Produce The Note Attorney

California Plaintiff goes in pro per and files “Produce the Note” challenge to stop foreclosure…….

Attorney Steve Vondran — Sat, 06 Mar 2010 23:03:44 +0000

Unfortunately, court says “no way” and declares THERE IS NO REQUIREMENT THAT THE ANYONE PRODUCE THE ORIGINAL PROMISSORY NOTE AS A PRE-REQUISITE TO PURSUING A PRIVATE TRUSTEE SALE. Here are a few snipets from the case:

MY COMMENTS ARE IN BOLD AND MERELY REPRESENT MY OPINION.

Chilton v. Federal Nat. Mortg. Ass’n, Slip Copy, 2009 WL 5197869 (E.D.Cal.)  

ORDER RE PROPOSED ORDER TO SHOW CAUSE AND MOTION FOR TEMPORARY RESTRAINING ORDER

  Plaintiff filed a complaint on December 16, 2009, alleging that Defendant, Federal National Mortgage Association, violated unspecified provisions of federal law within “Title 15 U.S.C. and/or Title 18 U.S.C.” because Defendant initiated non-judicial foreclosure on her property, located in Clovis, California, without possessing the genuine original note.” She advances no other bases for relief.

Plaintiff has also filed an “order to show cause and motion for temporary restraining order,” in an attempt to block the foreclosure process.
To obtain temporary or permanent injunctive relief, a plaintiff must demonstrate likelihood of success on the merits. Here, Plaintiff’s only legal theory has been resoundingly rejected as a basis for relief. It is well-established that non-judicial foreclosures can be commenced without producing the original promissory note.

THAT’S THE PART THAT HURTS. I SUPPOSE ANYONE WHO SHOWS UP ON FORECLOSURE DAY CLAIMING TO BE THE HOLDER OF THE LOAN (WHETHER IT IS MERS PRETENDING TO BE THE BENEFICIARY OR THE NOMINEE OF THE LENDER, THE LOAN SERVICER PRETENDING TO BE THE HOLDER OF THE LOAN OR SOME OTHER THIRD PARTY, LIKE WALLMART FOR EXAMPLE, CLAIMING TO BE THE HOLDER OF THE LOAN) GETS AN UNFETTERED RIGHT TO FORECLOSE, AND A FREE PASS FROM ANY JUDICIAL SCRUTINY WHATSOEVER.

The Court went on to state:

“Non-judicial foreclosure under a deed of trust is governed by California Civil Code Section 2924 which relevant section provides that a “trustee, mortgagee or beneficiary or any of their authorized agents” may conduct the foreclosure process.” California courts have held that the Civil Code provisions “cover every aspect” of the foreclosure process, (case cited), and are “intended to be exhaustive,”(another case cited). There is no requirement that the party initiating foreclosure be in possession of the original note.

AFTER LEVELING THIS BLOW THE COURT CITED A FEW OTHER CASES THAT RESULTED IN THE SAME OUTCOME FOR PLAINTIFFS ASSERTING THE “PRODUCE THE NOTE” FORECLOSURE DEFENSE STRATEGY (OBVIOUSLY IN AN ATTEMPT TO TELL FUTURE LITIGANTS IN CALIFORNIA “GIVE UP TRYING TO VERIFY ANYONES CREDENTIALS”):

(1) See, e.g., Nool v. HomeQ Servicing, — F.Supp.2d —-, 2009 WL 2905745 (Sep. 4 2009) (”There is no requirement that the party initiating foreclosure be in possession of the original note.”);

(2) Candelo v. NDEX West, LLC, 2008 WL 5382259, at *4 (E.D.Cal. Dec.23, 2008) (”No requirement exists under statutory framework to produce the original note to initiate non-judicial foreclosure.”);

(3) Putkkuri v. ReconTrust Co., 2009 WL 32567, *2 (S.D.Cal. Jan.5, 2009) (”Production of the original note is not required to proceed with a non-judicial foreclosure.”);

(4) Phillips v. MERS Mortgage Electronic Registration Systems, 2009 WL 3233865, 9 (E.D.Cal.2009); Vargas v. Reconstruction Co., 2008 U.S. Dist. LEXIS 100115, at *8-9 (E.D.Cal. Dec. 1, 2008). 

WE HAVE PREVIOUSLY DISCUSSED THE KANSAS SUPREME COURT CASE THAT DISCUSSED THE ROLE OF MERS IN WHICH THE COURT SEEMED TO SUGGEST THAT MERS WAS NOT A BENEFICIARY UNDER THE DEED OF TRUST JUST BECAUSE THEY SAY THEY ARE IN THE DOCUMENT. THE COURT ADDRESSED PLAINTIFF’S RELIANCE ON THAT CASE:

“Plaintiff’s reliance on Landmark National Bank v. Kessler, 216 P.3d 158, 2009 Kan. LEXIS 834 (Kan.2009), is misplaced. That case concerned a company, Mortgage Electronic Registration Systems, Inc. (”MERS”), that acted on behalf of a lender to finalize a second mortgage on Kessler’s home. For procedural reasons not relevant to the present case, it became necessary for the Kansas court to determine whether MERS possessed an interest in the second mortgage, eventually concluding that under the specific facts of that case, MERS was more like an agent than a buyer/owner of the note.”

THE COURT CONTINUED:

“In reaching this conclusion, the Landmark court noted:  Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable. “The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. [Citation omitted.] Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. [Citation omitted.] The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.” Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo.App.2009).” 

THE COURT CHIMED IN ON THIS LEGAL REQUIREMENT:

“This language merely stands for the proposition that one possessing the deed of trust cannot foreclose on a mortgage without (1) also possessing some interest in the promissory note, or (2) obtaining permission to act as agent of the note-holder. This has nothing whatsoever to do with possession of the “original” promissory note document, i.e., the original piece of paper with original signatures, etc., the possession of which is not required to initiate non-judicial foreclosure in California. Because Plaintiff cannot possibly establish any likelihood of success on her current claim for relief, it is not necessary to set her motion for temporary injunctive relief for hearing. Her motion is DENIED. IT IS SO ORDERED.” 

There you have it friends, as we have been telling callers to our office seeking foreclosure defense, DO NOT RELY ON “PRODUCE THE NOTE” AS A SILVER BULLET FORECLOSURE DEFENSE THAT IS GOING TO STOP YOUR FORECLOSURE WITH AN INJUNCTION AND GET YOUR HOUSE FOR FREE. IF THERE ARE GLARING IRREGULARITIES, AND OTHER LEGAL GROUNDS TO GET YOU INTO COURT VALIDLY, THEN YOU MAY WANT TO TAG ON THIS CLAIM AND SEE IF YOU CAN GET A DIFFERENT OUTCOME FROM A DIFFERENT JUDGE, BUT SUFFICE IT TO SAY AS A STAND-ALONE LEGAL THEORY, THERE IS SIMPLY NOT MUCH TEETH TO THE THEORY. MOST OF THE CASES WHERE YOU HEAR OF SOME SUCCESS COME FROM FLORIDA AND OHIO AND OTHER “JUDICIAL FORECLOSURE” STATES WHERE THE LENDER IS FORCED TO FILE IN COURT TO START THE FORECLOSURE PROCESS. IN THESE CASES, THE ISSUE BECOMES A QUESTION OF “STANDING” AND “REAL PARTY IN INTEREST.” THERE IS ALSO THE BANKRUPTCY ANGLE THAT WE WILL BE EXPLORING IN GREATER DETAIL IN FUTURE POSTS.

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In a similar case, NEWBECK v. WASHINGTON MUTUAL BANK, Slip Copy, 2010 WL 291821 (N.D.Cal.), the Court essentially held the same way when a Plaintiff tried to argue “produce the original note” as a strategy to set aside a foreclosure sale that had already occurred. In this case the Court first discussed the dreaded issue of challenging a foreclosure sale that had already been finalized, and the Court’s comments shed light on how one-sided the laws are when you dare take on a “lender” in Court

“Plaintiffs ask the Court to set aside Washington Mutual’s foreclosure sale of their property. They assert that Washington Mutual did not have possession of the original mortgage note or the deed of trust under which it was secured and, as a result, it was not entitled to foreclose. A plaintiff seeking to set aside a foreclosure sale must first allege tender of the amount of the secured indebtedness. Abdallah v. United Savings Bank, 43 Cal.App.4th 1101, 1109, 51 Cal.Rptr.2d 286 (1996) (citing FPCI RE-HAB 01 v. E & G Investments, Ltd., 207 Cal.App.3d 1018, 1021-22, 255 Cal.Rptr. 157 (1989)); Smith v. Wachovia, 2009 WL 1948829, at *3 (N.D.Cal.). Without pleading tender or the ability to offer tender, a plaintiff cannot state a cause of action to set aside a foreclosure sale. Karlsen v. Am. Savings & Loan Ass’n, 15 Cal.App.3d 112, 117, 92 Cal.Rptr. 851 (1971) (citing Copsey v. Sacramento Bank, 133 Cal. 659, 662 (1901)); Smith, 2009 WL 1948829, at * 3 (citing Karlsen ). Plaintiffs allege neither tender nor their ability to offer tender. Thus, they do not state a claim to set aside the foreclosure sale.

THIS MEANS, IF YOU ARE CHALLENGING A FORECLOSURE SALE AND SEEK TO SET IT ASIDE (ON WHATEVER PROPER GROUNDS YOU MAY HAVE) YOU NEED TO AT LEAST ALLEGE A WILLINGNESS AND ABILITY TO TENDER. IF ALL ELSE FAILS, YOU MAY WANT TO TELL THE JUDGE THAT YOU WILL TENDER THE FULL BALANCE DUE AFTER YOU COLLECT ON YOUR FRAUD JUDGEMENT. SOMETIMES THIS MAY BE ALL YOU HAVE WHEN YOU ARE WAY UPSIDE DOWN ON YOUR PROPERTY.

THE COURT THEN WENT ON TO DISCUSS WHAT MIGHT HAPPEN EVEN IF YOU COULD TENDER:

“Even if they alleged tender, the basis on which they appear to seek relief does not support their claim. In California, there is no requirement that a trustee produce the original promissory note prior to a non-judicial foreclosure sale. See, e.g., Pantoja v. Countrywide Home Loans, Inc., 640 F.Supp.2d 1177, 1186 (N.D.Cal.2009); Smith, 2009 WL 1948829, at *3; Neal v. Juarez,2007 WL 2140640, *8 (S.D.Cal.) (citing R.G. Hamilton Corp. v. Corum, 218 Cal. 92, 94, 97, 21 P.2d 413 (1933); Cal. Trust Co. v. Smead Inv. Co., 6 Cal.App.2d 432, 435, 44 P.2d 624 (1935)).California Civil Code Sections 2924 through 2924k ”provide a comprehensive framework for the regulation of a non-judicial foreclosure sale pursuant to a power of sale contained in a deed of trust.” Knapp v. Doherty, 123 Cal.App.4th 76, 86, 20 Cal.Rptr.3d 1 (2004) (quoting Moeller v. Lien, 25 Cal.App.4th 822, 830, 30 Cal.Rptr.2d 777 (1994)). Knapp explains the non-judicial foreclosure process as follows: Upon default by the trustor [under a deed of trust containing a power of sale], the beneficiary may declare a default and proceed with a nonjudicial foreclosure sale. The foreclosure process is commenced by the recording of a notice of default and election to sell by the trustee. After the notice of default is recorded, the trustee must wait three calendar months before proceeding with the sale. After the 3-month period has elapsed, a notice of sale must be published, posted and mailed 20 days before the sale and recorded 14 days before the sale. Knapp, 123 Cal.App.4th at 86, 20 Cal.Rptr.3d 1 (citation omitted).

I SUPPOSE YOU ARE NEVER ALLOWED TO ASK WHO THE “BENEFICIARY” IS OR MAKE ANYONE PROVE THAT POINT BEFORE THEY TAKE YOUR HOUSE. ARE YOU ALSO ALLOWED TO ASK WHO THE BENEFICIARY IS FOR PURPOSES OF COMPLIANCE WITH CALIFORNIA CIVIL CODE SECTION 2923.5 AND THE DECLARATION THAT IS MADE UNDER THIS SECTION? WE WILL DISCUSS THIS ISSUE IN ANOTHER BLOG POST.

ANYWAY, I DIGRESS, THE COURT CONTINUED:

“A properly conducted nonjudicial foreclosure sale constitutes a final 13 adjudication of the rights of the borrower and lender.” Plaintiffs have not pointed to controlling authority to show that this statutory scheme requires production of the original promissory note or deed of trust. Thus, even if they alleged tender, to the extent that they allege irregularities in the foreclosure sale based on Washington Mutual’s failure to produce the original promissory note or deed of trust, they do not state a claim.

AS DISCUSSED ABOVE, ONLY OUT OF STATE CLAIMS FOR PRODUCE THE NOTE WERE CITED (THESE COME FROM THE JUDICIAL FORECLOSURE STATES).

“Plaintiffs cite various out-of-state cases, which apply non-California law to judicial foreclosure actions. See In re Foreclosure Actions, 2007 WL 4034554 (N.D.Ohio); In re Foreclosure Cases, 2007 WL 3232430 (N.D.Ohio); Landmark Nat’l Bank v. Kessler, 289 Kan. 528, 216 P.3d 158 (2009); U.S. Bank Nat’l Ass’n v. Ibanez, 2009 WL 3297551 (Mass.Land Ct.). Because these cases do not apply California’s non-judicial foreclosure sale statutes, they do not support Plaintiffs’ position.”
SO THERE YOU HAVE IT, MORE PROOF OF THE MOUNTAIN YOU MUST CLIMB TO GET TO THE PROMISED LAND. AS WE TELL OUR CLIENTS, FORECLOSURE DEFENSE IS NOT AN EASY BUSINESS.

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KEYWORDS: CALIFORNIA FORECLOSURE DEFENSE LAWYER / PHOENIX FORECLOSURE DEFENSE LAWYER / ARIZONA LOAN MODIFICATION LAWYER / PRODUCE THE NOTE FORECLOSURE DEFENSE STRATEGY / SCOTTSDALE LOAN MODIFICATION / PHOENIX BANKRUPTCY LAWYER / PHOENIX BK ATTORNEY / NEWPORT BEACH FORECLOSURE LAWYER / INJUNCTION TO STOP FORECLOSURE / TRO / LIS PENDENS / SB1137 / FILE CHAPTER 7 BANKRUPTCY / MERS / SECURITIZED LOANS / QWR.

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AUTHORS NOTE: IF THE CALIFORNIA FORECLOSURE STATUTES GOVERN THE FORECLOSURE SALE PROCESS, AND IF NOTHING ELSE REALLY MATTERS, THEN YOU NEED TO TAKE A CLOSE LOOK AT WHETHER THAT STATUTE IS BEING COMPLIED WITH WHEN LOOKING TO OBTAIN AN INJUNCTION TO HALT FORECLOSURE.

Is Produce the Note foreclosure strategy the same as “Quiet Title”? No – Overview of California Quiet Title Law

Attorney Steve Vondran — Tue, 26 Jan 2010 16:31:21 +0000

QUIET TITLE ACTIONS IN CALIFORNIA – A BASIC OVERVIEW

The following is general legal information and is not to be construed as legal advice or a substitute for legal advice. The information below many not be complete, accurate, or up-to-date as law can, and does frequently change. For specific questions about your quiet title case, contact a real estate or foreclosure defense attorney to review the facts of your case.

Steve Vondran, Esq. practices Real Estate, Foreclosure Defense & Bankruptcy Law in Phoenix, Arizona, and California where he is licensed to practice law. He can be reached atsteve@vondranlaw.com or (877) 276-5084.

CALIFORNIA QUIET TITLE LAW – A GENERAL OVERVIEW

The statutory provisions for Quiet Title in California can be found in the California Code of Civil Procedure Sections 760.10-760.060. A Quiet Title action is basically a legal action that seeks to “quiet title” to property where adverse claims are made against the property. For example, where a lender wrongfully forecloses on a property and claims the property as their own, but the homeowner challenges this.

Here is the California Quiet Title Statutory Law (there are also cases interpreting these quiet title provisions). Bolded and italics material are provided by me:

760.010. As used in this chapter:

(a) “Claim” includes a legal or equitable right, title, estate, lien, or interest in property or cloud upon title.

(b) “Property” includes real property, and to the extent

applicable, personal property.

760.020. (a) An action may be brought under this chapter to establish title against adverse claims to real or personal property or any interest therein.

(b) An action may be brought under this chapter by parties to an agreement entered into pursuant to Section 6307 or 6357 of the Public Resources Code to confirm the validity of the agreement.

(c) Nothing in this section shall be construed to limit the right of members of the public to bring or participate in actions challenging the validity of agreements entered into pursuant to Section 6307 or 6357 of the Public Resources Code.

760.030. (a) The remedy provided in this chapter is cumulative and not exclusive of any other remedy, form or right of action, or proceeding provided by law for establishing or quieting title to property.

(b) In an action or proceeding in which establishing or quieting title to property is in issue the court in its discretion may, upon motion of any party, require that the issue be resolved pursuant to the provisions of this chapter to the extent practicable.

760.040. (a) The superior court has jurisdiction of actions under this chapter.

(b) The court has complete jurisdiction over the parties to the action and the property described in the complaint and is deemed to have obtained possession and control of the property for the purposes of the action with complete jurisdiction to render the judgment provided for in this chapter.

(c) Nothing in this chapter limits any authority the court may have to grant such equitable relief as may be proper under the circumstances of the case.

760.050. Subject to the power of the court to transfer actions, the proper county for the trial of an action under this chapter is:

(a) Where the subject of the action is real property or real and personal property, the county in which the real property, or some part thereof, is located.

(b) Where the subject of the action is personal property, the county in which the personal property is principally located at the commencement of the action or in which the defendants, or any of them, reside at the commencement of the action.

760.060. The statutes and rules governing practice in civil actions generally apply to actions under this chapter except where they are inconsistent with the provisions of this chapter.

CALIFORNIA QUIET TITLE LAW SUMMARY

So, in short, the main purpose of a quiet title action is to establish title against adverse claims to real property or personal property. As set forth above, the remedy of quiet title can be combined with other causes of action or other remedies. And, in any action or proceeding in which establishing or quieting title to property is in issue, the court may, in its discretion and on the motion of any party, require that the issue be resolved pursuant to the California Code Of Civil Procedure provisions relating to quiet title actions.

In regards to proper jurisdiction for a California quiet title lawsuit, the quiet title lawsuit must be brought in the superior court of the county where the real property is located. Once the Quiet Title Action is before the court, the court has complete power to determine title issues.

NOTE: SECTION 761.020-761.040 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE SETS FORTH SPECIFIC PLEADING REQUIREMENTS AND LIS PENDES RULES WHEN FILING A QUIET TITLE LAWSUIT. THE RULES CAN BE FOUND HERE:

761.010. (a) An action under this chapter is commenced by filing a complaint with the court.

(b) Immediately upon commencement of the action, the plaintiff shall file a notice of the pendency (THIS IS THE “LIS PENDENS” WE HAVE TALKED ABOUT THIS IN OTHER BLOG ARTICLES) of the action in the office of the county recorder of each county in which any real property described in the complaint is located.

LIS PENDENS NOTE (NOW CALLED THE NOTICE OF PENDENCY OF ACTION): This lis pendens puts other parties on notice of your claim to real property and usually stops anyone from buying or selling your real property while the lawsuit is pending. The lis pendens can later be removed, or dissolved by Court order. Please note, there are very specific requirements for filing a lis pendens that you will need to be familiar with (google “vondran lis pendens” for more information).

761.020. The complaint shall be verified and shall include all of the following:

(a) A description of the property that is the subject of the action. In the case of tangible personal property, the description shall include its usual location. In the case of real property, the description shall include both its legal description and its street address or common designation, if any.

(b) The title of the plaintiff as to which a determination under this chapter is sought and the basis of the title. If the title is based upon adverse possession, the complaint shall allege the specific facts constituting the adverse possession.

(d) The date as of which the determination is sought. If the determination is sought as of a date other than the date the complaint is filed, the complaint shall include a statement of the reasons why a determination as of that date is sought.

(e) A prayer for the determination of the title of the plaintiff against the adverse claims.

REQUIREMENTS OF THE DEFENDANTS ANSWER TO A CALIFORNIA QUIET TITLE LAWSUIT:

761.030. (a) The answer shall be verified and shall set forth:

(1) Any claim the defendant has.

(2) Any facts tending to controvert such material allegations of the complaint as the defendant does not wish to be taken as true.

(3) A statement of any new matter constituting a defense.

(b) If the defendant disclaims in the answer any claim, or suffers judgment to be taken without answer, the plaintiff shall not recover costs.

761.040. (a) The defendant may by cross-complaint seek affirmative relief in the action.

(b) If the defendant seeks a determination of title as of a date other than the date specified in the complaint, the cross-complaint shall include the date and a statement of the reasons why a determination as of that date is sought.

PARTIES IN A CALIFORNIA QUIET TITLE ACTION (PARTY ISSUES).

California Code of Civil Procedure Section 762.010-762.090 states that the when filing the Quiet Title Lawsuit, the Plaintiff must name as defendants all persons known or unknown claiming an interest in the property and other rules regarding proper parties in a quiet title action are addressed in these sections.

Here are those Sections:

762.010. The plaintiff shall name as defendants in the action the persons having adverse claims to the title of the plaintiff against which a determination is sought.

762.020. (a) If the name of a person required to be named as a defendant is not known to the plaintiff, the plaintiff shall so state in the complaint and shall name as parties all persons unknown in the manner provided in Section 762.060.

(b) If the claim or the share or quantity of the claim of a person required to be named as a defendant is unknown, uncertain, or contingent, the plaintiff shall so state in the complaint. If the lack of knowledge, uncertainty, or contingency is caused by a transfer to an unborn or un-ascertained person or class member, or by a transfer in the form of a contingent remainder, vested remainder subject to defeasance, executory interest, or similar disposition, the plaintiff shall also state in the complaint, so far as is known to the plaintiff, the name, age, and legal disability (if any) of the person in being who would be entitled to the claim had the contingency upon which the claim depends occurred prior to the commencement of the action.

762.030. (a) If a person required to be named as a defendant is dead and the plaintiff knows of a personal representative, the plaintiff shall join the personal representative as a defendant.

(b) If a person required to be named as a defendant is dead, or is believed by the plaintiff to be dead, and the plaintiff knows of no personal representative:

(1) The plaintiff shall state these facts in an affidavit filed with the complaint.

(2) Where it is stated in the affidavit that such person is dead, the plaintiff may join as defendants “the testate and intestate

successors of ____ (naming the deceased person), deceased, and all persons claiming by, through, or under such decedent,” naming them in that manner.

(3) Where it is stated in the affidavit that such person is believed to be dead, the plaintiff may join the person as a defendant, and may also join “the testate and intestate successors of ____ (naming the person) believed to be deceased, and all persons claiming by, through, or under such person,” naming them in that manner.

762.040. The court upon its own motion may, and upon motion of any party shall, make such orders as appear appropriate:

(a) For joinder of such additional parties as are necessary or proper.

(b) Requiring the plaintiff to procure a title report and designate a place where it shall be kept for inspection, use, and copying by the parties.

762.050. Any person who has a claim to the property described in the complaint may appear in the proceeding. Whether or not the person is named as a defendant in the complaint, the person shall appear as a defendant.

762.060. (a) In addition to the persons required to be named as defendants in the action, the plaintiff may name as defendants “all persons unknown, claiming any legal or equitable right, title, estate, lien, or interest in the property described in the complaint adverse to plaintiff’s title, or any cloud upon plaintiff’s title thereto,” naming them in that manner.

(b) In an action under this section, the plaintiff shall name as defendants the persons having adverse claims that are of record or known to the plaintiff or reasonably apparent from an inspection of the property.

762.070. A person named and served as an unknown defendant has the same rights as are provided by law in cases of all other defendants named and served, and the action shall proceed against unknown defendants in the same manner as against other defendants named and served, and with the same effect.

762.080. The court upon its own motion may, and upon motion of any party shall, make such orders for appointment of guardians ad litem as appear necessary to protect the interest of any party.

762.090. (a) The state may be joined as a party to an action under this chapter.

(b) This section does not constitute a change in, but is

declaratory of, existing law.

WHO BEARS THE BURDEN OF PROOF IN A CALIFORNIA QUIET TITLE ACTION? THE ANSWER WILL USUALLY DEPEND ON WHETHER DEFENDANT HOLDS LEGAL TITLE OR WHETHER TITLE IS DISPUTED.

In a California Quiet Title lawsuit (WHERE LEGAL TITLE VESTS IN DEFENDANTS), the Plaintiff must bear the burden of proof (this is the case in most civil lawsuits). The normal burden of proof in a civil lawsuit is “preponderance of the evidence.” However, in a Quiet Title action, the standard of proof is higher and the Plaintiff must establish its right to title by “CLEAR AND CONVINCING” proof. See California Evidence Code Section 662 which discusses the burden of proof in a Quiet Title case:

662. The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.

IF TITLE TO REAL PROPERTY IS “DISPUTED” (AS OPPOSED TO HAVING LEGAL TITLE HELD BY A DEFENDANT) THEN THE TYPICAL “PREPONDERANCE OF THE EVIDENCE” STANDARD WILL APPLY.

A JUDGEMENT IN A QUIET TITLE ACTION IS NORMALLY CONCLUSIVE ON ALL PARTIES KNOWN OR UNKNOWN WHO WERE PARTIES TO THE ACTION.

California Code of Civil Procedure Section 764.030 States:

764.030. The judgment in the action is binding and conclusive on all of the following persons, regardless of any legal disability:

(a) All persons known and unknown who were parties to the action and who have any claim to the property, whether present or future, vested or contingent, legal or equitable, several or undivided.  Except as provided in Section 764.045, all persons who were not parties to the action and who have any claim to the property which was not of record at the time the lis pendens was filed or, if none was filed, at the time the judgment was recorded.

HOWEVER, A QUIET TITLE ACTION WILL NOT NORMALLY AFFECT TITLE TO PARTIES WHO WERE NOT A PARTY TO THE ACTION IF THEIR CLAIM WAS KNOWN, OR REASONABLY SHOULD HAVE BEEN KNOWN.

California Code of Civil Procedure Section 764.045 states:

764.045. Except to the extent provided in Section 1908, the judgment does not affect a claim in the property or part thereof of any person who was not a party to the action if any of the following conditions is satisfied:

(a) The claim was of record at the time the lis pendens was filed or, if none was filed, at the time the judgment was recorded.
(b) The claim was actually known to the plaintiff or would have been reasonably apparent from an inspection of the property at the time the lis pendens was filed or, if none was filed, at the time the judgment was entered. Nothing in this subdivision shall be construed to impair the rights of a bona fide purchaser or encumbrancer for value dealing with the plaintiff or the plaintiff’s successors in interest.

THERE ARE NO DEFAULT JUDGMENTS – EVIDENCE IS REQUIRED IN A QUIET TITLE LAWSUIT:

California Code of Civil Procedure Section 764.010 States:

764.010. The court shall examine into and determine the plaintiff’s title against the claims of all the defendants. The court shall not enter judgment by default but shall in all cases require evidence of plaintiff’s title and hear such evidence as may be offered respecting the claims of any of the defendants, other than claims the validity of which is admitted by the plaintiff in the complaint. The court shall render judgment in accordance with the evidence and the law.

Quiet Title Case: Mangindin v. Washington Mutual Bank, 637 F. Supp.2d 700, (N.D. Cal.) 2009.

QUIET TITLE IN THE FORECLOSURE CONTEXT: TENDER ISSUES

Under California law, a plaintiff seeking to quiet title in the face of a foreclosure must allege tender or an offer of tender of the amount borrowed. See Arnolds Management Corp v. Eischen, 158 Cal.App.3d 575, 578, 205 Cal.Rptr. 15 (1984). This may make Quiet Title a more difficult proposition in a foreclosure case.

QUICK SUMMARY OF CALIFORNIA QUIET TITLE LAW

(1) THE COMPLAINT AND ANSWER TO A QUIET TITLE ACTION MUST BE VERIFIED (ESSENTIALLY MEANING MADE UNDER OATH) AND NAME ALL KNOWN OR UNKNOWN PARTIES CLAIMING AN INTEREST IN THE PROPERTY.

(2) THE QUIET TITLE COMPLAINT MUST DESCRIBE THE PROPERTY WITH A LEGAL DESCRIPTION AND COMMON ADDRESS DESCRIPTION.

(3) PLAINTIFF IN A CALIFORNIA QUIET TITLE ACTION MUST SET FORTH WHAT THE ADVERSE CLAIMS (SETTING FORTH SPECIFIC FACTS) ARE AND WHAT TYPE OF DETERMINATION IS SOUGHT.

(4) QUIET TITLE ACTION MUST SET FORTH THE DATE THE DETERMINATION IS SOUGHT AND A PRAYER FOR RELIEF TO DETERMINE PLAINTIFF’S TITLE AGAINST THE ADVERSE CLAIMS.

(5) A QUIET TITLE LAWSUIT MUST BE BROUGHT IN THE PROPER COUNTY.

(6) ANY PERSON WHO CLAIMS AN ADVERSE INTEREST IN THE PROPERTY MAY JOIN IN THE LAWSUIT EVEN IF THEY WERE NOT NAMED AS A A DEFENDANT.

(7) A QUIET TITLE LAWSUIT REQUIRES PROPER USE OF THE LIS PENDENS PROCEDURE (NOTICE OF PENDENCY OF ACTION).

(8) IN A QUIET TITLE ACTION, THE OWNER OF LEGAL TITLE (CHECK THE TITLE REPORT) IS PRESUMED TO BE THE OWNER, AND THIS CAN ONLY BE REBUTTED BY A SHOWING OF CLEAR AND CONVINCING EVIDENCE TO THE CONTRARY.

(9) GENERALLY SPEAKING, THERE ARE NO JURY TRIALS IN A QUIET TITLE ACTION AS THESE ACTIONS ARE “EQUITABLE” IN NATURE (NOT SEEKING MONEY DAMAGES) SO THE COURT WILL DECIDE PLAINTIFF’S CLAIM AND EQUITABLE DEFENSES MAY BE ASSERTED BY OPPOSING PARTIES. THE EXCEPTION WOULD BE IF PLAINTIFF IS OUT OF POSSESSION OF THE PROPERTY AND IS FILING THE QUIET TITLE ACTION TO REGAIN POSSESSION – IN THESE CIRCUMSTANCES THE CLAIM MAY BE DEEMED “LEGAL” IN NATURE AND A JURY TRIAL MAY BE REQUESTED. SEE MEDEIROS V. MEDEIROS, 177 CAL APP. 2d 69, (1960). THE PRUDENT PRACTICE IS TO ALWAYS REQUEST A JURY TRIAL WHEN FILING A PLEADING IF THAT IS WHAT YOU WANT. RAISE IT OR WAIVE IT IS THE GENERAL RULE.

(10) GENERALLY SPEAKING, A JUDGMENT IN A QUIET TITLE LAWSUIT IS CONCLUSIVE AND BINDING ON ALL PARTIES TO THE LITIGATION, BUT MAY NOT BE BINDING ON PARTIES NOT INVOLVED IN THE QUIET TITLE LAWSUIT BUT WHOS CLAIMS WERE KNOWN OR REASONABLY APPARENT. THERE ARE NO DEFAULT JUDGMENTS – CLEAR EVIDENCE IS REQUIRED.

(11) IN A QUIET TITLE ACTION IN THE FORECLOSURE OF A RESIDENCE, THE COURT MAY REQUIRE THE PLAINTIFF TO “DO EQUITY” OR TENDER AMOUNTS OWED OR IN ARREARS OR PAY THE ENTIRE BALANCE. A PARTY CANNOT USUALLY “GET EQUITY” IF THEY DON’T “DO EQUITY”.

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Visit our other websites at www.RescindMyLoan.net / www.VondranLegal.com / www.OptionArmLawyer.com / www.BKAttorneyS.net / www.ForeclosureDefenseResourceCenter.com /www.ProduceTheNoteAttorney.com / www.TrialPlanFraud.com / www.LoanModificationRipoff.net / www.LoanModSolutions.net / www.VondranLaw.com / www.LoanModLegal.com (the Southern California Foreclosure Defense Radio Show).

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KEYWORDS: CALIFORNIA LIS PENDENS / PENDENCY OF ACTION / QUIET TITLE ACTION / CALIFORNIA QUIET TITLE LAWSUIT / BURDEN OF PROOF IN QUIET TITLE CASE / QUIET TITLE IN FORECLOSURE CASE / LAWSUIT TO QUIET TITLE / CALIFORNIA FORECLOSURE DEFENSE LAWYER / PHOENIX FORECLOSURE LAWYER.

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ATTORNEY FEES - IN MOST CASES WE CHARGE AN UP-FRONT RETAINER AND HOURY FEE. IN SOME CASES, HOWEVER, WE MAY BE ABLE TO CHARGE A CONTINGENCY FEE OR FLAT RATE FEE. FOR MORE INFORMATION ABOUT CONTINGENCY FEES YOU CAN CHECK US OUT AT WWW.CONTINGENCYCASE.COM AN ONLINE DATABASE OF CONTINGENCY LAWYERS WHO MAY AGREE TO TAKE YOUR CASE ON A CONTINGENCY FEE BASIS.

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THIS IS AN ADVERTISEMENT AND COMMUNICATION PURSUANT TO STATE BAR RULES. COPYRIGHT 2010 ALL RIGHTS RESERVED. WE ONLY SEEK TO SOLICIT CLIENTS IN ARIZONA AND CALIFORNIA WHERE THE LAW OFFICES OF STEVEN C. VONDRAN IS LICENSED TO PRACTICE LAW.

CONSUMER LOAN MODIFICATION WARNING: JASON ADELMAN LITTLE LEAGUE COACH FROM BAKERSFIELD AND CREATIVE DAY CONCEPTS

Attorney Steve Vondran — Sat, 23 Jan 2010 06:05:59 +0000

It has been a while since we showcased the MOD SCAMMER of the MONTH. But we have a new one for you. Mr. Jason Adelman who resides in the State of Nevada and works for a company calledCreative Day Concepts. Guy coaches a little league team in Nevada area. We have contacted his little league district to put them on notice of their potential liability in having this low-life handing around.

Jason Adelmann is the CLASSIC LOAN MODIFICATION SCAMMER. Warning to NEVADA and CALIFORNIA HOMEOWNERS – he wants your money and cares less about compliance with state laws dealing with loan modification. Jason Adelman, we are hereby calling you out.

Once my office caught up with this loan modification ripoff artsist he came clean and admitted his wrongdoing. In fact, he stated he had no idea what the California Laws for loan modification are and he was hoping that his attorney “partner” would back him and would have compliance issues dealt with. One problem, when I asked him who his “attorney-backed” Nevada Attorney was, he went limp and silent. He was afraid to speak because he knew he got his hand caught in the non-compliance cookie jar. In fact, it is doubtful he has a lawyer backing him. Probably part of his loan mod scam.

After a conversation or two he agreed he was in the wrong and promised to correct his errant ways and pay back my California loan modification client. Here is the loan mod scam agreement he promised to sign.

MUTUAL RELEASE AND SETTLEMENT AGREEMENT

RE: Mr. XXXXXXXXXX Plaintiff v. Creative Day Concepts, Mr. Jason Adelman (“Settling Defendants”)

WHEREAS, Mr. XXXXXXXXXXXX (hereinafter referred to as “Plaintiff”), have asserted a claim against Creative Day Concepts, Mr. Jason Adelman and any other related entity including his “attorney-backed” partner who shall remain nameless (hereinafter “Settling Defendants”) in regard to loan modification services. Plaintiff and Settling Defendants Collectively may be referred to as “the Parties.”

WHEREAS, Settling Defendants deny any liability in connection with the alleged claims; and warrant that no legal action is currently pending against the Plaintiff;

WHEREAS, for valuable consideration the Parties to this Agreement wish to reach a full and final settlement of all matters and causes of action arising out of the facts, complaints, and claims between the Parties;

WHEREAS, this Settlement Agreement and Mutual Release shall be deemed confidential pursuant to the California rules of Evidence and shall not be admissible in any Court or other legal proceeding for any purpose whatsoever;

THEREFORE, the parties agree to mutually settle the above action and dispute and the Parties agree to mutually release and forever discharge each-other, including forever discharging all claims against Settling Defendants, including, but not limited to Paul Pope.

TERMS AND CONDITIONS OF MUTUAL RELEASE AND SETTLEMENT:

1. Payment to Plaintiff: In consideration for the agreement to dismiss all claims and causes of action relating to this incident, Plaintiff agrees to accept the total sum of $3,200.00 (THREE THOUSAND TWO HUNDRED DOLLARS) WHICH SHALL BE PAID IN FULL AND WHICH SETTLEMENT SHALL BE DEEMED COMPLETE UPON SUCH FUNDS CLEARING ATTORNEYS BANK ACCOUNT.

Such payment shall be made payable to The Law Offices of Steven C. Vondran, Esq., Client Trust Account and shall be sent to The Law Offices of Steven C. Vondran, 2415 East Camelback Road, Suite 700, Phoenix, AZ 85016. All payments owed under this Agreement shall be addressed and made payable as described in this section. This offer to settle shall expire November 30, 2009 at 5pm. Upon receipt and confirmation of funds, Plaintiff agrees to maintain all information in connection with the case and settlement agreement as confidential.

2. Mutual Release:

(A) As consideration for this Settlement, the Parties, their agents, spouses, heirs, employees, executors, administrators and assigns do hereby fully release and discharge each other, from and against any and all suits, demands, and/or liabilities of whatever kind or natures, including, but not limited to any liability in any way connected with and/or arising from the events and/or consequences alleged between the Parties and/or described by way of any Complaint and/or answer thereto.

The Parties agree to fully, completely, irrevocably, and mutually release each-other from any and all claims relating to this incident (and further agree to release Plaintiffs attorney from any and all legal action of any kind), except in the event any of the settling defendants (as set forth herein), institutes any type of legal action or preceding against the Plaintiff(s) or Plaintiff’s attorney, which relates to any of the claims or assertions referenced or covered herein, in which case this agreement shall become null and void and Plaintiff may file or re-institute any lawsuit against any or all the parties.

(B) Civil Code Section 1542 Waiver: In releasing each of the parties hereto as above described, all parties waive all rights described in Civil of the State of California, Section 1542, which reads as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO THE CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED THE SETTLEMENT WITH THE DEBTOR.”

The Parties understand the above-quoted provisions of the California Civil Code Section 1542 and knowingly enter into this waiver because it is their intention in executing this release to discharge each other for all claims for relief, whether known or unknown that may be asserted by each of them. The Parties acknowledge and agree that this waiver is an essential and material term of this Release and the release provisions contained herein and that without such waiver the settlement described in this release would not have been entered into.

(C) This release shall not release any party to this Agreement from performance of his obligations under this Settlement Agreement.

3. No Promise or Inducement: No promise or inducement has been made other than those specifically set forth in this Settlement Agreement. This Settlement Agreement is executed by the Parties to this Agreement without reliance on any representations of the Parties or their representatives concerning the nature, extent of damages, or legal liability, and after full review by the legal counsel for each party.

4. Counterparts: The parties to this Agreement may execute this Agreement in two or more counterparts, which shall, in aggregate, be signed by all the parties, and each counterpart shall be deemed an original instrument as against any party who signed it.

5 Construction: This release shall not be construed against the party preparing it, but shall be construed as if all parties jointly prepared this release and any uncertainty and ambiguity shall not be interpreted against any one party. All words and terms shall be given their ordinary and plain meaning. Titles or captions contained in this full release are inserted only as a matter of convenience and fore reference and in no way define, limit, extend, or describe the scope of the release or the intent of any provisions hereof.

(A) California Law Applies: this release is to be performed in California, and be interpreted, enforced and governed by and under the laws of the State of California regardless of any choice of law conflicts.

6. Modification: The release shall not be modified by any party by oral representation made before or after the execution of this release. All modifications must be in writing and signed by parties.

7. Further Documents: The parties shall execute and deliver all documents and perform all further acts that may be reasonably necessary to effectuate the provisions of this release.

8. Advise of Counsel: Each party acknowledges that it has been represented by counsel of its own choice (or had the opportunity for such legal review and advice) in the negotiations leading up to the execution of this release and that its representative has read this release and has had it fully explained to him, her or it, by his, her or its, counsel and having no objections hereby freely executes such.

(A) Attorney Fees and Costs: Each party hereto shall bear its own attorney fees and costs arising from the actions of their own counsel in connection with this settlement and mutual release of all claims.

9. Entire Agreement: This release contains the entire agreement between the signatories hereto. The terms of this release are contractual and not mere recital. This release is executed without reliance upon any representation by any person concerning the nature or extent of damages or legal liability therefore, and the undersigned have carefully read and understand the contents of this release and sign the same as their own free act.

(A) Severability: In the event any of the provisions of this release are deemed to be invalid and unenforceable, those provisions shall be severable from the remainder of the release, and shall not cause the invalidity or unenforceability of the balance of this release.

10. Authority to Settle: By signing below, Mr. Jason Adelman (on behalf of “Settling Defendants”) represents he has authority to enter into this agreement on behalf of all “Settling Defendants.”

The foregoing hereby read, understood, and agreed by (execution by both parties is required to effectuate settlement under this agreement):

PLAINTIFF:

DATED: ____________________, 2009 ____________________________________
Mr. XXXXXXX, Plaintiff

SETTLING DEFENDANTS:

DATED: ____________________, 2009 ____________________________________
Mr. Jason Adelman, for Defendants

Only one problem, Jason Adelmann is the typical loan mod scammer in that he refuses to follow through with what he says he will do (just like all the loan modification lies he tells). The wrost part is he likes to coach little leaguers in Nevada and what a shame it is if your Clients are drafted by this loan modification scam artist.

Rest assured, once we find his “attorney-backed” partner we will be calling him out and suing him too.

Suffice it to say for now, this is chapter one. Jason Adelman of Creative Concepts wants to skate free continuing his career of lies of non-compliance in the State of California. But we will not stop until justice is served. People like Jaspn Adelmann of Creative Concepts will be brought to justice and exposed as the lying, cheating, scammer that he is.

This foreclosure crises has brought out the loan modification bozos like Jason Adelmann who have to be stopped before their callous ways injure more homeowners. Mr. Jason Adelman is not afraid to lie to collect his fee. California and Arizona homeowners are warned to be on the lookout for Creative Day Concepts and Mr. Jason Adelman who refuses to acknowledge California loan modification laws in his pursuit of profits.

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Jason Adelman Updates

(1) It appears his company is called Creative Day Concepts AKA – No Stress Foreclosure AKA – Department of Foreclosure Prevention AKA – Utah Financial. Ever wonder why a company would have so many names?

(2) The addresses we have been able to obtain for Jason Adelman:

Address – 4900 California Avenue Tower B-210

Bakersfield, CA 93309

5330 Office Center Court, Suite 59

Bakersfield, CA 93309

5201 California Avenue, Suite 380

Bakersfield, CA 93309

Nevada – Creative Day Concepts

4760 South Pecos Road, Suite 103

Las Vegas, Nevada 89121

Home – 15626 Sammie Avenue

Bakersfield, CA 93314

1000 Norris Road

Bakersfield, CA 93308
Phone numbers we have been able to obtain via public sources

888-281-1363

661-633-1905

661-377-2937

661-428-0086

661-340-9049

3. It appears Jason Aldeman is also a youth football coach – Golden Empire Youth Football

Should a guy who promises loan modifications, principal reduction and money-back guarantees (who does not have the properly approved advanced fee agreement, is not a real estate broker, and who on information and belief accepted at least one notice of default case in violation of the California Foreclosure Consultant Act (and who agrees to a settlement and then disappears) be permitted to act as a mentor and coach for youth in the community? If My kids played in the Golden Empire Youth Football league, I would call Ron White (see his number below) and complain that I do not want a guy who blatantly violates the law in the name of profits, and who has obvious issues being truthful and honing up for his wrong-doing coaching my kids in a youth football league. Make your voice be known, help put a loan mod scammer to a halt.

5630 District #123

Bakersfield, CA 93313

Ron White – Director of Youth Football at Golden Empire Youth Football.

661-837-4393

661-201-1283

(4) It appears Jason Adelman’s wife’s name is Jennifer Lynn Adelman – She is the stated Secretary of Creative Day Concepts, Inc. a Nevada Corporation. It is not clear what role she plays, if any, in aiding, abetting, supporting and encouraging Mr. Jason Aldeman.

(5) Jason Aldeman’s Brother appears to be Mark Adelman – who is the Treasurer of Creative Day Concepts, Inc. – On information and belief he lives in the San Diego area. Again, it is not clear to what degree, if any, Mark Aldeman is involved in aiding, abetting, supporting and encouraging Mr. Jason Aldeman in his foreclosure defense business.

HERE ARE SOME OF THE VIOLATION WE WILL BE ALLEGING AGAINST JASON ADELMAN IN A CIVIL LAWSUIT:

(1) FRAUD AND DECEPTION: Offering 100% money back guarantees with no intent to honor such;

(2) FALSE ADVERTISING / 17200: JASON ALDEMAN Claims he is a “Loan Modification Specialist” (this is on his business card that he uses to illegally generate business in California) and it appears he claims he has been doing this foreclosure work for years.

(3) VIOLATION OF CALIFORNIA FORECLOSURE DEFENSE LAW: On information and belief, Mr. Aldeman has taken clients that have a Notice of Default in the State of California. Not being exempted under the law, he is in violation of the foreclosure defense law which carries stiff penalties which we plan to pursue.

If you have been ripped off or scammed by Mr. Jason Adelman, Creative Day Concepts, No Stress foreclosure or Department of Foreclosure Prevention, please contact our office to discuss a class action lawsuit.

Jason Adelman’s email address is jason@cdayc.com . If you were scammed by Jason Adelman and Creative Day Concepts, email him and ask him for a copy of your loan modification file so we can review your case.

Oh, and one last development, Jason Aldeman now appears to be running “New Life Investing” in Bakersfield. Don’t ask me how this relates to his expertise in loan modifications – also you might want to check and see if he has the proper licensing and credentials, if one is needed. His number at New Life Investing is (661) 323-5151.

Produce the Note is one theory, Financial Elder Abuse in California may be another

Attorney Steve Vondran — Fri, 22 Jan 2010 22:56:15 +0000

PREDATORY LENDING MEETS ELDER ABUSE: ARE LENDERS PERMITTED TO FORECLOSE ON PREDATORY OPTION ARM LOANS AND OTHER COMPLICATED FINANCIAL PRODICTS IN THE STATE OF CALIFORNIA?

The following article discusses general legal information on the topic of elder abuse and foreclosure defense. This article contains general legal information and not specific legal advice. In addition, the article, cases, and analysis may not be complete and comprehensive or up-to-date. Steve Vondran, Esq. is licensed to practice law in California and Arizona. He practices law in the area of Real Estate, Bankruptcy, and Foreclosure Defense. He can be reached at steve@vondranlaw.com.

INTRODUCTION TO ELDER ABUSE AND PREDATORY LENDING

The elderly population (over 65 years of age) is one of the fastest growing segments of society. Medical science is helping people live longer, more productive lives. However, it is fairly common knowledge that as each of us grow older, whether we like it or not, we lose some of our mental and physical capacities.

In the context of mortgage loans, it may mean that elderly persons become less able to comprehend sophisticated financial products such as Option Arm Loans (pay options ARM / “pick-a-pay loans) and Reverse Mortgages and other adjustable rate mortgage and interest-only loan products that differ from the traditional 30 year fixed rate mortgage most California homeowners grew up on.

The California Attorney General’s Office has issued a guide for “financial elder abuse.” In this guide, (which you can find at the Attorney General website), they state:

“Financial elder abuse is the theft of money or property from an elder….it can be as simple as taking money from a wallet and as complex as manipulating a victim into turning over property to an abuser.”

The publication goes on to state: “This form of abuse can be devastating because an elder victim’s life savings can disappear in the blink of an eye, leaving them unable to provide for their needs and afraid of what an uncertain tomorrow will bring.”

The guide discusses “recognizing the warning signs” and states: “while financial elder abuse can take many forms, the most widespread abuses include telemarketing fraud, identity theft, predatory lending, and home improvement and estate planning scams.” Telemarketing fraud could come in the form of dealing with a loan broker over the telephone who attempts to coerce an elderly homeowner into believing a certain type of loan (ex. An Option Arm Loan) is the best for the homeowner (when in fact the borrower has no ability to repay a loan that builds negative amortization and which is likely to “recast” in the near future), or falsely trumping up a homeowners income in order to ensure a loan is funded and the broker is paid.

In the section discussing “Predatory Lending” the publication states:

“More than 80% of Americans aged 50 and older are homeowners. Elders are often the target of unscrupulous lenders who pressure them into high-interest rate loans that they may not be able to repay. Older homeowners are often persuaded to borrow money through home equity loans for home repairs, debt consolidation, or to pay health care costs. These loans are sold as “miracle financial cure,” and homeowners are devastated to find out they cannot afford to pay off the loans, and as a result, may lose their home. Often these loans are packed with excessive fees, costly credit insurance, pre-payment penalties, and balloon payments.”

Even California Banker’s Association (an association of California Banker’s) discusses the concept of elder financial abuse on its website – www.calbankers.com – by stating “Common elder abuse scenarios – obtaining money or property by undue influence, misrepresentation, or fraud….” This suggests that even Banker’s in California realize that elder abuse is “common” and that it is wrongful. But what is to be done about it? What is to be done when lenders and brokers advise and “steer” and influence elder homeowners into entering into loan transactions with sophisticated non-traditional loan products and artificially falsify income documentation because they know there is no true ability to repay the loan, much less qualify for it in the first place.

This is precisely the scenario in many cases that we see in our role as foreclosure defense counsel for elderly homeowners facing foreclosure or facing eviction following foreclosure. It is against this back-drop that we must act, to what extent will the California Courts exercise their inherent equitable power to protect elderly homeowners (over 65 years of age at the signing of the loan documents or an elder dependent adult) where the loan product is seen to be the product of fraud or deception (such as steering, false trumping of income, intentional misrepresentations, or other fraudulent and deceptive business practices) perpetrated by predatory brokers, lenders and loan servicers who seek profit over fiduciary duty?

CALIFORNIA ELDER ABUSE LAW

•A. California Elder Abuse Statute

CALIFORNIA CODES

WELFARE AND INSTITUTIONS CODE

SECTION 15600-15601

INTRODUCTION SECTION

15600. (a) The Legislature recognizes that elders and dependent

adults may be subjected to abuse, neglect, or abandonment and that

this state has a responsibility to protect these persons.

(b) The Legislature further recognizes that a significant number

of these persons are elderly. The Legislature desires to direct

special attention to the needs and problems of elderly persons,

recognizing that these persons constitute a significant and

identifiable segment of the population and that they are more subject

to risks of abuse, neglect, and abandonment.

of these persons have developmental disabilities and that mental and

verbal limitations often leave them vulnerable to abuse and incapable

of asking for help and protection.

(d) The Legislature recognizes that most elders and dependent

adults who are at the greatest risk of abuse, neglect, or abandonment

by their families or caretakers suffer physical impairments and

other poor health that place them in a dependent and vulnerable

position.

(e) The Legislature further recognizes that factors which

contribute to abuse, neglect, or abandonment of elders and dependent

adults are economic instability of the family, resentment of

caretaker responsibilities, stress on the caretaker, and abuse by the

caretaker of drugs or alcohol.

(f) The Legislature declares that this state shall foster and

promote community services for the economic, social, and personal

well-being of its citizens in order to protect those persons

described in this section.

(g) The Legislature further declares that uniform state

guidelines, which specify when county adult protective service

agencies are to investigate allegations of abuse of elders and

dependent adults and the appropriate role of local law enforcement is

necessary in order to ensure that a minimum level of protection is

provided to elders and dependent adults in each county.

(h) The Legislature further finds and declares that infirm elderly

persons and dependent adults are a disadvantaged class, that cases

of abuse of these persons are seldom prosecuted as criminal matters,

and few civil cases are brought in connection with this abuse due to

problems of proof, court delays, and the lack of incentives to

prosecute these suits.

(i) Therefore, it is the intent of the Legislature in enacting

this chapter to provide that adult protective services agencies,

local long-term care ombudsman programs, and local law enforcement

agencies shall receive referrals or complaints from public or private

agencies, from any mandated reporter submitting reports pursuant to

Section 15630, or from any other source having reasonable cause to

know that the welfare of an elder or dependent adult is endangered,

and shall take any actions considered necessary to protect the elder

or dependent adult and correct the situation and ensure the

individual’s safety.

(j) It is the further intent of the Legislature in adding Article

8.5 (commencing with Section 15657) to this chapter to enable

interested persons to engage attorneys to take up the cause of abused

elderly persons and dependent adults.

DEFINITIONS SECTION

15610.07. “Abuse of an elder or a dependent adult” means either of

the following:

(a) Physical abuse, neglect, financial abuse, abandonment,

isolation, abduction, or other treatment with resulting physical harm

or pain or mental suffering.

15610.23. (a) “Dependent adult” means any person between the ages

of 18 and 64 years who resides in this state and who has physical or

mental limitations that restrict his or her ability to carry out

normal activities or to protect his or her rights, including, but not

limited to, persons who have physical or developmental disabilities,

or whose physical or mental abilities have diminished because of

age.

15610.25. “Developmentally disabled person” means a person with a

developmental disability specified by or as described in subdivision

(a) of Section 4512.

15610.27. “Elder” means any person residing in this state, 65 years

of age or older.

15610.30. (a) “Financial abuse” of an elder or dependent adult

occurs when a person or entity does any of the following:

(1) Takes, secretes, appropriates, obtains, or retains real or

personal property of an elder or dependent adult for a wrongful use

or with intent to defraud, or both.

(2) Assists in taking, secreting, appropriating, obtaining, or

retaining real or personal property of an elder or dependent adult

for a wrongful use or with intent to defraud, or both.

(3) Takes, secretes, appropriates, obtains, or retains, or assists

in taking, secreting, appropriating, obtaining, or retaining, real

or personal property of an elder or dependent adult by undue

influence, as defined in Section 1575 of the Civil Code.

(b) A person or entity shall be deemed to have taken, secreted,

appropriated, obtained, or retained property for a wrongful use if,

among other things, the person or entity takes, secretes,

appropriates, obtains, or retains the property and the person or

entity knew or should have known that this conduct is likely to be

harmful to the elder or dependent adult.

secretes, appropriates, obtains, or retains real or personal property

when an elder or dependent adult is deprived of any property right,

including by means of an agreement, donative transfer, or

testamentary bequest, regardless of whether the property is held

directly or by a representative of an elder or dependent adult.

UNDUE INFLUENCE FOR ELDER ABUSES PURPOSES: (AS REFERENCED ABOVE)

1575. Undue influence consists:

1. In the use, by one in whom a confidence is reposed by another,

or who holds a real or apparent authority over him, of such

confidence or authority for the purpose of obtaining an unfair

advantage over him;

2. In taking an unfair advantage of another’s weakness of mind;

or,

3. In taking a grossly oppressive and unfair advantage of another’s

necessities or distress.

WRIT OF ATTACHMENT

15657.01. Notwithstanding Section 483.010 (SEE BELOW) of the Code of Civil

Procedure, an attachment may be issued in any action for damages

pursuant to Section 15657.5 for financial abuse of an elder or

dependent adult, as defined in Section 15610.30. The other provisions

of the Code of Civil Procedure not inconsistent with this article

shall govern the issuance of an attachment pursuant to this section.

In an application for a writ of attachment, the claimant shall refer

to this section. An attachment may be issued pursuant to this section

whether or not other forms of relief are demanded.

483.010. (a) Except as otherwise provided by statute, an attachment

may be issued only in an action on a claim or claims for money, each

of which is based upon a contract, express or implied, where the

total amount of the claim or claims is a fixed or readily

ascertainable amount not less than five hundred dollars ($500)

exclusive of costs, interest, and attorney’s fees.

(b) An attachment may not be issued on a claim which is secured by

any interest in real property arising from agreement, statute, or

other rule of law (including any mortgage or deed of trust of realty

and any statutory, common law, or equitable lien on real property,

but excluding any security interest in fixtures subject to Division 9

(commencing with Section 9101) of the Commercial Code). However, an

attachment may be issued where the claim was originally so secured

but, without any act of the plaintiff or the person to whom the

security was given, the security has become valueless or has

decreased in value to less than the amount then owing on the claim,

in which event the amount to be secured by the attachment shall not

exceed the lesser of the amount of the decrease or the difference

between the value of the security and the amount then owing on the

claim.

an attachment may be issued only on a claim which arises out of the

conduct by the defendant of a trade, business, or profession. An

attachment may not be issued on a claim against a defendant who is a

natural person if the claim is based on the sale or lease of

property, a license to use property, the furnishing of services, or

the loan of money where the property sold or leased, or licensed for

use, the services furnished, or the money loaned was used by the

defendant primarily for personal, family, or household purposes.

(d) An attachment may be issued pursuant to this section whether

or not other forms of relief are demanded.

•B. California Elder Abuse Case-Law

REPORTED DECISIONS

•1. Zimmer v. Nawabi, 566 F. Supp.2d 1025, 2008 WL 7123093, (2008). In this case a Plaintiff elderly homeowner (79 years old) filed a lawsuit against a BROKER for elder abuse and a host of other legal claims including breach of fiduciary duty. The gravamen of Plaintiff’s complain was that the Broker lied about the amount of cash-out proceeds that would be tendered to Plaintiff at the close of the loan., and lied about the monthly payment amount and undisclosed Yield Spread Premium (YSP), and other non-disclosure of material terms of the loan. There was also an issue of a fraudulent release of legal claims Defendants fraudulently created and Plaintiff was instructed to sign the loan documents without reading them. This financial elder abuse case was also brought in the context of Plaintiff’s house facing foreclosure.

The Defendants argued there was no financial abuse or elder abuse and sought to dismiss Plaintiff’s claims. The Court failed to dismiss such claims and discussed the claim of Elder Abuse by stating: “Zimmer has a claim for financial elder abuse pursuant to Welfare and Institutions Code Section 15657 et seq. against Golden State (the Broker) because Golden State defrauded Zimmer out of the equity in her house while she was over 65 years old. She is entitled to actual and punitive damages and attorney fees.”

In regard to the Elder Abuse cause of action, the Court also stated: “Financial elder abuse is defined in subsection 15610.30(a), which provides: “Financial abuse” of an elder or dependent adult occurs when a person or entity does any of the following: (1) takes, secretes, appropriates or retains real or personal property of an elder or dependent adult to a wrongful use or with intent to defraud or both. (2) Assists in taking, secreting, appropriating or retaining real or personal property of an elder or dependent adult to a wrongful use or with intent to defraud or both.

The court went on to hold that under Cal. Welf. & Inst. Code Section 15610.30(a)(1)-(2), “a person or entity is deemed to have taken, secreted, appropriated or retained property for a wrongful use, if among other things, the the person or entity takes, secretes, appropriates, or retains possession of property in bad faith. Id Section 15610.30(b). A person or entity is deemed to have acted in bad faith if the person or entity knew or should have known that the elder had the right to have the property transferred or made readily available to the elder or to his representative. Id Section 15610.30(b)(1). Lastly, a persona should have known of such right “if, on the basis of the information received by the person or entity or the person or entity’s authorized third party, or both, it is obvious to a reasonable person that the elder has such a right. The Court determined that the Broker’s obtaining of fees (personal property) in the amount of $10,700 was wrongfully obtained under these circumstances indicating false statements and misrepresentations.

The Court in Zimmer also addressed the issue of breach of fiduciary duty. To this issue the court stated: “A mortgage broker breaches his fiduciary duty to borrower under California law if he provides materially misleading and incomplete information regarding the terms of the loan, even if correct terms are in the loan documents and borrower does not read documents.” In addition the Court stated, “when brokering loans for borrower of modest means and limited experience in financial affairs, mortgage broker has a duty of oral disclosure of material loan terms and counseling, which require him to disclose orally the true rate of interest, penalty for late payments, and other material terms of the loan. The court found the elderly homeowner/borrower to be of limited means and lacking financial savvy in financial matters. The court pointed to the elderly homeowner’s “14 years of education.”

The court went on to state that: “Under California law, a mortgage loan broker acts in a fiduciary capacity that “not only imposes on him the duty of acting in the highest good faith toward his principal, but precludes the agent from obtaining any advantage over the principal. The duty obligates brokers to make a full and accurate disclosure of the terms of a loan to borrowers and always act in utmost good faith toward their principles.”

Finally, the Zimmer court addressed “enhanced remedies” under California’s elder abuse statute. “To utilize the Elder Abuse Act’s enhanced remedies, a plaintiff must prove by clear and convincing evidence that the defendant has been guilty of recklessness, oppression, fraud, or malice in the commission of the abuse. Id Section 15610.30(b)(2). A preponderance of the evidence standard governs a Plaintiff’s ability to recover “all other remedies otherwise provided by law.”

NOTE: Although Zimmer held that a loan broker (as opposed to a lender), who owed the borrower a fiduciary duty, was liable for elder financial abuse, such cause of action may also extend to a “financial institution” or lender who may or may not owe a fiduciary duty as discussed in the Toscano case below.

UNREPORTED DECISIONS

Note: There are a fair amount of unreported decisions I found dealing with financial elder abuse. To me, it means the Courts may be willing to help out a senior, and yet for various reasons, the court may not want the case reported.

(1) Darone Case (2001 WL 34144398). In this case the Court set forth the requirements to prove a prima facie case for financial elder abuse. Specifically, the Court held:

“Here, then, in order to state a claim of actionable financial abuse…..Plaintiff must allege: (a) that she is an “elder”, (b) that Defendant “took, secreted, appropriated her “money or property”, © that Defendant did so “to a wrongful use or intent to defraud, or both” and (d) that in doing so, Defendant was guilty of “recklessness, oppression, fraud or malice.” The Court held in Darone that there was no fiduciary duty required to state a claim for elder abuse despite defendants contentions.

•2. Toscano v. Ameriquest Mortgage Company (non-reported in F.Supp 2d, 2007 WL 3125023 (E.D. Cal), (2007). In this case, a lender (as opposed to a loan broker) sought to dismiss financial elder abuse claims levied against him. The lender argued they owed no fiduciary duty to the borrower-homeowner, and therefore could not be liable for elder financial abuse. In Toscano, Plaintiff was a 65 year man who spoke only english. Although the loan was negotiated in Spanish, the loan documents were written in English. Defendant advised Plaintiff that the loan at issue (a loan at or below 6.3% interest) was the best loan for Plaintiff. The documents Plaintiff signed had loan terms of 7%. The Court held that a fiduciary relationship was not required to state a claim for financial elder abuse under California law. The Cout also went on to set forth a fiduciary duty test that would create a duty of care, even to lenders and financial institutions (as opposed to brokers) and set forth the test as follows:

“In California, the test for determining whether a financial institution owes a duty of care to the borrower-client involves the balancing of carious factors, among which are: (1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to him, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendants conduct and the injury suffered, (5) the moral blame attached to the defendants conduct, and (6) the policy or preventing future harm.” The Court stated “A FIDUCIARY RELATIONSHIO CAN ARISE WHERE THE LENDER BECOMES HEAVILY ENTANGLED WITH THE BORROWER.”

Although this case is not citeable, it does given reason to believe that the Courts may so hold this way in any future case, allowing a borrower to bring a claim of financial elder abuse against both a broker and the lender. The Lender could be seen as “assisting” financial elder abuse in these types of cases. More problematic is the case of the “holder in due course” lender who will claim no liability whatsoever for acts of elder abuse that may have been committed at the loan origination stage. See below for more on holder in due course defense.

LEGAL ARGUMENTS SEEKING TO ENJOIN FORECLOSURE OF LOANS ORIGINATED AS THE PRODUCT OF ELDER ABUSE

•1. A LENDER OR LOAN SERVICER SHOULD NOT BE PERMITTED TO FORECLOSE ON A PREDATORY ELDER ABUSE LOAN (THE FRUITS OF THE POISOINOUS TREE) WHERE THE RESULT IS TO LEAVE AN ELDERLY PERSON WITHOUT SAFE AND AFFORDABLE HOUSING SOLUTIONS.

It is common knowledge that many loan servicers may prefer foreclosing on homes, rather than modifying loans, due to financial incentives often provided for in various pooling and servicing agreements. These loan servicers likely enjoyed making money off the servicing of these loans that are the product of elder abuse, as well as other predatory loans such as pay option ARM loans (Pick-a-pay negative amortization loans).

This is a strong public policy argument to be made that a Court should step in and exercise its equitable powers to prevent a foreclosure where an elderly California homeowners is about to be foreclosed upon and kicked out of their homes and thrust into an uncertain future.

As discussed below, California Business and Professions Code Section 17203 grants Courts the express authority “as may be necessary to restore to any person in interest, any money or property, real or personal, which may have been acquired by means of such unfair competition.”

Where a violation of the California Elder abuse statutes can be shown, this violation can serve as an underlying violation sufficient for California Business and Professions Code Section 17200 purposes (17200 prohibits acts of unfair competition such as violations of other statutes), and the Court should restore the loan proceeds and loan payments back to Plaintiff – similar to a TILA rescission claim and/or return any foreclosure property back to the homeowner. These are just an example of the types of arguments that could and should be made to the judge.

The other option, of allowing the elderly victim to be “kicked to the curb” should not be permitted even where a subsequent lender claims it is a “holder in due course.” The subsequent lenders “create the marketplace” for these types of loans, and “enjoy the fruits of the poisonous tree.” But for their secondary market purchases of these types of predatory loans, the original lenders (who would be forced to hold their own garbage loans) would not abuse California elderly homeowners who would have direct recourse against them.

•2. THE COURTS SHOULD PROTECT CALIFORNIA ELDERLY HOMEONWERS WHO WERE STEERED INTO COMPLEX AND NON-TRADITIONAL FINANCIAL PRODUCTS AND SHOULD DEMAND THAT THE LENDER OR LOAN SERVICER SHOW GOOD CAUSE BEFORE PURSUING A JUDICIAL FORECLOSURE SALE OR AN UNLAWFUL DETAINER ACTION (FOLLOWING A FORECLOSURE SALE THAT WAS NOT STOPPED).

As referenced in this memorandum, the State of California protects elderly citizens (those over 65) from fraudulent, oppressive, wrongful and harmful acts that threaten to cause irreparable harm. In the Case of Hernandez v. Stabach, 145 Cal.App.3d 309, 193 Cal. Rptr. 350 (1983), the Court granted a preliminary injunction preventing Defendant (a Landlord accused of retaliatory eviction – an “unfair” and “illegal” act under California Business and Professions Code Section 17200) from filing an unlawful detainer action to evict the non-rent paying tenant until such time as the Defendant Landlord appeared in the Superior Court and obtained leave of Court, (by showing good cause for the eviction) which would permit such unlawful detainer action to be filed. In Stabach, the Court held:

“The challenged portion of the preliminary injunction does not enjoin defendant from initiating unlawful detainer actions against any Plaintiff for nonpayment of rent……or deny him access to the courts. Rather, it requires only that he obtain leave of Superior Court to institute such actions in the municipal court. The injunction does not prohibit the institution of unlawful detainer actions if a showing of good cause is made.”

The Court went on to state:
“California Business and Professions Code Section 17203 provides: Any person performing or proposing to perform an act of unfair competition within this state may be enjoined in any court of competent jurisdiction. THE COURT MAY MAKE SUCH ORDERS OR JUDGEMENTS, INCLUDING THE APPOINTMENT OF A RECEIVER, AS MAY BE NECESSARY to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore to any person in interest, any money or property, real or personal, which may have been acquired by means of such unfair competition.”

The Court finalized its opinion by stating:
“We conclude that it was within the court’s inherent equity power and the power conferred upon it by Business and Professions Code Section 17203 to enjoin defendant from evicting or attempting to evict any plaintiff without first obtaining permission from the court. By requiring defendant to seek leave of court, the trial court sought to MONITOR AND PREVENT DEFENDANT’S RETALIATORY ATTEMPTS TO EVICT TENANTS THAT ASSERT THEIR RIGHTS.”

The Stabach case suggests the courts have the express and inherent power to assist victims of elder financial abuse in the State of California. The question remains, will, and to what extent are the Courts willing to go to in order to protect past victims of financial elder abuse in the context of mortgage loans (hidden fees, bait and witch tactics, fraud in the factum, nondisclosure of material loan terms, false and fraudulent trumping of income, steering clients into the wrong financial product etc.)? In each of these scenarios the broker and lender (and subsequent investor of the loan on the secondary market) each enjoy handsome profits, fees and enjoy the fruits of loan origination at the elder homeowners expense and at time, to the loss of their property.

POTENTIAL PITFALLS TO ASSERTING A PREDATORY LENDING CLAIM, IN THE FORM OF AN ELDER ABUSE VIOLATION, IN THE CONTEXT OF A FORECLOSURE DEFENSE CASE

•1. Holder in Due Course: Where a company purchases a loan on the secondary market (i.e. they were not the originator of the loan, they will often claim they are a “holder in due course” and cannot be held liable for fraud, deception, elder abuse, etc. at the origination stage of the loan. This is a good argument in most cases. If a party can successfully assert holder in due course status, there are limited claims a party can make against them. We have addressed the issue of holder in due course status in other blog posts. Just google “vondran holder in due course” and you should be able to find it. Just know this is a potential defense in every predatory lending case, including elder abuse cases. The trick is to show the secondary lender is not a holder in due course and not entitled to HDC protection against liability.

•2. Federal Preemption: As if matters weren’t bad enough, and the chips stacked in favor of the powerful lenders and their mighty lobbiest in D.C., there is another doctrine of law that seeks to aid lenders in battling predatory lending claims like elder abuse. In many cases, the lenders or loan servicers who are named as defendants in lawsuits will claim the Plaintiff-homeowners claims are pre-empted by Federal law. One of these laws is HOLA. Again, we have another article that addresses this issue. Google “vondran pre-emption predatory lending.” Again, for purposes of this article, be aware that there are defenses that will be raised to every predatory lending claim you seek to raise. That is the battle folks.

CONCLUSION

Elders over 65 are one of the fastest growing segments of our society. People are living longer. That being said, many seniors grew up on 30 year fixed mortgages and are now being enticed with exotic and toxic loan products such as negative amortization loans, reverse mortgages, interest-only products, and adjustable rate mortgage products. Seniors can be particularly vulnerable when dealing with greedy and financially savvy loan brokers and lenders who seek profits over fiduciary duty and a sense of fair play. Someone has to protect seniors who are victimized in the predatory loan process. It is simply unfair to treat seniors in California like every other borrower. Seniors often survive on a fixed income, and if they are forced to the streets by Courts and Financial institutions that could care less about their well-being we can truly admit we are devolving as a society. The California elder abuse law should be used to prevent foreclosure where brokers, lenders, servicers, and other financial institutions don’t play by the rules and abuse seniors who deserve protection. The Courts must take a case-by-case approach and enjoin wrongful foreclosure and return property to the Senior where elder abuse is affirmatively shown to have been perpetrated.

ELDER ABUSE LINKS

National Center on Elder Abuse: www.ncca.aoa.gov

National Clearinghouse on Abuse Later in Life: www.ncall.com

Senior Care Attorney: www.SeniorCareAttorneys.com

National Academy of Elder Law Attorneys: www.naela.org

OptionArmLawyer: www.OptionArmLawyer.com

RescindMyLoan: www.RescindMyLoan.net

OTHER FORECLOSURE DEFENSE AND BANKRUPTCY LINKS

Foreclosure Defense Show: www.LoanModRadio.com

BK Attorney Steve: www.BKAttorneyS.net

Foreclosure Defense Resource Center: www.ForeclosureDefenseResourceCenter.com

Trial Plan Fraud: www.TrialPlanFraud.com

Vondran Law: www.VondranLaw.com and www.Vondranlegal.com

Vondran Blogs: http://activerain.com/attorneysteve

Foreclosure Defense Radio Show (Loan Modification Radio) www.LoanModRadio.com

LOOKING FOR A LAWYER TO TAKE YOUR CASE ON A CONTINGENCY FEE BASIS? WE TAKE WORLD SAVINGS AND WACHOVIA LOANS ON CONTINGENCY. TO FIND A LAWYER WHO MAY TAKE A CASE ON CONTINGENCY FEE BASIS IN YOUR AREA SEARCH THE DATABASE AT WWW.CONTINGENCYCASE.COM.

Arizona bankruptcy resources

Attorney Steve Vondran — Thu, 07 Jan 2010 08:26:12 +0000

When you are considering filing for bankruptcy in the Greater Phoenix Arizona region (Phoenix, Scottsdale, Tempe, Mesa, etc.), you will likely be filing your case in the United States Bankruptcy Court for the District of Arizona.

The address for the United States Bankruptcy Court for the District of Arizona is 230 N. First Ave, Suite 101, Phoenix, AZ 85003. The general telephone numbers are 602-682-4000 / 800-556-9230.

To find your bankruptcy filing office in Arizona use this tool: http://www.azb.uscourts.gov/ZipTool.aspx.

Here is a link to common forms and publications that may assist you in filing for bankruptcy in Phoenix Arizona with or without a Phoenix bankruptcy Lawyer http://www.azb.uscourts.gov/default.aspx?PID=73.

Here are some Arizona bankruptcy links of interest that may assist you in understanding the bankruptcy process in Phoenix, Arizona: http://www.azb.uscourts.gov/default.aspx?PID=9.

More good information about filing for bankruptcy in and around Phoenix Arizona can be found at www.BKAttorneyS.Net

KEYOWRDS: PHOENIX BANKRUPTCY ATTORNEY / PHOENIX BANKRUPTCY LAWYER / SCOTTSDALE BANKRUPTCY LAWYER / SCOTTSDALE BANKRUPTCY ATTORNEY /FOUNTAIN HILLS BANKRUPTCY LAWYER /FOUNTAIN HILLS BANKRUPTCY ATTORNEY /CREDITORS HEARING / AUTOMATIC STAY / ADVERSARY PROCEEDING / LIEN STRIP

Foreclosure Tips, Strategies, Tactics and Insights revealed at Foreclosure Defense Resource Center

Attorney Steve Vondran — Sun, 13 Dec 2009 07:15:29 +0000

MORE FORECLOSURE INFORMATION CAN BE FOUND AT WWW.FORECLOSUREDEFENSERESOURCECENTER.COM: This website is provided by the Law Offices of Steven C. Vondran, P.C., as a general information website that seeks to educate California and Arizona Homeowners (we are only licensed to practice laws in these two states, and only seek to solicit clients in these two states).

Foreclosure Defense Topics we will cover include: Truth in Lending (in many cases your most powerful weapon to stop foreclosure), Forensic Loan Audits, Predatory Loans and Potential Causes of Action, Lis Pendens, Deficiency Judgments, Trial Plan Modifications, and more.

HOLDER IN DUE COURSE AND HOW IT RELATES TO FORECLOSURE DEFENSE AND SECURITIZED LOANS

Attorney Steve Vondran — Tue, 24 Nov 2009 01:52:38 +0000

Trying to Leverage Loan Modifications against the Assignee of the loan (who will undoubtedly argue they are not liable for any predatory lending violations committed by the loan originator) as they are a “Holder in Due Course.”

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

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

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

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

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

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

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

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

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

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

(8) Reverse Redlining / Discriminatory Lending

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

(10) Violations of HOEPA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Does Freddie Mac own your loan?

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

Does Fannie Mae own your loan?

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

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

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

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

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

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

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

(2) HOEPA (hi cost loan) violations

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

HOLDER IN DUE COURSE OVERVIEW

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

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

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

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

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

(1) “Holder” of an “instrument;”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(1) Civil Conspiracy

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

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

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

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

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

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

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

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

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

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

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

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

(2) Joint Venture liability

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

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

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

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

In applying this, the Court held:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CONCLUSION

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

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

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

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

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

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

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

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

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To see some of other other websites dealing with the financial crisis please review the following websites:

(1) www.OptionArmLawyer.com (potential attacks against the predatory option arm loan – aka “Pick-a-Prey”)

(2) www.TrialPlanFraud.com (tackling issues involved with what we call trial-plan shennanigans)

(3) www.BKAttorneyS.net (BK Attorney Steve – Chapter 7 Bankruptcy information for Arizona and California Homeowners)

(4) www.RescindMyLoan.net (website that discusses Truth in Lending Rescission information)

(5) www.LoanModRadio.com (site which features foreclosure defense issues in streaming audio)

(6) www.ProduceTheNoteAttorney.com (general information on the “Produce the Note” foreclosure defense strategy that is running rampant on the Internet)

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

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

Our profiles will also be listed on www.ContingencyCase.com an online legal directory for lawyers who will consider taking cases on a contingency fee basis in a variety of legal areas. I will be listed for our World Savings and Wachovia Option Arm loans.

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

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12. Real Estate Partnership Law

13. Quiet Title Actions

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

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

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

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

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

As a consequence we are able to serve Arizona loan modification clients in the following Arizona cities:

Mesa
Glendale
Chandler
Scottsdale
Gilbert
Tempe
Peoria
Yuma
Surprise
Avondale
Flagstaff
Lake Havasu City
Goodyear
Sierra Vista
Prescott
Oro Valley
Bullhead City
Apache Junction
Prescott Valley
Casa Grande
El Mirage
Marana
Kingman
Buckeye
Fountain Hills
San Luis
Nogales
Florence
Douglas
Queen Creek
Maricopa
Payson
Sahuarita
Paradise Valley
Chino Valley
Eloy
Sedona
Cottonwood
Camp Verde
Show Low
Winslow
Somerton
Safford
Coolidge
Globe
Page
Bisbee
Tolleson
Youngtown
Wickenburg
South Tucson
Guadalupe
Holbrook
Snowflake
Cave Creek
Benson
Thatcher
Litchfield Park
Eagar
Pinetop-Lakeside
Taylor
Colorado City
Dewey-Humboldt
Willcox
St. Johns
Carefree
Clarkdale
Quartzsite
Parker
Superior
Williams
Clifton
Kear
Pima
Springerville
Star Valley
Gila Bend
Wellton
Miami
Huachuca City
Mammoth
Tombstone
Fredonia
Patagoni
Hayden
Dunca
Winkelman
Jerome

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NOTICE:

The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case, or loan modification case you should seek out the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).

Arizona Foreclosure Defense: Possible grounds to seek an injunction to stop the foreclosure sale……

Attorney Steve Vondran — Sun, 22 Nov 2009 06:47:58 +0000

A few ways (ideas) to try to seek an injunction against foreclosure in Arizona

The following is general legal information only and is not to be construed as legal advice or a substitute for legal advice. These are a few things to look at when investigating whether or not you have a defense to foreclosure.

Steve Vondran, Esq. is an attorney practicing Real Estate, Bankruptcy and Foreclosure Defense in Phoenix, Arizona and California. He can be reached at (877) 276-5084 or emailed at Steve@VondranLaw.com

POTENTIAL STRATEGIES TO SEEK AN INJUNCTION AGAINST FORECLOSURE IN PHOENIX, SCOTTSDALE, AND SURROUNDING AREAS IN ARIZONA.

(1) Tort of Wrongful Foreclosure: For example, one way to try to seek an injunction to stop a foreclosure sale would be to argue that you received a loan modification or loan workout, and performed the agreement and thus, cured the breach. See the case of Herring v. Countrywide Home Loans, 2007 WL 2051394 (D. Ariz. 2007). This is a foreclosure defense grounds that definitely needs to be explored with the explosion of loan modifications in Phoenix, Arizona and elsewhere. Under the Obama Making Home Affordable program (HAMP), and under some FHA HAMP modification programs, the lenders and loan servicers are giving out “three month trial plan” offers.

These agreements typically state that the borrower does, or may, qualify for a loan modification. The borrower, induced into believing they qualify for a loan modification, typically makes the three payments, and may also submit financial documentation to be reviewed. In at least some of these trial plan modification agreements we have reviewed, the lender promises that if the three trial plan payments are made on time, and if the borrower’s financial condition (and some other “material representations” made by the borrower) do not change by the time the third payment is made, then the lender, in some of these agreements, agrees to provide the final and permanent loan modification which is supposed to be in line with the the trial plan payment was. What we are seeing is lenders and loan servicers not honoring what appears to be a valid agreement, and instead either denying the modification, and in some cases, selling the house from underneath the borrower. If you feel duped by a trial plan offer that was not honored, check out our website at www.TrialPlanFraud.com

The court may reach the conclusion that the lender / beneficiary is not exercising the power of sale in good faith in violation of its statutory duty.

(2) Failure to Comply with Arizona Foreclosure Statutes:

There can be no valid foreclosure in the State of Arizona without complying with the rules and regulations set forth in the Arizona foreclosure statutes.

For example, if there is a failure to follow the Notice of Sale Procedures this could provide proper grounds to enjoin the foreclosure sale in Phoenix, Scottsdale, and other surrounding Arizona cities. Here are the statutory requirements under Arizona Revised Statutes Section 33-808.

33-808. Notice of trustee’s sale

A. The trustee shall give written notice of the time and place of sale legally describing the trust property to be sold by each of the following methods:
1. Recording a notice in the office of the recorder of each county where the trust property is situated.
2. Giving notice as provided in section 33-809 to the extent applicable.
3. Posting a copy of the notice of sale, at least twenty days before the date of sale in some conspicuous place on the trust property to be sold, if posting can be accomplished without a breach of the peace. If access to the trust property is denied because a common entrance to the property is restricted by a limited access gate or similar impediment, the property shall be posted by posting notice at that gate or impediment. Notice shall also be posted at one of the places provided for posting public notices at any building that serves as a location of the superior court in the county where the trust property is to be sold. Posting is deemed completed on the date the trust property is posted. The posting of notice at the superior court location is deemed a ministerial act.
4. Publication of the notice of sale in a newspaper of general circulation in each county in which the trust property to be sold is situated. The notice of sale shall be published at least once a week for four consecutive weeks. The last date of publication shall not be less than ten days prior to the date of sale. Publication is deemed completed on the date of the first of the four publications of the notice of sale pursuant to this paragraph.
B. The sale shall be held at the time and place designated in the notice of sale on a day other than a Saturday or legal holiday between 9:00 a.m. and 5:00 p.m. mountain standard time at a specified place on the trust property, at a specified place at any building that serves as a location of the superior court or at a specified place at a place of business of the trustee, in any county in which part of the trust property to be sold is situated.
C. The notice of sale shall contain:
1. The date, time and place of the sale. The date, time and place shall be set pursuant to section 33-807, subsection D. The date shall be no sooner than the ninety-first day after the date that the notice of sale was recorded.
2. The street address, if any, or identifiable location as well as the legal description of the trust property.
3. The county assessor’s tax parcel number for the trust property or the tax parcel number of a larger parcel of which the trust property is a part.
4. The original principal balance as shown on the deed of trust. If the amount is not shown on the deed of trust, it shall be listed as “unspecified”.
5. The names and addresses, as of the date the notice of sale is recorded, of the beneficiary and the trustee, the name and address of the original trustor as stated in the deed of trust, the signature of the trustee and the basis for the trustee’s qualification pursuant to section 33-803, subsection A, including an express statement of the paragraph under subsection A on which the qualification is based. The address of the beneficiary shall not be in care of the trustee.

6. The telephone number of the trustee.
7. The name of the state or federal licensing or regulatory body or controlling agency of the trustee as prescribed by section 33-803, subsection A.
D. The notice of sale shall be sufficient if made in substantially the following form:

Notice of Trustee’s Sale
The following legally described trust property will be sold, pursuant to the power of sale under that certain trust deed recorded in docket or book _______________________ at page __________ records of ______________ county, Arizona, at public auction to the highest bidder at (specific place of sale as permitted by law) _______________, in _______________ county, in or near _______________, Arizona, on ________, ____, at ___________ o’clock ___m. of said day:

(street address, if any, or identifiable

location of trust property)

(legal description of trust property)

Tax parcel number _______________

Original principal balance $________________________

Name and address of beneficiary ______________________________

______________________________

Name and address of original trustor _________________________

_________________________

Name, address and telephone number of trustee ________________

__________________________________

Signature of trustee _____________________________

Manner of trustee qualification ___________________________

Name of trustee’s regulator _______________________________

Dated this _____________ day of ______________, ____.

(Acknowledgement)
E. Any error or omission in the information required by subsection C or D of this section, other than an error in the legal description of the trust property or an error in the date, time or place of sale, shall not invalidate a trustee’s sale. Any error in the legal description of the trust property shall not invalidate a trustee’s sale if considered as a whole the information provided is sufficient to identify the trust property being sold. If there is an error or omission in the legal description so that the trust property cannot be identified, or if there is an error in the date, time or place of sale, the trustee shall record a cancellation of notice of sale. The trustee or any person furnishing information to the trustee shall not be subject to liability for any error or omission in the information required by subsection C of this section except for the wilful and intentional failure to provide such information. This subsection does not apply to claims made by an insured under any policy of title insurance.
F. The notice of trustee sale may not be rerecorded for any reason. This subsection does not prohibit the recording of a new or subsequent notice of sale regarding the same property.

Also note, where the deed of trust or mortgage calls for a certain plan or procedure for foreclosure, that plan must be followed. Therefore, you need to check the procedures set forth in the deed of trust or mortgage instrument and see if they complied with the procedures that may be called for therein.

There are other sections relating to foreclosure that must also be reviewed. For example, substitution of Trustees is covered in this section:

33-804. Appointment of successor trustee by beneficiary

A. If a person appointed as trustee fails to qualify, is unwilling or unable to serve or resigns as trustee or if a trustee was not designated in the deed of trust, the beneficiary may appoint a successor trustee, and such appointment shall constitute a substitution of trustee.
B. The beneficiary may at any time remove a trustee for any reason or cause and appoint a successor trustee, and such appointment shall constitute a substitution of trustee.
C. A notice of substitution of trustee shall be recorded in the office of the county recorder of each county in which the trust property or some part of the trust property is situated at the time of the substitution. The beneficiary shall give written notice through registered or certified mail, with postage prepaid, to the trustor.
D. A notice of substitution of trustee shall contain a description of the basis for the successor trustee’s qualification pursuant to section 33-803, subsection A. A notice of substitution of trustee shall be sufficient if acknowledged by all beneficiaries under the trust deed or their agents as authorized in writing and if prepared in substantially the following form:
Notice of Substitution of Trustee

The undersigned beneficiary hereby appoints ___________ _______________________________________________________________ _______________________________________________________________ _______________________________________________________________ successor trustee under the trust deed executed by ____________________ as trustor, in which _____________ is named beneficiary and _____________ as trustee, and recorded ________________, _____, in _________________ county in book or docket _________________, page ______________, and legally describing the trust property as:

(legal description of trust property)

The successor trustee appointed herein qualifies as a trustee of the trust deed in the trustee’s capacity as a ______________________ as required by Arizona Revised Statutes section 33-803, subsection A.

Dated this _______________ day of ________________, ____.

____________________

Signature

(Acknowledgement)
E. A notice of substitution of trustee is effective immediately on execution as prescribed by subsection D of this section.
F. A person appointed as a trustee under a deed of trust may resign as trustee at any time. Any such resignation shall be without liability, provided the person has not agreed in writing or by the person’s conduct to act in such capacity. If the trustee has agreed in writing or by the person’s conduct to act in such capacity, the person may only resign in accordance with the terms of the trust deed and this chapter. If a trustee fails to qualify or is unwilling or unable to serve or resigns, it does not affect the validity of the deed of trust, except that no action required to be performed by the trustee under this chapter or under the deed of trust may be taken until a successor trustee is appointed by the beneficiary or the beneficiary’s agent as authorized in writing pursuant to this section. Resignation by a trustee is made by recordation of a notice of resignation in the office of the county recorder of each county in which the trust property or some part of the trust property is situated at the time of the resignation. Written notice shall be given through registered or certified mail, with postage prepaid, to the trustor and the beneficiary. A notice of resignation of trustee is sufficient if acknowledged by the trustee and prepared in substantially the following form:

Notice of Resignation of Trustee

The undersigned trustee hereby resigns as trustee under the deed of trust executed by ________________, as trustor, in which ________________ is named beneficiary, and recorded ________________, ____, in ________________ county, in book or docket __________, page __________, and legally describing the trust property as:

(legal description of trust property)

Dated this _______________ day of _______________, ____.

_________________

Signature

(Acknowledgement)

Other Sections to look at (that may allow an Arizona homeowner to enjoin and/or set aside a foreclosure sale in Arizona) might relate to irregularities in the foreclosure sale/bidding process.

33-810. Sale by public auction; postponement of sale

A. On the date and at the time and place designated in the notice of sale, the trustee shall offer to sell the trust property at public auction for cash to the highest bidder. The trustee may schedule more than one sale for the same date, time and place. The attorney or agent for the trustee may conduct the sale and act at such sale as the auctioneer for the trustee. Any person, including the trustee or beneficiary, may bid at the sale. Only the beneficiary may make a credit bid in lieu of cash at sale. The trustee shall require every bidder except the beneficiary to provide a ten thousand dollar deposit in any form that is satisfactory to the trustee as a condition of entering a bid. The trustee or auctioneer may control the means and manner of the auction. Every bid shall be deemed an irrevocable offer until the sale is completed, except that a subsequent bid by the same bidder for a higher amount shall cancel that bidder’s lower bid. To determine the highest price bid, the trustor or beneficiary present at the sale may recommend the manner in which the known lots, parcels or divisions of the trust property described in the notice of sale be sold. The trustee shall conditionally sell the trust property under each recommendation, and, in addition, shall conditionally sell the trust property as a whole. The trustee shall determine which conditional sale or sales result in the highest total price bid for all of the trust property. The trustee shall return deposits to all but the bidder or bidders whose bid or bids result in the highest bid price. The sale shall be completed on payment by the purchaser of the price bid in a form satisfactory to the trustee. The subsequent execution, delivery and recordation of the trustee’s deed as prescribed by section 33-811 are ministerial acts. If the trustee’s deed is recorded in the county in which the trust property is located within fifteen business days after the date of the sale, the trustee’s sale is deemed perfected at the appointed date and time of the trustee’s sale. If the highest price bid at a completed sale is less than the amount of that bidder’s deposit, the amount of the deposit in excess of the bid price shall be refunded by the trustee at the time of delivery of the trustee’s deed.
B. The person conducting the sale may postpone or continue the sale from time to time or change the place of the sale to any other location authorized pursuant to this chapter by giving notice of the new date, time and place by public declaration at the time and place last appointed for the sale. Any new sale date shall be a fixed date within ninety calendar days of the date of the declaration. After a sale has been postponed or continued, the trustee, on request, shall make available the date and time of the next scheduled sale and, if the location of the sale has been changed, the new location of the sale until the sale has been conducted or canceled and providing this information shall be without obligation or liability for the accuracy or completeness of the information. No other notice of the postponed, continued or relocated sale is required except as provided in subsection C of this section.
C. A sale shall not be complete if the sale as held is contrary to or in violation of any federal statute in effect because of an unknown or undisclosed bankruptcy. A sale so held shall be deemed to be continued to a date, time and place announced by the trustee at the sale and shall comply with subsection B of this section or, if not announced, shall be continued to the same place and at the same time twenty-eight days later, unless the twenty-eighth day falls on a Saturday or legal holiday, in which event it shall be continued to the first business day thereafter. In the event a sale is continued because of an unknown or undisclosed bankruptcy, the trustee shall notify by registered or certified mail, with postage prepaid, all bidders who provide their names, addresses and telephone numbers in writing to the party conducting the sale of the continuation of the sale.
D. A sale is postponed by operation of law to the next business day at the same scheduled time and place if an act of force majeure prevents access to the sale location for the conduct of the sale.

NOTE: See also In re Kahn, 203 Ariz. 205 (2002) where a Court held that gross inadequacy of sale price may be grounds to set aside a foreclosure sale. In regard to the question of what constitutes “gross inadequacy” the court held:

Determining gross inadequacy

“Gross inadequacy” cannot be precisely defined in terms of a specific percentage of fair market value. Generally, however, a court is warranted in invalidating a sale where the price is less than 20 percent of fair market value and, absent other foreclosure defects, is usually not warranted in invalidating a sale that yields in excess of that amount. The Court also cited to the RESTATEMENT § 8.3 (emphasis added) and stated: In Fenton, our court of appeals noted, “even assuming that the price was inadequate, that fact standing alone would not justify setting aside the trustee’s sale…………..there must be in addition proof of some element of fraud, unfairness, or oppression as accounts for and brings about the inadequacy of price.”

THESE ARE JUST A FEW OF THE FORECLOSURE LAW SECTIONS THAT NEED TO BE LOOKED AT IN DETERMINING WHETHER THE FORECLOSURE PROCESS IN ARIZONA IS VALID. CONTACT AN ARIZONA FORECLOSURE DEFENSE LAWYER TO REVIEW YOUR CASE.

(3) Oppressive and unconscionable conduct of beneficiary/mortgagee or their agents (ex. loan servicers) in regard to loan acceleration and/or foreclosure tactics:

For example, pursuing the power of sale on trivial breaches, accepting late payments yet still foreclosing, etc. Review the case of Vork v. Dunn, 161 Ariz. 24, 775 (1989) for more information on possible challenges in this regard.

(4) TILA (truth in lending) Violations that trigger an extended three year right to rescind. Some general principles illuminating portions of TILA can be found in the case of Smith v. Wells Fargo Credit Corp., 713 F. Supp. 354, D.Ariz. 1989. In this case the court outlined the following TILA principles:

“In the case of closed-end credit, the material disclosures required of the lender are as follows: annual percentage rate, the finance charge, the amount financed, total of payments, and the payment schedule. TILA Sec. 103(u), 15 U.S.C. Sec. 1602(u). “Payment schedule” is defined as the number, amounts, and timing of payments scheduled to repay the obligation. Reg. Z, 12 C.F.R. Sec. 226.18(g); TILA Sec. 128(a)(6). The payment amount (which was stated incorrectly) on the original disclosure form is considered a “material” disclosure.

The consumer may exercise the right to rescind until midnight of the third business day following the latest of the following events:

1) consummation of the transaction;

2) delivery of notice of the right to rescind, or

3) delivery of all material disclosures.

See TILA Sec. 125(a), 15 U.S.C. Sec. 1635(a)

The consumer has a continuing right to rescind until the creditor provides the rescission notice and also supplies a copy of the TIL disclosure statement with all material information correctly disclosed. National Consumer Law Center, Truth in Lending (1986), para. 6.3.2 at 137.

Technical or minor violations of TILA, or Regulation Z, as well as major violations impose liability on the creditor and entitle the borrower to rescind. Semar v. Platte Valley Fed. S & L Assoc., 791 F.2d 699, 704 (9th Cir.1986) (notice to rescind was in error because it did not list the actual day *356 of expiration, but said “three business days after July 16”).

Congress made it clear that rescission suits are allowed after disclosure suits, and explicitly provided a statutory damages penalty for rescission violations. Aquino v. Public Finance Consumer Discount Co. 606 F.Supp 504, 511 (E.D.Pa.1985), based on S.Rep. No. 96-368, reprinted in 1980 U.S.Code Cong. & Admin.News at 236, 267.

If a mathematical error occurs with regard to a material disclosure, the three day rescission period will not commence, and thus the right to rescind will not expire three days later. Indeed, it will not expire until three business days after the correct disclosure is finally provided or until the earlier of three years after consummation. Rohrer, The Law of Truth in Lending (1984) at 8-33.

The rescission form that Wells Fargo had the Smiths sign at closing was not sufficient because the correct date of rescission must be stated. Reg. Z Sec. 226.23(b); TILA Sec. 125(a, f). To comply with this regulation, Wells Fargo was required to provide new rescission forms with the correct expiration date when the corrected material disclosure was made. Rohrer at 8-43.

There is a continuing right to rescind the transaction when the creditor makes an error regarding a material disclosure on the disclosure statement. In re Underwood, 66 B.R. 656 (Bkrtcy.W.D.Va.1986). In the Underwood case, the plaintiffs never received rescission forms-not when they initially closed, nor when the new finance charge data arrived. The court said “they would have had a continuing right to rescind the transaction even if they had initially been given copies of the Notice of the Right to Cancel because the defendant failed to make what now appears an admittedly erroneous and material disclosure on the disclosure statement.” Id. at 662. The court further stated that the Underwoods were entitled to rescind the transaction at any time within three years of the consummation of the transaction unless provided a statement containing the correct finance charge along with rescission forms. Id.

It is apparent that the courts have interpreted the right to rescind as being a continuing one in situations such as this. Here, Wells Fargo stated an incorrect payment amount (a material disclosure), and when the corrected amount was disclosed, they should have provided new rescission forms in compliance with the Truth in Lending Act. Because the Smiths were not given the new forms, they have a continuing right to rescind, within the statute of limitations of three years. 15 U.S.C. Sec. 1635(f).

Several defenses against TILA actions are available to creditors. There are three types of defenses: the TILA itself, common law, and standard procedural and jurisdictional defenses. NCLC at 146. The interpretation of the TILA defenses lies exclusively with the courts; Regulation Z and the Commentary of the Federal Reserve Board do not interpret them. Id.

[2] As to the right to rescind, Wells Fargo raises the defense of good faith conformity with the FRB rules, regulations, or interpretations. TILA Sec. 130(f), 15 U.S.C. Sec. 1640(f). Under the New Act, the creditor’s good-faith conformity is limited to the Regulations and the Commentary which supersede all previous formal and informal FRB staff interpretations, and the defense provides no protection for reliance on court decisions. Hamilton v. Southern Discount Co., 656 F.2d 150 (5th Cir.1981).

A creditor may not merely allege good faith conformity; it must point to the specific regulation, ruling, or interpretation with which it claims conformity. Valencia v. Anderson Bros. Ford, 617 F.2d 1278, 1287 (7th Cir.1980), rev’d on other grounds, 452 U.S. 205, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981). Wells Fargo relies on the lack of a requirement for a new rescission form in the regulations as its defense, but fails to cite any specific authority to support its position. In this situation, courts have concluded that if a creditor misreads or misconstrues the provision, it is not entitled to the defense, even if the mistake is a reasonable one. Id. at 1278 *357 (creditor’s mistaken interpretation of Regulation Z, even if honest and reasonable, is not a defense under Sec. 1640(f); see also Kessler v. Associates Fin. Services Co., 573 F.2d 577, 579 (9th Cir.1977).

However, where the provision is ambiguous and the creditor reasonably construes the provision as applying to its act or omission, it may be entitled to the conformity defense. Charles v. Krauss Co., 572 F.2d 544 (5th Cir.1978) (creditor’s good faith belief that its contract form complied with the literal language of Sec. 226.801 forms exception provided a good faith defense). A case by case interpretation is required. NCLC at 147.

TILA is not ambiguous with regard to the right to rescind in this instance, and courts have made clear the continuing right to rescind in situations such as these. A new rescission form should have been provided, and Wells Fargo’s mistaken interpretation of Regulation Z is not a defense.

This may give you a general idea of TILA law and how the Courts may look at these issues. We have posted other Truth in Lending blogs that you can search for online. There is a radio show we did which also discussed Truth in Lending, in general terms on one show. You can visit that site at www.LoanModRadio.com

TILA extended rescission rights may prove a nice foreclosure defense strategy where the borrower can put together a “tender” plan.

(5) Certain second mortgages containing a “balloon” payment may not be foreclosed upon (generally junior mortgages less than $10,000). Here is an Arizona statutory section that deals with that topic.

6-114. Balloon payments prohibited; applicability; exemptions

A. A person engaged in the business of lending money or negotiating a loan between parties shall not make or arrange a loan in violation of this section.

B. On a loan in an amount of ten thousand dollars or less for a term up to three years which is secured by a lien on real property comprising an owner-occupied dwelling, an installment payment, whether providing for payment of principal, interest or principal and interest, shall not be greater than twice the amount of the smallest installment.

C. This section applies only to mortgages, trust deeds or other evidences of indebtedness secured by a lien other than a primary or first lien on real property.

D. This section does not apply to transactions involving the purchase or sale or the proposed purchase or sale of real property or to a financial institution licensed or chartered by this state or the federal government.

E. Pursuant to the provisions of 12 United States Code section 3804, this section shall not be superseded by the provisions of 12 United States Code section 3803.

(6) Failure of Consideration (question of fact for the jury)

See the case of Sepo v. First National Bank of Arizona, 21 Ariz. App. 606, (1974) where the Court held:

“Failure of consideration consists in failure to perform, or carry out, or make good a promise given as consideration for an instrument……whether or not a failure of consideration has occurred may be a question of fact for a jury to determine…..where several promises are made by one party the question whether breach of one such promise results in a complete or a partial failure of consideration, or no failure at all, is determined under the doctrine of substantial performance…..the parties raising the defense of failure of consideration with reference to a note have the burden of proving it.”

It is not entirely clear how far this holding can stretch. For example, in the case of securitized loans, where MERS or a Trustee of a Trust claims it is the owner of the loan / loan beneficiary, but yet they gave no consideration to the transaction, can this be a grounds to raise to prevent foreclosure? For more general information about issues raised by securitized loans, and the so-called “produce the note” foreclosure defense strategy that has been successful in some states see our website at www.ProduceTheNoteAttorney.com where we discuss some of these issues and potential legal challenges. Note, many of these produce-the-note strategies are in the “test-phase.”

(7) Filing Bankruptcy (may temporarily stay a foreclosure, and in some cases may prevent a foreclosure). See our website at www.BKAttorneyS.net (BK Attorney Steve)

The preceding are some of the grounds that can be reviewed by a foreclosure defense attorney in Phoenix, Scottsdale, and surrounding cities in Arizona to see of you may have a right to seek an injunction against foreclosure. There maybe other grounds to review given the facts and circumstances of your case. For example where qualified written requests are not responded to and legitimate questions as to whether payments were properly paid and applied may raise a defense warranting at least a temporary restraining order stopping the foreclosure sale. Reverse Redlining – Financial Discrimination may also be another ground worth pursuing.

In addition, if you have an option arm loan it may be possible to argue that the loan is unconscionable and therefore unenforceable (see more discussion on our website www.OptionArmLawyer.com. Again, certain facts have to be ferreted out to see if you truly have a valid good faith defense to assert that might stop your foreclosure. The Courts will not likely treat you favorably where frivolous claims are filed (especially where loan payments are seriously delinquent), which tenuous claims are also prohibited from being filed by attorney ethics. Again, have your case reviewed by a real estate lawyer / foreclosure defense attorney.

ABOUT US:

The Law Offices of Steve Vondran in licensed to practice law in California and Arizona. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.

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

Offices:

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

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

Our Real Estate Law Services:

Loan Modifications / Loan Workouts (World Savings / Wachovia Loans)

Commercial Lease Modifications

Broker Advance Fee Agreements (Residential and Commercial)

DRE audits, hearings and investigations

Real Estate Broker admissions cases

Foreclosure Defense

Predatory Lending

Mortgage Law

Phoenix Real Estate Zoning Attorney

Phoenix Eminent Domain Attorney / Inverse Condemnation / Prop 207

Real Estate Arbitration, Litigation and Mediation

Foreclosure Consultant Contracts

Real Estate LLC’s

Real Estate Partnership Law

Quiet Title Actions

Forensic Loan Audits (Truth in Lending (TILA), RESPA, HOEPA, Fraud, etc.)

**ASK ABOUT ABOUT CHAPTER 7 BANKRUPTCY.

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

NOTICE:

The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case, or loan modification case you should seek the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).

Updated Post on Tenants Rights: New Federal Law may actually help modify investment loans?

Attorney Steve Vondran — Wed, 18 Nov 2009 19:49:34 +0000

FORECLOSURE TIPS: OVERVIEW OF TENANTS RIGHTS FOLLOWING EVICTION (NEW HOPE FOR MODIFYING INVESTMENT PROPERTIES?)

Hi again, we have posted information on previous blogs about tenants rights following eviction. Here is an overview of what we are looking at. The following is general legal information only and is not legal advice, or to be construed as legal advice. For specific questions please contact a real estate or foreclosure defense Attorney. Steve Vondran, Esq. practices law in the areas of Real Estate, Bankruptcy, and Foreclosure Defense. He assists homeowners in California and Arizona where he is licensed to practice law. He also holds a real estate broker’s license in both states. He can be emailed at Steve@VondranLaw.com or called at (877) 276-5084.

(1) IF YOU HAVE A FANNIE MAE LOAN THAT IS BEING THREATENED WITH FORECLOSED, FANNIE MAE, THROUGH THE LOAN SERVICER, MAY ACCEPT A DEED IN LIEU OF FORECLOSURE AND ALLOW A “DEED FOR LEASE” PROGRAM THAT ALLOWS UP TO A ONE YEAR LEASE AND POSSIBLE EXTENSIONS TO THE HOMEOWNER.

Here were some of the General Guidelines we discussed:

GENERAL GUIDELINES FOR FANNIE MAE DEED FOR LEASE RENT-BACK PROGRAM:

•(1) The loan must be owned by Fannie Mae (use their website here to see if your Loan is owned by Fannie): http://loanlookup.fanniemae.com/loanlookup/

•(2) Contact your loan servicer and see if you are eligible for the program and eligible to execute a “deed-in-lieu” of foreclosure (this means you sign over the deed to the loan holder in lieu of being foreclosed on). The owner of the loan, through the loan servicer, must agree to accept the deed-in-lieu of foreclosure. This is a requirement of the program. In some cases, you may only qualify for Deed in Lieu if you only have a first mortgage. In other instances, you may qualify if the second mortgagee releases your lien.

•(3) The property must be primary residence / owner occupied (landlord-owner may qualify if tenant uses property as primary residence).

•(4) Borrower must be able to pay market rent for the lease (which is a one year lease and option to extend by term or month-to -month). A property management company will determine market rate.

•(5) Rent payment cannot exceed 31% of Gross Monthly Income (yes, you will be required to submit financials).

•(6) Borrower cannot have had more than 12 late payment s on loan and cannot be in Bankruptcy.

•(7) FHA and VA loans do NOT qualify.

•(8) Borrower must have made at least three payments on loan.

•(9) House remains for sale and any new owner of the home would take “subject to” the lease.

A link to that blog post can be found here: http://activerain.com/blogsview/1340634/do-tenants-in-california-have-any-rights-if-the-house-they-live-in-is-foreclosed-

(2) FREDDIE MAC HAS A SIMILAR LEASE-BACK PROGRAM (CALLED THE REO RENTAL INITIATIVE) BUT IT DOES NOT INVLOVE THE DEED IN LIEU OF FORECLOSURE. ONCE THE FREDDIE LOAN IS FORECLOSED ON, THE LOAN SERVER MAY GRANT THE HOMEOWNER, OR REMAINING TENANT OF A RESIDENTIAL INVESTMENT PROPERTY TO STAY OVER ON A MONTH TO MONTH BASIS.

The Property must be in habitable condition, and the tenant must be able to afford the rent. Here is a link to the Freddie Mac press release discussing the REO Rental Initiative Program: http://www.freddiemac.com/news/archives/servicing/2009/20090305_reo-rental-initiative.html

(3) UNDER THE HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009, PURSUANT TO THE PROTECTING TENANTS AT FORECLOSURE ACT OF 2009, ANY BONA FIDE LEASE HOLDER MUST BE GIVEN AT LEAST 90 DAYS NOTICE BEFORE THEY C AN BE EVICTED.

Here is a look at the text of the law (the bold, italics, caps and underlines are my own-doing). Note the law expires (“sunsets”) on December 31, 2012.:

TITLE VII–PROTECTING TENANTS AT FORECLOSURE ACT
SEC. 701. SHORT TITLE. This title may be cited as the `Protecting Tenants at Foreclosure Act of 2009′.

SEC. 702. EFFECT OF FORECLOSURE ON PRE-EXISTING TENANCY.
(a) In General- In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—

(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and

(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure—

(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or

(B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),
except that nothing under this section shall affect the requirements for termination of any Federal or State subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.

NON-LEGAL EASE TRANSLATION: (but this is not legal advice please check with your attorney): Where a residential property sold in foreclosure, the remaining tenant (who must be a BONA FIDE TENANT – See Below for definition) is entitled to receive notice of their rights: mainly, that they have the right to live out the term of their lease – ASSUMING THE LEASE WAS ENTERED INTO PRIOR TO THE FORECLOSURE SALE, HOWEVER, the Successor in interest to the property (i.e. the bank that could not dump the property at a foreclosure sale, or, a successful bidder at the foreclosure auction) MAY TRY TO SELL THE PROPERTY, AND MAY EVICT THE TENANT WITH 90 DAYS NOTICE, BUT ONLY IF THE PERSON BUYING THE HOUSE PLANS ON LIVING THERE (AS OPPPOSED TO USING IT AS AN INVESTMENT PROPERTY OR SIMPLY “FLIPPING” THE PROPERTY).

If there is no lease in effect at the time of foreclosure (let’s say a tenant was living in the property under an oral lease, or month to month lease terminable at will) the tenant must be given the 90 day notice to vacate before they can be evicted. That is a mouthful, I know. The end result is adding the three months along with the time needed to evict a tenant (assuming they do not voluntarily vacate) adds more frustration to lenders and third-party purchasers of the property and creates rules they must comply with.

WHAT IS A BONA FIDE TENANT UNDER THE HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009 / PROTECTING TENANTS AT FORECLOSURE ACT OF 2009?

Only a bona fide tenant is entitled to the 90 day notice and the possibility to exercise the full term of any existing lease. Here is how the law defines bona fide tenants:

(b) Bona Fide Lease or Tenancy - For purposes of this section, a lease or tenancy shall be considered bona fide only if:

(1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;

(2) the lease or tenancy was the result of an arms-length transaction; and

(3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit’s rent is reduced or subsidized due to a Federal, State, or local subsidy.

(c) Definition- For purposes of this section, the term `federally-related mortgage loan’ has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).

TRANSLATION: DO NOT TRY TO ENTER INTO A SHAM LEASE PRIOR TO BEING FORECLOSED UPON IN ORDER TO TRY TO GET AN EXTRA 90 DAYS IN THE HOUSE. BUT THEN AGAIN, I SUPPOSE THE LENDER WOULD BE FORCED TO LITIGATE THIS ISSUE IN AN EVICTION PROCEEDING AND PROVE IT IS A SHAM.

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NOTE: There is also a section of the law that discuss tenants rights regarding Section 8 Housing. This Section states:

SEC. 703. EFFECT OF FORECLOSURE ON SECTION 8 TENANCIES. Section 8(o)(7) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(7)) is amended–
(1) by inserting before the semicolon in subparagraph (C) the following: `and in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the term of the lease vacating the property prior to sale shall not constitute other good cause, except that the owner may terminate the tenancy effective on the date of transfer of the unit to the owner if the owner-
(i) will occupy the unit as a primary residence; and

(ii) has provided the tenant a notice to vacate at least 90 days before the effective date of such notice, and

(2) by inserting at the end of subparagraph (F) the following: `In the case of any foreclosure on any federally-related mortgage loan (as that term is defined in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602)) or on any residential real property in which a recipient of assistance under this subsection resides, the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit, except that this provision and the provisions related to foreclosure in subparagraph (C) shall not shall not affect any State or local law that provides longer time periods or other additional protections for tenants.

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BOTTOM LINE ON FEDERAL TENANTS RIGHTS FOLLOWING FORECLOSURE

What might this mean in practice? In one case, recently we tried to perform a loan workout a major lender on an investment property. They were not willing to work-out or modify the loan. I think they were confident the property will sell at a public auction, and the house (and compliance with the Tenants Rights Law set forth herein) would be somebody else’s problem to deal with. After there were no bidders at the foreclosure sale, and the property reverted back to the lender, NOW THEY ARE MOTIVATED TO MODIFY THE LOAN AND WILL TAKE A BETTER LOOK AT A MODIFICATION. So the end result may be increased change of loan modification for investment properties. I do not believe lenders want to get into the “landlord business.” Being a landlord carries its own inherent risks. Note: Although this is a federal law (“law of the land”) individual states are free to provide even greater protections to tenants. Please consult with an attorney before making any decisions.

CALIFORNIA TENANTS RIGHTS UNDER CALIFORNIA CIVIL CODE SECTION 2924.8 AND CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1161(B):

Attorney Steve Vondran — Tue, 03 Nov 2009 05:37:45 +0000

California tenants have rights when residential property is being foreclosed upon. The following two sections apply where a lender, trustee, beneficiary or authorized agent is seeking to foreclose on residential real property in the State of California:

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

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

The following provisions also apply:

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

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

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

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

ABOUT US:

The Law Offices of Steve Vondran in licensed to practice law in California and Arizona. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.

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

Offices:

Arizona Office (Esplanade): 2415 E. Camelback Road, Suite 700, Phoenix, AZ, 85020.California Office (Fashion Island): 620 Newport Center Drive, Suite 1100, Newport Beach, CA 92660

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Our Real Estate Law Services:

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

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

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HELPFUL FORECLOSURE DEFENSE LINKS:

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

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

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NOTICE: