________________.
Name                    Address

NOTICE: A copy of any notice of default
and of any notice of sale will be
sent only to the address contained in this
recorded request. If your address changes, a new
request must be recorded.

Signature ________________ “

Upon the filing for record of the request, the recorder shall
index in the general index of grantors the names of the trustors (or
mortgagor) recited therein and the names of persons requesting
copies.
(b) The mortgagee, trustee, or other person authorized to record
the notice of default or the notice of sale shall do each of the
following:
(1) Within 10 business days following recordation of the notice of
default, deposit or cause to be deposited in the United States mail
an envelope, sent by registered or certified mail with postage
prepaid, containing a copy of the notice with the recording date
shown thereon, addressed to each person whose name and address are
set forth in a duly recorded request therefor, directed to the
address designated in the request and to each trustor or mortgagor at
his or her last known address if different than the address
specified in the deed of trust or mortgage with power of sale.
(2) At least 20 days before the date of sale, deposit or cause to
be deposited in the United States mail an envelope, sent by
registered or certified mail with postage prepaid, containing a copy
of the notice of the time and place of sale, addressed to each person
whose name and address are set forth in a duly recorded request
therefor, directed to the address designated in the request and to
each trustor or mortgagor at his or her last known address if
different than the address specified in the deed of trust or mortgage
with power of sale.
(3) As used in paragraphs (1) and (2), the “last known address” of
each trustor or mortgagor means the last business or residence
physical address actually known by the mortgagee, beneficiary,
trustee, or other person authorized to record the notice of default.
For the purposes of this subdivision, an address is “actually known”
if it is contained in the original deed of trust or mortgage, or in
any subsequent written notification of a change of physical address
from the trustor or mortgagor pursuant to the deed of trust or
mortgage. For the purposes of this subdivision, “physical address”
does not include an e-mail or any form of electronic address for a
trustor or mortgagor. The beneficiary shall inform the trustee of the
trustor’s last address actually known by the beneficiary. However,
the trustee shall incur no liability for failing to send any notice
to the last address unless the trustee has actual knowledge of it.
(4) A “person authorized to record the notice of default or the
notice of sale” shall include an agent for the mortgagee or
beneficiary, an agent of the named trustee, any person designated in
an executed substitution of trustee, or an agent of that substituted
trustee.
(c) The mortgagee, trustee, or other person authorized to record
the notice of default or the notice of sale shall do the following:
(1) Within one month following recordation of the notice of
default, deposit or cause to be deposited in the United States mail
an envelope, sent by registered or certified mail with postage
prepaid, containing a copy of the notice with the recording date
shown thereon, addressed to each person set forth in paragraph (2),
provided that the estate or interest of any person entitled to
receive notice under this subdivision is acquired by an instrument
sufficient to impart constructive notice of the estate or interest in
the land or portion thereof that is subject to the deed of trust or
mortgage being foreclosed, and provided the instrument is recorded in
the office of the county recorder so as to impart that constructive
notice prior to the recording date of the notice of default and
provided the instrument as so recorded sets forth a mailing address
that the county recorder shall use, as instructed within the
instrument, for the return of the instrument after recording, and
which address shall be the address used for the purposes of mailing
notices herein.
(2) The persons to whom notice shall be mailed under this
subdivision are:
(A) The successor in interest, as of the recording date of the
notice of default, of the estate or interest or any portion thereof
of the trustor or mortgagor of the deed of trust or mortgage being
foreclosed.
(B) The beneficiary or mortgagee of any deed of trust or mortgage
recorded subsequent to the deed of trust or mortgage being
foreclosed, or recorded prior to or concurrently with the deed of
trust or mortgage being foreclosed but subject to a recorded
agreement or a recorded statement of subordination to the deed of
trust or mortgage being foreclosed.
(C) The assignee of any interest of the beneficiary or mortgagee
described in subparagraph (B), as of the recording date of the notice
of default.
(D) The vendee of any contract of sale, or the lessee of any
lease, of the estate or interest being foreclosed that is recorded
subsequent to the deed of trust or mortgage being foreclosed, or
recorded prior to or concurrently with the deed of trust or mortgage
being foreclosed but subject to a recorded agreement or statement of
subordination to the deed of trust or mortgage being foreclosed.
(E) The successor in interest to the vendee or lessee described in
subparagraph (D), as of the recording date of the notice of default.

(F) The office of the Controller, Sacramento, California, where,
as of the recording date of the notice of default, a “Notice of Lien
for Postponed Property Taxes” has been recorded against the real
property to which the notice of default applies.
(3) At least 20 days before the date of sale, deposit or cause to
be deposited in the United States mail an envelope, sent by
registered or certified mail with postage prepaid, containing a copy
of the notice of the time and place of sale addressed to each person
to whom a copy of the notice of default is to be mailed as provided
in paragraphs (1) and (2), and addressed to the office of any state
taxing agency, Sacramento, California, that has recorded, subsequent
to the deed of trust or mortgage being foreclosed, a notice of tax
lien prior to the recording date of the notice of default against the
real property to which the notice of default applies.
(4) Provide a copy of the notice of sale to the Internal Revenue
Service, in accordance with Section 7425 of the Internal Revenue Code
and any applicable federal regulation, if a “Notice of Federal Tax
Lien under Internal Revenue Laws” has been recorded, subsequent to
the deed of trust or mortgage being foreclosed, against the real
property to which the notice of sale applies. The failure to provide
the Internal Revenue Service with a copy of the notice of sale
pursuant to this paragraph shall be sufficient cause to rescind the
trustee’s sale and invalidate the trustee’s deed, at the option of
either the successful bidder at the trustee’s sale or the trustee,
and in either case with the consent of the beneficiary. Any option to
rescind the trustee’s sale pursuant to this paragraph shall be
exercised prior to any transfer of the property by the successful
bidder to a bona fide purchaser for value. A recision of the trustee’
s sale pursuant to this paragraph may be recorded in a notice of
recision pursuant to Section 1058.5.
(5) The mailing of notices in the manner set forth in paragraph
(1) shall not impose upon any licensed attorney, agent, or employee
of any person entitled to receive notices as herein set forth any
duty to communicate the notice to the entitled person from the fact
that the mailing address used by the county recorder is the address
of the attorney, agent, or employee.
(d) Any deed of trust or mortgage with power of sale hereafter
executed upon real property or an estate for years therein may
contain a request that a copy of any notice of default and a copy of
any notice of sale thereunder shall be mailed to any person or party
thereto at the address of the person given therein, and a copy of any
notice of default and of any notice of sale shall be mailed to each
of these at the same time and in the same manner required as though a
separate request therefor had been filed by each of these persons as
herein authorized. If any deed of trust or mortgage with power of
sale executed after September 19, 1939, except a deed of trust or
mortgage of any of the classes excepted from the provisions of
Section 2924, does not contain a mailing address of the trustor or
mortgagor therein named, and if no request for special notice by the
trustor or mortgagor in substantially the form set forth in this
section has subsequently been recorded, a copy of the notice of
default shall be published once a week for at least four weeks in a
newspaper of general circulation in the county in which the property
is situated, the publication to commence within 10 business days
after the filing of the notice of default. In lieu of publication, a
copy of the notice of default may be delivered personally to the
trustor or mortgagor within the 10 business days or at any time
before publication is completed, or by posting the notice of default
in a conspicuous place on the property and mailing the notice to the
last known address of the trustor or mortgagor.
(e) Any person required to mail a copy of a notice of default or
notice of sale to each trustor or mortgagor pursuant to subdivision
(b) or (c) by registered or certified mail shall simultaneously cause
to be deposited in the United States mail, with postage prepaid and
mailed by first-class mail, an envelope containing an additional copy
of the required notice addressed to each trustor or mortgagor at the
same address to which the notice is sent by registered or certified
mail pursuant to subdivision (b) or (c). The person shall execute and
retain an affidavit identifying the notice mailed, showing the name
and residence or business address of that person, that he or she is
over the age of 18 years, the date of deposit in the mail, the name
and address of the trustor or mortgagor to whom sent, and that the
envelope was sealed and deposited in the mail with postage fully
prepaid. In the absence of fraud, the affidavit required by this
subdivision shall establish a conclusive presumption of mailing.
(f) With respect to separate interests governed by an association,
as defined in subdivision (a) of Section 1351, the association may
cause to be filed in the office of the recorder in the county in
which the separate interests are situated a request that a mortgagee,
trustee, or other person authorized to record a notice of default
regarding any of those separate interests mail to the association a
copy of any trustee’s deed upon sale concerning a separate interest.
The request shall include a legal description or the assessor’s
parcel number of the separate interests. A request recorded pursuant
to this subdivision shall include the name and address of the
association and a statement that it is a homeowners’ association.
Subsequent requests of an association shall supersede prior requests.
A request pursuant to this subdivision shall be recorded before the
filing of a notice of default. The mortgagee, trustee, or other
authorized person shall mail the requested information to the
association within 15 business days following the date the trustee’s
deed is recorded. Failure to mail the request, pursuant to this
subdivision, shall not affect the title to real property.
(g) No request for a copy of any notice filed for record pursuant
to this section, no statement or allegation in the request, and no
record thereof shall affect the title to real property or be deemed
notice to any person that any person requesting copies of notice has
or claims any right, title, or interest in, or lien or charge upon
the property described in the deed of trust or mortgage referred to
therein.
(h) “Business day,” as used in this section, has the meaning
specified in Section 9.

2924c.  (a) (1) Whenever all or a portion of the principal sum of
any obligation secured by deed of trust or mortgage on real property
or an estate for years therein hereafter executed has, prior to the
maturity date fixed in that obligation, become due or been declared
due by reason of default in payment of interest or of any installment
of principal, or by reason of failure of trustor or mortgagor to
pay, in accordance with the terms of that obligation or of the deed
of trust or mortgage, taxes, assessments, premiums for insurance, or
advances made by beneficiary or mortgagee in accordance with the
terms of that obligation or of the deed of trust or mortgage, the
trustor or mortgagor or his or her successor in interest in the
mortgaged or trust property or any part thereof, or any beneficiary
under a subordinate deed of trust or any other person having a
subordinate lien or encumbrance of record thereon, at any time within
the period specified in subdivision (e), if the power of sale
therein is to be exercised, or, otherwise at any time prior to entry
of the decree of foreclosure, may pay to the beneficiary or the
mortgagee or their successors in interest, respectively, the entire
amount due, at the time payment is tendered, with respect to (A) all
amounts of principal, interest, taxes, assessments, insurance
premiums, or advances actually known by the beneficiary to be, and
that are, in default and shown in the notice of default, under the
terms of the deed of trust or mortgage and the obligation secured
thereby, (B) all amounts in default on recurring obligations not
shown in the notice of default, and (C) all reasonable costs and
expenses, subject to subdivision (c), which are actually incurred in
enforcing the terms of the obligation, deed of trust, or mortgage,
and trustee’s or attorney’s fees, subject to subdivision (d), other
than the portion of principal as would not then be due had no default
occurred, and thereby cure the default theretofore existing, and
thereupon, all proceedings theretofore had or instituted shall be
dismissed or discontinued and the obligation and deed of trust or
mortgage shall be reinstated and shall be and remain in force and
effect, the same as if the acceleration had not occurred.  This
section does not apply to bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations or made by a public utility subject to the Public
Utilities Code.  For the purposes of this subdivision, the term
“recurring obligation” means all amounts of principal and interest on
the loan, or rents, subject to the deed of trust or mortgage in
default due after the notice of default is recorded; all amounts of
principal and interest or rents advanced on senior liens or
leaseholds which are advanced after the recordation of the notice of
default; and payments of taxes, assessments, and hazard insurance
advanced after recordation of the notice of default.  Where the
beneficiary or mortgagee has made no advances on defaults which would
constitute recurring obligations, the beneficiary or mortgagee may
require the trustor or mortgagor to provide reliable written evidence
that the amounts have been paid prior to reinstatement.
(2) If the trustor, mortgagor, or other person authorized to cure
the default pursuant to this subdivision does cure the default, the
beneficiary or mortgagee or the agent for the beneficiary or
mortgagee shall, within 21 days following the reinstatement, execute
and deliver to the trustee a notice of rescission which rescinds the
declaration of default and demand for sale and advises the trustee of
the date of reinstatement.  The trustee shall cause the notice of
rescission to be recorded within 30 days of receipt of the notice of
rescission and of all allowable fees and costs.
No charge, except for the recording fee, shall be made against the
trustor or mortgagor for the execution and recordation of the notice
which rescinds the declaration of default and demand for sale.
(b) (1) The notice, of any default described in this section,
recorded pursuant to Section 2924, and mailed to any person pursuant
to Section 2924b, shall begin with the following statement, printed
or typed thereon:
“IMPORTANT NOTICE (14-point boldface type if printed or in
capital letters if typed)

IF YOUR PROPERTY IS IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR
PAYMENTS, IT MAY BE SOLD WITHOUT ANY COURT ACTION, (14-point boldface
type if printed or in capital letters if typed) and you may have the
legal right to bring your account in good standing by paying all of
your past due payments plus permitted costs and expenses within the
time permitted by law for reinstatement of your account, which is
normally five business days prior to the date set for the sale of
your property.  No sale date may be set until three months from the
date this notice of default may be recorded (which date of
recordation appears on this notice).

This amount is ___________________ as of ______________________
(Date)
and will increase until your account becomes current.

While your property is in foreclosure, you still must pay other
obligations (such as insurance and taxes) required by your note and
deed of trust or mortgage.  If you fail to make future payments on
the loan, pay taxes on the property, provide insurance on the
property, or pay other obligations as required in the note and deed
of trust or mortgage, the beneficiary or mortgagee may insist that
you do so in order to reinstate your account in good standing.  In
addition, the beneficiary or mortgagee may require as a condition to
reinstatement that you provide reliable written evidence that you
paid all senior liens, property taxes, and hazard insurance premiums.

Upon your written request, the beneficiary or mortgagee will give
you a written itemization of the entire amount you must pay.  You may
not have to pay the entire unpaid portion of your account, even
though full payment was demanded, but you must pay all amounts in
default at the time payment is made.  However, you and your
beneficiary or mortgagee may mutually agree in writing prior to the
time the notice of sale is posted (which may not be earlier than the
end of the three-month period stated above) to, among other things,
(1) provide additional time in which to cure the default by transfer
of the property or otherwise; or (2) establish a schedule of payments
in order to cure your default; or both (1) and (2).
Following the expiration of the time period referred to in the
first paragraph of this notice, unless the obligation being
foreclosed upon or a separate written agreement between you and your
creditor permits a longer period, you have only the legal right to
stop the sale of your property by paying the entire amount demanded
by your creditor.
To find out the amount you must pay, or to arrange for payment to
stop the foreclosure, or if your property is in foreclosure for any
other reason, contact:

______________________________________
(Name of beneficiary or mortgagee)

______________________________________
(Mailing address)

______________________________________
(Telephone)

If you have any questions, you should contact a lawyer or the
governmental agency which may have insured your loan.
Notwithstanding the fact that your property is in foreclosure, you
may offer your property for sale, provided the sale is concluded
prior to the conclusion of the foreclosure.
Remember, YOU MAY LOSE LEGAL RIGHTS IF YOU DO NOT TAKE PROMPT
ACTION.  (14-point boldface type if printed or in capital letters if
typed)”

Unless otherwise specified, the notice, if printed, shall appear
in at least 12-point boldface type.
If the obligation secured by the deed of trust or mortgage is a
contract or agreement described in paragraph (1) or (4) of
subdivision (a) of Section 1632, the notice required herein shall be
in Spanish if the trustor requested a Spanish language translation of
the contract or agreement pursuant to Section 1632.  If the
obligation secured by the deed of trust or mortgage is contained in a
home improvement contract, as defined in Sections 7151.2 and 7159 of
the Business and Professions Code, which is subject to Title 2
(commencing with Section 1801), the seller shall specify on the
contract whether or not the contract was principally negotiated in
Spanish and if the contract was principally negotiated in Spanish,
the notice required herein shall be in Spanish.  No assignee of the
contract or person authorized to record the notice of default shall
incur any obligation or liability for failing to mail a notice in
Spanish unless Spanish is specified in the contract or the assignee
or person has actual knowledge that the secured obligation was
principally negotiated in Spanish.  Unless specified in writing to
the contrary, a copy of the notice required by subdivision (c) of
Section 2924b shall be in English.
(2) Any failure to comply with the provisions of this subdivision
shall not affect the validity of a sale in favor of a bona fide
purchaser or the rights of an encumbrancer for value and without
notice.
(c) Costs and expenses which may be charged pursuant to Sections
2924 to 2924i, inclusive, shall be limited to the costs incurred for
recording, mailing, including certified and express mail charges,
publishing, and posting notices required by Sections 2924 to 2924i,
inclusive, postponement pursuant to Section 2924g not to exceed fifty
dollars ($50) per postponement and a fee for a trustee’s sale
guarantee or, in the event of judicial foreclosure, a litigation
guarantee.  For purposes of this subdivision, a trustee or
beneficiary may purchase a trustee’s sale guarantee at a rate meeting
the standards contained in Sections 12401.1 and 12401.3 of the
Insurance Code.
(d) Trustee’s or attorney’s fees which may be charged pursuant to
subdivision (a), or until the notice of sale is deposited in the mail
to the trustor as provided in Section 2924b, if the sale is by power
of sale contained in the deed of trust or mortgage, or, otherwise at
any time prior to the decree of foreclosure, are hereby authorized
to be in a base amount that does not exceed three hundred dollars
($300) if the unpaid principal sum secured is one hundred fifty
thousand dollars ($150,000) or less, or two hundred fifty dollars
($250) if the unpaid principal sum secured exceeds one hundred fifty
thousand dollars ($150,000), plus one-half of 1 percent of the unpaid
principal sum secured exceeding fifty thousand dollars ($50,000) up
to and including one hundred fifty thousand dollars ($150,000), plus
one-quarter of 1 percent of any portion of the unpaid principal sum
secured exceeding one hundred fifty thousand dollars ($150,000) up to
and including five hundred thousand dollars ($500,000), plus
one-eighth of 1 percent of any portion of the unpaid principal sum
secured exceeding five hundred thousand dollars ($500,000).  Any
charge for trustee’s or attorney’s fees authorized by this
subdivision shall be conclusively presumed to be lawful and valid
where the charge does not exceed the amounts authorized herein.  For
purposes of this subdivision, the unpaid principal sum secured shall
be determined as of the date the notice of default is recorded.
(e) Reinstatement of a monetary default under the terms of an
obligation secured by a deed of trust, or mortgage may be made at any
time within the period commencing with the date of recordation of
the notice of default until five business days prior to the date of
sale set forth in the initial recorded notice of sale.
In the event the sale does not take place on the date set forth in
the initial recorded notice of sale or a subsequent recorded notice
of sale is required to be given, the right of reinstatement shall be
revived as of the date of recordation of the subsequent notice of
sale, and shall continue from that date until five business days
prior to the date of sale set forth in the subsequently recorded
notice of sale.
In the event the date of sale is postponed on the date of sale set
forth in either an initial or any subsequent notice of sale, or is
postponed on the date declared for sale at an immediately preceding
postponement of sale, and, the postponement is for a period which
exceeds five business days from the date set forth in the notice of
sale, or declared at the time of postponement, then the right of
reinstatement is revived as of the date of postponement and shall
continue from that date until five business days prior to the date of
sale declared at the time of the postponement.
Nothing contained herein shall give rise to a right of
reinstatement during the period of five business days prior to the
date of sale, whether the date of sale is noticed in a notice of sale
or declared at a postponement of sale.
Pursuant to the terms of this subdivision, no beneficiary,
trustee, mortgagee, or their agents or successors shall be liable in
any manner to a trustor, mortgagor, their agents or successors or any
beneficiary under a subordinate deed of trust or mortgage or any
other person having a subordinate lien or encumbrance of record
thereon for the failure to allow a reinstatement of the obligation
secured by a deed of trust or mortgage during the period of five
business days prior to the sale of the security property, and no such
right of reinstatement during this period is created by this
section.  Any right of reinstatement created by this section is
terminated five business days prior to the date of sale set forth in
the initial date of sale, and is revived only as prescribed herein
and only as of the date set forth herein.
As used in this subdivision, the term “business day” has the same
meaning as specified in Section 9.

2924d.  (a) Commencing with the date that the notice of sale is
deposited in the mail, as provided in Section 2924b, and until the
property is sold pursuant to the power of sale contained in the
mortgage or deed of trust, a beneficiary, trustee, mortgagee, or his
or her agent or successor in interest, may demand and receive from a
trustor, mortgagor, or his or her agent or successor in interest, or
any beneficiary under a subordinate deed of trust, or any other
person having a subordinate lien or encumbrance of record those
reasonable costs and expenses, to the extent allowed by subdivision
(c) of Section 2924c, which are actually incurred in enforcing the
terms of the obligation and trustee’s or attorney’s fees which are
hereby authorized to be in a base amount which does not exceed four
hundred twenty-five dollars ($425) if the unpaid principal sum
secured is one hundred fifty thousand dollars ($150,000) or less, or
three hundred sixty dollars ($360) if the unpaid principal sum
secured exceeds one hundred fifty thousand dollars ($150,000), plus 1
percent of any portion of the unpaid principal sum secured exceeding
fifty thousand dollars ($50,000) up to and including one hundred
fifty thousand dollars ($150,000), plus one-half of 1 percent of any
portion of the unpaid principal sum secured exceeding one hundred
fifty thousand dollars ($150,000) up to and including five hundred
thousand dollars ($500,000), plus one-quarter of 1 percent of any
portion of the unpaid principal sum secured exceeding five hundred
thousand dollars ($500,000).  For purposes of this subdivision, the
unpaid principal sum secured shall be determined as of the date the
notice of default is recorded.  Any charge for trustee’s or attorney’
s fees authorized by this subdivision shall be conclusively presumed
to be lawful and valid where that charge does not exceed the amounts
authorized herein.  Any charge for trustee’s or attorney’s fees made
pursuant to this subdivision shall be in lieu of and not in addition
to those charges authorized by subdivision (d) of Section 2924c.
(b) Upon the sale of property pursuant to a power of sale, a
trustee, or his or her agent or successor in interest, may demand and
receive from a beneficiary, or his or her agent or successor in
interest, or may deduct from the proceeds of the sale, those
reasonable costs and expenses, to the extent allowed by subdivision
(c) of Section 2924c, which are actually incurred in enforcing the
terms of the obligation and trustee’s or attorney’s fees which are
hereby authorized to be in an amount which does not exceed four
hundred twenty-five dollars ($425) or one percent of the unpaid
principal sum secured, whichever is greater.  For purposes of this
subdivision, the unpaid principal sum secured shall be determined as
of the date the notice of default is recorded.  Any charge for
trustee’s or attorney’s fees authorized by this subdivision shall be
conclusively presumed to be lawful and valid where that charge does
not exceed the amount authorized herein.  Any charges for trustee’s
or attorney’s fees made pursuant to this subdivision shall be in lieu
of and not in addition to those charges authorized by subdivision
(a) of this section and subdivision (d) of Section 2924c.
(c) (1) No person shall pay or offer to pay or collect any rebate
or kickback for the referral of business involving the performance of
any act required by this article.
(2) Any person who violates this subdivision shall be liable to
the trustor for three times the amount of any rebate or kickback,
plus reasonable attorney’s fees and costs, in addition to any other
remedies provided by law.
(3) No violation of this subdivision shall affect the validity of
a sale in favor of a bona fide purchaser or the rights of an
encumbrancer for value without notice.
(d) It shall not be unlawful for a trustee to pay or offer to pay
a fee to an agent or subagent of the trustee for work performed by
the agent or subagent in discharging the trustee’s obligations under
the terms of the deed of trust.  Any payment of a fee by a trustee to
an agent or subagent of the trustee for work performed by the agent
or subagent in discharging the trustee’s obligations under the terms
of the deed of trust shall be conclusively presumed to be lawful and
valid if the fee, when combined with other fees of the trustee, does
not exceed in the aggregate the trustee’s fee authorized by
subdivision (d) of Section 2924c or subdivision (a) or (b) of this
section.
(e) When a court issues a decree of foreclosure, it shall have
discretion to award attorney’s fees, costs, and expenses as are
reasonable, if provided for in the note, deed of trust, or mortgage,
pursuant to Section 580c of the Code of Civil Procedure.

2924e.  (a) The beneficiary or mortgagee of any deed of trust or
mortgage on real property either containing one to four residential
units or given to secure an original obligation not to exceed three
hundred thousand dollars ($300,000) may, with the written consent of
the trustor or mortgagor that is either effected through a signed and
dated agreement which shall be separate from other loan and security
documents or disclosed to the trustor or mortgagor in at least
10-point type, submit a written request by certified mail to the
beneficiary or mortgagee of any lien which is senior to the lien of
the requester, for written notice of any or all delinquencies of four
months or more, in payments of principal or interest on any
obligation secured by that senior lien notwithstanding that the loan
secured by the lien of the requester is not then in default as to
payments of principal or interest.
The request shall be sent to the beneficiary or mortgagee, or
agent which it might designate for the purpose of receiving loan
payments, at the address specified for the receipt of these payments,
if known, or, if not known, at the address shown on the recorded
deed of trust or mortgage.
(b) The request for notice shall identify the ownership or
security interest of the requester, the date on which the interest of
the requester will terminate as evidenced by the maturity date of
the note of the trustor or mortgagor in favor of the requester, the
name of the trustor or mortgagor and the name of the current owner of
the security property if different from the trustor or mortgagor,
the street address or other description of the security property, the
loan number (if available to the requester) of the loan secured by
the senior lien, the name and address to which notice is to be sent,
and shall include or be accompanied by the signed written consent of
the trustor or mortgagor, and a fee of forty dollars ($40).  For
obligations secured by residential properties, the request shall
remain valid until withdrawn in writing and shall be applicable to
all delinquencies as provided in this section, which occur prior to
the date on which the interest of the requester will terminate as
specified in the request or the expiration date, as appropriate.  For
obligations secured by nonresidential properties, the request shall
remain valid until withdrawn in writing and shall be applicable to
all delinquencies as provided in this section, which occur prior to
the date on which the interest of the requester will terminate as
specified in the request or the expiration date, as appropriate.  The
beneficiary or mortgagee of obligations secured by nonresidential
properties that have sent five or more notices prior to the
expiration of the effective period of the request may charge a fee up
to fifteen dollars ($15) for each subsequent notice. A request for
notice shall be effective for five years from the mailing of the
request or the recording of that request, whichever occurs later, and
may be renewed within six months prior to its expiration date by
sending the beneficiary or mortgagee, or agent, as the case may be,
at the address to which original requests for notice are to be sent,
a copy of the earlier request for notice together with a signed
statement that the request is renewed and a renewal fee of fifteen
dollars ($15).  Upon timely submittal of a renewal request for
notice, the effectiveness of the original request is continued for
five years from the time when it would otherwise have lapsed.
Succeeding renewal requests may be submitted in the same manner.  The
request for notice and renewals thereof shall be recorded in the
office of the county recorder of the county in which the security
real property is situated.  The rights and obligations specified in
this section shall inure to the benefit of, or pass to, as the case
may be, successors in interest of parties specified in this section.
Any successor in interest of a party entitled to notice under this
section shall file a request for that notice with any beneficiary or
mortgagee of the senior lien and shall pay a processing fee of
fifteen dollars ($15).  No new written consent shall be required from
the trustor or mortgagor.
(c) Unless the delinquency has been cured, within 15 days
following the end of four months from any delinquency in payments of
principal or interest on any obligation secured by the senior lien
which delinquency exists or occurs on or after 10 days from the
mailing of the request for notice or the recording of that request,
whichever occurs later, the beneficiary or mortgagee shall give
written notice to the requester of the fact of any delinquency and
the amount thereof.
The notice shall be given by personal service, or by deposit in
the mail, first-class postage paid.  Following the recording of any
notice of default pursuant to Section 2924 with respect to the same
delinquency, no notice or further notice shall be required pursuant
to this section.
(d) If the beneficiary or mortgagee of any such senior lien fails
to give notice to the requester as required in subdivision (c), and a
subsequent foreclosure or trustee’s sale of the security property
occurs, the beneficiary or mortgagee shall be liable to the requester
for any monetary damage due to the failure to provide notice within
the time period specified in subdivision (c) which the requester has
sustained from the date on which notice should have been given to the
earlier of the date on which the notice is given or the date of the
recording of the notice of default under Section 2924, and shall also
forfeit to the requester the sum of three hundred dollars ($300).  A
showing by the beneficiary or mortgagee by a preponderance of the
evidence that the failure to provide timely notice as required by
subdivision (c) resulted from a bona fide error notwithstanding the
maintenance of procedures reasonably adapted to avoid any such error
shall be a defense to any liability for that failure.
(e) If any beneficiary or mortgagee, or agent which it had
designated for the purpose of receiving loan payments, has been
succeeded in interest by any other person, any request for notice
received pursuant to this section shall be transmitted promptly to
that person.
(f) Any failure to comply with the provisions of this section
shall not affect the validity of a sale in favor of a bona fide
purchaser or the rights of an encumbrancer for value and without
notice.
(g) Upon satisfaction of an obligation secured by a junior lien
with respect to which a notice request was made pursuant to this
section, the beneficiary or mortgagee that made the request shall
communicate that fact in writing to the senior lienholder to whom the
request was made.  The communication shall specify that provision of
notice pursuant to the prior request under this section is no longer
required.

2924f.  (a) As used in this section and Sections 2924g and 2924h,
“property” means real property or a leasehold estate therein, and
“calendar week” means Monday through Saturday, inclusive.
(b) (1) Except as provided in subdivision (c), before any sale of
property can be made under the power of sale contained in any deed of
trust or mortgage, or any resale resulting from a rescission for a
failure of consideration pursuant to subdivision (c) of Section
2924h, notice of the sale thereof shall be given by posting a written
notice of the time of sale and of the street address and the
specific place at the street address where the sale will be held, and
describing the property to be sold, at least 20 days before the date
of sale in one public place in the city where the property is to be
sold, if the property is to be sold in a city, or, if not, then in
one public place in the judicial district in which the property is to
be sold, and publishing a copy once a week for three consecutive
calendar weeks, the first publication to be at least 20 days before
the date of sale, in a newspaper of general circulation published in
the city in which the property or some part thereof is situated, if
any part thereof is situated in a city, if not, then in a newspaper
of general circulation published in the judicial district in which
the property or some part thereof is situated, or in case no
newspaper of general circulation is published in the city or judicial
district, as the case may be, in a newspaper of general circulation
published in the county in which the property or some part thereof is
situated, or in case no newspaper of general circulation is
published in the city or judicial district or county, as the case may
be, in a newspaper of general circulation published in the county in
this state that (A) is contiguous to the county in which the
property or some part thereof is situated and (B) has, by comparison
with all similarly contiguous counties, the highest population based
upon total county population as determined by the most recent federal
decennial census published by the Bureau of the Census.  A copy of
the notice of sale shall also be posted in a conspicuous place on the
property to be sold at least 20 days before the date of sale, where
possible and where not restricted for any reason.  If the property is
a single-family residence the posting shall be on a door of the
residence, but, if not possible or restricted, then the notice shall
be posted in a conspicuous place on the property; however, if access
is denied because a common entrance to the property is restricted by
a guard gate or similar impediment, the property may be posted at
that guard gate or similar impediment to any development community.
Additionally, the notice of sale shall conform to the minimum
requirements of Section 6043 of the Government Code and be recorded
with the county recorder of the county in which the property or some
part thereof is situated at least 14 days prior to the date of sale.
The notice of sale shall contain the name, street address in this
state, which may reflect an agent of the trustee, and either a
toll-free telephone number or telephone number in this state of the
trustee, and the name of the original trustor, and also shall contain
the statement required by paragraph (3) of subdivision (c).  In
addition to any other description of the property, the notice shall
describe the property by giving its street address, if any, or other
common designation, if any, and a county assessor’s parcel number;
but if the property has no street address or other common
designation, the notice shall contain a legal description of the
property, the name and address of the beneficiary at whose request
the sale is to be conducted, and a statement that directions may be
obtained pursuant to a written request submitted to the beneficiary
within 10 days from the first publication of the notice.  Directions
shall be deemed reasonably sufficient to locate the property if
information as to the location of the property is given by reference
to the direction and approximate distance from the nearest
crossroads, frontage road, or access road.  If a legal description or
a county assessor’s parcel number and either a street address or
another common designation of the property is given, the validity of
the notice and the validity of the sale shall not be affected by the
fact that the street address, other common designation, name and
address of the beneficiary, or the directions obtained therefrom are
erroneous or that the street address, other common designation, name
and address of the beneficiary, or directions obtained therefrom are
omitted.  The term “newspaper of general circulation,” as used in
this section, has the same meaning as defined in Article 1
(commencing with Section 6000) of Chapter 1 of Division 7 of Title 1
of the Government Code.
The notice of sale shall contain a statement of the total amount
of the unpaid balance of the obligation secured by the property to be
sold and reasonably estimated costs, expenses, advances at the time
of the initial publication of the notice of sale, and, if republished
pursuant to a cancellation of a cash equivalent pursuant to
subdivision (d) of Section 2924h, a reference of that fact; provided,
that the trustee shall incur no liability for any good faith error
in stating the proper amount, including any amount provided in good
faith by or on behalf of the beneficiary.  An inaccurate statement of
this amount shall not affect the validity of any sale to a bona fide
purchaser for value, nor shall the failure to post the notice of
sale on a door as provided by this subdivision affect the validity of
any sale to a bona fide purchaser for value.
(2) If the sale of the property is to be a unified sale as
provided in subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code, the notice of sale shall also
contain a description of the personal property or fixtures to be
sold.  In the case where it is contemplated that all of the personal
property or fixtures are to be sold, the description in the notice of
the personal property or fixtures shall be sufficient if it is the
same as the description of the personal property or fixtures
contained in the agreement creating the security interest in or
encumbrance on the personal property or fixtures or the filed
financing statement relating to the personal property or fixtures.
In all other cases, the description in the notice shall be sufficient
if it would be a sufficient description of the personal property or
fixtures under Section 9108 of the Commercial Code.  Inclusion of a
reference to or a description of personal property or fixtures in a
notice of sale hereunder shall not constitute an election by the
secured party to conduct a unified sale pursuant to subparagraph (B)
of paragraph (1) of subdivision (a) of Section 9604 of the Commercial
Code, shall not obligate the secured party to conduct a unified sale
pursuant to subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code, and in no way shall render
defective or noncomplying either that notice or a sale pursuant to
that notice by reason of the fact that the sale includes none or less
than all of the personal property or fixtures referred to or
described in the notice.  This paragraph shall not otherwise affect
the obligations or duties of a secured party under the Commercial
Code.
(c) (1) This subdivision applies only to deeds of trust or
mortgages which contain a power of sale and which are secured by real
property containing a single-family, owner-occupied residence, where
the obligation secured by the deed of trust or mortgage is contained
in a contract for goods or services subject to the provisions of the
Unruh Act (Chapter 1 (commencing with Section 1801) of Title 2 of
Part 4 of Division 3).
(2) Except as otherwise expressly set forth in this subdivision,
all other provisions of law relating to the exercise of a power of
sale shall govern the exercise of a power of sale contained in a deed
of trust or mortgage described in paragraph (1).
(3) If any default of the obligation secured by a deed of trust or
mortgage described in paragraph (1) has not been cured within 30
days after the recordation of the notice of default, the trustee or
mortgagee shall mail to the trustor or mortgagor, at his or her last
known address, a copy of the following statement:

YOU ARE IN DEFAULT UNDER A
___________________________________________________,
(Deed of trust or mortgage)
DATED ______.  UNLESS YOU TAKE ACTION TO PROTECT
YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE.
IF YOU NEED AN EXPLANATION OF THE NATURE OF THE
PROCEEDING AGAINST YOU, YOU SHOULD CONTACT A LAWYER.

(4) All sales of real property pursuant to a power of sale
contained in any deed of trust or mortgage described in paragraph (1)
shall be held in the county where the residence is located and shall
be made to the person making the highest offer.  The trustee may
receive offers during the 10-day period immediately prior to the date
of sale and if any offer is accepted in writing by both the trustor
or mortgagor and the beneficiary or mortgagee prior to the time set
for sale, the sale shall be postponed to a date certain and prior to
which the property may be conveyed by the trustor to the person
making the offer according to its terms.  The offer is revocable
until accepted.  The performance of the offer, following acceptance,
according to its terms, by a conveyance of the property to the
offeror, shall operate to terminate any further proceeding under the
notice of sale and it shall be deemed revoked.
(5) In addition to the trustee fee pursuant to Section 2924c, the
trustee or mortgagee pursuant to a deed of trust or mortgage subject
to this subdivision shall be entitled to charge an additional fee of
fifty dollars ($50).
(6) This subdivision applies only to property on which notices of
default were filed on or after the effective date of this
subdivision.

2924g.  (a) All sales of property under the power of sale contained
in any deed of trust or mortgage shall be held in the county where
the property or some part thereof is situated, and shall be made at
auction, to the highest bidder, between the hours of 9 a.m. and 5
p.m. on any business day, Monday through Friday.
The sale shall commence at the time and location specified in the
notice of sale. Any postponement shall be announced at the time and
location specified in the notice of sale for commencement of the sale
or pursuant to paragraph (1) of subdivision (c).
If the sale of more than one parcel of real property has been
scheduled for the same time and location by the same trustee, (1) any
postponement of any of the sales shall be announced at the time
published in the notice of sale, (2) the first sale shall commence at
the time published in the notice of sale or immediately after the
announcement of any postponement, and (3) each subsequent sale shall
take place as soon as possible after the preceding sale has been
completed.
(b) When the property consists of several known lots or parcels,
they shall be sold separately unless the deed of trust or mortgage
provides otherwise. When a portion of the property is claimed by a
third person, who requires it to be sold separately, the portion
subject to the claim may be thus sold. The trustor, if present at the
sale, may also, unless the deed of trust or mortgage otherwise
provides, direct the order in which property shall be sold, when the
property consists of several known lots or parcels which may be sold
to advantage separately, and the trustee shall follow that direction.
After sufficient property has been sold to satisfy the indebtedness,
no more can be sold.
If the property under power of sale is in two or more counties,
the public auction sale of all of the property under the power of
sale may take place in any one of the counties where the property or
a portion thereof is located.
(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.
(2) In the event that the sale proceedings are postponed for a
period or periods totaling more than 365 days, the scheduling of any
further sale proceedings shall be preceded by giving a new notice of
sale in the manner prescribed in Section 2924f. New fees incurred for
the new notice of sale shall not exceed the amounts specified in
Sections 2924c and 2924d, and shall not exceed reasonable costs that
are necessary to comply with this paragraph.
(d) The notice of each postponement and the reason therefor shall
be given by public declaration by the trustee at the time and place
last appointed for sale. A public declaration of postponement shall
also set forth the new date, time, and place of sale and the place of
sale shall be the same place as originally fixed by the trustee for
the sale.  No other notice of postponement need be given. However,
the sale shall be conducted no sooner than on the seventh day after
the earlier of (1) dismissal of the action or (2) expiration or
termination of the injunction, restraining order, or stay that
required postponement of the sale, whether by entry of an order by a
court of competent jurisdiction, operation of law, or otherwise,
unless the injunction, restraining order, or subsequent order
expressly directs the conduct of the sale within that seven-day
period. For purposes of this subdivision, the seven-day period shall
not include the day on which the action is dismissed, or the day on
which the injunction, restraining order, or stay expires or is
terminated. If the sale had been scheduled to occur, but this
subdivision precludes its conduct during that seven-day period, a new
notice of postponement shall be given if the sale had been scheduled
to occur during that seven-day period. The trustee shall maintain
records of each postponement and the reason therefor.
(e) Notwithstanding the time periods established under subdivision
(d), if postponement of a sale is based on a stay imposed by Title
11 of the United States Code (bankruptcy), the sale shall be
conducted no sooner than the expiration of the stay imposed by that
title and the seven-day provision of subdivision (d) shall not apply.

2924h.  (a) Each and every bid made by a bidder at a trustee’s sale
under a power of sale contained in a deed of trust or mortgage shall
be deemed to be an irrevocable offer by that bidder to purchase the
property being sold by the trustee under the power of sale for the
amount of the bid.  Any second or subsequent bid by the same bidder
or any other bidder for a higher amount shall be a cancellation of
the prior bid.
(b) At the trustee’s sale the trustee shall have the right (1) to
require every bidder to show evidence of the bidder’s ability to
deposit with the trustee the full amount of his or her final bid in
cash, a cashier’s check drawn on a state or national bank, a check
drawn by a state or federal credit union, or a check drawn by a state
or federal savings and loan association, savings association, or
savings bank specified in Section 5102 of the Financial Code and
authorized to do business in this state, or a cash equivalent which
has been designated in the notice of sale as acceptable to the
trustee prior to, and as a condition to, the recognizing of the bid,
and to conditionally accept and hold these amounts for the duration
of the sale, and (2) to require the last and highest bidder to
deposit, if not deposited previously, the full amount of the bidder’s
final bid in cash, a cashier’s check drawn on a state or national
bank, a check drawn by a state or federal credit union, or a check
drawn by a state or federal savings and loan association, savings
association, or savings bank specified in Section 5102 of the
Financial Code and authorized to do business in this state, or a cash
equivalent which has been designated in the notice of sale as
acceptable to the trustee, immediately prior to the completion of the
sale, the completion of the sale being so announced by the fall of
the hammer or in  another customary manner.  The present beneficiary
of the deed of trust under foreclosure shall have the right to offset
his or her bid or bids only to the extent of the total amount due
the beneficiary including the trustee’s fees and expenses.
(c) In the event the trustee accepts a check drawn by a credit
union or a savings and loan association pursuant to this subdivision
or a cash equivalent designated in the notice of sale, the trustee
may withhold the issuance of the trustee’s deed to the successful
bidder submitting the check drawn by a state or federal credit union
or savings and loan association or the cash equivalent until funds
become available to the payee or endorsee as a matter of right.
For the purposes of this subdivision, the trustee’s sale shall be
deemed final upon the acceptance of the last and highest bid, and
shall be deemed perfected as of 8 a.m. on the actual date of sale if
the trustee’s deed is recorded within 15 calendar days after the
sale, or the next business day following the 15th day if the county
recorder in which the property is located is closed on the 15th day.
However, the sale is subject to an automatic rescission for a
failure of consideration in the event the funds are not “available
for withdrawal” as defined in Section 12413.1 of the Insurance Code.
The trustee shall send a notice of rescission for a failure of
consideration to the last and highest bidder submitting the check or
alternative instrument, if the address of the last and highest bidder
is known to the trustee.
If a sale results in an automatic right of rescission for failure
of consideration pursuant to this subdivision, the interest of any
lienholder shall be reinstated in the same priority as if the
previous sale had not occurred.
(d) If the trustee has not required the last and highest bidder to
deposit the cash, a cashier’s check drawn on a state or national
bank, a check drawn by a state or federal credit union, or a check
drawn by a state or federal savings and loan association, savings
association, or savings bank specified in Section 5102 of the
Financial Code and authorized to do business in this state, or a cash
equivalent which has been designated in the notice of sale as
acceptable to the trustee in the manner set forth in paragraph (2) of
subdivision (b), the trustee shall complete the sale.  If the last
and highest bidder then fails to deliver to the trustee, when
demanded, the amount of his or her final bid in cash, a cashier’s
check drawn on a state or national bank, a check drawn by a state or
federal credit union, or a check drawn by a state or federal savings
and loan association, savings association, or savings bank specified
in Section 5102 of the Financial Code and authorized to do business
in this state, or a cash equivalent which has been designated in the
notice of sale as acceptable to the trustee, that bidder shall be
liable to the trustee for all damages which the trustee may sustain
by the refusal to deliver to the trustee the amount of the final bid,
including any court costs and reasonable attorneys’ fees.
If the last and highest bidder willfully fails to deliver to the
trustee the amount of his or her final bid in cash, a cashier’s check
drawn on a state or national bank, a check drawn by a state or
federal credit union, or a check drawn by a state or federal savings
and loan association, savings association, or savings bank specified
in Section 5102 of the Financial Code and authorized to do business
in this state, or a cash equivalent which has been designated in the
notice of sale as acceptable to the trustee, or if the last and
highest bidder cancels a cashiers check drawn on a state or national
bank, a check drawn by a state or federal credit union, or a check
drawn by a state or federal savings and loan association, savings
association, or savings bank specified in Section 5102 of the
Financial Code and authorized to do business in this state, or a cash
equivalent that has been designated in the notice of sale as
acceptable to the trustee, that bidder shall be guilty of a
misdemeanor punishable by a fine of not more than two thousand five
hundred dollars ($2,500).
In the event the last and highest bidder cancels an instrument
submitted to the trustee as a cash equivalent, the trustee shall
provide a new notice of sale in the manner set forth in Section 2924f
and shall be entitled to recover the costs of the new notice of sale
as provided in Section 2924c.
(e) Any postponement or discontinuance of the sale proceedings
shall be a cancellation of the last bid.
(f) In the event that this section conflicts with any other
statute, then this section shall prevail.
(g) It shall be unlawful for any person, acting alone or in
concert with others, (1) to offer to accept or accept from another,
any consideration of any type not to bid, or (2) to fix or restrain
bidding in any manner, at a sale of property conducted pursuant to a
power of sale in a deed of trust or mortgage.  However, it shall not
be unlawful for any person, including a trustee, to state that a
property subject to a recorded notice of default or subject to a sale
conducted pursuant to this chapter is being sold in an “as-is”
condition.
In addition to any other remedies, any person committing any act
declared unlawful by this subdivision or any act which would operate
as a fraud or deceit upon any beneficiary, trustor, or junior lienor
shall, upon conviction, be fined not more than ten thousand dollars
($10,000) or imprisoned in the county jail for not more than one
year, or be punished by both that fine and imprisonment.

2924i.  (a) This section applies to loans secured by a deed of trust
or mortgage on real property containing one to four residential
units at least one of which at the time the loan is made is or is to
be occupied by the borrower if the loan is for a period in excess of
one year and is a balloon payment loan.
(b) This section shall not apply to (1) open end credit as defined
in Regulation Z, whether or not the transaction is otherwise subject
to Regulation Z, (2) transactions subject to Section 2956, or (3)
loans made for the principal purpose of financing the construction of
one or more residential units.
(c) At least 90 days but not more than 150 days prior to the due
date of the final payment on a loan that is subject to this section,
the holder of the loan shall deliver or mail by first-class mail,
with a certificate of mailing obtained from the United States Postal
Service, to the trustor, or his or her successor in interest, at the
last known address of that person, a written notice which shall
include all of the following:
(1) A statement of the name and address of the person to whom the
final payment is required to be paid.
(2) The date on or before which the final payment is required to
be paid.
(3) The amount of the final payment, or if the exact amount is
unknown, a good faith estimate of the amount thereof, including
unpaid principal, interest and any other charges, such amount to be
determined assuming timely payment in full of all scheduled
installments coming due between the date the notice is prepared and
the date when the final payment is due.
(4) If the borrower has a contractual right to refinance the final
payment, a statement to that effect.
If the due date of the final payment of a loan subject to this
section is extended prior to the time notice is otherwise required
under this subdivision, this notice requirement shall apply only to
the due date as extended (or as subsequently extended).
(d) For purposes of this section:
(1) A “balloon payment loan” is a loan which provides for a final
payment as originally scheduled which is more than twice the amount
of any of the immediately preceding six regularly scheduled payments
or which contains a call provision; provided, however, that if the
call provision is not exercised by the holder of the loan, the
existence of the unexercised call provision shall not cause the loan
to be deemed to be a balloon payment loan.
(2) “Call provision” means a loan contract term that provides the
holder of the loan with the right to call the loan due and payable
either after a specified period has elapsed following closing or
after a specified date.
(3) “Regulation Z” means any rule, regulation, or interpretation
promulgated by the Board of Governors of the Federal Reserve System
under the Federal Truth in Lending Act, as amended (15 U.S.C. Sec.
1601 et seq.), and any interpretation or approval thereof issued by
an official or employee of the Federal Reserve System duly authorized
by the board under the Truth in Lending Act, as amended, to issue
such interpretations or approvals.
(e) Failure to provide notice as required by subdivision (a) does
not extinguish any obligation of payment by the borrower, except that
the due date for any balloon payment shall be the date specified in
the balloon payment note, or 90 days from the date of delivery or
mailing of the notice required by subdivision (a), or the due date
specified in the notice required by subdivision (a), whichever date
is later.  If the operation of this section acts to extend the term
of any note, interest shall continue to accrue for the extended term
at the contract  rate and payments shall continue to be due at any
periodic interval and on any payment schedule specified in the note
and shall be credited to principal or interest under the terms of the
note.  Default in any extended periodic payment shall be considered
a default under terms of the note or security instrument.
(f) (1) The validity of any credit document or of any security
document subject to the provisions of this section shall not be
invalidated solely because of the failure of any person to comply
with this section.  However, any person who willfully violates any
provision of this section shall be liable in the amount of actual
damages suffered by the debtor as the proximate result of the
violation, and, if the debtor prevails in any suit to recover that
amount, for reasonable attorney’s fees.
(2) No person may be held liable in any action under this section
if it is shown by a preponderance of the evidence that the violation
was not intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably adopted to
avoid any such error.
(g) The provisions of this section shall apply to any note
executed on or after January 1, 1984.

2924j.  (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.

2924k.  (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.

2924l.  (a) In the event that a trustee under a deed of trust is
named in an action or proceeding in which that deed of trust is the
subject, and in the event that the trustee maintains a reasonable
belief that it has been named in the action or proceeding solely in
its capacity as trustee, and not arising out of any wrongful acts or
omissions on its part in the performance of its duties as trustee,
then, at any time, the trustee may file a declaration of nonmonetary
status.  The declaration shall be served on the parties in the manner
set forth in Chapter 5 (commencing with Section 1010) of Title 14 of
the Code of Civil Procedure.
(b) The declaration of nonmonetary status shall set forth the
status of the trustee as trustee under the deed of trust that is the
subject of the action or proceeding, that the trustee knows or
maintains a reasonable belief that it has been named as a defendant
in the proceeding solely in its capacity as a trustee under the deed
of trust, its reasonable belief that it has not been named as a
defendant due to any acts or omissions on its part in the performance
of its duties as trustee, the basis for that knowledge or reasonable
belief, and that it agrees to be bound by whatever order or judgment
is issued by the court regarding the subject deed of trust.
(c) The parties who have appeared in the action or proceeding
shall have 15 days from the service of the declaration by the trustee
in which to object to the nonmonetary judgment status of the
trustee.  Any objection shall set forth the factual basis on which
the objection is based and shall be served on the trustee.
(d) In the event that no objection is served within the 15-day
objection period, the trustee shall not be required to participate
any further in the action or proceeding, shall not be subject to any
monetary awards as and for damages, attorneys’ fees or costs, shall
be required to respond to any discovery requests as a nonparty, and
shall be bound by any court order relating to the subject deed of
trust that is the subject of the action or proceeding.
(e) In the event of a timely objection to the declaration of
nonmonetary status, the trustee shall thereafter be required to
participate in the action or proceeding.
Additionally, in the event that the parties elect not to, or fail
to, timely object to the declaration of nonmonetary status, but later
through discovery, or otherwise, determine that the trustee should
participate in the action because of the performance of its duties as
a trustee, the parties may file and serve on all parties and the
trustee a motion pursuant to Section 473 of the Code of Civil
Procedure that specifies the factual basis for the demand.   Upon the
court’s granting of the motion, the trustee shall thereafter be
required to participate in the action or proceeding, and the court
shall provide sufficient time prior to trial for the trustee to be
able to respond to the complaint, to conduct discovery, and to bring
other pretrial motions in accordance with the Code of Civil
Procedure.
(f) Upon the filing of the declaration of nonmonetary status, the
time within which the trustee is required to file an answer or other
responsive pleading shall be tolled for the period of time within
which the opposing parties may respond to the declaration.  Upon the
timely service of an objection to the declaration on nonmonetary
status, the trustee shall have 30 days from the date of service
within which to file an answer or other responsive pleading to the
complaint or cross-complaint.
(g) For purposes of this section, “trustee” includes any agent or
employee of the trustee who performs some or all of the duties of a
trustee under this article, and includes substituted trustees and
agents of the beneficiary or trustee.

2925.  The fact that a transfer was made subject to defeasance on a
condition, may, for the purpose of showing such transfer to be a
mortgage, be proved (except as against a subsequent purchaser or
incumbrancer for value and without notice), though the fact does not
appear by the terms of the instrument.

2926.  A mortgage is a lien upon everything that would pass by a
grant of the property.

2927.  A mortgage does not entitle the mortgagee to the possession
of the property, unless authorized by the express terms of the
mortgage; but after the execution of the mortgage the mortgagor may
agree to such change of possession without a new consideration.

2928.  A mortgage does not bind the mortgagor personally to perform
the act for the performance of which it is a security, unless there
is an express covenant therein to that effect.

2929.  No person whose interest is subject to the lien of a mortgage
may do any act which will substantially impair the mortgagee’s
security.

2929.3.  (a) (1) A legal owner shall maintain vacant residential
property purchased by that owner at a foreclosure sale, or acquired
by that owner through foreclosure under a mortgage or deed of trust.
A governmental entity may impose a civil fine of up to one thousand
dollars ($1,000) per day for a violation. If the governmental entity
chooses to impose a fine pursuant to this section, it shall give
notice of the alleged violation, including a description of the
conditions that gave rise to the allegation, and notice of the entity’
s intent to assess a civil fine if action to correct the violation is
not commenced within a period of not less than 14 days and completed
within a period of not less than 30 days. The notice shall be mailed
to the address provided in the deed or other instrument as specified
in subdivision (a) of Section 27321.5 of the Government Code, or, if
none, to the return address provided on the deed or other
instrument.
(2) The governmental entity shall provide a period of not less
than 30 days for the legal owner to remedy the violation prior to
imposing a civil fine and shall allow for a hearing and opportunity
to contest any fine imposed. In determining the amount of the fine,
the governmental entity shall take into consideration any timely and
good faith efforts by the legal owner to remedy the violation. The
maximum civil fine authorized by this section is one thousand dollars
($1,000) for each day that the owner fails to maintain the property,
commencing on the day following the expiration of the period to
remedy the violation established by the governmental entity.
(3) Subject to the provisions of this section, a governmental
entity may establish different compliance periods for different
conditions on the same property in the notice of alleged violation
mailed to the legal owner.
(b) For purposes of this section, “failure to maintain” means
failure to care for the exterior of the property, including, but not
limited to, permitting excessive foliage growth that diminishes the
value of surrounding properties, failing to take action to prevent
trespassers or squatters from remaining on the property, or failing
to take action to prevent mosquito larvae from growing in standing
water or other conditions that create a public nuisance.
(c) Notwithstanding subdivisions (a) and (b), a governmental
entity may provide less than 30 days’ notice to remedy a condition
before imposing a civil fine if the entity determines that a specific
condition of the property threatens public health or safety and
provided that notice of that determination and time for compliance is
given.
(d) Fines and penalties collected pursuant to this section shall
be directed to local nuisance abatement programs.
(e) A governmental entity may not impose fines on a legal owner
under both this section and a local ordinance.
(f) These provisions shall not preempt any local ordinance.
(g) This section shall only apply to residential real property.
(h) The rights and remedies provided in this section are
cumulative and in addition to any other rights and remedies provided
by law.
(i) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.

2929.5.  (a) A secured lender may enter and inspect the real
property security for the purpose of determining the existence,
location, nature, and magnitude of any past or present release or
threatened release of any hazardous substance into, onto, beneath, or
from the real property security on either of the following:
(1) Upon reasonable belief of the existence of a past or present
release or threatened release of any hazardous substance into, onto,
beneath, or from the real property security not previously disclosed
in writing to the secured lender in conjunction with the making,
renewal, or modification of a loan, extension of credit, guaranty, or
other obligation involving the borrower.
(2) After the commencement of nonjudicial or judicial foreclosure
proceedings against the real property security.
(b) The secured lender shall not abuse the right of entry and
inspection or use it to harass the borrower or tenant of the
property.  Except in case of an emergency, when the borrower or
tenant of the property has abandoned the premises, or if it is
impracticable to do so, the secured lender shall give the borrower or
tenant of the property reasonable notice of the secured lender’s
intent to enter, and enter only during the borrower’s or tenant’s
normal business hours.  Twenty-four hours’ notice shall be presumed
to be reasonable notice in the absence of evidence to the contrary.
(c) The secured lender shall reimburse the borrower for the cost
of repair of any physical injury to the real property security caused
by the entry and inspection.
(d) If a secured lender is refused the right of entry and
inspection by the borrower or tenant of the property, or is otherwise
unable to enter and inspect the property without a breach of the
peace, the secured lender may, upon petition, obtain an order from a
court of competent jurisdiction to exercise the secured lender’s
rights under subdivision (a), and that action shall not constitute an
action within the meaning of subdivision (a) of Section 726 of the
Code of Civil Procedure.
(e) For purposes of this section:
(1) “Borrower” means the trustor under a deed of trust, or a
mortgagor under a mortgage, where the deed of trust or mortgage
encumbers real property security and secures the performance of the
trustor or mortgagor under a loan, extension of credit, guaranty, or
other obligation.  The term includes any successor-in-interest of the
trustor or mortgagor to the real property security before the deed
of trust or mortgage has been discharged, reconveyed, or foreclosed
upon.
(2) “Hazardous substance”  includes all of the following:
(A) Any “hazardous substance” as defined in subdivision (h) of
Section 25281 of the Health and Safety Code.
(B) Any “waste” as defined in subdivision (d) of Section 13050 of
the Water Code.
(C) Petroleum, including crude oil or any fraction thereof,
natural gas, natural gas liquids, liquefied natural gas, or synthetic
gas usable for fuel, or any mixture thereof.
(3) “Real property security” means any real property and
improvements, other than a separate interest and any related interest
in the common area of a residential common interest development, as
the terms “separate interest,” “common area,” and “common interest
development” are defined in Section 1351, or real property consisting
of one acre or less which contains 1 to 15 dwelling units.
(4) “Release” means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the environment, including continuing
migration, of hazardous substances into, onto, or through soil,
surface water, or groundwater.
(5) “Secured lender” means the beneficiary under a deed of trust
against the real property security, or the mortgagee under a mortgage
against the real property security, and any successor-in-interest of
the beneficiary or mortgagee to the deed of trust or mortgage.

(2930.) Section Twenty-nine Hundred and Thirty.  Title acquired by
the mortgagor subsequent to the execution of the mortgage, inures to
the mortgagee as security for the debt in like manner as if acquired
before the execution.

2931.  A mortgagee may foreclose the right of redemption of the
mortgagor in the manner prescribed by the CODE OF CIVIL PROCEDURE.

2931a.  In any action brought to determine conflicting claims to
real property, or for partition of real property or an estate for
years therein, or to foreclose a deed of trust, mortgage, or other
lien upon real property, or in all eminent domain proceedings under
Section 1250.110 et seq., of the Code of Civil Procedure against real
property upon which exists a lien to secure the payment of taxes or
other obligations to an agency of the State of California, other than
ad valorem taxes upon the real property, the state agency charged
with the collection of the tax obligation may be made a party.  In
such an action, the court shall have jurisdiction to determine the
priority and effect of the liens described in the complaint in or
upon the real property or estate for years therein, but the
jurisdiction of the court in the action shall not include a
determination of the validity of the tax giving rise to the lien or
claim of lien.  The complaint or petition in the action shall contain
a description of the lien sufficient to enable the tax or other
obligation, payment of which it secures, to be identified with
certainty, and shall include the name and address of the person owing
the tax or other obligation, the name of the state agency that
recorded the lien, and the date and place where the lien was
recorded.  Services of process in the action shall be made upon the
agency, officer, board, commission, department, division, or other
body charged with the collection of the tax or obligation.  It shall
be the duty of the Attorney General to represent the state agency in
the action.

2931b.  In all actions in which the State of California is named a
party pursuant to the provisions of Section 2931a and in which real
property or an estate for years therein is sought to be sold, the
Attorney General may, with the consent of the Department of Finance,
bid upon and purchase that real property or estate for years.

2931c.  The Attorney General may bring an action in the courts of
this or any other state or of the United States to enforce any lien
to secure the payment of taxes or other obligations to the State of
California under the Unemployment Insurance Code, the Revenue and
Taxation Code, or Chapter 6 (commencing with Section 16180) of Part 1
of Division 4 of Title 2 of the Government Code or to subject to
payment of the liability giving rise to the lien any property in
which the debtor has any right, title, or interest.  In any action
brought under this section the court shall have jurisdiction to
determine the priority and effect of the lien in or upon the
property, but the jurisdiction of the court in such action shall not
extend to a determination of the validity of the liability giving
rise to the lien.

2932.  A power of sale may be conferred by a mortgage upon the
mortgagee or any other person, to be exercised after a breach of the
obligation for which the mortgage is a security.

2932.5.  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.

2932.6.  (a) Notwithstanding any other provision of law, a financial
institution may undertake to repair any property acquired through
foreclosure under a mortgage or deed of trust.
(b) As used in this section, the term “financial institution”
includes, but is not limited to, banks, savings associations, credit
unions, and industrial loan companies.
(c) The rights granted to a financial institution by this section
are in addition to, and not in derogation of, the rights of a
financial institution which otherwise exist.

2933.  A power of attorney to execute a mortgage must be in writing,
subscribed, acknowledged, or proved, certified, and recorded in like
manner as powers of attorney for grants of real property.

2934.  Any assignment of a mortgage and any assignment of the
beneficial interest under a deed of trust may be recorded, and from
the time the same is filed for record operates as constructive notice
of the contents thereof to all persons; and any instrument by which
any mortgage or deed of trust of, lien upon or interest in real
property, (or by which any mortgage of, lien upon or interest in
personal property a document evidencing or creating which is required
or permitted by law to be recorded), is subordinated or waived as to
priority may be recorded, and from the time the same is filed for
record operates as constructive notice of the contents thereof, to
all persons.

2934a.  (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, and the substitution shall be effective
notwithstanding any contrary provision in any trust deed executed on
or after January 1, 1968; 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.
(2) A substitution executed pursuant to subparagraph (B) of
paragraph (1) is not effective unless all the parties signing the
substitution sign, under penalty of perjury, a separate written
document stating the following:
(A) The substitution has been signed pursuant to subparagraph (B)
of paragraph (1).
(B) None of the undersigned is a licensed real estate broker or an
affiliate of the broker that is the issuer or servicer of the
obligation secured by the deed of trust.
(C) The undersigned together hold 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.
(D) Notice of the substitution was sent by certified mail, postage
prepaid, with return receipt requested to each holder of an interest
in the obligation secured by the deed of trust who has not joined in
the execution of the substitution or the separate document.
The separate document shall be attached to the substitution and be
recorded in the office of the county recorder of each county in
which the real property described in the deed of trust is located.
Once the document required by this paragraph is recorded, it shall
constitute conclusive evidence of compliance with the requirements of
this paragraph in favor of substituted trustees acting pursuant to
this section, subsequent assignees of the obligation secured by the
deed of trust, and subsequent bona fide purchasers or encumbrancers
for value of the real property described therein.
(3) For purposes of this section, “affiliate of the licensed real
estate broker” includes any person as defined in Section 25013 of the
Corporations Code that is controlled by, or is under common control
with, or who controls, a licensed real estate broker.  “Control”
means the possession, direct or indirect, of the power to direct or
cause the direction of management and policies.
(4) The substitution shall contain the date of recordation of the
trust deed, the name of the trustor, the book and page or instrument
number where the trust deed is recorded, and the name of the new
trustee.  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.  A substitution may be accomplished, with respect to multiple
deeds of trust which are recorded in the same county in which the
substitution is being recorded and which all have the same trustee
and beneficiary or beneficiaries, by recording a single document,
complying with the requirements of this section, substituting
trustees for all those deeds of trust.
(b) If the substitution is effected after a notice of default has
been recorded but prior to the recording of the notice of sale, the
beneficiary or beneficiaries shall cause a copy of the substitution
to be mailed, prior to the recording thereof, in the manner provided
in Section 2924b, to the trustee then of record and to all persons to
whom a copy of the notice of default would be required to be mailed
by the provisions of Section 2924b.  An affidavit shall be attached
to the substitution that notice has been given to those persons and
in the manner required by this subdivision.
(c) Notwithstanding any provision of this section or any provision
in any deed of trust, unless a new notice of sale containing the
name, street address, and telephone number of the substituted trustee
is given pursuant to Section 2924f, any sale conducted by the
substituted trustee shall be void.
(d) This section shall remain in effect only until January 1,
1998, and shall have no force or effect after that date, unless a
later enacted statute, which is enacted before January 1, 1998,
deletes or extends that date.

2934a.  (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, and the substitution shall be effective
notwithstanding any contrary provision in any trust deed executed on
or after January 1, 1968; 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.
(2) A substitution executed pursuant to subparagraph (B) of
paragraph (1) is not effective unless all the parties signing the
substitution sign, under penalty of perjury, a separate written
document stating the following:
(A) The substitution has been signed pursuant to subparagraph (B)
of paragraph (1).
(B) None of the undersigned is a licensed real estate broker or an
affiliate of the broker that is the issuer or servicer of the
obligation secured by the deed of trust.
(C) The undersigned together hold 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.
(D) Notice of the substitution was sent by certified mail, postage
prepaid, with return receipt requested to each holder of an interest
in the obligation secured by the deed of trust who has not joined in
the execution of the substitution or the separate document.
The separate document shall be attached to the substitution and be
recorded in the office of the county recorder of each county in
which the real property described in the deed of trust is located.
Once the document required by this paragraph is recorded, it shall
constitute conclusive evidence of compliance with the requirements of
this paragraph in favor of substituted trustees acting pursuant to
this section, subsequent assignees of the obligation secured by the
deed of trust and subsequent bona fide purchasers or encumbrancers
for value of the real property described therein.
(3) For purposes of this section, “affiliate of the licensed real
estate broker” includes any person as defined in Section 25013 of the
Corporations Code that is controlled by, or is under common control
with, or who controls, a licensed real estate broker.  “Control”
means the possession, direct or indirect, of the power to direct or
cause the direction of management and policies.
(4) The substitution shall contain the date of recordation of the
trust deed, the name of the trustor, the book and page or instrument
number where the trust deed is recorded, and the name of the new
trustee.  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.  A substitution may be accomplished, with respect to multiple
deeds of trust which are recorded in the same county in which the
substitution is being recorded and which all have the same trustee
and beneficiary or beneficiaries, by recording a single document,
complying with the requirements of this section, substituting
trustees for all those deeds of trust.
(b) If the substitution is executed, but not recorded, prior to or
concurrently with the recording of the notice of default, the
beneficiary or beneficiaries or their authorized agents shall cause
notice of the substitution to be mailed prior to or concurrently with
the recording thereof, in the manner provided in Section 2924b, to
all persons to whom a copy of the notice of default would be required
to be mailed by the provisions of Section 2924b.  An affidavit shall
be attached to the substitution that notice has been given to those
persons and in the manner required by this subdivision.
(c) If the substitution is effected after a notice of default has
been recorded but prior to the recording of the notice of sale, the
beneficiary or beneficiaries or their authorized agents shall cause a
copy of the substitution to be mailed, prior to, or concurrently
with, the recording thereof, in the manner provided in Section 2924b,
to the trustee then of record and to all persons to whom a copy of
the notice of default would be required to be mailed by the
provisions of Section 2924b.  An affidavit shall be attached to the
substitution that notice has been given to those persons and in the
manner required by this subdivision.
(d)  A trustee named in a recorded substitution of trustee shall
be deemed to be authorized to act as the trustee under the mortgage
or deed of trust for all purposes from the date the substitution is
executed by the mortgagee, beneficiaries, or by their authorized
agents.  Nothing herein requires that a trustee under a recorded
substitution accept the substitution.  Once recorded, the
substitution shall constitute conclusive evidence of the authority of
the substituted trustee or his or her agents to act pursuant to this
section.
(e)  Notwithstanding any provision of this section or any
provision in any deed of trust, unless a new notice of sale
containing the name, street address, and telephone number of the
substituted trustee is given pursuant to Section 2924f after
execution of the substitution, any sale conducted by the substituted
trustee shall be void.
(f)  This section shall become operative on January 1, 1998.

2934b.  Sections 15643 and 18102 of the Probate Code apply to
trustees under deeds of trust given to secure obligations.

2935.  When a mortgage or deed of trust is executed as security for
money due or to become due, on a promissory note, bond, or other
instrument, designated in the mortgage or deed of trust, the record
of the assignment of the mortgage or of the assignment of the
beneficial interest under the deed of trust, is not of itself notice
to the debtor, his heirs, or personal representatives, so as to
invalidate any payment made by them, or any of them, to the person
holding such note, bond, or other instrument.

2936.  The assignment of a debt secured by mortgage carries with it
the security.

2937.  (a) The Legislature hereby finds and declares that borrowers
or subsequent obligors have the right to know when a person holding a
promissory note, bond, or other instrument transfers servicing of
the indebtedness secured by a mortgage or deed of trust on real
property containing one to four residential units located in this
state.  The Legislature also finds that notification to the borrower
or subsequent obligor of the transfer may protect the borrower or
subsequent obligor from fraudulent business practices and may ensure
timely payments.
It is the intent of the Legislature in enacting this section to
mandate that a borrower or subsequent obligor be given written notice
when a person transfers the servicing of the indebtedness on notes,
bonds, or other instruments secured by a mortgage or deed of trust on
real property containing one to four residential units and located
in this state.
(b) Any person transferring the servicing of indebtedness  as
provided in subdivision (a) to a different servicing agent and any
person assuming from another responsibility for servicing the
instrument evidencing indebtedness, shall give written notice to the
borrower or subsequent obligor before the borrower or subsequent
obligor becomes obligated to make payments to a new servicing agent.

(c) In the event a notice of default has been recorded or a
judicial foreclosure proceeding has been commenced, the person
transferring the servicing of the indebtedness and the person
assuming from another the duty of servicing the indebtedness shall
give written notice to the trustee or attorney named in the notice of
default or judicial foreclosure of the transfer.  A notice of
default, notice of sale, or judicial foreclosure shall not be
invalidated solely because the servicing agent is changed during the
foreclosure process.
(d) Any person transferring the servicing of indebtedness as
provided in subdivision (a) to a different servicing agent shall
provide to the new servicing agent all existing insurance policy
information that the person is responsible for maintaining,
including, but not limited to, flood and hazard insurance policy
information.
(e) The notices required by subdivision (b) shall be sent by
first-class mail, postage prepaid, to the borrower’s or subsequent
obligor’s address designated for loan payment billings, or if escrow
is pending, as provided in the escrow, and shall contain each of the
following:
(1) The name and address of the person to which the transfer of
the servicing of the indebtedness is made.
(2) The date the transfer was or will be completed.
(3) The address where all payments pursuant to the transfer are to
be made.
(f) Any person assuming from another responsibility for servicing
the instrument evidencing indebtedness shall include in the notice
required by subdivision (b) a statement of the due date of the next
payment.
(g) The borrower or subsequent obligor shall not be liable to the
holder of the note, bond, or other instrument or to any servicing
agent for payments made to the previous servicing agent or for late
charges if these payments were made prior to the borrower or
subsequent obligor receiving written notice of the transfer as
provided by subdivision (e) and the payments were otherwise on time.

(h) For purposes of this section, the term servicing agent shall
not include a trustee exercising a power of sale pursuant to a deed
of trust.

2937.7.  In any action affecting the interest of any trustor or
beneficiary under a deed of trust or mortgage, service of process to
the trustee does not constitute service to the trustor or beneficiary
and does not impose any obligation on the trustee to notify the
trustor or beneficiary of the action.

2938.  (a) A written assignment of an interest in leases, rents,
issues, or profits of real property made in connection with an
obligation secured by real property, irrespective of whether the
assignment is denoted as absolute, absolute conditioned upon default,
additional security for an obligation, or otherwise, shall, upon
execution and delivery by the assignor, be effective to create a
present security interest in existing and future leases, rents,
issues, or profits of that real property. As used in this section,
“leases, rents, issues, and profits of real property” includes the
cash proceeds thereof. “Cash proceeds” means cash, checks, deposit
accounts, and the like.
(b) An assignment of an interest in leases, rents, issues, or
profits of real property may be recorded in the records of the county
recorder in the county in which the underlying real property is
located in the same manner as any other conveyance of an interest in
real property, whether the assignment is in a separate document or
part of a mortgage or deed of trust, and when so duly recorded in
accordance with the methods, procedures, and requirements for
recordation of conveyances of other interests in real property, (1)
the assignment shall be deemed to give constructive notice of the
content of the assignment with the same force and effect as any other
duly recorded conveyance of an interest in real property and (2) the
interest granted by the assignment shall be deemed fully perfected
as of the time of recordation with the same force and effect as any
other duly recorded conveyance of an interest in real property,
notwithstanding a provision of the assignment or a provision of law
that would otherwise preclude or defer enforcement of the rights
granted the assignee under the assignment until the occurrence of a
subsequent event, including, but not limited to, a subsequent default
of the assignor, or the assignee’s obtaining possession of the real
property or the appointment of a receiver.
(c) Upon default of the assignor under the obligation secured by
the assignment of leases, rents, issues, and profits, the assignee
shall be entitled to enforce the assignment in accordance with this
section. On and after the date the assignee takes one or more of the
enforcement steps described in this subdivision, the assignee shall
be entitled to collect and receive all rents, issues, and profits
that have accrued but remain unpaid and uncollected by the assignor
or its agent or for the assignor’s benefit on that date, and all
rents, issues, and profits that accrue on or after the date. The
assignment shall be enforced by one or more of the following:
(1) The appointment of a receiver.
(2) Obtaining possession of the rents, issues, or profits.
(3) Delivery to any one or more of the tenants of a written demand
for turnover of rents, issues, and profits in the form specified in
subdivision (k), a copy of which demand shall also be delivered to
the assignor; and a copy of which shall be mailed to all other
assignees of record of the leases, rents, issues, and profits of the
real property at the address for notices provided in the assignment
or, if none, to the address to which the recorded assignment was to
be mailed after recording.
(4) Delivery to the assignor of a written demand for the rents,
issues, or profits, a copy of which shall be mailed to all other
assignees of record of the leases, rents, issues, and profits of the
real property at the address for notices provided in the assignment
or, if none, to the address to which the recorded assignment was to
be mailed after recording.
Moneys received by the assignee pursuant to this subdivision, net
of amounts paid pursuant to subdivision (g), if any, shall be applied
by the assignee to the debt or otherwise in accordance with the
assignment or the promissory note, deed of trust, or other instrument
evidencing the obligation, provided, however, that neither the
application nor the failure to so apply the rents, issues, or profits
shall result in a loss of any lien or security interest that the
assignee may have in the underlying real property or any other
collateral, render the obligation unenforceable, constitute a
violation of Section 726 of the Code of Civil Procedure, or otherwise
limit a right available to the assignee with respect to its
security.
(d) If an assignee elects to take the action provided for under
paragraph (3) of subdivision (c), the demand provided for therein
shall be signed under penalty of perjury by the assignee or an
authorized agent of the assignee and shall be effective as against
the tenant when actually received by the tenant at the address for
notices provided under the lease or other contractual agreement under
which the tenant occupies the property or, if no address for notices
is so provided, at the property.  Upon receipt of this demand, the
tenant shall be obligated to pay to the assignee all rents, issues,
and profits that are past due and payable on the date of receipt of
the demand, and all rents, issues, and profits coming due under the
lease following the date of receipt of the demand, unless either of
the following occurs:
(1) The tenant has previously received a demand that is valid on
its face from another assignee of the leases, issues, rents, and
profits sent by the other assignee in accordance with this
subdivision and subdivision (c).
(2) The tenant, in good faith and in a manner that is not
inconsistent with the lease, has previously paid, or within 10 days
following receipt of the demand notice pays, the rent to the
assignor.
Payment of rent to an assignee following a demand under an
assignment of leases, rents, issues, and profits shall satisfy the
tenant’s obligation to pay the amounts under the lease. If a tenant
pays rent to the assignor after receipt of a demand other than under
the circumstances described in this subdivision, the tenant shall not
be discharged of the obligation to pay rent to the assignee, unless
the tenant occupies the property for residential purposes. The
obligation of a tenant to pay rent pursuant to this subdivision and
subdivision (c) shall continue until receipt by the tenant of a
written notice from a court directing the tenant to pay the rent in a
different manner or receipt by the tenant of a written notice from
the assignee from whom the demand was received canceling the demand,
whichever occurs first. This subdivision does not affect the
entitlement to rents, issues, or profits as between assignees as set
forth in subdivision (h).
(e) An enforcement action of the type authorized by subdivision
(c), and a collection, distribution, or application of rents, issues,
or profits by the assignee following an enforcement action of the
type authorized by subdivision (c), shall not do any of the
following:
(1) Make the assignee a mortgagee in possession of the property,
except if the assignee obtains actual possession of the real
property, or an agent of the assignor.
(2) Constitute an action, render the obligation unenforceable,
violate Section 726 of the Code of Civil Procedure, or, other than
with respect to marshaling requirements, otherwise limit any rights
available to the assignee with respect to its security.
(3) Be deemed to create a bar to a deficiency judgment pursuant to
a provision of law governing or relating to deficiency judgments
following the enforcement of any encumbrance, lien, or security
interest, notwithstanding that the action, collection, distribution,
or application may reduce the indebtedness secured by the assignment
or by a deed of trust or other security instrument.
The application of rents, issues, or profits to the secured
obligation shall satisfy the secured obligation to the extent of
those rents, issues, or profits, and, notwithstanding any provisions
of the assignment or other loan documents to the contrary, shall be
credited against any amounts necessary to cure any monetary default
for purposes of reinstatement under Section 2924c.
(f) If cash proceeds of rents, issues, or profits to which the
assignee is entitled following enforcement as set forth in
subdivision (c) are received by the assignor or its agent for
collection or by another person who has collected such rents, issues,
or profits for the assignor’s benefit, or for the benefit of a
subsequent assignee under the circumstances described in subdivision
(h), following the taking by the assignee of either of the
enforcement actions authorized in paragraph (3) or (4) of subdivision
(c), and the assignee has not authorized the assignor’s disposition
of the cash proceeds in a writing signed by the assignee, the rights
to the cash proceeds and to the recovery of the cash proceeds shall
be determined by the following:
(1) The assignee shall be entitled to an immediate turnover of the
cash proceeds received by the assignor or its agent for collection
or any other person who has collected the rents, issues, or profits
for the assignor’s benefit, or for the benefit of a subsequent
assignee under the circumstances described in subdivision (h), and
the assignor or other described party in possession of those cash
proceeds shall turn over the full amount of cash proceeds to the
assignee, less any amount representing payment of expenses authorized
by the assignee in writing. The assignee shall have a right to bring
an action for recovery of the cash proceeds, and to recover the cash
proceeds, without the necessity of bringing an action to foreclose a
security interest that it may have in the real property. This action
shall not violate Section 726 of the Code of Civil Procedure or
otherwise limit a right available to the assignee with respect to its
security.
(2) As between an assignee with an interest in cash proceeds
perfected in the manner set forth in subdivision (b) and enforced in
accordance with paragraph (3) or (4) of subdivision (c) and another
person claiming an interest in the cash proceeds, other than the
assignor or its agent for collection or one collecting rents, issues,
and profits for the benefit of the assignor, and subject to
subdivision (h), the assignee shall have a continuously perfected
security interest in the cash proceeds to the extent that the cash
proceeds are identifiable. For purposes hereof, cash proceeds are
identifiable if they are either (A) segregated or (B) if commingled
with other funds of the assignor or its agent or one acting on its
behalf, can be traced using the lowest intermediate balance
principle, unless the assignor or other party claiming an interest in
proceeds shows that some other method of tracing would better serve
the interests of justice and equity under the circumstances of the
case. The provisions of this paragraph are subject to any generally
applicable law with respect to payments made in the operation of the
assignor’s business.
(g) (1) If the assignee enforces the assignment under subdivision
(c) by means other than the appointment of a receiver and receives
rents, issues, or profits pursuant to this enforcement, the assignor
or another assignee of the affected real property may make written
demand upon the assignee to pay the reasonable costs of protecting
and preserving the property, including payment of taxes and insurance
and compliance with building and housing codes, if any.
(2) On and after the date of receipt of the demand, the assignee
shall pay for the reasonable costs of protecting and preserving the
real property to the extent of any rents, issues, or profits actually
received by the assignee, provided, however, that no such acts by
the assignee shall cause the assignee to become a mortgagee in
possession and the assignee’s duties under this subdivision, upon
receipt of a demand from the assignor or any other assignee of the
leases, rents, issues, and profits pursuant to paragraph (1), shall
not be construed to require the assignee to operate or manage the
property, which obligation shall remain that of the assignor.
(3) The obligation of the assignee hereunder shall continue until
the earlier of (A) the date on which the assignee obtains the
appointment of a receiver for the real property pursuant to
application to a court of competent jurisdiction, or (B) the date on
which the assignee ceases to enforce the assignment.
(4) This subdivision does not supersede or diminish the right of
the assignee to the appointment of a receiver.
(h) The lien priorities, rights, and interests among creditors
concerning rents, issues, or profits collected before the enforcement
by the assignee shall be governed by subdivisions (a) and (b).
Without limiting the generality of the foregoing, if an assignee who
has recorded its interest in leases, rents, issues, and profits prior
to the recordation of that interest by a subsequent assignee seeks
to enforce its interest in those rents, issues, or profits in
accordance with this section after any enforcement action has been
taken by a subsequent assignee, the prior assignee shall be entitled
only to the rents, issues, and profits that are accrued and unpaid as
of the date of its enforcement action and unpaid rents, issues, and
profits accruing thereafter. The prior assignee shall have no right
to rents, issues, or profits paid prior to the date of the
enforcement action, whether in the hands of the assignor or any
subsequent assignee. Upon receipt of notice that the prior assignee
has enforced its interest in the rents, issues, and profits, the
subsequent assignee shall immediately send a notice to any tenant to
whom it has given notice under subdivision (c). The notice shall
inform the tenant that the subsequent assignee cancels its demand
that the tenant pay rent to the subsequent assignee.
(i) (1) This section shall apply to contracts entered into on or
after January 1, 1997.
(2) Sections 2938 and 2938.1, as these sections were in effect
prior to January 1, 1997, shall govern contracts entered into prior
to January 1, 1997, and shall govern actions and proceedings
initiated on the basis of these contracts.
(j) “Real property,” as used in this section, means real property
or any estate or interest therein.
(k) The demand required by paragraph (3) of subdivision (c) shall
be in the following form:
DEMAND TO PAY RENT TO
PARTY OTHER THAN LANDLORD
(SECTION 2938 OF THE CIVIL CODE)
Tenant:  (Name of Tenant)
Property Occupied by Tenant:  (Address)
Landlord:  (Name of Landlord)
Secured Party:  (Name of Secured Party)
Address:  (Address for Payment of Rent to Secured Party and for
Further Information):
The secured party named above is the assignee of leases, rents,
issues, and profits under (name of document) dated ______, and
recorded at (recording information) in the official records of
___________ County, California. You may request a copy of the
assignment from the secured party at ____ (address).
THIS NOTICE AFFECTS YOUR LEASE OR RENTAL AGREEMENT RIGHTS AND
OBLIGATIONS. YOU ARE THEREFORE ADVISED TO CONSULT AN ATTORNEY
CONCERNING THOSE RIGHTS AND OBLIGATIONS IF YOU HAVE ANY QUESTIONS
REGARDING YOUR RIGHTS AND OBLIGATIONS UNDER THIS NOTICE.
IN ACCORDANCE WITH SUBDIVISION (C) OF SECTION 2938 OF THE CIVIL
CODE, YOU ARE HEREBY DIRECTED TO PAY TO THE SECURED PARTY, ____ (NAME
OF SECURED PARTY) AT ____ (ADDRESS), ALL RENTS UNDER YOUR LEASE OR
OTHER RENTAL AGREEMENT WITH THE LANDLORD OR PREDECESSOR IN INTEREST
OF LANDLORD, FOR THE OCCUPANCY OF THE PROPERTY AT ____ (ADDRESS OF
RENTAL PREMISES) WHICH ARE PAST DUE AND PAYABLE ON THE DATE YOU
RECEIVE THIS DEMAND, AND ALL RENTS COMING DUE UNDER THE LEASE OR
OTHER RENTAL AGREEMENT FOLLOWING THE DATE YOU RECEIVE THIS DEMAND
UNLESS YOU HAVE ALREADY PAID THIS RENT TO THE LANDLORD IN GOOD FAITH
AND IN A MANNER NOT INCONSISTENT WITH THE AGREEMENT BETWEEN YOU AND
THE LANDLORD. IN THIS CASE, THIS DEMAND NOTICE SHALL REQUIRE YOU TO
PAY TO THE SECURED PARTY, ____ (NAME OF THE SECURED PARTY), ALL RENTS
THAT COME DUE FOLLOWING THE DATE OF THE PAYMENT TO THE LANDLORD.
IF YOU PAY THE RENT TO THE UNDERSIGNED SECURED PARTY, ____ (NAME OF
SECURED PARTY), IN ACCORDANCE WITH THIS NOTICE, YOU DO NOT HAVE TO
PAY THE RENT TO THE LANDLORD. YOU WILL NOT BE SUBJECT TO DAMAGES OR
OBLIGATED TO PAY RENT TO THE SECURED PARTY IF YOU HAVE PREVIOUSLY
RECEIVED A DEMAND OF THIS TYPE FROM A DIFFERENT SECURED PARTY.
(For other than residential tenants) IF YOU PAY RENT TO THE LANDLORD
THAT BY THE TERMS OF THIS DEMAND YOU ARE REQUIRED TO PAY TO THE
SECURED PARTY, YOU MAY BE SUBJECT TO DAMAGES INCURRED BY THE SECURED
PARTY BY REASON OF YOUR FAILURE TO COMPLY WITH THIS DEMAND, AND YOU
MAY NOT BE DISCHARGED FROM YOUR OBLIGATION TO PAY THAT RENT TO THE
SECURED PARTY. YOU WILL NOT BE SUBJECT TO THOSE DAMAGES OR OBLIGATED
TO PAY THAT RENT TO THE SECURED PARTY IF YOU HAVE PREVIOUSLY RECEIVED
A DEMAND OF THIS TYPE FROM A DIFFERENT ASSIGNEE.
Your obligation to pay rent under this demand shall continue until
you receive either (1) a written notice from a court directing you to
pay the rent in a manner provided therein, or (2) a written notice
from the secured party named above canceling this demand.
The undersigned hereby certifies, under penalty of perjury, that the
undersigned is an authorized officer or agent of the secured party
and that the secured party is the assignee, or the current successor
to the assignee, under an assignment of leases, rents, issues, or
profits executed by the landlord, or a predecessor in interest, that
is being enforced pursuant to and in accordance with Section 2938 of
the Civil Code.
Executed at _________, California, this ____ day of _________,
_____.

(Secured Party)
Name: __________________________
Title: _________________________

2939.  A recorded mortgage must be discharged by a certificate
signed by the mortgagee, his personal representatives or assigns,
acknowledged or proved and certified as prescribed by the chapter on
“recording transfers,” stating that the mortgage has been paid,
satisfied, or discharged.  Reference shall be made in said
certificate to the book and page where the mortgage is recorded.

2939.5.  Foreign executors, administrators and guardians may satisfy
mortgages upon the records of any county in this state, upon
producing and recording in the office of the county recorder of the
county in which such mortgage is recorded, a duly certified and
authenticated copy of their letters testamentary, or of
administration or of guardianship, and which certificate or
authentication shall also recite that said letters have not been
revoked.  For the purposes of this section, “guardian” includes a
foreign conservator, committee, or comparable fiduciary.

2940.  A certificate of the discharge of a mortgage, and the proof
or acknowledgment thereof, must be recorded in the office of the
county recorder in which the mortgage is recorded.

2941.  (a) Within 30 days after any mortgage has been satisfied, the
mortgagee or the assignee of the mortgagee shall execute a
certificate of the discharge thereof, as provided in Section 2939,
and shall record or cause to be recorded in the office of the county
recorder in which the mortgage is recorded.  The mortgagee shall then
deliver, upon the written request of the mortgagor or the mortgagor’
s heirs, successors, or assignees, as the case may be, the original
note and mortgage to the person making the request.
(b) (1) Within 30 calendar days after the obligation secured by
any deed of trust has been satisfied, the beneficiary or the assignee
of the beneficiary shall execute and deliver to the trustee the
original note, deed of trust, request for a full reconveyance, and
other documents as may be necessary to reconvey, or cause to be
reconveyed, the deed of trust.
(A) The trustee shall execute the full reconveyance and shall
record or cause it to be recorded in the office of the county
recorder in which the deed of trust is recorded within 21 calendar
days after receipt by the trustee of the original note, deed of
trust, request for a full reconveyance, the fee that may be charged
pursuant to subdivision (e), recorder’s fees, and other documents as
may be necessary to reconvey, or cause to be reconveyed, the deed of
trust.
(B) The trustee shall deliver a copy of the reconveyance to the
beneficiary, its successor in interest, or its servicing agent, if
known.  The reconveyance instrument shall specify one of the
following options for delivery of the instrument, the addresses of
which the recorder has no duty to validate:
(i) The trustor or successor in interest, and that person’s last
known address, as the person to whom the recorder will deliver the
recorded instrument pursuant to Section 27321 of the Government Code.

(ii) That the recorder shall deliver the recorded instrument to
the trustee’s address.  If the trustee’s address is specified for
delivery, the trustee shall mail the recorded instrument to the
trustor or the successor in interest to the last known address for
that party.
(C) Following execution and recordation of the full reconveyance,
upon receipt of a written request by the trustor or the trustor’s
heirs, successors, or assignees, the trustee shall then deliver, or
caused to be delivered, the original note and deed of trust to the
person making that request.
(D) If the note or deed of trust, or any copy of the note or deed
of trust, is electronic, upon satisfaction of an obligation secured
by a deed of trust, any electronic original, or electronic copy which
has not been previously marked solely for use as a copy, of the note
and deed of trust, shall be altered to indicate that the obligation
is paid in full.
(2) If the trustee has failed to execute and record, or cause to
be recorded, the full reconveyance within 60 calendar days of
satisfaction of the obligation, the beneficiary, upon receipt of a
written request by the trustor or trustor’s heirs, successor in
interest, agent, or assignee, shall execute and acknowledge a
document pursuant to Section 2934a substituting itself or another as
trustee and issue a full reconveyance.
(3) If a full reconveyance has not been executed and recorded
pursuant to either paragraph (1) or paragraph (2) within 75 calendar
days of satisfaction of the obligation, then a title insurance
company may prepare and record a release of the obligation.  However,
at least 10 days prior to the issuance and recording of a full
release pursuant to this paragraph, the title insurance company shall
mail by first-class mail with postage prepaid, the intention to
release the obligation to the trustee, trustor, and beneficiary of
record, or their successor in interest of record, at the last known
address.
(A) The release shall set forth:
(i) The name of the beneficiary.
(ii) The name of the trustor.
(iii) The recording reference to the deed of trust.
(iv) A recital that the obligation secured by the deed of trust
has been paid in full.
(v) The date and amount of payment.
(B) The release issued pursuant to this subdivision shall be
entitled to recordation and, when recorded, shall be deemed to be the
equivalent of a reconveyance of a deed of trust.
(4) Where an obligation secured by a deed of trust was paid in
full prior to July 1, 1989, and no reconveyance has been issued and
recorded by October 1, 1989, then a release of obligation as provided
for in paragraph (3) may be issued.
(5) Paragraphs (2) and (3) do not excuse the beneficiary or the
trustee from compliance with paragraph (1).  Paragraph (3) does not
excuse the beneficiary from compliance with paragraph (2).
(6) In addition to any other remedy provided by law, a title
insurance company preparing or recording the release of the
obligation shall be liable to any party for damages, including
attorney’s fees, which any person may sustain by reason of the
issuance and recording of the release, pursuant to paragraphs (3) and
(4).
(7) A beneficiary may, at its discretion, in accordance with the
requirements and procedures of Section 2934a, substitute the title
company conducting the escrow through which the obligation is
satisfied for the trustee of record, in which case the title company
assumes the obligation of a trustee under this subdivision, and may
collect the fee authorized by subdivision (e).
(8) In lieu of delivering the original note and deed of trust to
the trustee within 30 days of loan satisfaction, as required by
paragraph (1) of subdivision (b), a beneficiary who executes and
delivers to the trustee a request for a full reconveyance within 30
days of loan satisfaction may, within 120 days of loan satisfaction,
deliver the original note and deed of trust to either the trustee or
trustor.  If the note and deed of trust are delivered as provided in
this paragraph, upon satisfaction of the note and deed of trust, the
note and deed of trust shall be altered to indicate that the
obligation is paid in full.  Nothing in this paragraph alters the
requirements and obligations set forth in paragraphs (2) and (3).
(c) For the purposes of this section, the phrases “cause to be
recorded” and “cause it to be recorded” include, but are not limited
to, sending by certified mail with the United States Postal Service
or by an independent courier service using its tracking service that
provides documentation of receipt and delivery, including the
signature of the recipient, the full reconveyance or certificate of
discharge in a recordable form, together with payment for all
required fees, in an envelope addressed to the county recorder’s
office of the county in which the deed of trust or mortgage is
recorded.  Within two business days from the day of receipt, if
received in recordable form together with all required fees, the
county recorder shall stamp and record the full reconveyance or
certificate of discharge.  Compliance with this subdivision shall
entitle the trustee to the benefit of the presumption found in
Section 641 of the Evidence Code.
(d) The violation of this section shall make the violator liable
to the person affected by the violation for all damages which that
person may sustain by reason of the violation, and shall require that
the violator forfeit to that person the sum of five hundred dollars
($500).
(e) (1) The trustee, beneficiary, or mortgagee may charge a
reasonable fee to the trustor or mortgagor, or the owner of the land,
as the case may be, for all services involved in the preparation,
execution, and recordation of the full reconveyance, including, but
not limited to, document preparation and forwarding services rendered
to effect the full reconveyance, and, in addition, may collect
official fees.  This fee may be made payable no earlier than the
opening of a bona fide escrow or no more than 60 days prior to the
full satisfaction of the obligation secured by the deed of trust or
mortgage.
(2) If the fee charged pursuant to this subdivision does not
exceed forty-five dollars ($45), the fee is conclusively presumed to
be reasonable.
(3) The fee described in paragraph (1) may not be charged unless
demand for the fee was included in the payoff demand statement
described in Section 2943.
(f) For purposes of this section, “original” may include an
optically imaged reproduction when the following requirements are
met:
(1) The trustee receiving the request for reconveyance and
executing the reconveyance as provided in subdivision (b) is an
affiliate or subsidiary of the beneficiary or an affiliate or
subsidiary of the assignee of the beneficiary, respectively.
(2) The optical image storage media used to store the document
shall be nonerasable write once, read many (WORM) optical image media
that does not allow changes to the stored document.
(3) The optical image reproduction shall be made consistent with
the minimum standards of quality approved by either the National
Institute of Standards and Technology or the Association for
Information and Image Management.
(4) Written authentication identifying the optical image
reproduction as an unaltered copy of the note, deed of trust, or
mortgage shall be stamped or printed on the optical image
reproduction.
(g) No fee or charge may be imposed on the trustor in connection
with, or relating to, any act described in this section except as
expressly authorized by this section.
(h) The amendments to this section enacted at the 1999-2000
Regular Session shall apply only to a mortgage or an obligation
secured by a deed of trust that is satisfied on or after January 1,
2001.
(i) (1) In any action filed before January 1, 2002, that is
dismissed as a result of the amendments to this section enacted at
the 2001-02 Regular Session, the plaintiff shall not be required to
pay the defendant’s costs.
(2) Any claimant, including a claimant in a class action lawsuit,
whose claim is dismissed or barred as a result of the amendments to
this section enacted at the 2001-02 Regular Session, may, within 6
months of the dismissal or barring of the action or claim, file or
refile a claim for actual damages occurring before January 1, 2002,
that were proximately caused by a time lapse between loan
satisfaction and the completion of the beneficiary’s obligations as
required under paragraph (1) of subdivision (b).  In any action
brought under this section, the defendant may be found liable for
actual damages, but may not be found liable for any civil penalty
authorized by Section 2941.
(j) Notwithstanding any other penalties, if a beneficiary collects
a fee for reconveyance and thereafter has knowledge, or should have
knowledge, that no reconveyance has been recorded, the beneficiary
shall cause to be recorded the reconveyance, or in the event a
release of obligation is earlier and timely recorded, the beneficiary
shall refund to the trustor the fee charged to perform the
reconveyance.  Evidence of knowledge includes, but is not limited to,
notice of a release of obligation pursuant to paragraph (3) of
subdivision (b).

2941.1.  Notwithstanding any other provision of law, if no payoff
demand statement is issued pursuant to Section 2943, nothing in
Section 2941 shall be construed to prohibit the charging of a
reconveyance fee.

2941.5.  Every person who willfully violates Section 2941 is guilty
of a misdemeanor punishable by fine of not less than fifty dollars
($50) nor more than four hundred dollars ($400), or by imprisonment
in the county jail for not to exceed six months, or by both such fine
and imprisonment.
For purposes of this section, “willfully” means simply a purpose
or willingness to commit the act, or make the omission referred to.
It does not require an intent to violate the law, to injure another,
or to acquire any advantage.

2941.7.  Whenever the obligation secured by a mortgage or deed of
trust has been fully satisfied and the present mortgagee or
beneficiary of record cannot be located after diligent search, or
refuses to execute and deliver a proper certificate of discharge or
request for reconveyance, or whenever a specified balance, including
principal and interest, remains due and the mortgagor or trustor or
the mortgagor’s or trustor’s successor in interest cannot, after
diligent search, locate the then mortgagee or beneficiary of record,
the lien of any mortgage or deed of trust shall be released when the
mortgagor or trustor or the mortgagor’s or trustor’s successor in
interest records or causes to be recorded, in the office of the
county recorder of the county in which the encumbered property is
located, a corporate bond accompanied by a declaration, as specified
in subdivision (b), and with respect to a deed of trust, a
reconveyance as hereinafter provided.
(a) The bond shall be acceptable to the trustee and shall be
issued by a corporation lawfully authorized to issue surety bonds in
the State of California in a sum equal to the greater of either (1)
two times the amount of the original obligation secured by the
mortgage or deed of trust and any additional principal amounts,
including advances, shown in any recorded amendment thereto, or (2)
one-half of the total amount computed pursuant to (1) and any accrued
interest on such amount, and shall be conditioned for payment of any
sum which the mortgagee or beneficiary may recover in an action on
the obligation secured by the mortgage or deed of trust, with costs
of suit and reasonable attorneys’ fees.  The obligees under the bond
shall be the mortgagee or mortgagee’s successor in interest or the
trustee who executes a reconveyance under this section and the
beneficiary or beneficiary’s successor in interest.
The bond recorded by the mortgagor or trustor or mortgagor’s or
trustor’s successor in interest shall contain the following
information describing the mortgage or deed of trust:
(1) Recording date and instrument number or book and page number
of the recorded instrument.
(2) Names of original mortgagor and mortgagee or trustor and
beneficiary.
(3) Amount shown as original principal sum secured thereby.
(4) The recording information and new principal amount shown in
any recorded amendment thereto.
(b) The declaration accompanying the corporate bond recorded by
the mortgagor or trustor or the mortgagor’s or trustor’s successor in
interest shall state:
(1) That it is recorded pursuant to this section.
(2) The name of the original mortgagor or trustor and mortgagee or
beneficiary.
(3) The name and address of the person making the declaration.
(4) That either the obligation secured by the mortgage or deed of
trust has been fully satisfied and the present mortgagee or
beneficiary of record cannot be located after diligent search, or
refuses to execute and deliver a proper certificate of discharge or
request for reconveyance as required under Section 2941; or that a
specified balance, including principal and interest, remains due and
the mortgagor or trustor or mortgagor’s or trustor’s successor in
interest cannot, after diligent search, locate the then mortgagee or
beneficiary.
(5) That the declarant has mailed by certified mail, return
receipt requested, to the last address of the person to whom payments
under the mortgage or deed of trust were made and to the last
mortgagee or beneficiary of record at the address for such mortgagee
or beneficiary shown on the instrument creating, assigning, or
conveying the interest, a notice of recording a declaration and bond
under this section and informing the recipient of the name and
address of the mortgagor or trustee, if any, and of the right to
record a written objection with respect to the release of the lien of
the mortgage or, with respect to a deed of trust, notify the trustee
in writing of any objection to the reconveyance of the deed of
trust.  The declaration shall state the date any notices were mailed
pursuant to this section and the names and addresses of all persons
to whom mailed.
The declaration provided for in this section shall be signed by
the mortgagor or trustor under penalty of perjury.
(c) With respect to a deed of trust, after the expiration of 30
days following the recording of the corporate bond and accompanying
declaration provided in subdivisions (a) and (b), and delivery to the
trustee of the usual reconveyance fees plus costs and a demand for
reconveyance under this section, the trustee shall execute and
record, or otherwise deliver as provided in Section 2941, a
reconveyance in the same form as if the beneficiary had delivered to
the trustee a proper request for reconveyance, provided that the
trustee has not received a written objection to the reconveyance from
the beneficiary of record.  No trustee shall have any liability to
any person by reason of its execution of a reconveyance in reliance
upon a trustor’s or trustor’s successor’s in interest substantial
compliance with this section.  The sole remedy of any person damaged
by reason of the reconveyance shall be against the trustor, the
affiant, or the bond.  With respect to a mortgage, a mortgage shall
be satisfied of record when 30 days have expired following
recordation of the corporate bond and accompanying declaration,
provided no objection to satisfaction has been recorded by the
mortgagee within that period.  A bona fide purchaser or encumbrancer
for value shall take the interest conveyed free of such mortgage,
provided there has been compliance with subdivisions (a) and (b) and
the deed to the purchaser recites that no objections by the mortgagee
have been recorded.
Upon recording of a reconveyance under this section, or, in the
case of a mortgage the expiration of 30 days following recordation of
the corporate bond and accompanying declaration without objection
thereto having been recorded, interest shall no longer accrue as to
any balance remaining due to the extent the balance due has been
alleged in the declaration recorded under subdivision (b).
The sum of any specified balance, including principal and
interest, which remains due and which is remitted to any issuer of a
corporate bond in conjunction with the issuance of a bond pursuant to
this section shall, if unclaimed, escheat to the state after three
years pursuant to the Unclaimed Property Law.  From the date of
escheat the issuer of the bond shall be relieved of any liability to
pay to the beneficiary or his or her heirs or other successors in
interest the escheated funds and the sole remedy shall be a claim for
property paid or delivered to the Controller pursuant to the
Unclaimed Property Law.
(d) The term “diligent search,” as used in this section, shall
mean all of the following:
(1) The mailing of notices as provided in paragraph (5) of
subdivision (b), and to any other address that the declarant has used
to correspond with or contact the mortgagee or beneficiary.
(2) A check of the telephone directory in the city where the
mortgagee or beneficiary maintained the mortgagee’s or beneficiary’s
last known address or place of business.
(3) In the event the mortgagee or beneficiary or the mortgagee’s
or beneficiary’s successor in interest is a corporation, a check of
the records of the California Secretary of State and the secretary of
state in the state of incorporation, if known.
(4) In the event the mortgagee or beneficiary is a state or
national bank or a state or federal savings and loan association, an
inquiry of the regulatory authority of such bank or savings and loan
association.
(e) This section shall not be deemed to create an exclusive
procedure for the issuance of reconveyances and the issuance of bonds
and declarations to release the lien of a mortgage and shall not
affect any other procedures, whether or not such procedures are set
forth in statute, for the issuance of reconveyances and the issuance
of bonds and declarations to release the lien of a mortgage.
(f) For purposes of this section, the trustor or trustor’s
successor in interest may substitute the present trustee of record
without conferring any duties upon the trustee other than those that
are incidental to the execution of a reconveyance pursuant to this
section if all of the following requirements are met:
(1) The present trustee of record and the present mortgagee or
beneficiary of record cannot be located after diligent search.
(2) The declaration filed pursuant to subdivision (b) shall state
in addition that it is filed pursuant to this subdivision, and shall,
in lieu of the provisions of paragraph (4) of subdivision (b), state
that the obligation secured by the mortgage or deed of trust has
been fully satisfied and the present trustee of record and present
mortgagee or beneficiary of record cannot be located after diligent
search.
(3) The substitute trustee is a title insurance company that
agrees to accept the substitution.  This subdivision shall not impose
a duty upon a title insurance company to accept the substitution.
(4) The corporate bond required in subdivision (a) is for a period
of five or more years.

2941.9.  (a) The purpose of this section is to establish a process
through which all of the beneficiaries under a trust deed may agree
to be governed by beneficiaries holding 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 any affiliate of that licensed
real estate broker.
(b) All holders of notes secured by the same real property or a
series of undivided interests in notes secured by real property
equivalent to a series transaction may agree in writing to be
governed by the desires of the holders of more than 50 percent of the
record beneficial interest of those notes or interests, exclusive of
any notes or interests of a licensed real estate broker that is the
issuer or servicer of the notes or interests of any affiliate of the
licensed real estate broker, with respect to actions to be taken on
behalf of all holders in the event of default or foreclosure for
matters that require direction or approval of the holders, including
designation of the broker, servicing agent, or other person acting on
their behalf, and the sale, encumbrance, or lease of real property
owned by the holders resulting from foreclosure or receipt of a deed
in lieu of foreclosure.
(c) A description of the agreement authorized in subdivision (b)
of this section shall be disclosed pursuant to Section 10232.5 of the
Business and Professions Code and shall be included in a recorded
document such as the deed of trust or the assignment of interests.
(d) Any action taken pursuant to the authority granted in this
section is not effective unless all the parties agreeing to the
action sign, under penalty of perjury, a separate written document
entitled “Majority Action Affidavit” stating the following:
(1) The action has been authorized pursuant to this section.
(2) None of the undersigned is a licensed real estate broker or an
affiliate of the broker that is the issuer or servicer of the
obligation secured by the deed of trust.
(3) The undersigned together hold 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.
(4) Notice of the action was sent by certified mail, postage
prepaid, with return receipt requested, to each holder of an interest
in the obligation secured by the deed of trust who has not joined in
the execution of the substitution or this document.
This document shall be recorded in the office of the county
recorder of each county in which the real property described in the
deed of trust is located.  Once the document in this subdivision is
recorded, it shall constitute conclusive evidence of compliance with
the requirements of this subdivision in favor of trustees acting
pursuant to this section, substituted trustees acting pursuant to
Section 2934a, subsequent assignees of the obligation secured by the
deed of trust, and subsequent bona fide purchasers or encumbrancers
for value of the real property described therein.
(e) For purposes of this section, “affiliate of the licensed real
estate broker” includes any person as defined in Section 25013 of the
Corporations Code who is controlled by, or is under common control
with, or who controls, a licensed real estate broker.  “Control”
means the possession, direct or indirect, of the power to direct or
cause the direction of management and policies.

2942.  Contracts of bottomry or respondentia, although in the nature
of mortgages, are not affected by any of the provisions of this
Chapter.

2943.  (a) As used in this section:
(1) “Beneficiary” means a mortgagee or beneficiary of a mortgage
or deed of trust, or his or her assignees.
(2) “Beneficiary statement” means a written statement showing:
(A) The amount of the unpaid balance of the obligation secured by
the mortgage or deed of trust and the interest rate, together with
the total amounts, if any, of all overdue installments of either
principal or interest, or both.
(B) The amounts of periodic payments, if any.
(C) The date on which the obligation is due in whole or in part.
(D) The date to which real estate taxes and special assessments
have been paid to the extent the information is known to the
beneficiary.
(E) The amount of hazard insurance in effect and the term and
premium of that insurance to the extent the information is known to
the beneficiary.
(F) The amount in an account, if any, maintained for the
accumulation of funds with which to pay taxes and insurance premiums.

(G) The nature and, if known, the amount of any additional
charges, costs, or expenses paid or incurred by the beneficiary which
have become a lien on the real property involved.
(H) Whether the obligation secured by the mortgage or deed of
trust can or may be transferred to a new borrower.
(3) “Delivery” means depositing or causing to be deposited in the
United States mail an envelope with postage prepaid, containing a
copy of the document to be delivered, addressed to the person whose
name and address is set forth in the demand therefor.  The document
may also be transmitted by facsimile machine to the person whose name
and address is set forth in the demand therefor.
(4) “Entitled person” means the trustor or mortgagor of, or his or
her successor in interest in, the mortgaged or trust property or any
part thereof, any beneficiary under a deed of trust, any person
having a subordinate lien or encumbrance of record thereon, the
escrowholder licensed as an agent pursuant to Division 6 (commencing
with Section 17000) of the Financial Code, or the party exempt by
virtue of Section 17006 of the Financial Code who is acting as the
escrowholder.
(5) “Payoff demand statement” means a written statement, prepared
in response to a written demand made by an entitled person or
authorized agent, setting forth the amounts required as of the date
of preparation by the beneficiary, to fully satisfy all obligations
secured by the loan that is the subject of the payoff demand
statement.  The written statement shall include information
reasonably necessary to calculate the payoff amount on a per diem
basis for the period of time, not to exceed 30 days, during which the
per diem amount is not changed by the terms of the note.
(b) (1) A beneficiary, or his or her authorized agent, shall,
within 21 days of the receipt of a written demand by an entitled
person or his or her authorized agent, prepare and deliver to the
person demanding it a true, correct, and complete copy of the note or
other evidence of indebtedness with any modification thereto, and a
beneficiary statement.
(2) A request pursuant to this subdivision may be made by an
entitled person or his or her authorized agent at any time before, or
within two months after, the recording of a notice of default under
a mortgage or deed of trust, or may otherwise be made more than 30
days prior to the entry of the decree of foreclosure.
(c) A beneficiary, or his or her authorized agent, shall, on the
written demand of an entitled person, or his or her authorized agent,
prepare and deliver a payoff demand statement to the person
demanding it within 21 days of the receipt of the demand.  However,
if the loan is subject to a recorded notice of default or a filed
complaint commencing a judicial foreclosure, the beneficiary shall
have no obligation to prepare and deliver this statement as
prescribed unless the written demand is received prior to the first
publication of a notice of sale or the notice of the first date of
sale established by a court.
(d) (1) A beneficiary statement or payoff demand statement may be
relied upon by the entitled person or his or her authorized agent in
accordance with its terms, including with respect to the payoff
demand statement reliance for the purpose of establishing the amount
necessary to pay the obligation in full.  If the beneficiary notifies
the entitled person or his or her authorized agent of any amendment
to the statement, then the amended statement may be relied upon by
the entitled person or his or her authorized agent as provided in
this subdivision.
(2) If notification of any amendment to the statement is not given
in writing, then a written amendment to the statement shall be
delivered to the entitled person or his or her authorized agent no
later than the next business day after notification.
(3) Upon the dates specified in subparagraphs (A) and (B) any sums
that were due and for any reason not included in the statement or
amended statement shall continue to be recoverable by the beneficiary
as an unsecured obligation of the obligor pursuant to the terms of
the note and existing provisions of law.
(A) If the transaction is voluntary, the entitled party or his or
her authorized agent may rely upon the statement or amended statement
upon the earlier of (i) the close of escrow, (ii) transfer of title,
or (iii) recordation of a lien.
(B) If the loan is subject to a recorded notice of default or a
filed complaint commencing a judicial foreclosure, the entitled party
or his or her authorized agent may rely upon the statement or
amended statement upon the acceptance of the last and highest bid at
a trustee’s sale or a court supervised sale.
(e) The following provisions apply to a demand for either a
beneficiary statement or a payoff demand statement:
(1) If an entitled person or his or her authorized agent requests
a statement pursuant to this section and does not specify a
beneficiary statement or a payoff demand statement the beneficiary
shall treat the request as a request for a payoff demand statement.
(2) If the entitled person or the entitled person’s authorized
agent includes in the written demand a specific request for a copy of
the deed of trust or mortgage, it shall be furnished with the
written statement at no additional charge.
(3) The beneficiary may, before delivering a statement, require
reasonable proof that the person making the demand is, in fact, an
entitled person or an authorized agent of an entitled person, in
which event the beneficiary shall not be subject to the penalties of
this section until 21 days after receipt of the proof herein provided
for.  A statement in writing signed by the entitled person
appointing an authorized agent when delivered personally to the
beneficiary or delivered by registered return receipt mail shall
constitute reasonable proof as to the identity of an agent.  Similar
delivery of a policy of title insurance, preliminary report issued by
a title company, original or photographic copy of a grant deed or
certified copy of letters testamentary, guardianship, or
conservatorship shall constitute reasonable proof as to the identity
of a successor in interest, provided the person demanding a statement
is named as successor in interest in the document.
(4) If a beneficiary for a period of 21 days after receipt of the
written demand willfully fails to prepare and deliver the statement,
he or she is liable to the entitled person for all damages which he
or she may sustain by reason of the refusal and, whether or not
actual damages are sustained, he or she shall forfeit to the entitled
person the sum of three hundred dollars ($300).  Each failure to
prepare and deliver the statement, occurring at a time when, pursuant
to this section, the beneficiary is required to prepare and deliver
the statement, creates a separate cause of action, but a judgment
awarding an entitled person a forfeiture, or damages and forfeiture,
for any failure to prepare and deliver a statement bars recovery of
damages and forfeiture for any other failure to prepare and deliver a
statement, with respect to the same obligation, in compliance with a
demand therefor made within six months before or after the demand as
to which the award was made.  For the purposes of this subdivision,
“willfully” means an intentional failure to comply with the
requirements of this section without just cause or excuse.
(5) If the beneficiary has more than one branch, office, or other
place of business, then the demand shall be made to the branch or
office address set forth in the payment billing notice or payment
book, and the statement, unless it specifies otherwise, shall be
deemed to apply only to the unpaid balance of the single obligation
named in the request and secured by the mortgage or deed of trust
which is payable at the branch or office whose address appears on the
aforesaid billing notice or payment book.
(6) The beneficiary may make a charge not to exceed thirty dollars
($30) for furnishing each required statement.  The provisions of
this paragraph shall not apply to mortgages or deeds of trust insured
by the Federal Housing Administrator or guaranteed by the
Administrator of Veterans Affairs.
(f) The preparation and delivery of a beneficiary statement or a
payoff demand statement pursuant to this section shall not change a
date of sale established pursuant to Section 2924g.

2944.  None of the provisions of this chapter applies to any
transaction or security interest governed by the Commercial Code,
except to the extent made applicable by reason of an election made by
the secured party pursuant to subparagraph (B) of paragraph (1) of
subdivision (a) of Section 9604 of the Commercial Code.

2944.5.  No lender, mortgagee, or any third party having an interest
in real or personal property shall refuse to accept a policy issued
by an admitted insurer solely  because the policy is issued for a
continuous period without a fixed expiration date even though the
policy premium is due and payable every six months, provided the
lender, mortgagee, or third party is entitled to receive (a) notice
of renewal from the insurer within 15 days of receipt of payment on
the policy by the insured or (b) notice of cancellation or nonrenewal
under the terms and conditions set forth in Sections 678 and 2074.8
of the Insurance Code, whichever is applicable.

CONCLUSION: The point here is that it seems that the California State Legislature, in enacting the California Foreclosure sections set forth above, requires that the TRUE AND PROPER PARTIES (i.e. the mortgagee, beneficiary, or trustee, or their properly authorized agents), should be the parties that are required to engage in the required foreclosure process and procedures such as contacting the borrower, assessing their financial situations, discussing loan modification options, filing notice of defaults with the required declarations, filing the notice of sale, and ultimately conducting and carrying our foreclosure sales. If a California Homeowner wishes to challenge (through the filing of a temporary restraining order, or seeking a preliminary injunction to halt foreclosure) whether or not these entities are the proper entities and the TRUE parties permitted to actually foreclose – especially where the loan servicer ignores or fails to comply with a RESPA Qualified Written Request which sought to establish the identity of the true beneficiary – shouldn’t the Courts entertain the Borrower’s final stand to save their property from foreclosure and require that the foreclosing entity prove that they are the real beneficiary, real trustee, or agent of the real party?  To fail to require this would be akin to allowing a neighbor to foreclose on his neighbors property by presenting false claims of default, false county recording filings, false attempts at modification, etc.   As the financial entities were in the best position to safeguard their financial instruments and investments and to ensure their claims are enforceable, is it too much to make them prove, under the California Foreclosure laws, that they are the Real Party entitled to Act?  Isn’t that what our legislators contemplated when they passed the above referenced foreclosure sections?

Although there is sparse legal authority on “produce the note” in California and Arizona, is it such a novel concept that could not be considered in regard to proper application and enforcement of the Foreclosure laws?  We believe that produce the note strategy should be permitted to be heard where other valid legal grounds exist to seek an injunction or TRO (such as a truth in lending rescission claim or wrongful foreclosure action, or 1632 foreign language law violation that seeks rescission), where other good faith grounds exist to file a lawsuit, it would seem natural and proper to raise the produce the note defense and force the lender, loan servicer, or whatever entity that is claiming the legal right to foreclose on your property, and your dreams, to prove it has the legal right to do so.  Again, this is just our opinion and reasonable minds may differ on this issue.

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RESPA COVERAGE:

RESPA applies to a “federally related mortgage loan,” which is defined as:

The term “federally related mortgage loan” includes any loan (other than temporary financing such as a construction loan) which is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families, including any such secured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property; and is made in whole or in part by any lender the deposits or accounts of which are insured by any agency of the Federal Government, or is made in whole or in part by any lender which is regulated by any agency of the Federal Government, or is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by the Secretary or any other officer or agency of the Federal Government or under or in connection with a housing or urban development program administered by the Secretary or a housing or related program administered by any other such officer or agency; or is intended to be sold by the originating lender to the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, or a financial institution from which it is to be purchased by the Federal Home Loan Mortgage Corporation; or is made in whole or in part by any “creditor”, as defined in 15 U.S.C.A. § 1602(f) who makes or invests in residential real estate loans aggregating more than $1,000,000 per year, except that for the purpose of this chapter, the term “creditor” does not include any agency or instrumentality of any State.

QUALIFIED WRITTEN REQUEST UNDER 12 U.S.C. 2605 et seq. (RESPA – QWR)

A. THE LAW: 12 U.S.C. § 2605 STATES:

(1) Qualified written request:

For purposes of this subsection, a qualified written request shall be a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that includes, or otherwise enables the servicer to identify, the name and account of the borrower; and includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower. (RESPA therefore provides the explicit statutory right for a borrower to request “other information” as deemed necessary to the borrower).

NOTE: This Section makes clear that a Borrower may request “other information” (with no limits placed on what constitutes “other information”). Therefore, please do not state that this request “goes beyond that which is permitted by RESPA.” RESPA places no statutory limitiations on the information which can be requested. A loan servicer is not therefore entitled to ignore this provision merely because of any perceived inconvenience in responding.

B. LEGALLY MANDATED LOAN SERVICER ACTIONS REQUIRED (LOAN SERVICER DUTY):

(1) Action with respect to inquiry:

Not later than 60 days (excluding legal public holidays, Saturdays, and Sundays) after the receipt from any borrower of any qualified written request under paragraph (1) and, if applicable, before taking any action with respect to the inquiry of the borrower, the servicer shall make appropriate corrections in the account of the borrower, including the crediting of any late charges or penalties, and transmit to the borrower a written notification of such correction (which shall include the name and telephone number of a representative of the servicer who can provide assistance to the borrower);

After conducting an investigation, provide the borrower with a written explanation or clarification that includes to the extent applicable, a statement of the reasons for which the servicer believes the account of the borrower is correct as determined by the servicer; and the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower; or after conducting an investigation, provide the borrower with a written explanation or clarification that includes information requested by the borrower or an explanation of why the information requested is unavailable or cannot be obtained by the servicer; and the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower.

NOTE: This makes clear that 2605 requires the lender or loan servicer to take action includling providing information requested by the borrower, conducting an investigation of the borrower’s concerns, providing an explanation or clarification of the reasons the servicer believes the account is correct and, if necessary, making appropriate corrections to the borrower’s account. Once a borrower makes a “qualified written request” RESPA requires loan servicing companies to: (a) provide written notice to the borrower (within 20 days) acknowledging receipt of the request, (b) take appropriate action with respect to the inquiry either by making corrections or providing a written explanation or clarification; and (c) protect the borrower’s credit rating by not reporting to credit bureaus the overdue payments relating to request for 60 days after receiving the request.

(3) Protection of credit rating:

During the 60-day period beginning on the date of the servicer’s receipt from any borrower of a qualified written request relating to a dispute regarding the borrower’s payments, a servicer may not provide information regarding any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency.

NOTE: This Section provides for damages for any negative credit which is reported to any credit bureau which causes damage to my Clients.

C. RECOVERABLE DAMAGES FOR NON-COMPLIANCE:

Whoever fails to comply with any provision of this section shall be liable to the borrower for each such failure in the following amounts:

(1) Individuals:

In the case of any action by an individual, an amount equal to the sum of any actual damages to the borrower as a result of the failure; and any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $1,000.

(2) Class actions:

In the case of a class action, an amount equal to the sum of any actual damages to each of the borrowers in the class as a result of the failure; and any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not greater than $1,000 for each member of the class, except that the total amount of damages under this subparagraph in any class action may not exceed the lesser of $500,000; or 1 percent of the net worth of the servicer.

(3) Costs:

In addition to the amounts under paragraph (1) or (2), in the case of any successful action under this section, the costs of the action, together with any attorneys fees incurred in connection with such action as the court may determine to be reasonable under the circumstances.

D. “ACTUAL DAMAGES” MAY PERMIT RECOVERY OR EMOTIONAL DAMAGES SUFFERED DUE TO NON-COMPLIANCE:

NOTE: If a lender or loan servicer breaches this duty, a borrower may recover any “actual damages” proximately caused. “Actual damages” includes time spent on the case (and lost wages if required to be away from work), attorney fees, and there is legal precedent for the recovery of emotional distress damages for a loan servicer’s failure to comply with RESPA. See Johnstone v. Bank of America, N.A., 173 F.Supp.2d 809, 814-16 (N.D.Ill.2001) (RESPA plaintiffs may recover for mental suffering); Ploog v. HomeSide Lending, Inc., 209 F.Supp.2d 863, 870 (N.D.Ill.2002); and Rawlings v. Dovenmuehle Mortgage, Inc., 64 F.Supp.2d 1156, 1166 (M.D.Ala.1999). See also Wanger v. EMC Mortgage Corp., 103 Cal.App.4th 1125, 127 Cal.Rptr.2d 685, Cal.App. 5 Dist.,(2002)

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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.

He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084

Offices:

Arizona Office (Esplanade): 2415 E. Camelback Road, Suite 700, Phoenix, AZ, 85020.

California Office (Fashion Island): 620 Newport Center Drive, Suite 1100, Newport Beach, CA 92660

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Our Real Estate Law Services:

Loan Modifications / Loan Workouts
Commercial Lease Modifications
Broker Advance Fee Agreements (Residential and Commercial)
DRE audits, hearings and investigations
Real Estate Broker admissions cases
Foreclosure Defense
Predatory Lending
Mortgage Law
Phoenix Real Estate Zoning Attorney
Phoenix Eminent Domain Attorney / Inverse Condemnation / Prop 207
Real Estate Arbitration, Litigation and Mediation
Foreclosure Consultant Contracts
Real Estate LLC’s
Real Estate Partnership Law
Quiet Title Actions
Forensic Loan Audits (Truth in Lending (TILA), RESPA, HOEPA, Fraud, etc.)

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KEYWORDS: ARIZONA FORECLOSURE DEFENSE ATTORNEY / CALIFORNIA FORECLOSURE DEFENSE ATTORNEY / PHOENIX FORECLOSURE DEFENSE ATTORNEY / PHOENIX FORECLOSURE DEFENSE LAWYER / SCOTTSDALE FORECLOSURE DEFENSE ATTORNEY / SCOTTSDALE FORECLOSURE DEFENSE LAWYER / ORANGE COUNTY PREDATORY LENDING LAWYER / ORANGE COUNTY FORECLOSURE DEFENSE ATTORNEY / ORANGE COUNTY FORECLOSURE DEFENSE LAYWER / TRUTH IN LENDING LAWYER / TRUTH IN LENDING ATTORNEY / SOUTHER CALIFORNIA MORTGAGE LAW ATTORNEY / MORTGAGE LAWYER / RIVERSIDE FORECLOSURE ATTORNEY / RIVERSIDE FORECLOSURE LAWYER / RESPA LAWYER / RESPA ATTORNEY / FORECLOSURE DEFENSE LAW / PHOENIX LOAN MODIFICATION ATTORNEY / PHOENIX LOAN MODIFICATION LAWYER / ORANGE COUNTY LOAN MODIFICATION LAWYER / ORANGE COUNTY LOAN MODIFICATION ATTORNEY / NEWPORT BEACH LOAN MODIFICATION LAWYER / NEWPORT BEACH LOAN MODIFICATION ATTORNEY / CALIFORNIA FORECLOSURE DEFENSE LAWYER / PREDATORY LENDING LAW SAN DIEGO.

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HELPFUL LOAN MODIFICATION LINKS:

SUBMIT YOUR LOAN MODIFICATION SCENARIO: WWW.LOANMODSOLUTIONS.NET
SUBMIT YOUR LOAN MODIFICATION SCAM SCENARIO: WWW.LOANMODIFICATIONRIPOFF.NET
RESIDENTIAL AND COMMERCIAL ADVANCE FEE AGREEMENTS: WWW.ADVANCEFEECONTRACT.COM
CALIFORNIA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM
ARIZONA FORECLOSURE DEFENSE ATTORNEY STEVE VONDRAN WEBSITE: WWW.VONDRANLEGAL.COM
STEVE VONDRAN WEBSITE WWW.VONDRANLAW.COM
INFORMATION ON FORENSIC LOAN AUDITS: WWW.ATTORNEYMODS.COM
LOAN MODIFICATION RADIO SHOW: WWW.LOANMODRADIO.COM
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LOAN MOD FREQUENTLY ASKED QUESTIONS (FAQ):

(1) Does everyone qualify for a loan modification? No. In general, there are requirements that must be met. In some cases you may have grounds to file a lawsuit which may create some leverage for a loan modification.

(2) Am I able to sue my ender for predatory lending practices? In some cases (ex. truth in lending violation cases) you may have grounds to file a lawsuit. Other grounds such as wrongful foreclosure may also exist. Contact an attorney and ask about forensic loan audits.

(3) What is a forensic loan audit? This is basically reconstructing the loan to see if you were a victim of predatory lending loan practices including truth in lending violations, RESPA violations fraud, and the like. Of particular importance is Option Arm Loans. The strength of the audit findings will often depend on whether the original lender is still profiting from the predatory loan or whether it is in the hands of a “holder in due course.” Call us to discuss.

(4) What types of loan modifications are lenders providing? Sample modifications may include interest rate reductions, interest-only payments, loan forbearance, principle loan balance reduction (our firms has documentable evidence of principal loan balance reduction on Wachovia and World Savings Option Arm Loans. If you have a Wachovia or World Savings loan please contact us as soon as possible to submit your loss mitigation package, in many cases, we offer a 100% refund if you do not sign a loan modification agreement.

(5) What is usually needed to get a loan modification? In most cases, you will need to have documentable income, an unaffordable monthly mortgage payment (high housing ratio), and a verifiable hardship (ex. loss of job, etc.). In lieu of these typical requirements, you need strong evidence of predatory lending violations such as Truth in Lending to support a case for modification. Typically in the form of an extended three year right to rescind your loan along with a reasonable plan for tender. Contact us to discuss TILA claims.

(6) How long do I have to try to get a loan modification? In California, when you get a notice of default you have 90 days before you can expect to get a notice of sale. The Notice of Sale will provide notice that the house may be sold after 20 days. During these 110 days, you still have time to negotiate a loan modification. Contact us to discuss your case. Do not waste time.

(7) Can I seek my own modification? Absolutely. However, you should prepare to spend alot of time dealing with lenders and loan servicers who, frankly, could care very little about your rights. In addition, a lawyer will be able to send out a qualified written request, demand to produce the holder of the loan, and ensure that your legal rights are protected and that the lender follows the foreclosure laws. A law firm can also perform a forensic loan audit that may reveal additional rights and remedies and potentially leverage for a loan modification.

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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, 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 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).

Don’t forget to hear our loan modification radio show on every Monday & Friday from 12:30 pm to 1:00 pm

The Process of Obtaining an Injunction Against Foreclosure in California

INTRODUCTION: The following information is being posted as a public service to all california homeowners. many of my clients cannot afford to hire an attorney to prevent the threatened sale of their property, yet they have valid LEGAL grounds for filing for an injunction to stop the foreclosure.

the following article is not legal advice and is not intended to be a substitute for you obtaining the advice of an attorney, lawyer, or law-firm to assist you in evaluating the particular facts in your case and determining whether or not you have a valid case worth pursuing in a court of law. THERE ARE POTENTIAL DAMAGES TO YOU FOR FILING FALSE AND MERITLESS CLAIMS.

if you have specific questions about your case you must contact a lawyer to discuss. the following is general legal information only and is not to be relied on without discussing YOUR case with legal counsel. certain portions of this article may be incomPlete or inaccurate as the law is constantly evolving AND EACH COURT IS DIFFERENT.

it is my goal to TRY TO educate california homeowners of the basic process involved in trying to obtain an injunction against foreclosure in california.

people have legal rights that they should be informed of. there are lenders and loan servicers that are simply seeking to take advantage of homeowners who may have been the victim of predatory lending and/or loan servicing. where you have legal rights, every homeowner should have the opportunity to assert these rights, not just the wealthy FEW individuals who may be in a better financial condition to pursue their legal rights.

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ATTORNEY STEVE VONDRAN CAN BE REACHED AT (877) 276-5084 OR EMAILED AT STEVE@VONDRANLAW.COM. MR. VONDRAN IS LICENSED TO PRACTICE LAW IN CALIFORNIA AND ARIZONA AND HOLDS A REAL ESTATE BROKER LICENSE IN BOTH STATES. WE SEEK ONLY TO SOLICIT, SERVE AND REPRESENT CLIENTS IN THESE TWO STATES.

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The Process of Obtaining an Injunction Against Foreclosure in California

First, a General Overview of one Injunction Provision of California Law:

California Code of Civil Procedure:

525. An injunction is a writ or order requiring a person to refrain from a particular act. It may be granted by the court in which the action is brought, or by a judge thereof; and when granted by a judge, it may be enforced as an order of the court.

(a) An injunction may be granted in the following cases:

1. When it appears by the complaint that the plaintiff is entitled to the relief demanded, and the relief, or any part thereof, consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually.
2. When it appears by the complaint or affidavits that the commission or continuance of some act during the litigation would produce waste, or great or irreparable injury, to a party to the action.
3. When it appears, during the litigation, that a party to the action is doing, or threatens, or is about to do, or is procuring or suffering to be done, some act in violation of the rights of another party to the action respecting the subject of the action, and tending to render the judgment ineffectual.
4. When pecuniary compensation would not afford adequate relief.
5. To prevent the breach of a contract the performance of which would not be specifically enforced…..(parts omitted)

NOTE: when filing for an injunction, you need to keep in mind the california rules of court. in particular sections 3.1200-3.1207 and 3.1150-3.1152. Here is a link to these and other provisions that you should be aware of.

Here are some other rules to review: California Rules of COurt Injunctions

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The Process of Obtaining an Injunction Against Foreclosure in California

Here is an overview of the steps

(1) There must be valid grounds for obtaining an injunction (as opposed to seeking money damages).

In the context of foreclosure defense, the following are types of legal violations that may provide a valid and good faith right to seek an injunction against foreclosure of real property:

1. Truth in Lending Violation within the past three years, which violation provides an extended three year right to rescind the loan, and where the homeowner sought to exercising these rights (by sending in a rescission letter) that the lender or loan servicer ignored. If your right to rescind the loan was disregarded, you have a right to seek to file an injunction to stop the threatened foreclosure (Note: here is a list of some of the items we look for in our forensic loan audits in an attempt to find truth in lending and other violations that we may be able to use as leverage for a loan modification);
2. Wrongful Foreclosure – This arises where the homeowner can prove they are not actually in default of the loan (i.e. that payments are current, etc.). Normally this one reason we file for a Qualified Written Request under RESPA Section 6, to see how and when payments were made and applied (Click here to see my blog post on Qualified Written Requests under RESPA Section 6);
3. Lender has failed to properly follow California foreclosure statutes that mandate, among other things, contacting borrower to discuss financial situation and loan modification options, proper filing of notice of default and proper filing of notice of sale, etc; (See California Civil Code Section 2924 et seq.)
4. d. Lender failed “duty” to provide a loan modification under California Civil Code Section 2923.6 (See the law here) where loan modification presents a better “net present value” proposition to the holder of the loan than does pursuing foreclosure (these grounds are being reviewed in the Courts today as to whether or not this grounds for injunction against foreclosure will ultimately succeed). The thrust of the argument is really that a “loan modification should have been reached;”
5. Loan Modification Agreement “was” reached – This is another experimental area where I believe a good faith argument can be made that there is no right to foreclose where the borrower and lender/loan servicer has reached an agreement to modify the loan rather than pursue foreclosure. This situation arises where the homeowner was lead to believe (probably requires a written agreement) that a loan modification or trial payment plan was in effect and the lender is moving forward anyhow and attempting or threatening to foreclosure. The Courts should be asked to enjoin a foreclosure where this type of false, deceptive, and misleading behavior is perpetrated by a lender or loan servicer, and the Courts should require the lender to provide the modification it agreed to, proof of which being sufficient (a related topic is whether the lender has “waived” right to foreclose);
6. Enjoining the enforcement of false, deceptive, and unconscionable option arm loans and possibly subprime loans in California under the California Consumer Legal Remedies Act (Here is an article I wrote discussing the predatory and toxic option arm loans);
7. Where loan terms and conditions are negotiated in Spanish (or other protected foreign languages) but where the final loan documents are unfairly printed in English, a right of rescission applies which should prevent the foreclosure action of the lender, and even the loan assignee (See California Civil Code Section 1632); note; here is a blog post I wrote on this law: http://activerain.com/blogsview/727174/se-habla-espanol-california-civil-code-section-1632-and-the-loan-modification-can-you-rescind-your-mortgage-loan-

Other equitable grounds depending upon the facts of the case.

(2) IF THE LENDER/LOAN SERVICER SEEMS INTENT ON FORECLOSING, RATHER THAN CONSIDERING YOU FOR A SHORT-SALE, DEED IN LIEU OF FORECLOSURE, OR PROVIDING A MEANINGFUL LOAN MODIFICATION, AND ASSUMING ONE OF THE ABOVE POTENTIAL GROUNDS TO FILE FOR AN INJUNCTION EXIST, YOU NEED TO FOLLOW THE FOLLOWING GENERAL STEPS (NOTE ADDITIONAL RULES AND RESTRICTIONS MAY APPLY SO YOU ARE ADVISED TO SEEK OUT THE ASSISTANCE OF A FORECLOSURE DEFENSE LAWYER TO ASSIST YOU):

1. Serve a certified letter on the party seeking to foreclose, including any of their agents, etc. who they are working in concert with them to foreclose, notifying them of your intent to file for a temporary restraining order (TRO) to prevent the threatened sale from occurring on the scheduled date. Also, state the time, date and address where you will be filing for relief, and ask whether they intend to appear. You may also want to fax and email them if you can, but the certified letter (which gives you legal proof they have notice of the TRO application) should be sent. You will need to submit a declaration that you did all of the above with your application.

Note: There are time frames to keep in mind in regard to notifying the opposing parties and/or their attorney (See here). Here are some other things to keep in mind regarding providing note – you must make a declaration to the Court that you gave or tried to provide notice to the opposing parties (See here)

1. File a Complaint (i.e. lawsuit) with the proper Court in your County (you may have to call the Court and ask them which court in your County is the proper one). In some cases, a case may be filed in Federal court, as opposed to State Court. This is a good question for an attorney practicing foreclosure defense and predatory lending law. Also, ensure proper venue. The complaint must set out your request for a temporary restraining order (TRO) and preliminary injunction halting foreclosure. You need to properly plead all the relevant facts of the case, including the legal violations which give rise to your right to halt the foreclosure proceeding or private trustee sale. In regard to verifying your proper grounds, legal “points and authorities” will need to be cited to the Court and attached to your application that seeks the ex parte TRO.
2. Compliance with California Rules of Court in regard to seeking an ex parte motion (this is where generally only you show up and the other party, although permitted to show, may not actually attend) for a TRO:

Rule 3.1201. Required documents

A request for ex parte relief must be in writing and must include all of the following:

(1) An application containing the case caption and stating the relief requested (note: the application must contain the (Click here for Contents of the application);

(2) A declaration in support of the application making the factual showing required under rule 3.1202(c);

(3) A declaration based on personal knowledge of the notice given under rule 3.1204 (basically proving you tried to contact the other party);

(4) A memorandum (basically citation to legal points and authorities that support your request for an injunction); and

(5) A proposed order (so that the judge can issue a TRO that the other party will be required to comply with).

Note: Local Court Rules regarding obtaining injunctions are supposed to be pre-empted by these California Rules of Court.

LIS PENDENS ALERT: It is probably also wise after filing the complaint and application for TRO / OSC to file what’s called a “lis pendens” (this gets filed in the County Recorder’s Office rather than the Court).

A lis pendens is latin for “suit pending” and can only be filed where the lawsuit challenges an interest in the real property that is subject to litigation. There can be serious penalties for misusing the lis pendens process so consult with a real estate attorney prior to making this determination and filing.

What the lis pendens does is to put any potential purchasers of the property on notice (called constructive notice) that the property is the subject of litigation (title is disputed), and if they buy the property, they take title subject to the claims involved.

Filing the lis pendens then can have the effect of deterring bids to buy the property at a foreclosure sale, and can also provide grounds to counter the potential “bona fide purchaser for value” or ‘holder in due course” argument if the Court denies the preliminary injunction and the house is sold to a third party. Rather than being relegated to money damages against the purchaser of the property in this event, there could be a case for “quiet title” to the property and set-aside the sale. Contact a real estate foreclosure defense lawyer to discuss this somewhat complex topic.

After you file for the lis pendens, the lender or trustee may request that a bond be filed and can seek to lift the lis pendens (they don’t want clouds on title at the foreclosure sale). You should argue for a nominal bond in this case as the property is not going anywhere and delaying foreclosure in a down market can hardly have a big effect on the lender.

1. Once you file all of these documents with the Court (the complaint, OSC, TRO Application with Client Declarations and Memorandum of Legal Points and Authorities, Declaration of Notice to Opposing Parties, and Proposed Order) you are on your way. The Court will set a hearing date and you need to find out what that date is, and provide notice to the opposing parties. You might also want to see if they use court reporters in these hearings, and if not, look into obtaining one (this may help if you need to appeal an order denying an injunction).
2. Again, after all the Court filings are complete, you now have a pending suit, and if advisable in your case, the filing of a lis pendens might be a good move.
3. At the OSC hearing, Defendant (if they decide to show up) must show good cause why the injunction should not issue. That being said however, the burden of proof on why the injunction should be granted are on the Plaintiff, who is known as the “moving party.” (If called this by the judge, one response to lighten up the situation might be “hopefully we are not moving your honor” said with a smile). At the hearing, if you are represented by an attorney he or she must show up. In ruling on the TRO, the Court will normally look to the declarations but also has discretion to hear oral testimony from the homeowner or others (advance written request to the Court to present oral evidence should be requested).
4. If the Court grants the TRO, it will normally be effective only for about 15-22 days until such time as a preliminary injunction hearing is undertaken where both sides are fully represented. If the TRO issues, the Court may required the posting of a bond to recover any damages the defendant may suffer if the TRO was wrongfully granted and the preliminary injunction is ultimately denied. Plaintiffs must be aware of this possibility and should speak with a bonding agent prior to the OSC hearing date for the TRO. If granted, the TRO will not normally be effective until the bond posts. Don’t get caught short-handed on this one. If the TRO issues, the Plaintiff should serve a copy of the Order on all parties which will then be bound by Court order not to foreclose on the property, at least until the preliminary injunction stage.
5. At the hearing for a preliminary injunction, both sides may appear and if the preliminary injunction issues, then the judge MUST require the posting of a bond. However, it is at this point that the Defendants may want to discuss providing a reasonable loan modification, accepting a short-sale, accepting Client’s rescission, or approving a deed in lieu / cash for keys type of deal or settling on some other relevant terms.

In order to obtain an injuction against foreclosure the Plaintiff (the homeowner) which is known as the “moving party” must prove the following:

1. Likelihood of success on the merits of the case (for example, likelihood of proving a TILA violation that allows for rescsission)
2. That money damages – the usual remedy at law – are inadequate and will not make the Plaintiff whole (for example, property is unique, and money damages will not make the Plaintiff whole since she cannot go and re-purcahse the exact same property, plus if the property is sold, the owner will not likely be able to get it back)
3. That Plaintiff will face imminent irreperable harm and injury if the threatened action (i.e. foreclosure of the property) is permitted to ensue.
4. That the balance of equities favors granting the injunction (Court will weigh the harm to the Plaintiff if the injunction is not granted, versus the injury to the Defendant if the injunction is granted). Generally, there will be limited harm to the Defendant by having to wait until the conclsusion of the litigation to sell the property. The Court can require a posting of a bond by Plaintiff to protect against any perceived harm caused by the TRO and/or injuction.

So that is a general and basic overview of the process of obtaining a temporary restraining order (TRO) / preliminary injunction in California and how it may help you obtain a loan modification, or else any money damages that you may be entitled to for RESPA violations, QWR violations, Truth in Lending Violations, Business and Professions Code Section 17220, 17500 violations, violations of the Fair Debt Collections Practices Act, California Consumer Legal Remedies Act, etc.

Where the lender or loan servicer has violated your rights, and where a valid and good faith grounds exists for filing for filing a lawsuit and TRO to halt a foreclosure sale is present, you may have a strong defense in pursuing your legal claims.

Plus, when you haul these lenders into Court with good faith and valid grounds, this is a good time to raise the “produce the note” strategy, which makes the trustee and loan servicer prove they have possession of the original promissory note, and all recorded assignments as required under California Commercial law of Negotiable Instruments. If they cannot prove their right to enforce the debt, the Court should (although there is not solid legal precedence on this claim in California) kick these “strangers” out of court. Otherwise, they might as well allow your neighbor to privately foreclose on your property.

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A separate issue that can arise in the foreclosure context, is where the house has already been sold, and the borrower believes the sale is wrongful or in violation of law. In this situation, where the lender has purchased the property at the foreclosure sale, there may be a way to “quiet title” and use a “lis pendens” procedure. Claims that may be raised after a sale date are truth in lending rescission claims, failure to sell property per the deed of trust, sale improprieties such as not using an independent third party, chilled bidding, failure to properly advertise the sale etc. If the property was sold to a bona fide purchaser for value (see an attorney to discuss what this means and how it works) then your legal action would likely be limited to a claim for money damages. These issues can also be raised in a lender seeks to file for a default judgment following a private trustee sale. If all else fails, this could be a nice way of “getting the final word” with the lender or loan servicer. Contact a real estate attorney in your area to discuss your case.

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To have your situation reviewed please fill out our form at www.LoanModSolutions.net

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The Law Offices of Steve Vondran has been processing loan modification files and has experience dealing with the following mortgage lenders and loan servicers:

• Bank of America
• Countrywide
• Chase
• Aurora Loan Services
• Washington Mutual
• Nationstar
• World Savings (Call us if you have a World Savings Option Arm Loan – we have been getting principal reduction in select cases)*
• Wachovia (Call us if you have a Wachovia Option Arm loan – we have been getting principal balance reductions in select cases)*
• Wells Fargo

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Other Legal Services we Provide: (877) 276-5084

1. Forensic Loan Audits – Truth in Lending Violations / RESPA violations / Predatory Lending
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3. Predatory Lending Law (Predatory Option Arm Loans, Subprime Arm Loans, Elder Abuse, Loan Fraud)
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Find us on the web on www.VondranLegal.com / www.VondranLaw.com / www.LoanModRadio.com

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Our Offices:
(1) Phoenix, Arizona: 2415 E. Camelback Road (Esplanade) Suite 700, Phoenix, Arizona 85016 (877) 276-5084
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Email: Steve@Vondranlaw.com
This is an advertisement and communication pursuant to State bar Rules. Law Offices of Steven C. Vondran is licensed to practice law in California and Arizona and only seeks to serve Clients in these states.

*We make no guarantees, warranties or representations of any particular outcome in any type of case including loan modification and loan workout cases and no guarantees of principal loan balance reduction in any case.

We are often asked what we look for in a forensic loan audit.

Typical items we look for when conducting a forensic loan audit:

(1) Did each borrower or person with ownership interest in the property get two copies of the proper Notice of Right to cancel with the Rescission dates filled in? (Federal Truth in Lending requirement – TILA).

(2) Were the material TILA disclosures made, and were they accurate if made (APR, Finance Charge, Amount Financed, Total of Payments, Payment Schedule). If these disclosures were not or defective in nature, an extended three year right of rescission exists in non-exempt transactions.

(3) Were the good faith estimate and preliminary truth in lending statements given to the borrower within 3 days of giving the loan application?

(4) Were advance fees improperly collected?

(5) Was the broker/loan officer/lender properly licensed at all stages of the loan origination process?

(6) Was the ARM / Option ARM / Negative Amortization Loan accurately disclosed in the note and adjustable rate rider and any loan program disclosure? Were the disclosures consistent?

(7) After the broker/lender ran the credit, were the credit scores disclosed and factors affecting risk properly disclosed?

(8) Did the Client receive a copy of the appraisal?

(9) Can the lender or investor produce the promissory note and prove it has the legal right to collect the debt? This is not so much a forensic audit issue, but rather an issue that can be raised at a later date. Not finding a copy of the promissory note in the loan file also triggers the need to have them produce the note so we can verify the actual terms of the note.

(10) Is the note clear and comprehensible (or do we have grounds to argue that a contract was never formed – that there could be no meeting of the minds)?

(11) Unfair Competition – If we find a violation of RESPA, Truth in Lending or HOEPA, or other law, do we have grounds to assert that the lender has engaged in unfair, deceptive and/or fraudulent business acts and practices and seek the imposition of a constructive trust forcing the lender to disgorge any ill-gotten gains or to seek an injunction? Countrywide was sued under Business and Professions Code Section 17200 and 17500 for false advertising and deceptive business practices.

(12) Were the loan documents properly signed and notarized?

(13) Option Arms / Negam Loans: These loans are predatory in nature and potentially unconscionable. The terms of the note and adjustable rate rider and loan program disclosures may conflict making it virtually impossible to properly understand the terms of the loan and to disclose this properly per truth in lending requirements.

(14) Is the loan substantively unconscionable and thus unenforceable?

(15) Was there fraud, deceit, deception, coercion or undue influence used against the elderly (elder abuse issues)?

(16) If the lender targeted minority groups, where the contracts negotiated in the language of the borrower (lender would be required to sign documents in a certain protected language of the borrower or a right to rescind is created?

(17) Was there predatory underwriting on stated income loans (i.e. underwriter did not verify borrowers stated income via salary.com, 4506-T statements, or in another manner as required by their internal policies – turning a blind eye and not following their own underwriting policies to get a loan done)?

(18) Were there excessive fees that Violate HOEPA? Or a Lack of HOEPA disclosures? Or excessive YSP fees that are predatory in nature that feathered the nest of the broker at the expense of the borrower?

(19) Was the borrower asked to sign conflicting disclosures or documents such as two different ARM disclosures or two different truth in lending statements that reflect two different APR’s or Interest rates (evidencing potential bait and switch or deceptive loan practices)?

(20) Were FICO scores and credit risk factors properly disclosed?

As you can see, we are closely scrutinizing the work of the lenders and holding their feet to the fire. They have rules they need to comply with, and they should be held accountable where their legal violations are uncovered.

Note: The strength of these violations depends upon whether or not your originating lender still holds the loan or whether a third party investor purchased the loan on the secondary market. In addition, there are no guarantees, promises or representations made that a loan audit will reveal any of these loan compliance or legal errors. Every file is different. We are never required to follow-up our audits or loan modification services with actual litigation. Attorney has the sole discretion whether or not to accept any litigation cases. This is an advertisement and communication pursuant to state bar rules. We only seek to represent Clients in Arizona and California where the attorney is licensed to practice law.

Don’t forget to hear our loan modification radio show on KLAA radion or www.LoanModRadio.com

The question we are exploring is whether or not it is possible to have option arm loans declared unconscionable by the Courts, thus rendering them unenforceable. If the loan is declared unconscionable and unenforceable, might this compel a lender or loan servicer to provide a meaningful modification? For specific questions consult an attorney.

First, recall the key features of the originating of many OPTION ARM LOANS (an option arm loan is a loan that allows the borrower to make a choice in the type and amount of payment they want to make each month):

1. Many unsophisticated loan borrowers are never informed about the negative amortization feature of an option arm loan until after the loan documents are signed (and normally the loan signing is done in a manner that is intended to hurry Clients through the process). Instead of being informed of the negative amortization feature by the loan officer (which is required by the fiduciary duty owed to the borrower), these harsh and oppressive terms are only able to be ascertained after the loan signing via a very confusing promissory note, adjustable rate rider, and loan program disclosure which often requires a PHD in mortgage notes to understand.
2. The Borrowers are often told that they will be able to refinance the option arm loan in a year or two. Even though onerous prepayment penalties may realistically prevent this.
3. The Borrowers are not informed that the interest rate they are paying, at least initially, (the so called “teaser rate” or discount rate”) is not the actual interest rate of the loan, and that by failing to make the fully amortized principal and interest payment, the loan balance will increase to cover the interest not being paid.
4. The truth in lending statements often show only the minimum monthly payment, which has a tendency to mislead clients into believing that the payment stated in the payment schedule will not change.
5. The borrower is normally not informed of the recast feature (when the loan hits 110% or 115% of the original loan balance the loan will recast in a manner that will provide full payment over the term of the loan. This results in “payment shock” that many borrowers simply were not informed of, and which could not have been readily ascertained by reading the note or adjustable rate rider.
6. Most borrower’s were never informed, that the loan, taken as a whole, would not have any way for the borrower to escape without foreclosure. As their equity was being eaten up by the negative amortization feature of the loan, and since the prepayment penalty (that many loans had) had a tendency to lock clients into the loan, that the loan was likely to wind up in foreclosure.
7. As the lender’s have the superior bargaining position, and as they write the contracts, and since the borrower is normally not sophisticated enough to deal with complex financial instruments that contain vague, confusing, and complex language, many Client’s simply have no idea what they were getting into in signing up for one of these loans and were often completely mislead or else kept in the dark about the true nature of the loan product.

The loan contract, promissory note, and adjustable rate rider therefore have to be questioned in regard to whether or not they are unconscionable, and potentially unenforceable.

Note: I try to put my personal comments in italics below.

I. California Civil Code Section 1670.5. (Unconscionable contract or clause of contract).

Here is the California Statute dealing with Unconscionability of Contracts.

(a) If the court as a matter of law (this means the judge and not a jury decides) 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.

(b) 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.

This section states that it is up to the judge to make the determination as to whether or not a contract is unconscionable and that the parties should be entitled to present evidence on the matter.

Here are a few other cases interpreting the California Unconscionability statute.

Under California law, the critical juncture for determining whether a contract is unconscionable is the moment when it is entered into by both parties, not whether it is unconscionable in light of subsequent events. See Stern v. Cingular Wireless Corp., C.D.Cal.2006, 453 F.Supp.2d 1138.

This would suggest you would evaluate whether or not a contract is unconscionable given the time the loan was made. In many option arm loans, you could argue that (at least in the one month option arm loans) that the loan was unconscionable at its inception, and given the recasting provisions of these loans, the entire loan could be seen as unconscionable at the inception of the loan.

A contract may be procedurally unconscionable under California law when the party with substantially greater bargaining power presents a take-it-or-leave it contract to a customer, even if the customer has a meaningful choice as to service providers. Shroyer v. New Cingular Wireless Services, Inc., C.A.9 (Cal.)2007, 498 F.3d 976.

In a purchase loan, time-frames often dictate that a consumer has to sign the loan in order to close on the sale of the property. In these situations, especially where the terms of the loan changes at the 11th hour, or where loan programs are changed at the last minute for various underwriting purposes, it could be argued that the borrower does not have much chance to get out of the loan. In refinance transactions, where interest rates may have risen since the loan was locked in, this may also create a take it or leave it proposition. At any rate, when the loan documents are packaged for signing, and these documents cannot be reviewed until the signing date, most borrowers get put into a take it or leave it proposition and any realistic chance for meaningful choice is lost at the 11th hour signing table.

Under California law, when a party to a contract possesses far greater bargaining power than another party, or when the stronger party pressures, harasses, or compels another party into entering into a contract, oppression and, therefore, procedural unconscionability, are present. See Circuit City Stores, Inc. v. Mantor, C.A.9 (Cal.) 2003, 335 F.3d 1101.

Again, this ties into the above argument or not knowing the true terms of the contract until the 11th hour at the loan document signing table. Other factors need to be looked at on a case by case basis.

Under California law, where a party in a position of unequal bargaining power is presented with an offending clause without the opportunity for meaningful negotiation, oppression and, therefore, procedural unconscionability, are present. See Ferguson v. Countrywide Credit Industries, Inc., C.A.9 (Cal.) 2002, 298 F.3d 778.

Surprise, in the context of a contract that is procedurally unconscionable, involves the extent to which the terms of the bargain are hidden in a prolix printed form drafted by a party in a superior bargaining position. See Crippen v. Central Valley RV Outlet, Inc. (App. 5 Dist. 2004), 22 Cal.Rptr.3d 189, 124 Cal.App.4th 1159

So these cases provide some illumination into the law of unconscionability in California and when Courts amy declare a contract to be unenforceable, or limit the effect of the clause. Here is some background on the law:

Civil Code section 1670.5 follows the law developed primarily in the sale of goods, governed by the Uniform Commercial Code, in enabling courts to grant relief from unconscionable contracts or clauses. “The principle is one of the prevention of oppression and unfair surprise.” Whether a contract is unconscionable or not is a question of law for the Court. Shadoan v. World Savings & Loan Assn., 219 Cal.App.3d 97, 268 Cal.Rptr. 207 (1990).

As stated by the court in the seminal case of Williams v. Walker-Thomas Furniture Company (D.C.Cir.1965) 350 F.2d 445, 449, “Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.”

Absence of meaningful choice occurs when a party to a bargain has little choice but to accept the terms stated by the other party. Hidden Terms in an agreement may qualify to show absence of meaningful terms.” See A & M Produce Co. v. FMC Corp. 135 Cal.App.3d 473, 486 (1982).

I would argue the Option Arm loan notes, riders, and program disclosures are so hard to read (not clearly and conspicuously disclosed) so as to essentially make the exact details of the loan “hidden.”

Absence of meaningful choice can also occur where a party is wholly unable to obtain the same consideration on other terms. The classic situation is discussed in Henningsen v. Bloomfield Motors, Inc. (1960) 32 N.J. 358, 161 A.2d 69, 87: “the warranty before us is a standardized form designed for mass use. It is imposed upon the automobile consumer. He takes it or leaves it, and he must take it to buy an automobile. No bargaining is engaged in with respect to it…..”

Whether a meaningful choice is present in a particular case can only be determined by consideration of all the circumstances surrounding the transaction. In many cases the meaningfulness of the choice is negated by a gross inequality of bargaining power The manner in which the contract was entered is also relevant to this consideration. Did each party to the contract, considering his obvious education or lack of it, have a reasonable opportunity to understand the terms of the contract, or were the important terms hidden in a maze of fine print and minimized by deceptive sales practices? Ordinarily, one who signs an agreement without full knowledge of its terms might be held to assume the risk that he has entered a one-sided bargain. But, when a party of little bargaining power, and hence little real choice, signs a commercially unreasonable contract with little or no knowledge of its terms, it is hardly likely that his consent, or even an objective manifestation of his consent, was ever given to all the terms. In such a case the usual rule that the terms of the agreement are not to be questioned should be abandoned and the court should consider whether the terms of the contract are so unfair that enforcement should be withheld. See Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (1965).

So far so good. It looks like there are some decent arguments that a borrower could make to a judge in the hopes of declaring the contract unconscionable. Now enters a little hurdle to seeking an injunction against foreclosure on the grounds of having a toxic and predatory option arm loan.

Unconscionability cannot be used as an affirmative cause of action – it is a contract defense. Under statute governing unconscionable contracts, court may refuse to enforce unconscionable contract or may enforce remainder of contract without unconscionable clause; however, statute does not in itself create affirmative cause of action but merely codifies defense of unconscionability. See California Grocers Assn. v. Bank of America (App. 1 Dist. 1994) 27 Cal.Rptr.2d 396, 22 Cal.App.4th 205.

The California Grocers case goes on to state: “Unlike Consumers Legal Remedies Act, statutory law of unfair competition provides no express authorization of affirmative cause of action for unconscionability.” The Consumers Legal Remedies Acts permits consumer to bring action for damages and injunctive relief based on insertion of unconscionable provision in contract. See California Civil Code § 1750 et seq., 1770(s), 1780(a).

So, this seems to suggest that instead of filing a lawsuit seeking to assert the unconscionability of an option arm loan and seeking an injunction, it appears you might want to investigate potentially file a suit to seek a declaratory judgment that the contract is unconscionable and then raise the issue of a violation of the consumer legal remedies act as discussed below, which prohibits unconscionable contract clauses.

Consumer Legal Remedies Act

California’s Consumers Legal Remedies Act (CLRA) establishes a nonexclusive statutory remedy for unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the SALE OR LEASE OF GOODS OR SERVICES to any consumer. See Gonzalez v. Proctor and Gamble Co., S.D.Cal.2007, 247 F.R.D. 616.

Purpose of California Consumers Legal Remedies Act (CLRA) is to attempt to alleviate social and economic problems stemming from deceptive business practices. See America Online, Inc. v. Superior Court (App. 1 Dist. 2001) 108 Cal.Rptr.2d 699.

First Big Question, does the CLRA apply to loan transactions (I.E. DOES ORIGINATING A MORTGAGE LOAN RESULT IN THE SALE OR LEASE OF GOODS OR SERVICES)? IF NOT, THE CLRA DOES NOT APPLY.

One Court says no: McKell v. Washington Mutual, 142 Cal.App.4th 1457, (2006). In this case the court held: “Plaintiffs cite no authority or make no argument demonstrating that Washington Mutual’s actions were undertaken “in a transaction intended to result or which results in the sale or lease of goods or services……rather, its actions were undertaken in transactions resulting in the sale of real property….the CLRA thus is inapplicable..”

Note: In McKell, the court provided very little analysis on the actual question of the applicability of the CLRA to financial transactions (it seems they relied more on the fact that Plaintiffs cited no legal authority and didn’t make any valid arguments as to why the Defendant’s actions fell under the act. This might be an important distinction to point out.

Other decisions suggest the McKell Court may not have reached the correct decision and the CRLA may well apply to loan transactions in California:

(1) Hernandez v. Hilltop Financial Mortg., Inc., 622 F.Supp.2d 842, N.D.Cal.,(2007).

Applicability of the CLRA to plaintiffs’ mortgage loan:

In this case the Court held that: “the CLRA shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection….a plaintiff may bring a claim under the CLRA when “any person” uses a statutorily prohibited trade practice “in a transaction … which results in the sale or lease of goods or services to any consumer.”

Section 1761(a) provides ” ‘Goods’ means tangible chattels bought or leased for use primarily for personal, family, or household purposes …” The CLRA defines “services” as “work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods.” Id. at § 1761(b). Finally, “consumer’ means an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes.” Id. at § 1761(d).

The California Supreme Court has not addressed the question whether a mortgage loan, and the activities involved in receiving and maintaining one, falls within the CLRA’s definition of a “good” or a “service.” This Court must apply “California law as we believe the California Supreme Court would apply it.” In re KF Dairies, Inc. & Affiliates, 224 F.3d 922, 924 (9th Cir.2000).

In similar matters involving financial transactions, the California Supreme Court and intermediate appellate divisions have found the CLRA applicable. See Corbett v. Hayward Dodge, Inc., 119 Cal.App.4th 915, (Cal.Ct.App.2004) (applying the CLRA to automobile loans).

In other analysis, it was stated that “The Court finds and concludes the California Supreme Court would find that the CLRA does apply to the mortgage loans in the present case.”

In so holding, the Court agreed with the reasoning of several other district courts that addressed this issue.

Here are a few cases that could potentially be cited in support of the proposition that the CLRA applies to California loan transactions:

(1) Jefferson v. Chase Home Finance LLC, No. C06-6510, 2007 WL 1302984 (N.D.Cal. May 3, 2007) (concluding that the loan transactions between a mortgage finance company and the plaintiff involved “more than the provision of a loan; they also include the financial services of managing the loan.”)

(2) Knox v. Ameriquest Mortgage Co., No. C05-00240, 2005 WL 1910927 (N.D.Cal. Aug. 10, 2005) (finding that, in the context of predatory lending allegations and after a review of the case law, “California courts generally find financial transactions to be subject to the CLRA.”);

(3) In re Ameriquest Mortgage Co., No 05-CV-7097, 2007 WL 1202544, (N.D.Ill. Apr. 23, 2007) (stating, in dicta, that “it is not inconceivable that Plaintiffs could prove the existence of tangential ‘services’ associated with their residential mortgages and establish that these transactions were covered by the CLRA.”).

Also,

(4) In an unreported decision (Jefferson v. Chase Home Finance, LLC – 2007 WL 1302984, N.D.Cal., 2007.) the Court stated:

“Although not cited by either party, California Civil Code section 1754 provides that the CLRA “shall not apply to any transaction which provides for the construction, sale, or construction and sale of an entire residence or … for the sale of a lot or parcel of real property, including any site preparation incidental to such sale.” However, this provision bars application of the CLRA only to transactions for the sale or construction of real property; it does not also exclude financial services related to such transactions.

In Jefferson the Court stated “the arranging of the loan, including but not limited to its origination, processing, documentation, wire-transmittal and underwriting constitutes ‘services’ within the meaning of subsection(b) of § 1761 of the CLRA……Plaintiffs did not seek just a loan; they sought defendants’ services in developing an acceptable refinancing plan by which they could remain in possession of their home. Thus, unlike the Berry case cited above……the present case involves more than the mere extension of a credit line. Instead, the circumstances here deal not just with the mortgage loan itself, but also with the services involved in developing, securing and maintaining plaintiffs’ loan…..in fact, in an effort to create an appropriate refinancing package, plaintiffs met with defendants’ agent three times before finally agreeing on a payment plan that plaintiffs and defendants found acceptable.

So, taking all of the above, it appears there is a good faith argument to be made that the CLRA does apply to loan origination transactions.

Note: The CLRA does not apply to the sale of real property, including construction, sale or construction and sale of residential housing or commercial or industrial buildings

So what does the CLRA prohibit?

Section 1770 prohibits the following (there are about 24 things prohibited, I have limited this article to the ones that may be best related to loan transactions):

(9) Advertising goods or services with intent not to sell them as advertised (Option Arm Loans were sold.

This violation may arise where the broker or lender told the Client one thing before the loan was funded, only to find out the terms of the loan changed at signing (ex. higher rate, loan program switched, etc.)

(17) Representing that the consumer will receive…..an economic benefit (ex. “don’t worry about the negam feature, you will be able to come back to me and refinance your option arm loan in a year or two”), if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction (this assertion is contingent upon the negam not eating up all of the Client’s equity and property values maintaining or increasing).

1. Inserting an unconscionable provision in the contract (these arguments were discussed above)

Section 1770(a)(19) requires courts to draw upon the doctrine of unconscionability, as stated in California Civil Code section 1670.5

Potential Unconscionable Provisions (others may exist):

1. Clause/contract which is based on a requirement that the option arm loan recast at 110% or 115% of the original loan balance. It is not clear if the loan has to have re-casted before you can make this argument.
2. Adjustable rate rider (which normally amends the deed of trust) or note which permits loan to immediately start accruing negative amortization after the first month or first few months of the loan, often unbeknownst to the borrower and not disclosed. Such a provision results in the equity in a property being eaten up.
3. Promissory note and adjustable rider that resulted in placing borrowers into a loan they were not going to be able to pay, and not going to be able to get out of due to the equity being eaten up by the negative amortization, and often with onerous prepayment penalties that essentially “locked” the borrower into the loan.

Now, in the loan setting, if the lender/loan servicer was the party that originated the loan (meaning the loan was never sold off), perhaps these option arm loans provide leverage depending on the facts of the case.

If the loan was sold off in the secondary market, the leverage may not be a great as “holder in due course” arguments may present themselves. In the situation where you had lenders like Countrywide who originated the loans, sold them off, and then retained loan servicing rights (and where they are now acting like innocent loan servicers), perhaps leverage exists in this scenario since they should not be allowed to “wash their dirty laundry” in the secondary market and then continue to profit from its deceptive acts.

Notice and Cure Requirement:

Section 1782 of the Consumer Legal Remedies Act requires that any Plaintiff that intends to file a cause of action for damages under the CLRA MUST PROVIDE each Defendant with notice of the alleged violations and provide the Defendants 30 days to correct the alleged violations. If the defendant corrects the damage then there is no action for damages.

In the loan modification context, providing the borrower a fixed loan at an affordable interest rate and “washing the borrower out of the toxic and predatory loan” that has unconscionable contract provisions may be a sensible correction of the unconscionable provisions. Other potential solutions may apply given the facts of a case.

Note: If there is no time to send the demand to cure (ex. there is a pending sale date within 30 days), it may be possible to file a complaint for injunctive relief, and then provide notice to the defendant that Plaintiff intends to amend the complaint to include damages claims. If the defendant does not cure within the 30-day time period, plaintiff may so amend the complaint. See Cal. Civ. Code § 1782(d).

Under CLRA Section 1780:

What are the potential remedies for the Consumer Legal Remedies Act (assuming you can prevail on a claim for the option arm loan)?

(a) Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to recover or obtain any of the following:

(1) Actual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000 minimum).

(2) An order enjoining the methods, acts, or practices.

(3) Restitution of property.

(4) Punitive damages.

(5) Any other relief that the court deems proper.

(b)(1) Any consumer who is a senior citizen or a disabled person, as defined in subdivisions (f) and (g) of Section 1761, as part of an action under subdivision (a), may seek and be awarded, in addition to the remedies specified therein, up to five thousand dollars ($5,000) where the trier of fact does all of the following:

(A) Finds that the consumer has suffered substantial physical, emotional, or economic damage resulting from the defendant’s conduct.

(B) Makes an affirmative finding in regard to one or more of the factors set forth in subdivision (b) of Section 3345.

(C) Finds that an additional award is appropriate.

(2) Judgment in a class action by senior citizens or disabled persons under Section 1781 may award each class member that additional award if the trier of fact has made the foregoing findings.

(c) Whenever it is proven by a preponderance of the evidence that a defendant has engaged in conduct in violation of paragraph (24) of subdivision (a) of Section 1770, in addition to all other remedies otherwise provided in this section, the court shall award treble actual damages to the plaintiff. Subdivision (c) shall not apply to attorneys licensed to practice law in California, who are subject to the California Rules of Professional Conduct and to the mandatory fee arbitration provisions of Article 13 (commencing with Section 6200) of Chapter 4 of Division 3 of the Business and Professions Code, when the fees charged or received are for providing representation in administrative agency appeal proceedings or court proceedings for purposes of procuring, maintaining, or securing public social services on behalf of a person or group of persons.

(d) An action under subdivision (a) or (b) may be commenced in the county in which the person against whom it is brought resides, has his or her principal place of business, or is doing business, or in the county where the transaction or any substantial portion thereof occurred.

VENUE NOTE: In any action subject to the provisions of this section, concurrently with the filing of the complaint, the plaintiff shall file an affidavit stating facts showing that the action has been commenced in a county described in this section as a proper place for the trial of the action. If a plaintiff fails to file the affidavit required by this section, the court shall, upon its own motion or upon motion of any party, dismiss the action without prejudice.

(e) The court shall award court costs and attorney’s fees to a prevailing plaintiff in litigation filed pursuant to this section. Reasonable attorney’s fees may be awarded to a prevailing defendant upon a finding by the court that the plaintiff’s prosecution of the action was not in good faith.

(1) Injunctions:

Under California’s Consumers Legal Remedies Act (CLRA), party to contract can seek to enjoin operation of illegal or unconscionable provision of contract, in addition to defending against effort to enforce such a provision. See Ting v. AT & T, N.D.Cal. 2002, 182 F.Supp.2d 902.

Claims for injunctive relief under the Consumers Legal Remedies Act (CLRA) are intended to remedy public wrongs and further the public interest and are not subject to arbitration. See Klussman v. Cross Country Bank (App. 1 Dist. 2005) 36 Cal.Rptr.3d 728. The Legislature did not intend for injunctive relief claims benefiting numerous persons to be subject to arbitration. It is not clear if an individual claim for injunction would be precluded from arbitration.

1. Actual Damages:

Actual Damages and Causation are Required: To state a cause of action for a violation of the CLRA, section 1780(a) requires allegations of actual damages that are actually caused by the wrongful and deceptive conduct at issue.

In the context of predatory and toxic option ARM loans, if the borrower was never informed about the precise details of the loan, I would argue that all the negative amortization accrued constitutes actual damages. There are probably several other arguments that could be raised depending on the borrowers particular loan.

1. Contract Invalidation:

Section 1770(a)(14) provides consumers with a basis to invalidate contracts. See Podolsky v. First healthcare Corp, 50 Cal. App. 4th at 654-55 (1996). Parol evidence is not barred

a) Attorney Fees: The CLRA allows a prevailing plaintiff to recover court costs and attorneys’ fees as a matter of right: “The court shall award court costs and attorney’s fees to a prevailing plaintiff in litigation.” Courts will look to the general definition of “prevailing party” as illuminated by California Code of Civil Procedure section 1032 and cases defining this term.

b) Restitution: See above

c) Punitive Damages / Treble Damages: See above

NOTE Cumulative Remedies: Section 1752 provides that the remedies provided under the CLRA are not exclusive and are available in addition to “other procedures or remedies for any violation or conduct provided for in any other law.

Statute of Limitations

CLRA claims are subject to a three-year statute of limitations. This is similar to Truth in Lending Rescission Claims. However, note that Courts have held that the statute runs from the time that a reasonable person would have discovered the basis for a claim. See Massachusetts Mutual Life Ins. Co. v. Superior Court, 97 Cal. App. 4th at 1295 (2002).

NOTE: The average consumer might not have discovered the unconscionable clause at the time of making the loan. They may have only realized this gross unfairness of the loan until a later date when the loan adjusted or recasted. Therefore, these option arm loan cases are very case specific and the need to have an attorney review the facts of any case are of the utmost importance. Time is definitely of the essence in these types of cases and prompt action is required to protect your legal rights.

Federal Pre-Emption

See Smith v. Wells Fargo Bank, N.A., 135 Cal. App. 4th at 1482, 1484, (2005). Case held that the National Bank Act did not preempt CLRA claim against national bank. This issue needs to be considered as a change in the facts could change the outcome.

Conclusion

Where California homeowners and borrowers were deceptively mislead and where unconscionable terms are set forth in the loan documents, there may be a claim that can be made the the contract is unconscionable in violation of the Consumer Legal Remedies Act. There are several violations that can support a violation of the Act. Any Plaintiff must bring such a claim in good faith and with sufficient facts. A notice to the Defendants with an opportunity to cure the violation is an essential requirement before filing a lawsuit. When filing a lawsuit, the Plaintiff must file an affidavit of venue. If the lender is not willing to acknowledge or remedy a violation of the consumer legal remedies act, and fails to provide a cure in the form of a meaningful loan modification that “washes the client out of the predatory loan” then a cause of action may exist. Contact legal counsel to advise you in regards to the three year statute of limitations, which generally runs from the time a reasonable consumer would have discovered the violation. With the threat of attorney fees, punitive damages, etc., this may present a strong case for lender loan modification. The case may be more difficult when the loan was sold on the secondary market so the complete set of facts of the case must be reviewed and all the appropriate and relevant parties identified.

Attorney Steve Vondran is licensed to practice law in California and Arizona. He is also a broker in both states. This article pertains strictly to California law. We only seek to represent Clients who reside in California and in and around the Greater Phoenix area. Mr. Vondran can be emailed at Steve@VondranLaw.com or reached through www.VondranLegal.com

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