Friday, July 26, 2013

The Federal Reserve releases an amendment to the enforcement action against GMAC Mortgage --July 26, 2013

The Federal Reserve Board on Friday released an amendment to the enforcement action against GMAC Mortgage requiring approximately $230 million in cash payments to mortgage borrowers.
The amendment is similar to those announced in early 2013 between 13 mortgage servicing companies and the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board.  Like the other institutions, GMAC Mortgage was subject to an enforcement action for deficient practices in mortgage loan servicing and foreclosure processing. 

More than 232,000 borrowers whose homes were in any stage of foreclosure in 2009 and 2010 with GMAC Mortgage will receive cash compensation under the amendment.  Information about payments to borrowers whose mortgages were serviced by GMAC Mortgage will be announced in the near future.

The bankruptcy court that is overseeing the bankruptcy proceedings involving GMAC Mortgage approved GMAC Mortgage's entry into the amended enforcement action Friday.  As a result of this amendment, the independent foreclosure reviews will conclude for GMAC Mortgage borrowers.
Previously, the OCC and the Federal Reserve entered into amendments with Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.  With the addition of GMAC Mortgage, approximately 4.4 million borrowers will receive a total of more than $3.8 billion in cash compensation while an additional $5.8 billion will be provided by the servicers in commitments for loss-mitigation assistance, such as loan modifications and forgiveness of deficiency judgments.

The $230 million to be paid by GMAC Mortgage includes $32 million that will satisfy GMAC Mortgage's obligation to provide loss-mitigation assistance.  GMAC Mortgage will satisfy its requirement for loss-mitigation assistance with direct borrower payments because it no longer owns a significant residential mortgaging portfolio.

As is the case with the previous amendments, borrowers whose mortgages were serviced by GMAC Mortgage who accept a payment will not be prevented from taking any action related to their foreclosure.  Servicers are not permitted to ask borrowers to sign a waiver of any legal claims they may have against their servicer in connection with accepting these payments.  In addition, the servicer's internal complaint process will remain available to borrowers.

Federal Reserve examiners continue to closely monitor the servicers' implementation of plans required by the enforcement actions previously issued against the servicers to correct the unsafe and unsound mortgage servicing and foreclosure practices.

Borrowers with all 14 servicers can call 1-888-952-9105 to update their contact information, verify that they are covered by the agreement, or to ask further questions.
Attachment (55 KB PDF)

FRB: Press Release--The Federal Reserve releases an amendment to the enforcement action against GMAC Mortgage --July 26, 2013

How Does Chase Service a Foreclosure -- A Playbook

Servicer’s Notifications

Notification of the foreclosure referral date should be submitted to the Buyer electronically. The notification of said action must be in electronic format and include the foreclosure referral date, reason for default, occupancy status, condition of property, date of last property inspection and most current broker’s price opinion if available.

If collection and loss mitigation efforts have exhausted, the servicer should ensure the initiation of foreclosure action occur no later than the 120th day of delinquency. The Servicer must also submit all notices promptly to the primary mortgage insurer as required. A copy of the notice need not be sent to the Buyer but should be made part of the foreclosure records.

Failure to initiate and/or complete the foreclosure action in accordance with the time frame specified will result in a per diem interest penalty assessment at the note rate. During the time that the loan remains in a foreclosure status, the Servicer must provide monthly updates of information.

Assignment to the Mortgage Insurer

Servicer may not make arrangements for the assignment of a delinquent loan to the mortgage insurer without the Buyer’s prior approval. If an assignment is approved, the Servicer will complete the transaction and file the claim. If the insurer declines the assignment of a delinquent loan, the Servicer must request the Buyer’s approval before taking any alternative action.

Deed-In-Lieu of Foreclosure

A deed-in-lieu of foreclosure is usually preferred to foreclosure. If the borrower is willing to execute a voluntary deed-in-lieu of foreclosure, the Servicer should recommend acceptance by the Buyer if the Servicer determines:
  • Such action is in the Buyer’s best interest.
  • Full benefits of any mortgage insurance will be received.
  • Marketable title, free from any liens, will be obtained.
  • The property will be vacant at the time of conveyance.
The following documentation is required when requesting the Buyer’s approval of the acceptance of a
deed-in-lieu of foreclosure: 
  • Hardship letter 
  • Loss Analysis sheet showing benefit of approving deed in lieu versus foreclosure sale
  • Broker’s price opinion
  • Primary mortgage insurer’s approval, if applicable Upon receipt of the Buyer’s written approval, the Servicer or the Servicer’s counsel should prepare any documents necessary to process the deed-in-lieu of foreclosure, following Fannie Mae guidelines to ensure reimbursement of the attorney’s fees and costs. The Servicer must arrange for conveyance of the property. The borrower must agree to assign and transfer to the  Buyer all rents due and to become due. In general, the
  • Servicer should not take title to the mortgaged property until it is vacant. If hardship exists, the Servicer may take title provided the date of possession is agreed upon in advance. The Servicer must email the buyer once the conveyance documents have been sent for recording. Title should be conveyed directly from the borrower to the Buyer’s assignee

Preforeclosure Sale

The Servicer should pursue a preforeclosure sale when a borrower is required to sell his or her home in time of financial hardship, and if it is foreseen that it will be difficult to sell, as the current market value is less than the amount required to satisfy the loan and any sales costs.

The Servicer is responsible to inform the borrower that they are required to maintain the property until it is sold.  The Buyer may require the borrower to contribute funds  if the sale proceeds do not satisfy the loan. Any escrow funds will not be reimbursed to the mortgagor.

The following documentation must be submitted to the Buyer prior to any preforeclosure sale:
  • Copy of primary mortgage insurer’s approval, if applicable
  •  Interior broker’s price opinion or appraisal
  • Loss Analysis sheet showing benefit of approving short sale offer versus REO sale.
  • Estimated HUD-1 settlement statement
The following documentation must be submitted to the Buyer after the preforeclosure sale:
  • Copy of proceeds check or wire confirmation
  • Copy of HUD-I settlement statement
  • Copy of primary claim, if applicable
  • Copy of explanation of benefits form once MI has settled


The loan modification process is to provide struggling Borrower’s who have demonstrated a willingness and ability to repay, with an opportunity to change the original terms of their loan based on a demonstrated need  to achieve an affordable and sustainable payment.

Affordability may be achieved through the capitalization of the arrearage, interest rate reduction, step rate or an amortization terms extensions creating a balloon when the loan reaches its maturity date.
The Servicer needs to complete the WMMSC Modification Request (WMMSC 4020). The form needs to be filled out in its entirety in order for WMMSC to provide a decision. The form should be submitted to for review. The broker’s price opinion must be submitted within 90 days of the date the request is being submitted. Please be advised that not all modifications are allowed. Some pooling and servicing agreements (PSAs) have  restrictions and conditions limiting what can be done for a loan in the deal. If you are unsure of what you can offer to the borrower, you may email to see if there are any restrictions the loan may have. WMMSC verifies the proposed modification terms requested from the servicer complies with the investor guidelines.

Institution of Foreclosure

Acceleration of the maturity of a loan must be accomplished in accordance with the terms of the
mortgage instrument and applicable law. The Buyer must be provided with written notification of all
foreclosure actions as provided in Section 206.01. The Servicer should not recommend foreclosure until every reasonable effort has been made to cure the delinquency, as discussed above. Once the Servicer determines no other course of action will cure the default, the Servicer should promptly refer the file to the attorney to commence foreclosure which should be done no later than the 120th day of the delinquency. The Servicer should actively continue all efforts to cure the default and mitigate losses to the Buyer until the Servicer can no longer legally do so under the terms of the mortgage
instruments and federal, state or other applicable governing law or agency requirements. The Servicer
should prepare and forward with the foreclosure notification any necessary papers for the Buyer’s
execution and, when appropriate should ask the Buyer to return the security instrument. If the security instrument is sent to the Servicer, the Servicer will hold it on behalf of, and for the benefit of, the Buyer and its successors and assigns, and must ensure its safe storage and return it to the Buyer promptly when foreclosure is discontinued. The Buyer’s execution of any document submitted by the
Servicer does not imply that the Buyer has reviewed such document for legal compliance. The Servicer maintains this responsibility.

On a FHA/VA reconveyance, the Servicer is responsible for preparing the necessary documents and forwarding them to the Buyer for execution. This should take place no later than two weeks prior to the expected foreclosure sale date. The Servicer shall monitor the foreclosure process to ensure that no unnecessary delays occur. The Servicer will be assessed a per diem interest penalty at the note rate for any late foreclosure referral and for any unnecessary or unsupported delays in the foreclosure

 Foreclosure Processing

The Servicer should take appropriate action during the foreclosure process to protect the property. The Servicer must obtain the Buyer’s approval in advance for any expenditure to protect the property which exceeds $2,500. In any situation where delaying protection  action might result in impairment of the property, the Servicer should call the Buyer for approval of any expenditure in excess of $2,500. The Buyer will send the Servicer a confirmation of the cost and nature of the protective action approved. 

The Servicer should retain the borrower’s escrow funds and all other unapplied funds. The Servicer should obtain bills for, and pay all expenses due under the loan, including taxes, special assessments, ground rents, and other charges which are or may become first liens upon the property as well as hazard and mortgage insurance premiums. If the borrower’s escrow funds are insufficient to pay these items as they become due during the foreclosure, the Servicer must advance funds for the
payment of such expenses to protect the Buyer’s interest. Reimbursement for all approved expenses may be requested on the Statement of Expenses (WMMSC 3001) at the time of final property disposition.                                                                                                                                                              
  • The Servicer must inspect the property at least once a month and more frequently when circumstances warrant. 
  • Notifications of sale results are required within 24 hours after the sale.

Attorney’s/Trustee’s Fees

Servicer should adhere to FNMA guidelines for foreclosure fees and costs allowed. Any exceptions
require the Buyer’s approval

All fees discussed in this section are to be paid by the Servicer and will be reimbursed by the Buyer after the final settlement of the sale of the property and all insurance claim proceeds have been paid. If foreclosure proceedings are discontinued, all fees and costs incurred are to be collected from the borrower unless prohibited by law. In jurisdictions where the collection of attorney’s fees or costs from the borrower is prohibited, the Buyer will share such expenses with the Servicer in proportion to the Buyer’s interest in the loan.

In deed-of-trust jurisdictions, it is the Servicer’s responsibility to ensure a proper individual or entity, free from any conflict of interest, serves as trustee or substitute trustee. The Buyer may select the foreclosure counsel or request substitution of a trustee to whom the case is t o be referred. The Servicer is expected to work closely with the foreclosure counsel, trustee, or substitute trustee to ensure prompt and efficient completion of the foreclosur e proceedings.

Offer of Payment During Foreclosure

If the borrower offers payment of the full delinquency during foreclosure, including advances, legal costs, and oth er foreclosure expenses, the Servicer should determine the total amount of all foreclosure costs and expenses which will be incurred if the offer is accepted. Such an offer may be accepted by the Servicer if the payment offered will cover all costs and expenses. No offer of full payment may be declined without the Buyer’s approval.

If the offer is accepted, after receiving the funds the Servicer must take action to prevent additional
foreclosur e expenses from bein g incurred, pay the foreclosure expenses, and apply the remaining funds to the borrower’s account and return the debt instrument to the Trustee by certified mail .

If the borrower offers to pay an amount less than the full delinquency during foreclosure, the Servicer should determine the total amount of foreclosure costs and expenses which would be incurred if the offer were accepted. The Servicer may decline without requesting the Buyer’s approval, but must obtain the Buyer’s approval before accepting. The Servicer’s recommendation should include an opinion regarding whether the foreclosure action should be suspended or dismissed and how the remaining delinquency will be cured.

 Bidding Instructions

The Servicer must issue bidding instructions to its employee, agent, or the attorney attending the
foreclosure sale unless the Buyer directs otherwise.

The Servicer must comply with all bidding instructions and requirements of the mortgage insurer, when applicable. The Buyer does not need to approve the maximum bid price if it will recover the total indebtedness, including expenses and costs, or if it is the maximum amount permitted by applicable law. If the mortgagor has substantial assets or earning power and state law allows collection of deficiency amounts, the Servicer must preserve the Buyer’s rights to pursue collection and recovery of a deficiency. The Servicer must obtain the Buyer’s prior approval of a maximum
bid which is insufficient to recover the total indebtedness. If the Buyer’s approval of a maximum bid
is required, the request for approval must be accompanied by an estimated market value of the
property in an “as is” condition at least 14 days prior to the actual foreclosure sale date.

Third Party Acquisitions

If the property is disposed of in a third party transaction at the foreclosure sale, all reasonable expenses advanced by the Servicer during the foreclosure process and approved in writing by the Buyer will be netted against the foreclosure sale proceeds. The Buyer’s portion of the proceeds will then be transferred to the Buyer.

Claim Procedures

 Filing a Claim

All mortgage insurance claims must be filed within the time required by the mortgage insurer. If a claim cannot be filed with the mortgage insurer within that time, the Servicer must obtain an extension from the mortgage insurer. The Servicer must forward a copy of the mortgage insurer’s extension approval to the Buyer and must include a written explanation of the reason for the
delay and anticipated date for the claim filing.

The Servicer should complete the claim according to the mortgage insurer’s procedures and forward a copy to the Buyer. The mortgage insurer should make settlement checks payable to the Servicer .

If the primary mortgage insurance was issued by PMI Mortgage Insurance Co., the Servicer must inform PMI that the policy covers a loan purchased by the Buyer.

If the mortgage insurer fails to pay the claim within 60 days, the Servicer must make demand upon the mortgage insurer for immediate payment. The Servicer is responsible for reimbursement for any shortfall in insurance cover age.

If the mortgage insurer reduces the claim due to administrative error, the Servicer will reimburse the
Buyer for the amount of such reduction. All claim reductions or denials must be brought to the attention of the Buyer along with the Servicer ’s response to the reduction or denial

Deposit of Settlement Proceeds

Within 1 business day of receipt of settlement funds, the SeBuyer after the preforeclosure sale: Servicer should immediately deposit the proceeds into the P&I Custodial Account. The servicer should email or fax a copy of the final signed HUD-1 that must match the proceeds received. Gross proceeds along with MI be wired to the buyer within 2 business days. If the loan has MI insurance pending, servicer should not hold funds in their custodial account until the MI claim has been paid. A copy of the explanation of benefits settlement statement should be sent to the Buyer upon receipt of MI funds. Do not delay liquidating a loan due to non receipt of MI proceeds. These can be submitted as a supplemental upon receipt of funds.

New Site for Washington Mutual Mortgage Securities Corporation

 Just how does JPMorgan Chase Bank NA service their home loans securitized through Washington Mutual Securities Corporation?  Today's blog entry contains a wealth of information for foreclosure fighters. The Servicer's Guide contains valuable links to servicing information that can be downloaded in one PDF file.   Please  click here.  See  Section 206 for Foreclosure .

Effective July 25, 2013 the site address of  http://www.wamusecurities.comf or Washington Mutual Mortgage Securities Corporation, a wholly owned subsidiary of JPMorgan Chase National Association, was decommissioned.  Please use the new site address of 

New Site Address:

Other Valuable Links are below:

Section 101: Servicer Eligibility
Section 102: Compensation and Subcontracting
Section 103: Administrative Responsibilities
Section 201: Loan Servicing
Section 202: Tax and Insurance Escrows
Section 203: Insurance Requirements
Section 204: Protecting the Property
Section 205: Delinquencies
Section 206: Foreclosure
Section 207: Acquired Properties
Section 208: Conversion Process Adjustable Rate Mortgages
Section 301: Recordkeeping
Section 302: Identifying WMMSC Loans
Section 303: Custodial Accounts
Section 304: Loan Accounting
Section 305: Reporting to WMMSC
Section 401: Representations, Warranties and Obligations of Servicer
Section 402: Assignments and Recordations of Mortgages
Section 403: Remedies for Breach of Representations and Warranties
Appendix A: Glossary of Terms
Appendix B: Office Locations and Telephone Numbers
Appendix C: Holiday Schedule
Appendix D: Wiring Instructions
Appendix E: Electronic Monthly Reporting Fields Required by WMMSC
Forms & Disclosures:Forms & Disclosures

Program Updates
MSC SVRU 001 022: Appendix C
MSC SVRU 001 004: 201 Loan Servicing
MSC SVRU 001 007: 204 Protecting the Property
MSC SVRU 001 001: 101 Servicer Eligibility
MSC SVRU 001 002: 102 Compensation and Subcontracting
MSC SVRU 001 003: 103 Administrative Responsibilities
MSC SVRU 001 014: 303 Custodial Accounts
MSC SVRU 001 012: 301 Recordkeeping
MSC SVRU 002 011: 208 Conversion Process Adjustable Rate Mortgages
MSC SVRU 001 017: 401 Representations, Warranties and Obligations of Servicer
Show All Updates


SSF 003 Contact List
SSF 005 Lender's Authorization and Investor Release Form
SSF 006 Lender's Authorization and MI Company & HUD Reference Request
SSF 010 Seller Servicer Application
SSF 011Seller Servicer Supplemental Information
WMMSC 1002 Selling and Servicing Agreement
WMMSC 1007 Annual Certification
WMMSC 1008 Corporate Resolution
WMMSC 2009 Final Documentation Transmittal
WMMSC 3001 Statement of Expenses
WMMSC 3002 Delinquency Report
WMMSC 3003 Foreclosure Recommendation Individual Delinquency Report
WMMSC 3008 Request for Transfer of Servicing
WMMSC 31477 Annual Statement of Compliance 12.7.10
WMMSC 4002 Principal and Interest Custodial Acccount Letter Agreement
WMMSC 4004 Taxes and Insurance Custodial Account Letter Agreement
WMMSC 4006 ACH Debit Authorization
WMMSC 4007 Curtailments and Prepaid Installments Reports
WMMSC 4008 Collection Report
WMMSC 4009 Liquidation Schedule
WMMSC 4010 Remittance Reconciliation
WMMSC 4011 Analysis of Custodial Accounts
WMMSC 4013 ARM Adjustments Report
WMMSC 4014 Buydown Custodial Account Letter Agreement
WMMSC 4017 New Loans Report
WMMSC 4018 Trial Balance Report
WMMSC 4019 Request for Release of Mortgage Documents
WMMSC 4020 WMMSC Modification Request
WMMSC 406 Borrower's Certification and Authorization Letter


Friday, July 19, 2013

Jury finds against JPMorgan Chase in Washington County foreclosure trial |


Jury finds against JPMorgan Chase in Washington County foreclosure trial

Elliot Njus, The Oregonian By Elliot Njus, The Oregonian
Email the author | Follow on Twitter
on July 18, 2013 at 7:14 PM, updated July 19, 2013 at 7:18 AM house in the Bethany area, operated as an adult foster home, is at the center of a wrongful foreclosure trial in Washington County Circuit Court. .

A Washington County jury on Thursday rebuked JPMorgan Chase's handling of a foreclosure case, ruling the nation's second largest bank likely had broken promises it made to borrowers Bela and Eva Lengyel, resulting in the seizure of their home.

The case is believed to be the first wrongful foreclosure suit to go before a jury in Oregon since the beginning of the housing crash, though many cases have gone before judges in the state. It offers a glimpse into how juries may deal with fallout from the mortgage crisis and the way the nation's leading banks reacted.

"If I were a transnational bank, I would be very concerned about facing juries in this state," said attorney Terry Scannell, who represented the couple.

Bela Lengyel said he contacted the bank in November 2008 seeking to lower the monthly mortgage payments he and his wife, Eva, were making on the home where they also operate an adult foster care business. The bank told him it would help, but he had to first default on his payments, he said.

By January 2009 he had done just that, setting him on the road to an August 2010 foreclosure even though he contends he had the money to pay even the original, higher payments. Shortly thereafter, the Lengyels sued.

Attorneys for Chase, which serviced the loan owned by federally backed mortgage giant Freddie Mac, argued no such promise was made. They presented a form signed by Lengyel that said no modification agreements would be made verbally, only in writing. And the bank's records didn't show such a promise had been made.

Still, 10 jurors found that the bank had agreed to modify the loan after the Lengyels went into default and that they qualified for such a modification. (One juror was undecided on each point, and one fell ill and missed the final day's testimony.)

The jury awarded $10,850 in damages, and presiding Judge Don Letourneau will rule later on whether the Lengyels may remain in the home.
 Read more at:    Jury finds against JPMorgan Chase in Washington County foreclosure trial |


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The FOIA machine
Posted: 19 Jul 2013 12:59 AM PDT
Consumer advocates often want government-held information and use the federal Freedom of Information Act (or state open government laws) to get that information. Check out the FOIA machine, a new on-line tool sponsored by the Center for Investigative Reporting. What is it? Here's what the FOIA machine says:

What is the FOIA Machine?

FOIA Machine is the open source web transparency platform that allows journalists and citizens to prepare, file and track public record requests to government agencies worldwide.

What I can do with the FOIA Machine?

  • Prepare a request under the FOIA or any other Public Records state law from the agencies databases
  • Send one or more requests to a right officer and agency, or schedule it for later sending
  • Track the status of your requests
  • Get the records back to your email and FOIA Machine mailbox
  • Create projects from the group of similar requests
  • Use automated request creation workflow or request letter templates to prepare request
  • Search for other users requests and responsive documents
  • Share your FOIA experience with other users

The Home Equity Theft Reporter

The Home Equity Theft Reporter

Matt Taibbi: Chase to Pay Another Massive Settlement | Matt Taibbi | Rolling Stone

 JPMorgan Chase jamie dimonDuring the financial crisis, while Dr. Evil-ish Wall Street villains like Goldman and Lehman Brothers were getting all the bad press, pundits continually referred to J.P. Morgan Chase as the "good bank." The myth of Chase as the finance sector's one upstanding rock of rectitude reached its zenith in July of 2009 with an embarrassingly hagiographic piece in the New York Times entitled, "In Washington, One Bank Chief Still Holds Sway." In that one, the paper breathlessly praised Jamie Dimon for emerging from "the disgrace of his industry" to become Barack Obama's "favorite banker."
Chase and Jamie Dimon kept that rep for a good long time. As late as 2011, Dimon's name was being floated around Washington very seriously as a potential replacement for Tim Geithner's Treasury Secretary post. Even when Dimon showed up on the Hill last year to testify (read: obfuscate) about the infamous "London Whale" episode, Senators on the banking committee – who, as writer George Zornick noted, had collected a cumulative $522,088 in donations from Chase – slobbered all over Dimon and shelved the important London Whale matter to ask the great genius's advice on how to fix the economy.

Matt Taibbi: Chase to Pay Another Massive Settlement | Matt Taibbi | Rolling Stone

Saturday, July 13, 2013

Frequently Asked Questions (FAQs) on Servicer and Responsible Party Obligations for Bifurcated Mortgage Loans - servicer-responsible-party-obligations-bifurcated-mortage-loans-faqs.pdf

Frequently Asked Questions (FAQs) on Servicer and Responsible Party Obligations for Bifurcated Mortgage Loans - servicer-responsible-party-obligations-bifurcated-mortage-loans-faqs.pdf

Did You Know? How the Terms of a HAMP Modification Are Determined

HouseKeeping Report

Posted: 11 Jul 2013 03:33 PM PDT
Have you ever wondered how the servicer decides what terms to offer when evaluating a borrower for HAMP? Despite appearances, the terms that are modified are not arrived at randomly. The servicer applies a “waterfall” that specifies which terms will be adjusted, to what extent, and in what order.

The waterfalls—there are a few—are described in the MHA Handbook for Non-GSE Loans and in Fannie Mae’s and Freddie Mac’s Servicing Guides. These documents are all publicly available and regularly updated.

Standard Waterfall for HAMP Tier 1

For a HAMP Tier 1 modification (think “HAMP Classic”), the standard waterfall works like this:

STEP ONE:  First, the servicer capitalizes the arrears. What does this mean? The servicer adds up the missed principal and interest payments, costs already incurred, and any amounts the servicer advanced (or expects to advance during the trial period) for property taxes and insurance. The total arrearage is added to the unpaid principal balance (UPB).

For example, suppose Beatrice owes $100,000 on her loan and has missed $20,000 in payments, but there are no expenses or escrow advances. After capitalizing the arrears, her new UPB is $120,000. Notice that Beatrice will now be paying interest on her missed interest payments.

STEP TWO: Next, the servicer begins reducing the interest rate in small increments of 0.125%. The goal is to get the borrower’s monthly housing cost (principal, interest, taxes and insurance) down to 31% of gross income. The floor interest rate for HAMP is 2%. If reducing the interest rate to 2% does not result in a 31% ratio, the servicer moves on to the next step. (Note: The full interest rate reduction typically is for five years and thereafter increases in steps until it hits the “interest rate cap,” which is based on the Primary Mortgage Market Survey (PMMS). The current rate is available here.)
For example, suppose Beatrice has an adjustable rate mortgage (ARM) with a 6.75% interest rate.  The servicer will convert the loan to a fixed rate and begin reducing the rate in 0.125% increments until the monthly housing ratio hits 31% or the servicer hits the floor of 2%. In most cases, Beatrice will end up with a 2% fixed rate mortgage for the first five years, with two or more steps up in the rate in succeeding years up to the interest rate cap.

STEP THREE: Unless the investor prohibits term extensions, the servicer must begin extending the term of the loan, i.e., how many months the borrower will pay on the loan. The maximum term is 480 months or 40 years.

For example, if Beatrice has a 30-year loan, the servicer can extend the term out to 40 years to try to hit the 31% target ratio. Notice that Beatrice will now be paying interest over a longer period of time and will ultimately pay quite a bit more for her home than she originally bargained for, even though her rate is lower.

STEP FOUR:  If the monthly housing ratio still exceeds 31%, the servicer has another tool: principal forbearance. The servicer will defer a portion of the principal to the end of the loan resulting in a balloon payment. The borrower will not pay any interest on the deferred principal, but the principal is not forgiven. The servicer can defer up to 30% of the UPB but need only defer down to 115% LTV. (For more about the difference between forbearance and forgiveness, see Did You Know? The Difference Between Principal Forbearance and Principal Forgiveness.)

For example, suppose that Beatrice’s home is worth $90,000. The servicer can forbear $16,500 of principal (115% x 90,000). Beatrice will not pay any interest on the $16,500, which she will owe as a lump sum when her last payment comes due.

At the end of this four-step process, Beatrice’s loan terms have changed quite a bit. She started with a fully amortizing, 30-year mortgage with an adjustable 6.75% interest rate and a UPB of $100,000. Now Beatrice has a 40-year fixed rate mortgage with a 2% fixed interest rate (that may rise a couple of percentage points after the first five years), a UPB of $120,000, and a $16,5000 balloon owing at the end of her loan.

Beatrice’s modified loan isn’t great, but it isn’t terrible. She now owes $30,000 more than her home is worth. Her monthly payments have been reduced by at least 10% (a HAMP requirement) and are now at or less than 31% of her gross income. She will be current again and no longer facing foreclosure. If Beatrice had a larger arrearage or was deeply underwater, the modified loan could look much, much worse.

(Note: For purposes of this article, we are ignoring Beatrice’s total debt ratio and the net present value of the modification. Both factors could disqualify Beatrice for a HAMP modification even if the waterfall produces a housing ratio of 31% or less.)

Alternative Waterfall for HAMP Tier 1

Because Beatrice’s loan-to-value ratio is greater than 115%, the servicer also must run the alternative waterfall for HAMP Tier 1. In the alternative waterfall, there is one more step between capitalizing arrears and reducing the interest rate: reducing principal. This extra step does not apply if the investor does not allow principal forgiveness. For example, if the loan is owned or guaranteed by Fannie or Freddie, forgiveness is not an option.

The new step requires the servicer to reduce the UPB until the borrower owes 115% of the property’s value or, if less, until the 31% housing ratio is met. (Some investors require the servicer to use a different LTV ratio.)

For example, suppose the investor that owns Beatrice’s loan allows principal forgiveness. After capitalizing the $20,000 in arrears, the servicer can reduce her principal by $16,500 to bring her LTV to 115%. If that reduction is not enough to reduce her payments to 31% of gross income, the servicer will move on to the third and fourth steps above.

Beatrice may be required to earn forgiveness from her investor. If so, Beatrice will have to make timely monthly payments for several years. At the end of each year, a pro rata portion of the forgiveness amount will be deducted from her UPB. In the meantime, the amount of principal to be forgiven will be treated as deferred, non-interest bearing principal. If Beatrice misses too many payments, the unapplied forgiveness will be lost and Beatrice will have to pay it back.

For example, the servicer may require Beatrice to earn the $16,500 principal reduction by making timely payments for five years. At the end of each those five years, her principal balance will be reduced by $3,300 (one-fifth of the $16,500).  If Beatrice defaults in the middle of year two, she will not lose the first year’s forgiveness, but there will be no reduction in years two through five.

Standard and Alternative Waterfalls for HAMP Tier 2

Borrowers who do not qualify for HAMP Tier 1 may be considered for HAMP Tier 2. The waterfall works the same as it does in HAMP Tier 1 but the terms are less favorable. Tier 2 also has an alternative waterfall for investors who allow principal forgiveness.

In the standard waterfall, as before, the servicer capitalizes the arrears first. A new fixed interest rate is set that is a little higher than the PMMS rate mentioned above. (That rate is generally well above the 2% floor that Tier 1 offers.) The term of the loan is extended to 40 years. Finally, principal forbearance is calculated down to 115% LTV but no more than 30% of UPB. The resulting monthly principal and interest payment must be at least 10% less than the current payment, and the total debt ratio must be between 25 and 42%. Just like HAMP Tier 1, the alternative waterfall inserts a principal forgiveness step between capitalizing arrears and reducing the interest rate.

For example, suppose Beatrice’s property is a rental. Beatrice does not qualify for a modification under Tier 1, so she is evaluated for a Tier 2 modification. After capitalizing the $20,000 arrearage, the servicer will reduce Beatrice’s interest rate to the current fixed rate, which could result in an interest rate several points higher than what Tier 1 would offer. Beatrice’s 30-year loan will be reamortized over 40 years and a portion of her principal will be deferred until the end of her loan, leaving her with a balloon payment. If these changes do not result in a 10% reduction of her principal and interest payments, she will be denied. If her total debt ratio still exceeds 42% of her gross income, she will be denied. In either case, she still may be considered for programs other than HAMP.

Transparency and HAMP Waterfalls

Understanding the waterfalls creates some transparency in the loan modification process. A borrower or her attorney can approximate the modification terms using the current UPB, the amount of the estimated arrearage, and the published PMMS rates. Even if the servicer refuses to disclose material terms of the modification at the TPP stage, which is common, it is possible to compare your estimate with the servicer’s offer.

If the servicer offers a trial period plan or permanent modification with substantially different terms, there are a few possibilities. The servicer screwed up—often the problem. The investor may limit or prohibit forgiveness, term extensions, or forbearance, resulting in only a partial application of the waterfall. Or, in many cases, the borrower does not qualify for a HAMP modification and the servicer is using standard non-HAMP terms, which are typically less favorable.

If the terms of a HAMP modification vary greatly from your estimate, it may be worthwhile to determine which of these possibilities is at fault. If servicer error is the problem, you may need to escalate or appeal the determination.

Putting HAMP in Perspective

Keep in mind that HAMP modifications represent a minority of all loan modifications. For non-HAMP modifications, a similar waterfall might apply but the investor may use higher interest rates, higher payment targets, and favor term extensions over forbearance and forgiveness.
For example, standard non-HAMP modifications for Fannie loans use a fixed rate set by Fannie, which is higher than HAMP’s 2% floor. While other terms are similar to those in the standard HAMP waterfall, the goal is to reduce principal and interest payments by 10% (as opposed to HAMP’s 31% housing ratio target). These differences may result in a much less affordable modification than a borrower could get under HAMP.

As always the devil is in the details. HAMP allows servicers to diverge from the standard waterfalls as required by the investor. Some borrowers may be offered more favorable terms, and others may be offered less favorable terms, even though both borrowers are technically receiving HAMP modifications. And in most cases the borrower will never know, or at least will never know why.
If you are an Oregon borrower in default or struggling to stay current, visit your local HUD-certified counseling agency for more information about loan modifications and free help in applying for HAMP. A searchable list of counseling agencies is available at

Thursday, July 11, 2013

CFRB Rules on Debt Collection

The CFPB published two bulletins on debt collection today. 

The first  makes clear that any entity subject to the Bureau's 
jurisdiction under the Dodd-Frank Act, whether a third-party collector 
or a creditor collecting its own debts, can be held accountable for any 
unfair, deceptive, or abusive practices in collecting a consumer’s debts. 

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The second warns companies to avoid deceptive statements concerning 
the impact of paying a debt on a consumer’s credit score, credit report, 
or creditworthiness.
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Foreclosure Case Summaries May 2012 - May 2013

Home » May 2013 Foreclosure Newsletter
State Cases:
Multani v. Witkin & Neal, __ Cal. App. 4th __, 2013 WL 1818613 (May 1, 2013):  HOA’s pre-sale notices do not absolve them of their post-sale statutory duty to notify homeowner of a 90-day redemption period (CCP § 729.050). HOA’s failure to comply with § 729.050 may be grounds to set aside the FC sale (remanded to trial court).  In addition, no tender is required because imposing one would financially bar most potential plaintiffs, rendering 729.050 ineffectual.  Therefore, “a debtor is properly excused from complying with the tender requirement where the nonjudicial foreclosure is subject to a statutory right of redemption and the trustee has failed to provide the notice required under section 729.050.”
West v. JP Morgan Chase Bank, N.A., 214 Cal. App. 4th 780 (2013):  Homeowner’s compliance with trial period plan (TPP) contractually requires servicer to offer a permanent loan modification (Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 556-57 (7th Cir. 2012)). That contractual obligation does not require express language in a TPP agreement, but is imposed through HAMP Supplemental Directive 09-01 (Apr. 6, 2009). A promissory estoppel claim is also possible in a TPP arrangement because the lender promises to offer a permanent loan modification if borrower fulfills TPP requirements. If borrower complies with the TPP, they forgo other options to their detriment, fulfilling another requirement of a PE claim. (Wigod, 673 F.3d at 566). A California unfair competition claim is also possible where lender holds out to the public that TPPs offered are HAMP compliant.
Intengan v. BAC Home Loans Servicing LP, 214 Cal. App. 4th 1047 (2013): A court may take judicial notice of the existence of a declaration from a servicer asserting compliance with the notice requirements in former CC § 2923.5, but cannot take judicial notice of the contents of that declaration. If disputed by the borrower, it is a matter of fact to be determined at trial whether or not a servicer actually attempted to make contact with the borrower 30 days prior to recording a notice of default.  At trial, a finding of non-compliance with § 2923.5 would only delay the foreclosure sale until the servicer became compliant.
Akopyan v. Wells Fargo Home Mortg., Inc., ___ Cal.Rptr.3d ___, 2013 WL 1352018 (Apr. 4, 2013):  Federal banking laws preempt California restrictions (Cal. Bus. & Prof. Code § 10242.5) on late charges when a national bank or federal savings association is servicing a mortgage loan, even when the bank or savings association did not originate the loan. Under HOLA, the OTS meant to “occupy the field,” negating a claim based on wrongful late fees. (Note: the Dodd-Frank Act got rid of this field preemption for post-2011 transactions).  Under NBA, the OCC does not claim field preemption, but plaintiff’s claim of wrongful late fees fails anyways because a state’s regulation of late fees “significantly interferes” with the bank’s powers under NBA.
Jolley v. Chase Home Fin., LLC., 213 Cal. App. 4th 872 (2012): Substantive information and contents of documents taken from websites, even “official” government websites, do not deserve judicial notice under California evidentiary rules, even where there are no factual disputes over the content or substance of the documents.
HAMP, the former California CC §§ 2923.5 & 2923.6, and HBOR all reflect the general attitude of legislatures that banks should be required to work with borrowers to modify their loans and avoid foreclosure. As to a negligence claim, these policy considerations “indicate[…] that courts should not rely mechanically on the ‘general rule’ that lenders owe no duty of care to their borrowers.” Several recent federal cases have correctly found a duty of care arising from modification negotiations where a lender promises a modification through one channel, and then uses another to foreclose or otherwise deny a modification (dual tracking). Notably,Jolley finds a duty of care after Ragland (below) failed to find one between a borrower and lender in a similar dual tracking scenario.
Pfeifer v. Countrywide Home Loans, 211 Cal. App. 4th 1250 (2012): Deeds of trust in FHA insured mortgages incorporate by reference HUD servicing requirements (express in the note and mortgage), which servicers must comply with before nonjudicial foreclosure. Mathews v. PHH Mortg. Corp., 283 Va. 723 (2012). One of those requirements is a face-to-face meeting between the borrower and servicer. That this meeting requirement is not expressly listed in HUD’s loss mitigation measures does not render it optional or immaterial. Without this meeting (or attempt to make contact) the lender is prevented from initiating foreclosure proceedings. 24 C.F.R. § 203.604. Tender is not required in these situations and where the borrower is bringing a defensive action to enjoin a foreclosure sale. A completed foreclosure sale could not be voided using this claim.
The act of foreclosure, by itself, does not constitute “debt collection” under the FDCPA. Nor does the notification of a pending foreclosure sale constitute a “debt collection activity.” Simply listing the amount owed in the sale notice does not create a debt collection relationship between the lender’s trustee and the borrower under the FDCPA.  A trustee whose only role is to carry out the foreclosure process does not constitute a “debt collector” as defined by the FDCPA and it cannot be sued under that Act.
Barroso v. Ocwen Loan Servicing, 208 Cal. App. 4th 1001 (2012): In a breach of contract claim involving a  permanent loan modification, express language requiring lender to send the executed agreement signed by both parties to the borrower is not a condition precedent to the formation of that contract. That interpretation would defeat both the spirit of the contract and the express language guaranteeing a HAMP modification when all the terms in the TPP are met. When a borrower signs and otherwise fulfills the demands of the contract, the contract is formed, even without lender’s signature or delivery of the contract to borrower. The servicer who foreclosed on a borrower with a permanent loan modification agreement is also subject to a wrongful foreclosure claim.
Skov v. U.S. Bank Nat’l Ass’n, 207 Cal. App. 4th 690 (2012): As Intengan later confirmed, it may be appropriate to take judicial notice of the existence of a lender’s declaration that it complied with notice requirements in former CC. § 2923.5. It is inappropriate, however, to take judicial notice of the validity of that declaration or of the contents of that declaration, where borrower disputes those aspects. An individual borrower had a private right of action under CC § 2923.5. Without one, the statute would have been meaningless. It was capable of postponing a foreclosure sale, but not voiding one.
OCC regulations, through the National Bank Act, do not preempt former CC § 2923.5. Foreclosure regulations, including those associated with notice, have traditionally been left to the states, and the OCC could have expressly preempted state foreclosure law but it did not. The requirements of § 2923.5 are not onerous on the banks and do not require them to enter into modification agreements with borrowers, which would create a preemption scenario.
Cadlerock Joint Venture, L.P. v. Lobel, 206 Cal. App. 4th 1531 (2012): If the lender of both the senior and junior lien on the same property assigns the junior lien to a different entity soon after its origination, that second entity and holder of the junior lien can go after the borrower for the deficiency after a foreclosure of the senior lien. In other words, this junior lien holder is not bound by the § 580d anti-deficiency statute, or case law forbidding such conduct when the junior lien is assigned after the trustee’s sale of the senior lien.  There is no definite time period by which to judge how quickly after origination the senior lien holder must assign the junior lien to ensure their right to sue for the deficiency, but it must be clear that the two loans were not “created . . . as an artifice to evade section 580d.”
Ragland v. U.S. Bank Nat’l Ass’n, 209 Cal. App. 4th 182 (2012): Summary judgment in favor of a lender is inappropriate based on borrower’s inability to tender the amount due when that inability is due solely to improperly imposed late fees and assessments. Late fees and assessments could be improper when, as in this case, the lender’s agents improperly instructed borrower to withhold mortgage payments.
CC § 2924(g)(d) prevents foreclosure sales from happening in the seven days following either a dismissal of an action brought by the borrower, or the expiration of a TRO or court-ordered postponement. There is a private right of action implied in CC § 2924(g)(d), as it would be rendered useless without one. Sec. 2924(g)(d) is not preempted by federal law. As part of a state foreclosure scheme, the statute does not deal with loan servicing and therefore falls outside of the preemption envisioned by the Home Owners’ Loan Act.
Wrongful foreclosure may give rise to a claim for intentional infliction of emotional distress. A claim of negligent infliction of emotional distress, however, cannot prevail without establishing a duty owed by the lender to the borrower. In arm’s length transactions, there is no fiduciary duty between those two parties. Even when a lender’s agents advise a borrower to withhold payment, that advice falls within the scope of normal money-lender activity and does not, by itself, create a fiduciary duty that would give rise to a NIED claim.
Herrera v. Fed. Nat’l Mortg. Ass’n, 205 Cal. App. 4th 1495 (2012):  Affirms California case law finding that MERS, as nominee and beneficiary of lender, has the power to assign lender’s interests. That power stems from the lender signing the deed of trust over to MERS. Any assignment from MERS to a second entity does not require an agency agreement or relationship. Also, the promissory note (debt) and DOT (security) do not have to “travel” together. If a lender assigns the note to a second entity, that second entity could have the power to foreclose regardless of whether it was also assigned the DOT by MERS.
CC § 2932.5 requires an assignee to record the assignment of a mortgage before they sell or foreclose on the property. Sec. 2932.5 is inapplicable in the case of deeds of trust, however; there is no similar requirement demanding that the assignee of a deed of trust record the assignment before invoking their power to sell or foreclose.
Heritage Pacific Fin., LLC v. Monroy, __ Cal. App. __, 2013 WL 1779278 (Mar. 29, 2013): The assignee of a promissory note is not assigned the right to bring tort claims against the borrower on the note if that right is not explicitly part of the assignment. “No California legal authority [has] held that the assignment of a promissory note automatically constituted an assignment of a lender’s fraud claims.”  Communications made by the assignee to the borrower claiming otherwise may violate the FDCPA (if all other conditions are met). For the purposes of the FDCPA, tort claims can be considered “debts.”
If the assignee was assigned a second lien after the first lien foreclosed, the second lien is extinguished and the assignee is prevented from collecting the balance of their loan due to anti-deficiency statutes. If the assignee nevertheless sends the borrower notices that they wish to collect the second lien, those notices may also violate the FDCPA as false and deceptive attempts to collect a debt.
Aurora Loan Services v. Brown, 2012 WL 6213737 (Cal. App. Div. Super. Ct. July 31, 2012): In an unlawful detainer (UD) action the only issue is whether plaintiff has the authority to possess the property. The only title issue that relates to the possession question is: can plaintiff prove acquisition of title at the trustee sale? Code Civ. Proc. § 1161a. Here, defendants put the validity of the title at issue in an effort to reclassify the case from a UD to an unlimited civil action. Code Civ. Proc. § 403.040.  To qualify as an unlimited civil action, the value of the property in question has to exceed $25,000. Defendants argued that putting the title at issue necessarily raises the amount at stake to the value of the property, which was over $25,000.  The court found that alleging improprieties surrounding title and trustee sale do not put the monetary value of the property at issue and the case cannot be reclassified as an unlimited civil action.
Personal service of a Notice to Vacate is adequately attempted under CC § 1162 by going to the recipient’s home or business and trying to make contact. Just one attempt is adequate before a service processor resorts to posting a copy of the Notice on the property and then mailing the Notice (“nail and mail”). Sec. 1162(a)(3). Service does not need to be attempted at both a residence and a business to be effective.  Nor is a plaintiff required to discover defendant’s place of business. The court, though, admits that “nail and mail” may not be effective if defendant refuses to attempt personal service at plaintiff’s known business address.
As explained further in U.S. Bank v. Cantartzoglou (below), the plaintiff in a UD action has the burden to prove they had the right to foreclose, including perfected title. CC § 1161a. Here, the beneficiary and trustee that foreclosed on the property and that were listed in the NOD and NTS were not the same beneficiary and trustee listed on the DOT. Further, Plaintiff offered no evidence that the DOT beneficiary had assigned their interest to the foreclosing beneficiary, or that the DOT beneficiary had substituted a trustee. The court did not accept as relevant a post-NOD and post-NTS recorded Corporate Assignment of Deed of Trust purportedly transferring the DOT from MERS to the foreclosing beneficiary.  Without a showing that MERS had an interest in the DOT, a “transfer” from MERS to another beneficiary does nothing to show perfected title.  In this case, the sale was declared void.
U.S. Bank v. Cantartzoglou, 2013 WL 443771 (Cal. App. Div. Super. Ct. Feb. 1, 2013): To bring a UD action a plaintiff must show that they purchased the property at a trustee sale that was compliant with both the relative statutes and the DOT. If the defendant raises questions as to the veracity of title, plaintiff has the affirmative burden to prove true title. The plaintiff must prove every aspect of the UD case, while the defendant has no burden of proof whatsoever. This differs from wrongful foreclosure actions where the homeowner plaintiff has the burden to show that something would void the sale (like an improper assignment).

Federal Cases:
Singh v. Bank of America, 2013 WL 1759863 (E.D. Cal. Apr. 23, 2013) (TRO); 2013 WL 1858436 (E.D. Cal. May 1, 2013) (PI): A preliminary injunction (and a TRO, under the same evaluation) to postpone a foreclosure sale may be appropriate under the new HBOR rule against dual tracking. If a borrower submits a “complete application” on a first mortgage, the servicer cannot move forward with a notice of default, notice of sale, or an actual trustee sale, while the modification application is pending. CC § 2923.6(c) (2013). Here, a lender’s failure to respond to a borrower’s complete application signaled that “negotiations” were still pending and triggered § 2923.6(c).
Preliminary injunction was ordered because the essential elements were met: 1) borrower was likely to prevail on the merits because lender violated the anti-dual tracking aspect of HBOR (§ 2923.6(c)); 2) losing the property at the FC sale would cause “irreparable harm” to borrower; 3) lender is not inequitably treated – the sale might only be delayed, not completely prohibited; and 4) a PI is in the public’s best interest because it follows the newly enacted HBOR scheme of laws and regulations which were created to protect the public.
BofA asked that a monthly bond be set at $2,700 per month. The judge instead found a one-time $1,000 bond to be more appropriate. F.R.C.P. 65(c).
Lindberg v. Wells Fargo Bank N.A., 2013 WL 1736785 (N.D. Cal. Apr. 22, 2013): HBOR law CC § 2923.6 does not apply when a borrower has failed to submit a “complete application” to the lender or servicer. Here, borrower’s failure to timely respond (30 days) to lender’s written request for further documentation prevented her from demonstrating that her application was complete. Because she would neither prevail on the merits, nor could she show that there were serious questions of fact, her motion for preliminary injunction to stop the FC sale failed.
Rex v. Chase Home Fin. LLC, __ F. Supp. 2d __, 2012 WL 5866209 (C.D. Cal Nov. 19, 2012):  CCP § 580e was passed as an anti-deficiency statute applying to short sales and became effective in July 2011. For sales conducted prior to that date, it may still be possible to prevent a deficiency suit after short sales involving a purchase money loan. This court found CCP § 580b’s anti-deficiency protections applicable in a short sale for three reasons: 1) § 580b’s plain language does not qualify the type of sale covered – it simply says “sale;” 2) the legislature passed § 580b to stabilize the mortgage market and state economy, goals which would be defeated if lenders could opt for a short sale instead of foreclosure and then contract out of 580b in the short sale agreement; and 3) reading § 580b to apply to short sales does not render § 580e superfluous. Sec. 580b applies to all modes of sale, but limits the loans involved to purchase money loans, whereas § 580e limits the type of sale to a short sale but does not limit the type of loan.
Gale v. First Franklin Loan Servs., 701 F.3d 1240 (9th Cir. 2012): The TILA provision requiring a servicer to respond to a borrower’s request for information pertaining to the owner of the mortgage only applies to servicers who are also assignees of the loan. A servicer does not have the obligation to respond if it is not also an assignee. If the servicer is the original creditor, they are also not obligated. TILA 15 U.S.C. § 1641(f)(2).
Medrano v. Flagstar Bank, 704 F.3d 661 (9th Cir. 2012): RESPA provision 12 U.S.C. § 2605(e) requires a servicer to timely respond to a borrower’s “qualified written request” (QWR). A QWR must include the name and account of the borrower and either a statement that the borrower believes the account to include an error (listing the reasons for believing such), or a request for specific information described with sufficient detail. Catalan v. GMAC Mortg. Corp., 629 F.3d 676, 687 (7th Cir. 2011). Additionally, any information sought must relate to the servicing of the loan. § 2605(e)(1)(A)-(B). Questions regarding anything that preceded the servicer’s role (like questions about the loan origination, terms, or validity) do not qualify as servicing. Notably, a request for a modification of the loan terms does not, by itself, amount to a valid QWR that triggers a response under § 2605(e). A request for a modification would need to be accompanied by a finding of an error regarding the loan’s servicing, or by a request of information related to that servicing.
Michel v. Deutsche Bank Trust Co., 2012 WL 4363720 (E.D. Cal. Sept. 20, 2012): When a beneficiary substitutes the trustee of a DOT, that substitution may be valid where the person signing on behalf of the beneficiary does not, in fact, work for the beneficiary. In Michel, the person who signed the substitution held herself out to be a “Vice President” of the beneficiary. The borrowers argued that she in fact had no real relationship with the beneficiary but was instead employed by an unrelated third party. Many courts have required borrowers to demonstrate in their complaints that a signor lacked the beneficiary’s authority to substitute a trustee for the claim to move forward. See Selby v. Bank of Am., Inc., 2011 WL 902182 (S.D. Cal. Mar. 14, 2011). Others, though, have found that simply alleging that the signor lacked this authority is a valid claim and a triable issue of fact. See Tang v. Bank of Am., N.A., 2012 WL 960373 (C.D. Cal. Mar. 19, 2012). The Michel court ruled this issue appropriate for adjudication in summary judgment.
If it were proved that an invalid trustee executed the foreclosure sale, that sale would be void, not voidable.
Winterbower v. Wells Fargo Bank, N.A., 2013 WL 1232997 (C.D. Cal. Mar. 27, 2013): Under HBOR provision CC § 2923.6(g), servicers must re-evaluate a borrower for a loan modification when there has been a “material change in the borrower’s financial circumstances” and the borrower submits evidence of that change.  Such a re-evaluation would halt the foreclosure process because of HBOR’s anti dual-tracking rule. In documenting changed financial circumstance, borrowers must do more than state the change in broad terms and/or list their new expenses or earnings.
Signatories to the National Mortgage Settlement (including Wells Fargo) are not liable for CC § 2923.6 violations as long as they are otherwise compliant with the Settlement.
This court takes care to note that it evaluated the above issues in regards to borrower’s request for a preliminary injunction stopping the FC sale.  PIs set a high bar for the moving party (see Singh above) and this opinion is not “conclusive . . . as to the meaning of relatively new portions of the California Civil Code, and of the meaning of the National Mortgage Settlement.”
Weber Living Trust v. Wells Fargo Bank, N.A., 2013 WL 1196959 (N.D. Cal., Mar. 25, 2013): HBOR provision CC § 2924.15 prohibits dual tracking when the property at issue is the borrower’s principal residence. In an action to stop a FC sale rooted in this HBOR claim, the borrower has the burden to prove that their principal residence is the property in question.
Makreas v. First Nat’l Bank of N. Cal., 856 F. Supp. 2d 1097 (N.D. Cal. 2012): If a borrower claims that an assignment or substitution of a trustee was backdated to hide the fact that it occurred after the notice of default, it would follow that the assignee or substituted trustee did not have the authority to foreclose, voiding the sale. Tamburri v. Suntrust Mortg., 2011 WL 6294472 (N.D. Cal. Dec. 15, 2011).
Foreclosure, alone, is not considered a “debt collection activity” under FDCPA. If a servicer or lender went beyond the foreclosure process though, and engaged in debt collection attempts or threats, that could give rise to a FDCPA claim.  A borrower should allege specific instances of debt collection attempts that are separate and distinct from foreclosure activity.
Mena v. JP Morgan Chase Bank, 2012 WL 3987475 (N.D. Cal. Sept. 7, 2012): Judicial notice may be granted to both the existence and the authenticity of certain foreclosure-related documents and government documents if they are not disputed and if they can be verified by public record. Fed. R. Ev. 201(b)(2). This differs from the Jolley court’s holding in a state of California case (above) that even official government documents not in dispute do not deserve judicial notice beyond the fact that they exist.
CC § 2932.5 does not require a foreclosing beneficiary-assignee to have recorded the assignment of the DOT prior to foreclosing.  Whether or not the assignment was valid and whether the foreclosing entity had the power to foreclose may be valid claims, but there is no § 2932.5 claim based on failure to record the DOT.
Barrioneuvo v. Chase Bank, 2012 WL 3235953 (N.D. Cal. Aug. 6, 2012): Tender is normally required when borrowers allege defects in the notice or procedural aspects of a foreclosure sale. If a borrower contends the validity of the foreclosure sale itself, however, tender should not be required. Tamburri v. Sunset Mortg., 2012 WL 2367881 (N.D. Cal. June 21, 2012).  Some courts have also found tender unnecessary when, as here, a borrower brings an action to prevent a sale from taking place and where the harm to the borrower has not yet occurred.
If a sale is (or would be) void, rather than voidable, that situation also frees the borrower from their tender burden. In a case where a lender does not comply with CC § 2923.5 notice requirements, the question becomes whether or not a notice defect –which usually would trigger the tender requirement—is of a nature so as to make the sale void, thus negating the tender requirement. If the DOT does not contain language “providing for a conclusive presumption of the regularity of sale,” and there is defective notice, the sale is considered void.Little v. C.F.S. Serv. Corp., 188 Cal. App. 3d 1354, 1359 (1987). In this situation, tender is not required.
Tamburri v. Suntrust Mortg., 2012 WL 2367881 (N.D. Cal. June 21, 2012): To bring a RESPA § 2605 claim for failure to respond to QWRs, a borrower must also allege actual damages resulting from a servicer’s noncompliance. The complaint must allege a specific financial harm stemming from the RESPA violation itself, rather than a broad, amorphous allegation of “harm” stemming from a default or foreclosure.
Requesting the identity of the loan’s owner(s), by itself, does not constitute a valid QWR falling under § 2605 protection because it does not relate to the servicing of the loan.
Halajian v. Deutsche Bank Nat’l Trust Co., 2013 WL 593671 (E.D. Cal. Feb. 14, 2013): In a CC § 2923.5 claim, a borrower needs to overcome a presumption that the trustee or servicer acted properly in regards to notice. The borrower needs to allege and demonstrate that notice was defective and resulted in prejudice to borrower. Knapp v. Doherty, 123 Cal. App. 4th 76, 86 n.4 (2004).   Further, § 2923.5 only provides a pre-sale remedy of foreclosure postponement. The statute cannot be used to un-do a foreclosure sale that has already occurred.
This court agrees with Michel (above) on the substitution/agency issue. Michel held that deciding whether a purported agent of a beneficiary (who is not an employee of that beneficiary) has the power to substitute a trustee is an issue for summary judgment and this court concurs. A borrower may allege in a complaint that a signor of a substitution was not a proper agent of the beneficiary, and discovery on that allegation is appropriate before a SJ motion is decided. Judicial notice of servicer’s “list of corporate officers” is inappropriate in cases where a servicer (like MERS, in this case) has thousands of these “officers.”
Harris v. Wells Fargo Bank, N.A., 2013 WL 1820003 (N.D. Cal. Apr. 30, 2013): If a borrower’s default results from a lender or servicer’s misconduct (ex: improperly imposed late fees), tender should not be required to bring suit. (This finding is similar to the Ragland case described above).
State-law claims based on a general duty “not to misrepresent material facts” or not to engage in fraud in business dealings, are generally not preempted by HOLA. DeLeon v. Wells Fargo Bank, N.A., 2011 WL 311376 at *6 (N.D. Cal. Jan. 26, 2011). Allegations that a servicer improperly instructed a borrower to withhold mortgage payments and that withholding would not result in foreclosure are such state law claims and are not preempted by HOLA.
Oral representations made by agents or employees of a servicer or lender and pertaining to the DOT (as opposed to the promissory note) may give rise to a valid breach of contract claim.
Skinner v. Green Tree Servicing, LLC, 2012 WL 6554530 (N.D. Cal. Dec. 14, 2012): CC § 580b does not bar a creditor from “merely contacting” the borrower, asking for any unpaid debt. While the ability to sue for a deficiency is barred by § 580b, the debt still theoretically exists and a creditor may ask for payment.
If the creditor asks for the debt in a manner rising to the level of harassment or making false representations to the borrower, the borrower may have valid FDCPA claims under 15 U.S.C. §§ 1692d & 1692e. There are no “bright line” rules as to what type of conduct qualifies as harassment or false representation, but the language of §§ 1692d & 1692e provide examples. In this case, repeated phone calls to borrowers’ home and places of employment rose to the level of a § 1692d harassment claim. The creditor’s accusation of “stealing” –insinuating that the borrower was committing a crime— was evidence of a valid § 1692e claim.
Stitt v. Citibank, 2013 WL 1787159 (N.D. Cal. Apr. 25, 2013): A fiduciary duty owed by a lender or servicer to the borrower (which does not exist in ordinary mortgage or DOT transactions) is not necessary to establishing a fraud claim. Nor does a fraud claim require an express duty (like a duty to disclose) stated in the loan agreement. When the alleged fraud is affirmative in nature, this may constitute special circumstances forming a duty. Here, the loan servicer exacted improper fees by marking-up actual costs for services like property inspections and then refused to disclose information related to those fees. The court allowed the fraud claim to move forward.
Out of State Cases:
Curtis v. US Bank Nat’l Ass’n, 50 A.3d 558 (Md. 2012): The Protecting Tenants at Foreclosure Act mandates that the purchaser of foreclosed property provide a bona fide month-to-month tenant with, at minimum, a 90-day notice to vacate.  The notice is effective the day it is received by tenant, not the day of the foreclosure sale. Pre-foreclosure notices that provide tenants with advanced warning of the foreclosure and possible end to their tenancies may give the tenant actual knowledge of a foreclosure sale date, but are irrelevant to the 90-day notice required by the PTFA. Moreover, defective notices to vacate that do not comply with the PTFA do not become effective once 90 days pass. The 90-day clock can only begin when the tenant receives an effective 90-day notice.
The court also held that even a 90-day notice may not satisfy the PTFA if it is coupled with other misleading and contradictory communications.  Here, the bank provided the tenant one notice to “immediately vacate, quit, and surrender possession,” but another notice instructed her that she did not have to vacate the property until March 2011, more than three months from the notice date.  To add to the confusion, the bank filed a motion one month later asserting that it had the right to immediate possession.  The court concluded the bank’s notice “was confusing and ineffective for the purpose of the PTFA” because “this succession of post-sale correspondence would have left anyone perplexed.”
Fontaine v. Deutsche Bank Nat’l Trust Co., 372 S.W.3d 257 (Tex. App. 2012): Under the PTFA, a bona fide lease must be honored by the new purchaser, unless that purchaser will be an owner-occupier (in that case, tenant still gets the 90-day notice protection).  PTFA § 702(a)(2)(A). A new purchaser steps into the old landlord’s shoes and assumes all the obligations and rights of the old landlord, including the obligation to honor the existing lease.
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