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California, from the National Mortgage Fraud Settlement, to assist California consumers.

September 2013 Newsletter

The Import & Impact ofGlaski v. Bank of America

A month has passed since the California Court of Appeal handed

down their decision in Glaski v. Bank of America, N.A., 218 Cal. App.

4th 1079 (2013). In that month, the opinion has been published and

Bank of Americas petition for rehearing denied. Now binding on all

California trial courts, the opinion has attracted much attention and

praise in the foreclosure defense world. This article summarizes the

courts major findings, places the decision into the current legal

landscape, and analyzes both its potential impact and its limitations.

I. The Courts Conclusions

Ultimately, the courts conclusions are rooted in two basic and

related inquiries that clarify (and in some respects simplify) the

authority to foreclose question in California, at least for the time

being. First, does the borrower allege that the foreclosing party was

not the beneficiary based on specific facts? Second, if borrowers claimis based on a failed assignment, was the assignment void, or voidable?

If borrowers can allege specific facts showing that the purported

beneficiary derived their authority from a void assignment, their

claims, under Glaski, may now survive the pleading stage in California

courts.

A. Alleging that the Assignment Granting the Beneficiarys Power to

Foreclose is Void, is a Specific, Factual Allegation and the Basis for a

Valid Wrongful Foreclosure Claim

The court divides wrongful foreclosure claims based on an authority

to foreclose theory into two categories: 1) borrowers who allege,

generally, that the foreclosing entity was not the true beneficiary


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under the deed of trust; and 2) borrowers who allege, with specific

facts, that the foreclosing entity was not the true beneficiary.1

Borrowers in the first category rarely make it past the pleading stage,

but borrowers in the second group may. In other words, it is not

enough to say X is not the true beneficiary, but it may be enough to

allege X is not the true beneficiary becauseY. If Y is a specific,

factual allegation that shows the foreclosing entity did not have the

authority to foreclose, then the claim is viable.

The court then explained that [o]ne basis for claiming that a

foreclosing party did not hold the deed of trust is if the assignment

purportedly giving that party foreclosing power is void.2 The court did

not say that attacking a beneficiarys assignment is the only way to

bring a wrongful foreclosure claim, only that this particular defect,

when alleged with specific facts, is enough to put the authority to

foreclose at issue. Glaski alleged that the assignment of his deed of

trust and note to the WaMu Securitized Trust was void because it

occurred after the trusts closing date.

B. Standing: Void vs. Voidable Assignment

Many securitization-based wrongful foreclosure claims fail because

the borrowers do not have standing to challenge how their loan was

securitized.3 The Glaski court framed this issue simply, focusing on the

assignment: When a borrower asserts an assignment was ineffective,a question often arises about the borrowers standing to challenge the

assignment of the loan (note and deed of trust)an assignment to

which the borrower is not a party.4 The court cites federal cases from

1See Glaski v. Bank of Am., N.A., 218 Cal. App. 4th 1079, 160 Cal. Rptr. 3d 449, 460

(2013).2

Glaski, 160 Cal. Rptr. 3d at 461 (emphasis added).3See, e.g., Rodenhurst v. Bank of Am., 773 F. Supp. 2d 886, 898-99 (D. Haw. 2011)

([C]ourts have uniformly rejected the argument that securitization of a mortgage

loan provides the mortgagor a cause of action.); Junger v. Bank of Am., N.A., 2012

WL 603262, at *3 (C.D. Cal. Feb. 24, 2012) ([P]laintiff lacks standing to challenge

the process by which his mortgage was (or was not) securitized because he is not a

party to the PSA.); Bascos v. Fed. Home Loan Mortg. Corp., 2011 WL 3157063, at *6

(C.D. Cal. July 22, 2011) (Plaintiff has no standing to challenge the validity of the

securitization of the loan as he is not an investor in of the loan trust.). 4Glaski, 160 Cal. Rptr. 3d at 461.


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other circuits,5 and a California Jurisprudence treatise to conclude, a

borrower can challenge an assignment of his or her note and deed of

trust if the defect asserted would void the assignment.6 California

courts have largely adopted a knee-jerk reaction to securitization

theories, throwing those claims out because the borrower is not a party

to, or third-party beneficiary of, the assignment agreement (the PSA in

most cases). The Glaski court broke with California precedent in

framing the issue as one of void versus voidable assignments, allowing

theories based on void assignments to survive pleading.

C. A Post-Closing Date Transfer to Trust Renders the Assignment Void

The court had thus far established: 1) Glaskis attack on the

beneficiarys assignment was specific enough that it went beyond a

general challenge foreclosing partys right to foreclose; and 2)

generally, void assignments give a borrower standing to challenge the

loans securitization, even though the borrower was not a party to, or

third-party beneficiary of, the PSA. The court then analyzed whether

Glaskis specific allegations, taken as true, would void the assignment,

giving him standing.

Like many mortgage loans, Glaskis note and deed of trust were

sold (assigned) to a trust to be bundled with other mortgages, sliced up

and sold again. Through a subsequent FDIC takeover, acquisition, and

more assignments, defendant Bank of America either became thesuccessor trustee to the WaMu trust, or acquired the Glaski deed of

trust from JP Morgan, who bought all of WaMus assets from the

FDIC.7 Either way, the possible chains of title are broken because the

transfer from JP Morgan Chase to the WaMu Securitized Trust

occurred long after the closing date of the trust.8

But does a post-closing assignment to a trust render that

assignment void? To answer this question, the Glaski court analyzed

5Id. (citing Reinagel v. Deutsche Bank Natl Trust Co., 722 F.3d 700, at *3 (5th Cir.

2013); Conlin v. Mortg. Elec. Registration Sys., Inc., 714 F.3d 355, 361 (6th Cir.

2013); Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282, 291 (1st Cir. 2013)).6Glaski, 160 Cal. Rptr. 3d at 461 (emphasis original).7Id.8Id. The WaMu trust, by its own terms, closed in 2005. Id. at 454. An assignment

recorded in 2008 stated that JP Morgan transferred and assigned all beneficial

interest under the Glaski deed of trust [and note] to LaSalle Bank NA as trustee for

WaMu [Securitized Trust].Id.


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New York law, which, according to the pleadings, was controlling,9 to

conclude that an assignment transferred after a trusts closing date is

void, rather than voidable.10

Glaski pled both threshold questions with the requisite specificity:

1) he alleged that Bank of America was not the beneficiary because the

assignment purporting to give it foreclosing power was invalid; and 2)

the assignment was void, not voidable, because the transfer to the

trust occurred after the trusts closing date. The first point got him

past Gomes, and the second established his standing.

D. Tender

The court addressed the tender issue briefly, but it was still critical

to its ruling and again emphasizes the importance of distinguishing

whether a foreclosure sale is void or voidable. Tender is not required

where the foreclosure sale is void, rather than voidable, such as when a

plaintiff proves that the entity lacked the authority to foreclose on the

property.11 Because tender was not required, and because Glaski

stated a cognizable claim for wrongful foreclosure, the court reversed

the trial courts dismissal of the complaint, and vacated and overruled

the order sustaining the Bank of Americas demurrer.

II. Placing Glaski in the California Foreclosure Landscape

A. Distinguishing Gomes: Specificity

Gomeswas probably Glaskis biggest hurdle. The court dedicated an

entire section of its opinion to differentiate its findings from those in

Gomes.12 The borrower in Gomes also brought a wrongful foreclosure

claim, alleging that the foreclosing entity, MERS, was not the

beneficiarys nominee because the unknown beneficiary did not appoint

MERS as nominee, or give MERS authorization to foreclose.13 Unlike

9Id. at 462.10Id. at 463 ([T]he [WaMu trust] trustees attempt to accept a loan after the closing

date would be void as an act in contravention of the trust document.). The closing

date is meant to protect the interests of the trusts investors because it ensures

REMIC status, exempting investors from federal income tax (with respect to the

trust). Id. at 460 n.12, 463.11Id. at 466.12Glaski, 160 Cal. Rptr. 3d at 464.13Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149, 1152 (2011).


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Glaski, however, Gomes left his argument there. He did not take the

crucial step of explaining why MERS, who was listed as beneficiary

and nominee in the deed of trust,14 was not the true beneficiary.15

Rather, Gomes alleged that CC 2924 afforded him the right to test

whether MERS had the beneficial interest before the sale took place. 16

Whether is the key word and the difference between a Gomes claim

and a Glaski claim. Gomes wanted to investigate whether or not MERS

was the beneficiary. By contrast, Glaski alleged that Bank of America

was definitely not the beneficiary because the assignment giving them

beneficiary status was late to the trust, and therefore void. Gomes

asked, who has the authority to foreclose? whereas Glaski stated: X

definitely does not have authority for these reasons . . . . The Gomes

court found that CC 2924 provides no right for borrowers to ask

whether the foreclosing party had the authority to do so.17

B. Distinguishing Nguyen: Void vs. Voidable

The Glaski court also had to reckon with Nguyen v. Calhoun, 105

Cal. App. 4th 428 (2003), which held that anything outside of the

foreclosure sale process cannot be used to challenge a presumably valid

and complete sale.18 Specifically, the court had to consider whether an

ineffective transfer to the WaMu Securitized Trust was an aspect of

the foreclosure sale, or if it fell outside of that sale and was therefore

irrelevant.19 Because the transfer to the trust was fundamental to

Bank of Americas authority to foreclose, and would void the sale itself,

the court decided that the trust transfer was part of the foreclosure

sale and a valid basis for challenging the foreclosure.20

14Id. at 1151.15

Instead, Gomes claimed he d[id] not know the identity of the Notes beneficialowner, but that whoever authorized MERS to foreclose was not the beneficiary or

the beneficiarys agent. Id. at 1152. He gave no specific reason for believing this,

other than that his loan was sold .. . on the secondary mortgage market. Id.16Id.17Id. at 1155 ([Section 2924 does not] provide for a judicial action to determine

whether the person . . . foreclos[ing] . . . is indeed authorized. ).18See Nguyen v. Calhoun, 105 Cal. App. 4th 428, 441-42 (2003).19Glaski, 160 Cal. Rptr. 3d at 466.20Id.


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C. Distinguishing Fontenot: Burden Shifting

The Glaski opinion nowhere cites Fontenotv. Wells Fargo Bank,

N.A., 198 Cal. App. 4th 256 (2011), but it is important to recognize why

Glaski came out differently from that case. As in Glaski, the borrower

in Fontenot alleged that an invalid assignment voided the entire

foreclosure transaction.21 Unlike Glaski, however, Fontenot based her

invalid assignment theory, not on specific facts like a late transfer to a

trust, but on the theory that the assignor (MERS) had the burden to

prove the assignment was valid, and could not do so.22 The court

determined that MERS did not bear that burden because nothing in

the statutory scheme regulating nonjudicial foreclosures created that

duty: [A] nonjudicial foreclosure sale is presumed to have been

conducted regularly, and the burden of proof rests with the party

attempting to rebut this presumption.23If the party challenging the

trustees sale [can] prove such irregularity and . . . overcome the

presumption of the sales regularity, that could shift the burden to

defendant to show a valid assignment.24 This is precisely what Glaski

accomplished: by pleading specifically that the assignment is void

because of the late transfer to the trust, Glaski rebutted the

presumption of regularity, which is all he needed to do at the pleading

stage.

III. The Promise & Limits ofGlaski

Glaski cannot be used to bolster every securitization theory. To

employ Glaski principles effectively, advocates should undertake the

same analysis the court did. First, does the borrower simply allege the

foreclosing party does not hold the beneficial interest in the deed of

trust (Gomes), or does the borrower allege that the foreclosing party

could not possibly be the rightful beneficiary because the assignment

giving them that interest was invalid? (Glaski). Second, do the

borrowers allegations render the assignment void or voidable? If void,then Glaski could lend support to both the borrowers standing and

their wrongful foreclosure claim. The HBOR Collaborative will monitor

21See Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256, 269 (2011).22Seeid. at 269-70.23Id. at 270.24Id. (quoting Melendrez v. D & I Inv., Inc., 127 Cal. App. 4th 1238, 1258 (2005)).


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Glaskis implications and influence as other courts interpret this

important decision.


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Summaries of Recent Cases25

State Cases

Challenging the Authority to Foreclose Requires Specific

Factual Allegations

Siliga v. Mortg. Elec. Registration Sys., Inc., __ Cal. App. 4th __,

2013 WL 4522474 (Aug. 27, 2013): Nonjudicial foreclosures are

regulated by statute. Borrowers may not bring the foreclosing entities

to court to require them to prove anything outside of what is already

required by statute. These types of actions are preemptive in that

they do not seek redress for specific misconduct (which would create a

valid cause of action), but rather generally allege that the entity

initiating a foreclosure lacks the authority to do so. Such an action is

preemptive if the plaintiff alleges no specific factual [basis] for the

claim that the foreclosure was not initiated by the correct person

(emphasis added).

Here, borrowers alleged MERS lacked the authority to foreclose

because: 1) when the lender went out of business, their agreement with

MERS (making MERS the DOT beneficiary and the lenders nominee)

lapsed, negating any authority to foreclose MERS did possess; 2)

MERS had no authority to assign the note, and any DOT assignment

without a note assignment is void; and 3) MERS required the lendersauthorization to assign the DOT and the note to satisfy the statute of

frauds, authorization it did not have. As to the first allegation, the

borrowers failed to allege in the complaint that the lender had gone out

of business. The lenders chapter 11 bankruptcy indicates

reorganization, but neither the companys death nor an incapacity to

contract. Second, MERS authority to assign the note derives from its

agency agreement with the lender. A general allegation that MERS

lacked authority, without alleging a specific problem with the agency

agreement, is not sufficient to state a claim. Lastly, the claim thatMERS lacked written authorization to assign the note and DOT,

without a more factual allegation, attempts to make MERS prove its

authority to foreclose outside the statutory scheme. Without sufficient

25 Cases without Westlaw citations can found at the end of the newsletter.


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factual allegations, the court affirmed the dismissal of borrowers

complaint.

Litigation Privilege Does Not Bar a UCL Claim Based on

Rosenthal Act and FDCPA Violations

People v. Persolve, LLC, __ Cal. App. 4th __, 2013 WL 4354386

(Aug. 15, 2013): Californias litigation privilege bars suits based on any

communication made in judicial or quasi-judicial proceedings . . . to

achieve the object of the litigation. CC 47. If the privilege directly

conflicts with a coequal state statute, a court will decide which takes

precedence by evaluating which is more specific, the statute or the

privilege, and whether application of the privilege would render the

statute significantly or wholly inoperable. Usually an UCL claimwould fail the specificity element because Bus. & Prof. Code 17200 is

much broader than the litigation privilege. Because this UCL claim

was based on alleged violations of the FDCPA and Rosenthal Act,

however, the privilege does not bar this UCL claim. Not only are those

two statutes more specific than the litigation privilege (explicitly

forbidding creditors from misleading debtors, providing false

information, etc.), but applying the privilege to prevent FDPCA and

RFDPCA-based claims would render those statutes meaningless. The

whole point of the FDCPA and RFDPCA is to regulate debt collectionconduct, much of which occurs in litigation, or in preparation for

litigation. The Court of Appeal reversed the trial courts dismissal and

allowed the county D.A.s UCL claim to continue.

CCP 1162 Notice Requirements; CCP 1161as Required

Compliance with CC 2924

Bank of New York Mellon v. Preciado, Nos. 1-12-AP-001360 & 1-

12-AP-001361 (Cal. App. Div. Super. Ct. Aug. 19, 2013): To be effective,UD notices to quit must be properly served: 1) by personal service; 2)

or if personal service failed, by leaving the notice with a person of

suitable age and discretion at the residence or business of the tenant

(or former borrower) and then mailing a copy; 3) or if the first two

methods failed, by posting a notice at the residence and mailing a copy.

CC 1162. Here, the process servers affidavit stated that after due


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and diligent effort, he executed post and mail service. The trial court

accepted this statement as evidence of compliance with CC 1162, but

the appellate division reversed. The statute indicates that post and

mail is the last available method of service, not the first. Since the

affidavit does not specifically assert that personal service was ever

attempted, the trial court erred in assuming that service complied with

CC 1162. Further, defendants appeal based on defective service was

not barred because they failed to assert it as an affirmative defense.

Proper service is an essential [UD] element and tenants general

denial of each statement in the complaint put service at issue.

Post-foreclosure UD plaintiffs must also demonstrate duly perfected

title and compliance with CC 2924 foreclosure procedures. CCP

1161a. Duly perfected title encompasses all aspects of purchasing the

property, not just recorded title. The trial court relied on plaintiffstrustees deed upon sale, showing plaintiffs purchased the property at

the foreclosure sale. The court ignored contradicting testimony alleging

that the property was sold to the loans servicer, not plaintiff. Further,

to prove compliance with section 2924, the plaintiff must necessarily

prove the sale was conducted by the trustee. Here, the trustees deed

upon sale identifies one trustee, but the DOT identifies another. The

trial court erred in accepting the recorded trustees deed upon sale as

conclusive evidence of compliance with 2924, and the appellate

division reversed.

TPP Requires Servicer to Re-review Borrower for Permanent

Modification

Lovelace v. Nationstar Mortg. LLC, No. 34-2012-00119643-CU-BC-

GDS (Cal. Super. Ct. Sacramento Co. Aug. 22, 2013): Borrowers must

allege performance, breach, consideration, and damages to plead a

breach of contract claim. Here, borrowers sufficiently alleged each

element and defendants demurrer was overruled. The predecessorservicer sent borrowers a TPP agreement and letter, requiring

borrowers to sign and return the agreement, make their payments,

and contact the servicer when the TPP ended, so servicer could re-

review them for a permanent modification. Borrowers performed all

aspects of the contract, but Nationstar, the current servicer, breached

by refusing to re-review them for a modification. To show


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consideration and damages, borrowers successfully alleged the time

and effort required in applying for a modification. Nationstar argued

that the TPP agreement and letter only constituted an agreement to

agree in the future. The TPP language clearly indicated, though, that

the servicer would perform a re-review ifthe borrower met the other

requirements, so this argument was unavailing.

Preliminary Injunction Granted on SPOC Claim; Dual

Tracking: First Application Requirement

Rogers v. OneWest Bank FSB, No. 34-2013-00144866-CU-WE-GDS

(Cal. Super. Ct. Sacramento Co. Aug. 19, 2013): HBORs single-point-

of-contact provision requires servicers to provide borrowers seeking

foreclosure alternatives with a single person (or team) that handles theborrowers application, has updated information, and the authority to

stop a foreclosure sale. Here, the court granted borrowers request for a

preliminary injunction to stop the foreclosure of her home because her

servicer gave her at least three points of contact over the course of one

month. One of these contacts informed her she did not qualify for a

HAMP modification. This contact, though, should have remained

borrowers contact until the servicer determined she did not qualify for

any foreclosure alternative, as required by CC 2923.7(c). Because the

borrower was shuffled to different people after this HAMP denial butbefore she was denied for other alternatives, the court granted the

injunction and set a $10,000 bond.

HBOR prohibits dual tracking while a servicer reviews a borrowers

first modification application. Even when the first application was

submitted pre-HBOR (1/1/13), if the servicer gave it a full review and

denied the application, the servicer has no duty to halt the foreclosure

process until it considered a second application (absent a change in

financial circumstances). Here, borrower submitted their first

application in 2012, which was denied by defendant in April 2013.Borrowers second application was submitted, at defendants

invitation, in May 2013, and defendant subsequently recorded an NTS.

Borrower argued that her 2012 application should not bar the dual

tracking claim based on her second application because HBOR does

not apply retroactively to a 2012 loan modification request. The court

pointed to the language in CC 2923.6(g) (specifically including pre-


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1/1/13 applications in its first lien loan modification definition) and

found the borrower unlikely to prevail on the merits of her dual

tracking claim.

Motion to Quash UD Service: CCP 1161bs 90-day Notice

Requirement

Deutsche Bank Natl Trust Co. vs. Pastor, No. 1417736 (Cal.

Super. Ct., Santa Barbara Co. Aug. 9, 2013): A motion to quash is the

correct procedural challenge to a courts exercise of personal

jurisdiction. In the unlawful detainer context, a defendant should bring

a motion to quash if the notice period is inappropriate. Here, plaintiff

served tenant a 30-day notice instead of the 90-day notice required for

tenants occupying foreclosed property. CCP 1161b. Plaintiff arguedthat as the daughter of the former homeowners, who still occupied the

property, the tenant only required a 30-day notice. Tenant provided

credible evidence that her parents no longer occupied the property,

convincing the court to grant the motion to quash. Plaintiff must serve

tenant with a 90-day notice in accordance with CCP 1161b, and can

only move forward with a UD after those 90 days.

Federal Cases

Fair Credit Reporting Act

Ferguson v. Wells Fargo Bank, __ F. Appx __, 2013 WL 4406843

(9th Cir. Aug. 19, 2013):The Fair Credit Reporting Act requires

furnishers of credit information (including servicers of mortgage loans)

to, upon notification of a dispute, investigate and report on their

calculations and conclusions. Here, borrower alleged that though Wells

Fargo may have responded to the dispute notification by completing

and returning a form sent by the credit-reporting agency, they

incorrectly reported that the borrower had gone through bankruptcy.

Upon production of this form, the district court granted summary

judgment to Wells Fargo. A factual dispute exists, however, because

Wells Fargo left a space blank instead of entering a particular code,

which would presumably have indicated that the borrower had not

gone through bankruptcy. The Ninth Circuit reversed and remanded.


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HOLA Does Not Preempt State Tort Law Claims; Tender;

Specifically Pled Fraud Claim; Modification Does Not Give Rise

to a Duty of Care

Wickman v. Aurora Loan Servs., LLC, 2013 WL 4517247 (S.D. Cal.

Aug. 23, 2013): State laws regulating or affecting the processing,

origination, servicing, sale or purchase of . . . mortgages are

preempted by the Home Owners Loan Act, as applied to federal

savings associations. State tort law claims that only incidentally affect

those areas of banking, however, are not preempted. Here, borrower

claimed fraud, negligent misrepresentation, and promissory estoppel

based on their servicers promise to work with the borrower on a loan

modification in good faith. Laws based in the general duty not to

engage in fraud, do not require anything additional from the servicer,

and do not demand or require a modification. These laws onlyincidentally affect defendants business practices, and borrowers

claims are therefore not preempted by HOLA.

Tender is usually required to bring a claim for wrongful foreclosure.

There are at least three exceptions to this general rule: 1) when it

would be inequitable to demand tender; 2) when the borrower seeks to

prevent a sale from happening, rather than undo a completed sale; and

3) when the sale is (or would be) void, rather than voidable. This

borrower brought his wrongful foreclosure claim after a notice of

trustee sale was recorded, but before an actual sale. Accordingly,

tender was not required here.

Fraud claims demand very specific pleading of: 1) a misrepresentation;

2) defendants knowledge that the misrepresentation is false; 3)

defendants intent to induce borrowers reliance; 4) the borrowers

justifiable reliance; and 5) damages. Many claims for fraud in wrongful

foreclosure cases are dismissed for lack of specificity. But here,

borrower was able to describe several conversations with a specific

employee of defendant, when those conversations occurred, and themisrepresentations made. Not all statements were ultimately held to

constitute a claim for fraud, but the employees statement assuring

borrower he was eligible for a loan modification despite his

unemployed status does serve as the basis for a fraud claim. The

employee told the borrower that being unemployed would actually help

him qualify for a modification because of financial hardship.


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Borrower alleged defendant knew this statement was false,

maintained a policy of denying modifications based on unemployed

status, and never intended to review him for a modification in good

faith. The fraud claim based on this statement survived the motion to

dismiss.

As outlined in Rosenfeld (above), a claim for negligent

misrepresentation requires the establishment of a duty of care owed

from the lender/servicer to the borrower. The court declined to find a

duty here, where defendant allegedly misrepresented the borrowers

ability to secure a modification while unemployed. The court does not

imply that any and all modification negotiations fail to give rise to a

duty of care, only that this particular negotiation and assurance does

not.

Dual Tracking: Document & Submit Requirements for a

Second Application; Modification Does Not Give Rise to a Duty

of Care

Rosenfeld v. Nationstar Mortg., LLC, 2013 WL 4479008 (C.D. Cal.

Aug. 19, 2013): Dual tracking protections are afforded to borrowers

who submit a second modification application if they can document

and submit to their servicer a material change in financial

circumstances. Here, borrowers submitted their first modificationapplication in 2012, and while that application was under review,

alerted their servicer that their income was reduced. With this

information, the servicer put them on a TPP plan, and then offered a

permanent modification in 2013. Borrowers objected to the terms of the

modification, asserting that the servicer did not consider the reduction

in income. Defendant scheduled a foreclosure sale, concluding that

borrowers had rejected the loan modification offer. While the sale was

scheduled, borrowers contend their financial circumstances changed a

second time, because they paid off credit card debt, reducing their

expenses. Their CC 2923.6 claim alleges that dual tracking

protections should extend to a second modification application, which

they should be allowed to submit based on their changed

circumstances. The court disagreed, largely because borrowers

complaint did not allege when the credit card debt was extinguished,

or when (and if) borrowers made their servicer aware of this change, as


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required. Alleging a change in financial circumstances in a complaint

does not fulfill the document and submit requirements in CC

2923.6(c). The court dismissed borrowers UCL claim based on the

alleged dual track.

To state a claim for negligence, a plaintiff must establish that

defendant owed them a duty of care. Generally, there is no duty of care

between a financial institution and a borrower, if their relationship is

confined to a usual lender-borrower relationship. This court

determined that activities related to loan modifications fall squarely

within defendants traditional money-lending role. Without a duty of

care, the borrowers negligence claim was dismissed.

CC 2923.5 Pleading Requirements vs. Preliminary Injunction

Requirements

Weber v. PNC Bank, N.A., 2013 WL 4432040 (E.D. Cal. Aug. 16,

2013): A servicer may not record an NOD until 30 days after they

contact the borrower to discuss foreclosure alternatives. Servicers must

make a diligent effort to contact the borrower under specific statute

requirements. A servicer must record an NOD declaration (with the

NOD) attesting to their statutory compliance. Here, borrowers 2923.5

claim survived a motion to dismiss because they alleged not only that

their servicer never contacted them before recording an NOD, but thatthe servicer could not have made a diligent attempt to contact them.

The specificity of this second allegation was crucial to their claim: they

asserted that their home telephone number had not changed since loan

origination, the servicer had successfully contacted borrowers in the

past, they had a working, automated answering machine that recorded

no messages from the servicer, and that they never received a certified

letter from servicer. These factual allegations put the veracity of

defendants NOD declaration at issue and defeated the motion to

dismiss. The court also indicated that, if borrowers allegations weretrue, not only would defendant have violated CC 2923.5, but the

NOD itself would be invalid, stopping the foreclosure.

The court allowed the 2923.5 claim to move forward, but denied

borrowers request for a preliminary injunction. To win a PI, a moving

party must demonstrate that they are likely to succeed on the merits of


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their claim. Here, even though borrowers pled their 2923.5 claim

with sufficient specificity, they failed to provide sufficient evidence to

show that they are likely to prevail on the merits. Defendant offered

evidence of a diligent effort to contact borrowers, and of actual contact.

Defendant produced copies of letters allegedly sent to borrowers

offering to discuss financial options regarding their loan. The letters

also memorialize several telephone conversations with borrowers.

Borrowers argument that these phone conversations were initiated by

them, not by the servicer, as required by statute, was deemed likely

unmeritorious by the court, which denied the PI.

Dual Tracking: PI Granted on 2011 Application

Ware v. Bayview Loan Servicing, LLC, 2013 WL 4446804 (S.D.

Cal. Aug. 16, 2013): In California federal district courts, a party

seeking a preliminary injunction must show they are likely to succeed

on the merits, to suffer irreparable harm without the PI, that the

balance of equities tips in their favor, and that the PI serves the public

interest. Here, borrowers sought a PI to prevent the foreclosure of their

property, alleging three separate violations of HBORs dual tracking

provision. First, they claimed that defendants cursory denial of their

short sale application violated CC 2923.6(f), which requires servicers

to identify reasons for a denial. The measure only applies to loan

modifications however, not short sales, so this claim was deemed

unlikely to prevail on the merits. Second, borrowers claimed they

should be granted dual tracking protections on their second

modification application because they sent a letter to their servicer

asserting an increase in routine expenses. This barebones

description of a change in financial circumstances does not constitute

documentation under CC 2923.6(g). Lastly, borrowers alleged a

dual tracking violation based on 2013 foreclosure actions, which

occurred before defendant made a determination on borrowers 2011

modification application. Defendant pointed to their internal policy ofdenying modifications to borrowers in bankruptcy (which borrowers

were in, from 2011-2013) as proof of the evaluation and denial. The

court determined that this policy did not, by itself, constitute an

evaluation for purposes of CC 2923.6. To proceed with a foreclosure

after HBOR became effective, defendant had to expressly deny

borrowers 2011 modification application. Because borrowers are likely


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to prevail on this third dual tracking claim, foreclosure constitutes

irreparable harm, a mere delay does not unduly burden defendants,

and because it is in the publics interest to enforce a newly enacted

state law, the court granted the PI.

Wrongful Foreclosure Burden of Proof

Barrionuevo v. Chase Bank, 2013 WL 4103606 (N.D. Cal. Aug. 12,

2013): Wrongful foreclosure plaintiffs normally bear the burden of

proving a defendant lacked authority to foreclose. If, however, 1) no

foreclosure has taken place; and 2) the borrower has alleged a specific

factual basis attacking the servicers authority to foreclose, the burden

shifts to defendant to prove authority. (The court implies this burden

shifting is unsettled law and does not seem certain the burden shouldshift to defendant, but goes through the analysis anyway.) Here, the

borrower pled an authority to foreclose theory based on WaMus

securitization (selling) ofborrowers loan. When Chase subsequently

purchased all of WaMus assets, the loan could not have been included

in the purchase because the loan was no longer WaMus to sell.

Purchasing and owning nothing, Chase lacked authority to foreclose.

This theory was specific enough to survive a motion to dismiss and

shift the burden to defendant. Chase provided evidence to support

their assertion that the loan was not securitized before Chasespurchase: sworn testimony that it possesses the original note and

DOT, electronic records attesting to its authority to foreclose, and the

absence of borrowers loan number in the WaMu trust. Even if the

burden had not shifted to Chase, the court found borrowers evidence

insufficient to survive a summary judgment motion. The court was not

persuaded by their experts research into the WaMu trust, reasoning

that, absent proof that borrowers specific loan was sold to the trust,

the experts findings amounted to speculation and opinion.A jury could

reasonably conclude from Chases evidence that Chase had authority to

foreclose on borrowers property.


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First & Second TPP Agreements as Distinct Bases for Fraud &

Promissory Estoppel Claims; Pre-HBOR Authority to Foreclose

Theory

Alimena v. Vericrest Fin., Inc., 2013 WL 4049663 (E.D. Cal. Aug. 9

2013): Deceit (a type of common law fraud) requires: 1)

misrepresentation; 2) knowledge of falsity; 3) intent to defraud; 4)

justifiable reliance; and 5) causal damages. In this case, borrower

successfully pled several counts of intentional misrepresentation based

on separate misrepresentations by their servicer, Citimortgage.

Borrowersfirst TPP agreement misrepresented Citis intentions

because it required borrowers to make timely TPP payments and

maintain documentation, and bound Citi to consider them for a

permanent modification if those conditions were metsomething Citinever did. Citis alleged conduct during the modification process (oral

and written promises, assurances, etc.), coupled with their ultimate

refusal to consider borrowers for a permanent modification, shows

knowledge and intent to defraud. Absent Citis TPP agreement and

assurances, borrowers would not have made their TPP payments,

demonstrating reasonable reliance. Finally, borrowers adequately pled

damageseven though their delinquency predated their modification

applicationby pointing to the dozens of fruitless hours spent

trying to meet Citis requests (fruitless because Citi never intended tomodify), a delayed bankruptcy filing, and the TPP payments

themselves. Alleging similar facts, borrowers successfully pled another

two counts of intentional misrepresentation against Citi for 1) their

promise, and then failure, to honestly review borrowers second HAMP

application, and 2) Citis notice (in letter form) of a second TPP and

subsequent failure to review them for a modification in good faith. To

show damages stemming from the second TPP, borrowers added the

sale of their car, which Citi assured borrowers would qualify them for a

modification.

From the same set of facts, borrowers successfully stated two claims

for promissory estoppel, based on each TPP agreement. Central to the

courts reasoning was its basic view of the first TPPs language, which

constitutes an enforceable agreement to permanently modify a

mortgage if the requirements are met by the borrower. Those

requirements were: 1) making timely TPP payments; 2) continuing to


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submit requested documentation; and 3) continuing to qualify for the

modification under HAMP. To plead a PE claim, borrowers must

amend their complaint to allege the third element: that they continued

to qualify for HAMP throughout the TPP process. Their PE claim is

still viable based on a different allegation, however: that Citi was

obligated to evaluate them for a permanent modification in good faith,

and failed, evidenced by Citis false accusation that borrowers failed to

supply all required documents, resulting in denial. Borrowers also

have a viable PE claim based on the second TPP. After all trial period

payments are timely made and you have submitted all the required

documents, your mortgage will be permanently modified, is a clear

and unambiguous promise, and their TPP payment evidenced

justifiable reliance, and constitutes an injury.

Pre-HBOR, CC 2924 required foreclosing entities to record an NOD,let three months pass, and then record an NTS. HBOR clarified that

the foreclosing entity must also possess the authority to foreclose. CC

2924(a)(6). Even without this additional protection, though, these

borrowers successfully pled a wrongful foreclosure claim based on an

authority to foreclose theory. They alleged that defendant Lone Star

was the beneficiary and note holder when MERS, not Lone Star,

assigned the DOT to Citi. Because Lone Star held the note, was the

loans beneficiary, and apparently did not appoint MERS as its agent,

MERS did not have the authority to assign anything, voiding theforeclosure. (Borrowers must present evidence, showing that MERS

was not Lone Stars agent, at a later stage.)

HOLA Preemption; CC 2923.5 Requirements; Wrongful

Foreclosure Claim Based on Loan Securitization

Cerezo v. Wells Fargo Bank, N.A., 2013 WL 4029274 (N.D. Cal.

Aug. 6, 2013): California federal district courts have adopted several

different analyses to determine whether national banks can invokeHOLA preemption, despite HOLAs application to federal savings

associations. This court objected to the popular bright line method[ ]

of applying HOLA wholesale to any successor in interest to a federal

savings association . . . . Logically, it makes more sense to examine

the conduct being litigated. If the conduct arises from the savings

associations activities, apply HOLA. If the conduct arises from the


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banks activities, then discern whether the action stems from the

successors obligations on instruments originating from the [savings

association] or whether the successor is acting independently of any

requirements from the instruments. The court though, declined to

decide the HOLA issue without sufficient briefing.

CC 2923.5 only applies to owner-occupied property (defined in CC

2924.15). Borrowers failure to allege compliance with this requirement

was not fatal to their claim, however, because defendant conceded this

element by requesting judicial notice of their 2923.5 declaration, in

which defendant did not dispute owner-occupancy.

A 2923.5 declaration attests to a servicers due diligence in

attempting to contact the borrower. Here, borrowers alleged that

defendant never contacted them pre-NOD, nor had defendant complied

with 2923.5s due diligence requirements. Further, defendants

2923.5 declaration was invalid because it was signed by someone who

lacked personal knowledge of its contents. The court found personal

knowledge not required to sign a declaration.26Borrowers 2923.5

claim survived anyway, though, because their allegation that they

were never contacted is a triable issue. While the claim survived, the

court denied borrowers request for an injunction, reasoning that the

borrowers may delay the foreclosure by prevailing on the merits.

As inBarrionuevo(above), borrowers authority to foreclose theory ispremised on the original lenders securitization of the note before

defendant invalidly purchased it. Other courts have found that

securitization of the . . . note does not result in loss of the power of sale

under a DOT, but this court disagrees. Securitizing the note sells the

proceeds from the mortgage, and it would be illogical if the seller

somehow retained the right to foreclose on the property.

Class Certification on Contract, Rosenthal Act, & UCL Claims

Based in TPP Agreements

26 Notably, the court did not discuss CC 2924.17, which became effective January 1,

2013 as part of HBOR. This statute requires servicers to review 2923.5 declarations

and ensure that their contents are supported by competent and reliable evidence.

In this case, the NOD was recorded in 2012, and 2924.17 may have then not

applied, even though the litigation began in 2013.


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Gaudin v. Saxon Mortg. Servs. Inc., 2013 WL 4029043 (N.D. Cal.

Aug. 5, 2013): The court certified the proposed class in this HAMP TPP

breach of contract case because all essential certification elements

were met. Notably, the named plaintiffs basic claim that compliance

with TPP requirements created an enforceable contract requiring

defendant to provide her with a permanent modificationraised

common and typical questions that pertained to a defined,

ascertainable class: borrowers who complied with the same TPP

agreement, with the same servicer, and were never given permanent

modifications. The court analyzed each claim to determine whether

they predominate and are superior to the individual class members.

All contract elements (performance, breach, consideration, and

damages) must meet the predominance and superiority requirement

for the breach of contract claim to survive class certification. Here, notonly were TPP payments themselves ruled consideration, but so too

was applying for a modification (which requires burdensome

documentation), jeopardizing credit ratings by reduced mortgage

payments, and risking a pointless loan extension (with additional

interest and late payments) if a permanent modification was never

granted. This consideration was common to all class as participants in

the same TPP agreement.

Under the FDCPA, entities that collect a debt which was not in

default at the time it was obtained are not considered debt

collectors. There is no similar restriction in the Rosenthal Act. To

bring a valid claim under the Rosenthal Act, then, a borrower does not

need to be in default, whereas an FDCPA claim requires default to

have standing. Plaintiffs Rosenthal Act claims also meet class

certification requirements because the Rosenthal violations are in the

four corners of the TPP, common to all class members.

There are three possible prongs within a UCL claim: unlawful, unfair,

and fraudulent. The unlawful prong bases a UCL violation on anotheractionable claim. Here, the Rosenthal Act violation provides the basis

for borrowers unlawful claim. The unfair prong involves an evaluation

of harm to the plaintiff and benefit to the defendant, a public policy, or

unfair competition. Here, the TPP agreement itself, and defendants

uniform practice of denying permanent modifications, provide the

basis for an unfair inquiry. Fraudulent practices must be likely to


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deceive the public. Defendants systemic practice of denying

modifications based on certain criteria, after a borrower complied with

their TPP, could deceive the public. All three UCL prongs are

actionable as to the entire class.

Valid Dual Tracking Claim After Voluntarily Postponed Sale

Young v. Deutsche Bank Natl Trust Co., 2013 WL 3992710 (E.D.

Cal. Aug. 2, 2013): A HBOR dual tracking claim may still be viable

even when no foreclosure sale is currently scheduled. Here, borrower

alleged they submitted a complete modification application to their

servicer, who then recorded an NTS without evaluating the

application. After borrower filed his complaint, the servicer voluntarily

postponed the sale and a modification evaluation is underway. Thecourt still granted borrower leave to amend their complaint to include

a dual tracking claim because the NTS violated the statute, even if the

statutes goals (a postponed sale and a modification evaluation) are

currently being met. That the NOD was recorded pre-HBOR (before

1/1/13) is irrelevant because borrower only alleges that the NTS and

the scheduling of the foreclosure sale violated dual tracking provisions.

Pre-Default Foreclosure Claim; Delayed Discovery Rule; UCL

Standing; HOLA Preemption; Duty of Care

Gerbery v. Wells Fargo Bank, N.A., 2013 WL 3946065 (S.D. Cal.

July 31, 2013): Claim ripeness is determined by: 1) whether delayed

review of the issue would cause hardship to the parties, and 2) whether

the issues are fit for judicial decision or would benefit from further

factual development. Importantly, the injury to plaintiff does not need

to have occurred, if the injury is certainly impending. In this case,

borrowers brought UCL, fraud, negligent misrepresentation,

promissory estoppel, and contract claims while current on their

mortgage payments. The court nevertheless found these claims ripe

because borrowers mortgage payments have increased by over $2,000,

an economic injury sufficient to satisfy the ripeness inquiry. Further,

delayed review would drive borrowers closer to foreclosure, and

defendants conduct has already occurred, even if the ultimate harm

has not.


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Borrowers claims were nevertheless time barred. Usually, statute of

limitations clocks begin when the conduct or transaction transpired.

Under the doctrine of delayed discovery, SOL clocks can toll until the

plaintiff discovered (or had reasonable opportunity to discover) the

misconduct. To take advantage of this tolling, a borrower must show:

1) when and how they made their discovery; and 2) why it was

unreasonable for them to discover the misconduct sooner. Here, the

court dismissed borrowers claims with leave to amend because

borrowers made no attempt to assert the doctrine besides claiming

that that were unaware of defendants fraud until 2011 (the loan

originated in 2007 and they brought suit in 2013).

UCL standing requires a distinct and palpable injury that was

caused by the UCL violation. Here, borrowers alleged injuries

foreclosure risk, forgone opportunities to refinance, and hiring anattorney and expertsare not particular enough to constitute UCL

standing. The court advised borrowers to plead the increased mortgage

payments as an injury.

Applying a HOLA preemption analysis to a national bank, this court

nevertheless found borrowers UCL, fraud, and negligent

misrepresentation claims not preempted. Even though defendants

conduct arguably qualifies as servicing, and would therefore fall

under the purview of HOLA and OTS regulations, the specific type of

alleged misrepresentation here, promising to honestly and fairly

evaluate borrowers modification application, rel[ies] on the general

duty not to misrepresent material facts, and is not preempted.

To claim negligent misrepresentation, a borrower must show some

type of legal relationship giving rise to a duty of care between

themselves and their servicer. Generally, servicers do not owe a duty of

care to a borrower because their relationship does not exceed the usual

lender-borrower relationship. The court cites two exceptions to this

rule. First, if the servicers activities go beyond that usual relationship.Second, if the servicers actions meet the conditions of a six-factor test

developed by the California Supreme Court. Here, borrowers claim

that defendant attempted to induce them into skipping mortgage

payments so defendant could eventually foreclose, meets both

exceptions. [W]hen the lender takes action intended to induce a

borrower to enter into a particular loan transaction that is not only


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intended to protect the lender - the lenders activities have exceeded

those of a conventional lender. Additionally, the court found the

dramatic increase in borrowers mortgage payments a basis for

establishing a duty of care according to the six-factor California

Supreme Court test. The payments were a foreseeable and certain

financial strain, directly resulting from defendants

misrepresentations, for which defendant was morally to blame, and

finding a duty of care here is in the publics interest. Even with this

duty of care though, borrowers need to amend their complaint to meet

the specificity requirements for negligent misrepresentation claims.

HOLA Preemption & Laws of General Applicability

Babb v. Wachovia Mortg., FSB, 2013 WL 3985001 (C.D. Cal. July26, 2013): The Home Owners Loan Act and its attendant OTS

regulations govern federal savings associations. This court adopts the

view that a national bank may assert HOLA preemption defensively if

it purchased a loan that originated with a federal savings associated.

Other California federal district courts have focused on the conduct

being litigated, rather than loan origination, to determine whether

HOLA applies. Here though, Wells Fargo was allowed to assert HOLA

preemption because it acquired a loan originated by a FSA.27

Under HOLA, state laws of general applicability . . . are preempted if

their enforcement would impact federal savings associations in

relation to loan-related fees, disclosures and advertising, processing,

origination, or servicing. Here, borrowers based their promissory

estoppel claim on their servicers delayed response to the modification

application. The servicers actions, though, amounted to loan

servicing, expressly preempted under HOLA. Borrowers other claims

(breach of contract, breach of implied covenant of good faith and fair

dealing, negligence, negligent and intentional interference with

prospective economic advantage, fraud, and UCL), all based on statelaws of general applicability, were also preempted by HOLA and

27Also, the court uses Wachovia to describe defendant, only noting in the

Background that Wachovia was later acquired by Wells Fargo. Even if this court

did adopt the conduct-related approach, it is unclear from the opinion whose

servicing conduct is at issue, Wells Fargos or Wachovias.


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dismissed. The court equated the modification process with loan

servicing in every instance.

National Housing Acts Servicing Standards & Federal

Jurisdiction

Smith v. Deutsche Bank Natl Trust, 2013 WL 3863947 (E.D. Cal.

July 24, 2013): Federal courts exercise original jurisdiction over all

civil actions arising under [federal] law. The mere mention of a

federal law does not, however, automatically bestow federal subject

matter jurisdiction. A claim arises under federal law only if it

involves a determination respecting the validity, construction, or effect

of such a law and the result of the action depends on that

determination. In other words, the federal question must be

substantial. While not dispositive, the lack of a private right of action

in the federal law often indicates that federal jurisdiction is

inappropriate. Here, defendant removed borrowers original state case

to federal court based on a wrongful foreclosure claim, which stemmed

from a violation of the foreclosure prevention servicing requirements in

the National Housing Act. The court agreed that this was too tenuous

a thread on which to base jurisdiction. Neither the NHA nor its

foreclosure prevention provisions provide for a private right of action.

Further, the question before the courta state based wrongful

foreclosure claimdoes not delve into the validity, construction, or

effect of the NHA provisions. The case was remanded to the more

appropriate state court.

Breach of Contract and Promissory Estoppel Claims Based on

Modification Offer Letter

Loftis v. Homeward Residential, Inc., 2013 WL 4045808 (C.D. Cal.

June 11, 2013): To plead a breach of contract claim, borrowers must

allege a contract, their performance, defendants breach, and damages.

Here, defendants congratulatory letter, alerting borrowers of their

modification eligibility, constituted an express contract. The letter

instructed borrowers that they could accept the offer by (1)

completing and returning the agreement and (2) continuing to make

TPP payments. Borrowers performed by fulfilling these instructions


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and defendant breached by refusing to modify, and instead, raising the

loans interest rate. Damages are often difficult to show, if borrowers

default, not the servicers refusal to modify, led to foreclosure. Here

though, borrowers successfully pled damages by alleging they were

current on their mortgage and TPP payments before defendant raised

their interest rate. It was this raise (contract breach) that led to

increased monthly payments, eventual default, and foreclosure.

Defendants statute of frauds defense failed. The offer letter was

printed on defendants letterhead and signed, complying with the

statute of frauds: a writing subscribed by the party to be charged.

Defendants failure to return a signed copy to borrowers does not

change this analysis because the letter already memorialized the

contract in writing, and defendant intended to be bound by the

contract if the borrower fulfilled its requirements.

Borrowers promissory estoppel claim survives for similar reasons.

First, the offer letter constitutes a clear and unambiguous promise: if

you comply . . . we will modify your mortgage loan. Borrowers alleged

lost refinancing, bankruptcy, and sale opportunities, and the court

agreed that this constituted reasonable, detrimental reliance.

Defendant argued that borrowers had time to pursue these

opportunities between the alleged breach and the foreclosure sale. The

court determined potential opportunities occurring after the breach do

not negate reliance.

Correction to August newsletter:

Caldwell v. Wells Fargo Bank, N.A., 2013 WL 3789808 (N.D. Cal.

July 16, 2013).

Original: CC 2923.6(g) allows for resubmission of an application for

afirst lien loan modification. Dual tracking protections therefore do

not protect a borrower who previously defaulted on a modification

plan. Here, the court found the borrower unlikely to prevail on the

merits (for purposes of a TRO request) of her dual tracking claim

despite an alleged change in income, because her default on her first

modification disqualified her from any further modification evaluation.

Revised: CC 2923.6(g) provides dual-tracking protections for

resubmission of an application for a loan modification if there has been


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a material change in the borrowers financial circumstances since the

date of the borrowers previous application, which has been

documented and submitted to the servicer. Here, the court determined

that Wells Fargo evaluated the borrowers second loan modification

application and denied the application based on its internal policy of

denying second modifications to borrowers who previously defaulted on

a modification constitutes an evaluation under HBOR. The borrower

was deemed unlikely to prevail on the merits of her dual tracking

claim because ofWells Fargos proper denial under its internal

modification evaluation policy, not because her previous default

disqualified her from HBORs dual tracking protections on a second

modification evaluation. Under CC 2923.6, she was entitled to a

second evaluation because of her change in financial circumstances.

She received an evaluation and was denied.


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Recent Regulatory Updates

HAMP Supplemental Directive 13-06(Aug. 30, 2013)

Borrower Notice of Interest Rate Step-Ups

HAMP Tier-1 modifications will soon reach the end of their initial five-

year terms. After the first five years, the interest rates on the loan

increase by one percent each year until they reach a pre-determined

cap. At least 120 days (but not more than 240 days) before the first

adjusted payment is due, servicers must notify borrowers of the

increase. As the interest rates increase over time, servicers must notify

the borrowers of each additional increase at least 60 days (but not

more than 120) before the borrowers first payment is due.

Servicing Transfers

When a loan is transferred from one servicer to another, the new

servicer must abide by any TPP agreement already in-place between

the previous servicer and the borrower. This is true even if the new

servicer determines that the old servicer incorrectly calculated

borrowers TPP payments. The borrower must be allowed to complete

the trial period plan pursuant to the terms of the trial period plan

notice.

Upon successful completion of a TPP, the new servicer must offer the

borrowers a permanent loan modification. If the TPP payment amount

incorrectly exceeded the correct TPP amount by 10% or more, the new

servicer must re-run the waterfall to determine accurate permanent

modification payments. If the TPP payments were incorrectly less than

what they should have been, the servicer does not need to re-run the

waterfall.

Death & Divorce: Impact on Non-Occupants and Non-Borrowers

Non-occupants who inherit or are awarded property after death or

divorce, when the original borrower was successfully completing a

TPP, must now be treated as occupant non-borrowers and co-borrowers

under HAMP Handbook, Chapter 2, sections 8.9.1 and 8.9.2.
https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1306.pdfhttps://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1306.pdfhttps://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1306.pdf


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Non-borrowers who inherit or are awarded the property when the

original borrower was not in a TPP plan may apply for HAMP and

given a TPP plan if they qualify. These new owners should be

evaluate[d] . . . as if he or she was the borrower. If investor guidelines

on a particular loan allow for the loans assumption, servicers should

process the assumption and loan modification simultaneously.

Return of Fully Executed Modification Agreement

Servicers must sign and return a permanent modification agreement to

the borrowers no later than 30 days after receiving the signed-

borrower copy of the agreement, and the borrowers compliance with

the TPP.

Fannie Mae Servicing Guide Announcement SCV 201317(Aug.

28, 2013)

Widows & Orphans

New ownerswidows, orphans, or other survivors of the original

borrowermust be allowed to assume the loan, make mortgage

payments, and enter into foreclosure prevention alternatives, even if

the new owner is not on the original note. Further, servicers must

implement policies and procedures that will allow them to quickly

identify the party that took over ownership of the property, and to

communicate with that person. If the loan is delinquent and the new

owner cannot bring it current, they must be evaluated for foreclosure

prevention alternatives.

Unemployment Forbearance

Before a borrowers first unemployment forbearance period expires, or

when the borrower alerts their servicer that they have been re-

employed, the servicer must re-evaluate the borrower for a second

unemployment forbearance, or for another foreclosure prevention

alternative, whichever is applicable. Before a borrowers extended

unemployment forbearance period is set to expire, or if the borrower

becomes re-employed, the servicer must evaluate the borrower for

another foreclosure prevention alternative.
https://www.fanniemae.com/content/announcement/svc1317.pdfhttps://www.fanniemae.com/content/announcement/svc1317.pdfhttps://www.fanniemae.com/content/announcement/svc1317.pdfhttps://www.fanniemae.com/content/announcement/svc1317.pdfhttps://www.fanniemae.com/content/announcement/svc1317.pdfhttps://www.fanniemae.com/content/announcement/svc1317.pdfhttps://www.fanniemae.com/content/announcement/svc1317.pdf


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HAMP Rules on Loss Mitigation

Tuesday, September 24, 201312:00pm to 1:30pm Pacific Time

1.5 Hours of MCLE Credit

Reserve your webinar seat! Register now!

This free webinar will introduce the basic structure of the federal Home Affordable

Modification Program (HAMP) and place it in the context of other available

modification programs. We will review topics including eligibility, how modificationsare done, and servicer requirements for timing and notice. Updates on recent

developments will be included.

Presenter: Alys Cohen, staff attorney, National Consumer Law Center

The HBOR Collaborative is comprised ofSan Francisco-based housing

advocacy center, the National Housing Law Project (NHLP), and its project partners,

Western Center on Law & Poverty, the National Consumer Law Center, and Tenants

Together. The HBOR Collaborativeis funded by the Office of the California Attorney

General under the national Mortgage Settlement. The HBOR Collaborative offers

free training, technical assistance, litigation support, and legal resources toCalifornias consumer attorneys and the judiciary on all aspects of the new California

Homeowner Bill of Rights (HBOR). The goal of the Collaborative is to ensure that

Californias homeowners and tenants receive the intended benefits secured for

them under the Homeowner Bill of Rights by providing legal representation with a

broad array of support services and practice resources. To learn more about

California HBOR and all upcoming trainings, consumer attorneys should go

tohttp://calhbor.org/.Register hereor at the HBOR Collaborative for this training.

After registering, you will receive a confirmation email containing information

about joining the webinar.

System Requirements:

PC-based Attendees: Require Windows 8, 7, Vista XP, or 2003 Server, Mac-based

Attendees: Require Mac OSX 10.6 or newer, Mobile attendees: IPhone, IPad,

Android phone or Android tablet.

Questions?

If you need help registering for this webinar, please contact [email protected]
https://www1.gotomeeting.com/register/168794816http://calhbor.org/http://calhbor.org/http://calhbor.org/https://www1.gotomeeting.com/register/168794816https://www1.gotomeeting.com/register/168794816https://www1.gotomeeting.com/register/168794816https://www1.gotomeeting.com/register/168794816http://calhbor.org/https://www1.gotomeeting.com/register/168794816


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SAVE THE DATE!Wednesday October 23

rd, 2013

The HBOR Collaborative presents:REPRESENTING HOMEOWNERS & TENANTS UNDER

THE HOMEOWNER BILL OF RIGHTS

This free training will be held at:

Sierra Curtis Neighborhood Association

2791 24th Street, Sacramento

The HBOR Collaborative presents a free all-day training on the nuts and bolts of

representing tenants and homeowners under Californias Homeowner Bill of

Rights (HBOR). The training will cover HBOR basics and provide practical tips for

representing clients. HBOR became effective on January 1, 2013 and codifies the

broad intentions of the National Mortgage Settlements pre-foreclosure

protections. It also provides tenants in foreclosed properties with a host of

substantive and procedural protections. The training will cover the interplay of

HBOR with NMS, CFPB servicing rules, and the Protecting Tenants at ForeclosureAct. We will also discuss HBORs attorney fee provisions. Registration

informationwill be available in mid-September.

The HBOR Collaborative, a partnership of four organizations, National Housing

Law Project, National Consumer Law Center, Tenants Together and Western

Center on Law and Poverty, offers free training, technical assistance, litigation

support, and legal resources to Californias consumer attorneys and the judiciary

on all aspects of the new California Homeowner Bill of Rights, including its tenant

protections. The goal of the Collaborative is to ensure that Californias

homeowners and tenants receive the intended benefits secured for them under

the Homeowner Bill of Rights by providing legal representation with a broad

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COL?\iY OF SASTA CL\RAAPPELL \TE 1>1\'1510;';

THE BANK OF I\CW YORK. t E L L O N ,Plaintiff and R e s p o n d ~ n t ,

v.VIDAL A. PRECIADO, ET AL

Ddendants and Appellants.

Case Nos. \-12 -:\1'-00 1360 nnd1-12 -:\ 1'-00 \)6\

ORDER

The appcJ! by appellants Vidal Preciado ("Prec iado"), Roland Luke ("Luke"), nndKenm:th I-[cnderson ("Henderson") (collectively, "Appellants") from the un!lIwfu! detainerjudgments entered on M:lfCh Hi, 2012, C;l.mc on regubrly for hearing and wa s heard andsubmitted on August 16. 20 13. We he reby hold as follows:I'rocedurai l l is tory

This is:m app eal from IWO related un lawful detainer actions. 1 Respondent '1l1e Bank ofNew York Mellon ("Bank") is the owner of 1343 State Street, in Alv iso, Cali fornia. On July25,20 11 , B.lnk (lcquired title to this prop erty (It a trustee's sale pu rsuant to foreclosure upon adet'd of trusl. TIle property W(lS previously owned by Precbdo and occupied by Appellants.

, S e p : l f n C 1 ~ f k 's T r J n s c r i p t ~ "efe : l : p n f ~ d for Case l-ll -CV -215285 A ~ t 1 e ~ 1 :':0. , . I2 AI'QO1360) i!.'



1,I6;89

10I I

On September 1. 2011. 11 3m: sen 'cd :1 wlinen nolice 1o Appe llants to qui t and deli \'crpossession oflhe property wit lun three days, 30 d

u d s ~ 10 change the propc ny address to Alviso, 'AI Appellants' request. the court st3yed Appell:!.nts' evic tion (or ':0 enys. cp to !:'.d

i:-:;:Iud:n ..\ p: i! 2S, 20 12.9 Appell:mts filcd indi \"idU3! noticcJ of 3ppca1 ~ \ 12.:ch 16.20 12 m ~ n t to,\p pc ::. l::.hi lit y

A finz l judgment in :l limited civil casc is appe:ll3b1 c to L1c :l?pellate division of 6 :~ p court. (Code Civ. Prot ., 90 .;,] , subd. (a). ) The b cou rt entered u d g : : l ~ n : i::

limiterl civil cases on 16. 201 2. Accordingly. the judgments are apPcJ.b:'!e 10Appclb te Dh"ision.1/1

: St t CT . 2!6 . pp. 9 . !2. CT 283, pp 9 12.I 5 : e CT . 2!6. pp. 1 12. c r 2 8 ~ . PI' . 1 12 Se c CT .2!6. pp 2025 . JO . J I. CT .2&8 , rp 10 N . 27jO. 45"":6 )'On Ihl ! Wlle e ly . i'!ecmlo lik d "I on l>ful filrec1osu:e 'S Jin il UJlIl other (See cr .2M.p 20C0 ..W )StC CT2!6 . pp IjO ! jO. CT . 2&8, rp IIJ&-I. Se e CT . 286, Pi" 1J2 . 165. CT 188 . rp SH ISI Sce CT.2S6. P? 166 . 167.C r2n . r? 119 . 120 . Sn CT156. p 23J . CT .2u ' pp. 1291J2I' See C1 .286. pj ). 26] . 265. 270212. CT::!!. r p 161 . t6-1. t69 . 171 .

2OlllER



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On nppcal. Appellants make the following Ilrgumcnts:I )2)J)

4)

111e Appci1n!c Division mu st conduct an independent review of the entirert:conl pur suant to People II. Wende ;"111e SCfy icc Process was liuc rcd \\ith gross procedural irregularities";Ihnk of Amctk'a did not produce ev ide nce su fficient to prov e that Liteforcdosurc sale was conduc ted in st ric t compliance wit h Civil (ode section291..: :mc! thll ti tk was duly perfec ted; andUank improperly filed two SCp:l!2.IC unlawful deta iner actions fa: the samepropeny.

StantianlornCl"iewIn an appeal from an unlawful detainer jUdgment, "(wJc revicw the trial coun's findin gsof (:lct to determine whether the)' arc sUfponed by subs1:mtial evidence," (Palm Properryb ll"eS /l/l i!Jl/S, LLC v. a d ~ g (20 11) 19'; Cal.App.4 th 1419. 1425 .) To the extent the trial COUttdrew conc:lus ions of b w based upon its findings of fan , we review those conclusions of lawno\'o. (/d. at pp. 14251426.)I'rop! .'" Y. Wend e is In :tpplicable 10 Ch'il Appc:lls

Ap?ellants' first argu men t is that the App ellate Division mu st conduct an independe ntrc\'icw oflhe enti re record pur sua nt to People \'. Wendr (1979) 25 Cal.3d 436. Howe\'er. aWen dt' rev iew only upplics to criminal uppeals. (See In re Sade C. (1996) 13 Cal.4th 952, 98';')

In civ il ::tppc31s, the nppellnte coens ue 110/ required to perform an u.'1lSsi5!cd stud\" ofthc record rC\'jcw of the law relevant 10 a p:my's contenti ons on appeal. (Air CO!lrieflInt t rnal. \P. Employm t lll Dewfopmel:t ~ p l . (2007) 150 CaLApp.4lh 923, 928; GUlhrry,'. Slaleo/California (1998) 63 CnLApp .4lh 11 08, I! 15 .) Instead. a part(s failure to perform its dutyto providt! nrgument, citations to the record, nnd legal authority in support of a contention mlybe trelteu as a waiver of the issue. (A nw)(f Corp . \'. Hamil/on & Samuels (2002) 100Ca l.App.4th 1286, 130 1; Peopft ex ref. lOl! Cen/llry flu. Co. \'. Hili/ding Perm it Consultonts.II/C, (2000) 86 Cal. App.4th 280, 284 ; GMhrey, sllpra, at pp. I I I$.1116.) Thus. ApprllalllS'req uC5 t for an independent Wende review is imp roper.

3ORDER



"

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Apl'd lal1ls t ~ l I l ! that they ww: not properly ser\'ed Wilh notices terminating theirAs:\ 1l1\:T\.'quisilc \0 minS an unlawful detainer tletion. a tenant must be ser.'cd wilh

dlhc[ a 3, 30. ,'I' 90 ,I:\rs' 1I0lice, dcp(,lIding on the individual's slatus ns n tenant. (Code Ci \',\'\w .. 11 61. 1161:1. 11 61b.) Code ofCivil Procedure section 116i! provides three methodsl, r thes e noli,'c s: ( I) by pe rso na l dcli\"cl')" 0 the !('n:lnl (pcrsoru[ service); or (2) jftheICI :lnl is at-se n! from hi s residence :md Usu:li pl3cc of bu siness , by Jcu\'ing a copy \\i lh a persont' f suitable age and di sc ret io n at either pInel.'. and sending a copy through the mail to the ten:mfi

i d c n (s ub stituted ser vice); or (3) i f a place of residence and usual place of business cannoth: :lsCCMJincd or n person of suita ble :le or discretion C!lrulot be found there, then by :lffixing II( (lPY in :l c O I 1 ~ pbcc ll n thc property :lnd ddi\'cring a cepy to (l person residing there, if5\I\:h n pencn can be found,:!.:1d al $o ~ ' n d a copy through th: m:lil addressed to the tenant a1the place where the propeny is sitUlltcd (post:md mllil service), A notice is \'alid andcnfl)r,'cab le only if the le sso r has strictly complied '\i th thes e statuto ri ly m:mdlllcd requirementsf",r 5eryice. (LM om io \'. -'(otta (1998) 67 Cal.App.4lh 110, 11 314; Liebo\'ich v.ShClhrokHh :my (1 997) Clll.App.-i lh 511, 5I3,)

AI trial. Hen der son testified that he did not receive any notice to quit. (RT, p. 14 :1115.)In rcs ponse, )) :mk ' s coun sel ~ p l : ! . i n e - Ihal llllthe- occupants were- sefyed with a no tice 10 quiton Sc pleillber I, 20 11 . Bank ' s couns d referred the court 10 Exhib it B of Dank's complainlwh ich COltaincJ the proofs of ser\'ice for the notices. (RT, p. 14 :1623.) In the proofs ofsen'ice, reg istered proc ess sener Kris VOS.JIZ (,-Vorsatz") declared that he served the notices( ' I I September I, 20 II . (CT 286, pp. 11.12; CT 288 , [ '[I 11 . 12) ,\ ecornin8 to the proo fs ofscrvice, "[aJftt:r dU!: and diligc r1 1cOort" "orsatz posted a copy of the notices on 1343 StaleStreet, S3" Jose, ClI1ifomi3 . (id) Thereafter, Versatz mailed a copy of e



Where serv;ce is carried out by a registered process se rver, Evidence Code sec tion 6472 appl ies to c\imin31C the necess ity ofcalling the proce ss server as:l \ \ ~ t n e s s 31lfial. (Pa/III3 I 'roprrty /III'l'stlll l'lIts, L!.C \', )'adegar, slIpra, 194 CaLApp.41h :H p. 1427 .) Unde r Evidence4 Codc section 647. "[I]hc return of a process server [ I uJ:on process or notice estab lishes n.s pre sump tion. affect ing Ihc bu rden of producing evidence. of thc facts slaled in the retu rn ," A56 U:mk did not produce VO(531 7as a witness, the question is whether Vorsalz's proo fs of scry icc7 Dlnk complied w;lh thc notice re quircmentso f seCl io n 11 62.8 In Iligh/nnd Plas/lcs, Inc. \'. Enders (1980) 109 Cal.AppJd Supp. 1, thc coun ana lyzed9 wh elher there was suffic ient evidence that the landlord comp lied wilh the "post and mail"

10 provision of section 1162 . The court noted thlt this code sec tion does not requi re:1 showing ofII rcasonlble diligence in atlempting personal service before utili zing the substi tuted se rvice12 provisior.s, as requi red in Code ofCivjl Procedu re section 41 5.20, subd ivi sion (b). (ld at p. 6.)13 It docs requi re, howe ver , "that if the tenant c:mnot be located fo r personll se rv ice that the14 perso n mlking this substituted service first determine either thlllhe ten ant 'S' , . . place of15 residence and busine ss cannot be ascertained, that a person ofsuitable age or disc retion there16 CMnot b: found . . .. .. (ld) In Highland Plastics, the deputy marshll lestified Ihat when he\7 attempted to serve the 30 day notice on dd::ndant. no O:lC answe red his knock on the door of18 the prem ises wh ich had been identified to him as the place of re sidence and busi ness of19 defendant. (ld. at pp. 6-7,) Wh en the re was no response to the deputy's knoc k, he then posted20 the not ice "in a conspicuous place on the prop erty" and mai led a cop y to the place whe re the21 propeny was si tuated. (lei. at p. 7.) Thus, the court conduded that there wa s subs tantial22 evidence supporting the tria l cou rt 's find ing that there hJd been (! proper se rv ice of the not ice23 utiliz in g the "pOSt :lnd nl:lij" provi sions :ls neither the d e f e n d ~ n t nOr:l person of sui tab le age and24 discretion co uld be found . (lei.)25 Similarly, in flo:::: \'. Lewis (1989) 215 Ca l.App.3d 314, the cou rt held th at trial cou n26 prope rly found that the landlord's "post and mail" procedu re of service of n IhrcedlY notice27 pur suan t to sect ion 1162 was :ldequa te , In that case, testimony at tria l established that the28 land lord's agent went to apartment, rang the bell an d knocked on the door. When no one

5ORDER



:mswC'red.the employee l:lpC'd n copy of lhe notice to the door :md slipped another copy under2 the doo r. He Ihen posted another copy by mlil : ! d d r e ~ 5 ! d to the (cnlnt. (It/. at p. 3! 6.) Since no3 one \\-:lS pres,"nt when the procC'ss serve, went 10 Ih," :!.p:;nmenl. ~ p o s t and mair' se rvice \\-:lS4 authoriud unde r settion 1162. (ld. at p. 31 i.)5 As explained :!.bove. no sho\\inS ofre:lSon3ble dilisen,"e in 3ltempting personal sen"ice6 before utilizing the substituted service pro\'isions is rC'quired under the statule. (See Ho:: v.7 L,'" is. supra. 215 Cal.App.3d at p" 317 .) Ne\"enheless. "post ilnd m3il" scn'ice is notS 3uthori zed 3S a first -reson melhod of sm;ce. Here, Vors:ltz's deelnrntion does not establish9 Ihat Bank complied wilh seclion 1162 as it does show Ihll person:l i serviee was fver auempted.

10 The proofs of service do nOI st He Ih:ll Appell:!nts were not home or Ihul no one of a sui table ageII was home whC'n the sen'er pos ted the r!otiC'e "in:l conspicuous pbce:"12 In its opposition brier". Bm.!.:. argue,; th:!.t Appellants m:!.y not eh:llknge service of the13 notices as Ihey did nOI include this lS enlffinn:lIiw defense in their answers. Dank is mistaken.14 An affirmative defense is e.!l o.!Iegation of new m:mer in thC' answer th:lt is not responsi\'e to an15 essential allegation in the eompb.int. In other words. an 2flinnati\'e defense is an allegation16 relied on by the deicndant that is not put in issue by the phintifr s complaint. ( B ~ l ' i I l ,'. l O/lra17 9 9 ~ ) 2i Cal.AppAlh 694. 69S ; Stare Farm .\fut. Au/o. IllS Co \". Sllprr

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