Financial Institutions Law Blog

By Alejandro E. Moreno and Shannon Z. Petersen 

In Pfeiffer v. Countrywide Home Loans, --- Cal.Rptr.3d ----, 2012 WL 6216039 (Dec. 13, 2012), mortgage borrowers filed a damages claim against a trustee for violating the federal Fair Debt Collection Practices Act (“FDCPA”) and an injunction claim against a lender to halt a foreclosure they claimed was wrongful. The trial court sustained the defendants’ demurrer to both claims without leave to amend. The California Court of Appeal affirmed as to the first claim, but reversed as to the second. Continue Reading Questions & comments

By Mark Rackers, Alejandro Moreno, and Shannon Petersen    

The California Homeowner Bill of Rights (“HBR”) goes into effect on January 1, 2013. The HBR revamps California’s non-judicial foreclosure statutes granting borrowers additional rights. It was designed to correct perceived abuses by lenders and servicers.

The HBR applies only to first lien mortgages or deeds of trust that are secured by owner-occupied residential real property. It does not protect: (i) entity borrowers; (ii) borrowers who purchased investment property; (iii) borrowers who are already in bankruptcy; (iv) borrowers who have already surrendered their property ; or (v) borrowers who have contracted with someone whose primary business is advising on how to delay or prevent foreclosure. Continue Reading Questions & comments

By Alejandro Moreno and Shannon Petersen

In Gale v. First Franklin Loan Services, 686 F.3d 1055 (9th Cir. 2012), the Ninth Circuit held that a borrower has no right under the federal Truth in Lending Act (“TILA”) to require a loan servicer to identify the owner of a loan obligation. TILA requires a servicer to identify the owner of the loan only when the servicer owns the loan, and only when the servicer owns the loan by assignment. Continue Reading Questions & comments

By Erik Bliss and Alejandro Moreno

In Skov v. U.S. Bank N.A., 2102 WL 2549811 (June 8, 2012), the Court of Appeal reversed the trial court’s decision to sustain a demurrer against plaintiff Andrea Skov’s second amended complaint, holding that she had stated a claim for violation of Civil Code Section 2923.5, which requires a lender to contact a defaulted borrower to discuss alternatives to foreclosure before starting a nonjudicial foreclosure by recording a notice of default. This opinion discusses issues of (1) judicial notice, (2) MERS’ ability to foreclose, and (3) the pleading of a violation of Section 2923.5. Continue Reading Questions & comments

By Alejandro Moreno and Shannon Petersen

In Herrera v. Federal National Mortgage Association (2012) 205 Cal.App.4th 1495, the California Court of Appeal joined other courts in rejecting the plaintiffs’ attempt to avoid their mortgage obligations on the grounds that Mortgage Electronic Registration Systems (MERS) is a sham. MERS is a private company that operates an electronic registry to track servicing rights and ownership of mortgage loans. Lenders use MERS to facilitate their transactions and avoid having to record assignments and pay recording fees relating to mortgages. The case confirms that MERS has the authority to assign promissory notes and deeds of trust and that its use is legitimate. Continue Reading Questions & comments

By Alejandro Moreno and Shannon Petersen

In Debrunner v. Deutsche Bank Nat. Trust Co. (Cal.App. 6 Dist., 2012) --- Cal.Rptr.3d ----, 2012 WL 883128, the California Court of Appeal affirmed the dismissal of a complaint for wrongful foreclosure with prejudice, holding that a beneficiary under a deed of trust need not possess the original promissory note to commence foreclosure and that a borrower cannot avoid foreclosure based on a technical deficiency without showing actual prejudice. Continue Reading Questions & comments

By David Sands and Sherwin Root

The California Department of Corporations recently added a question to its on-line frequently asked questions on mortgage loan originators which made clear that wholesale lender account executives who do not deal with the public (but only with correspondent lenders) do not need to be licensed as mortgage loan originators with the NMLS. Here is the text of the entire question and answer: Continue Reading Questions & comments

By Alejandro Moreno and Shannon Petersen

In Nungaray v. Litton Loan Servicing, LP (2011) 200 Cal.App.4th 1499, the California Court of Appeal held that (i) a Loan Workout Plan is not an enforceable agreement to modify a loan and (ii) a bank does not violate the "one-form-of-action" rule by accepting payments under such a Plan, then proceeding with foreclosure. Continue Reading Questions & comments

In Harbour Vista, LLC v. HSBC Mortgage Services Inc., 2011 WL 6318525 (Cal.App. 4 Dist. 2011), the California Court of Appeal held that plaintiffs may not obtain default judgments in quiet title actions.

Harbour owned a ground lease under a condo complex. Julie Nugent purchased a condo and paid her mortgage to Fieldstone Mortgage Company. She also subleased from and paid rent to Harbour. Both the mortgage and the sub-lease were secured by the condo. Nugent eventually defaulted on both her rent and mortgage. After HSBC purchased the condo from Fieldstone at a foreclosure sale, Harbour filed a complaint to quiet title. HSBC failed to respond to the complaint and Harbour obtained a default judgment. HSBC then moved to set aside the default judgment, but the trial court denied the motion. HSBC appealed. Continue Reading Questions & comments

The Massachusetts Supreme Judicial Court ruled this week that owners of property whose titles have been rendered defective due to improper foreclosures cannot bring a court action to clear their titles under the “try title” procedure in the Massachusetts Land Court. The Court, which in January found that banks can’t foreclose on a house if they don’t own the mortgage, went one step further in a closely watched case and said a sale after that foreclosure doesn’t transfer the property. Therefore, the buyer couldn’t bring his court action against a previous owner, the Court ruled. Left open, however, was whether owners could attempt to put their chains of title back together and conduct new foreclosure sales to clear their titles. Unfortunately, the Court did not provide the real estate community with any further guidance as to how best to resolve these complicated title defects.

Continue Reading Questions & comments