All posts in Foreclosure Corner

Move Over Sundquist – 9th Circuit Says Enticing a Borrower to Apply for a Loan Mod It Knows Will be Rejected is a Violation of California B & P 17200

Oskoui v. JP Morgan Chase, 851 F.3d 851 (9th Cir. March, 2017)

Issue:   Did the bank’s offer to the borrower that she apply for a loan modification which it knew would be rejected because the borrower did not qualify constitute unfair competition under California B & P Section 17200?

Holding:   Yes, at least enough to overcome summary judgment.  The borrower “was the victim of an unconscionable process.”

Appeal from district court, Judge Fernando Olguin

Judge Stephen Trott

“Mahin Oskoui sued defendant J.P. Morgan Chase Bank, N.A. (“Chase”) for damages allegedly suffered when she unsuccessfully attempted over a two-year period to modify the loan on her home.”  When she became delinquent on her house payments, she began responding to Chase letters offering her loan modifications which she found out later she did not qualify for under any circumstances.  With each application, she made certain required payments to Chase. Read more…

Mortgage Refinance Calculator

This “tool” is really nice.  If you want to refi your mortgage and get a lower interest rate, you have to pay points, appraisal, other costs etc.  You’re actually in the hole for a while.  Is it worth it?  This calculator is just my style – SIMPLE and gives you a straight answer.  You can get it here.

Consumer Financial Protection Board Slaps Around Fay Servicing

“The Consumer Financial Protection Bureau (CFPB) today took action against mortgage servicer Fay Servicing for failing to provide mortgage borrowers with the protections against foreclosure that are required by law.”  The article on the CFPB website can be accessed here.

Nice Explanation from the BAP of the Mechanics of Property Tax Sales in California

Judge Jury lays out the process very nicely in County of Imperial Treasurer Tax Collector v. Stadtmueller (In re RW Meridian LLC), — B.R. — (9th Cir. BAP February 2017)

California’s statutory scheme for tax sales Taxes on real property are secured by and serve as a lien on the real property for which they are assessed. Secured property taxes that remain unpaid at the close of the fiscal year (June 30) are deemed to be in default. Tax Code § 3436.  Properties which have been tax defaulted for a minimum of five years are subject to the county tax collector’s power to sell them to satisfy the outstanding defaulted taxes. Tax Code § 3691. [per FN 5, For nonresidential commercial property, the period is three years. Tax Code § 3691]  Sale is to the highest bidder at a public auction.  Public auction includes the internet. Tax Code § 3693.  Various notices and publication are required prior to the tax sale. Tax Code §§ 3351, 3361, 3371, 3701, 3704.7. Read more…

In re Sundquist – $45 million in Punis Sounds About Right to Me

I hereby nominate Judge Christopher Klein for Super Judge.  This is my brief of the 109 page Memorandum.

Sundquist v. Bank of America (In re Sundquist) 566 B.R. 563, 14-02278 CN (Bkrtcy, E. D. Cal. May, 2017) Klein, J.

Issue:   Given that Bank of America violated the automatic stay, what is the proper amount of damages under section 362(k)?

Holding:   Actual damages of $1,074,000 plus $5 million of punitive damages, further punitive damages awarded of $40 million payable to two consumer organizations and five law schools.

Judge Christopher Klein

The debtors here had attempted unsuccessfully prepetition to do loan mods with Bank of America.  They finally filed chapter 13 to stop the foreclosure sale.  Notwithstanding that it had notice, the bank conducted the foreclosure sale the next day anyway.  “Bank of America committed at least six further automatic stay violations by the end of August 2010 as it bulled forward.”  This included bringing an unlawful detainer.  About the same time, a different department of the bank recognized the error and notified the foreclosure company.  But upon receiving the three day notice, the debtors panicked and immediately moved.  “Although Bank of America knew on August 20, 2010, and beyond cavil by September 7, 2010, that the foreclosure would be rescinded, it did not withdraw the unlawful detainer action or tell the Sundquists the action would be dismissed.”  Six months later, the bank finally rescinded the foreclosure sale but did not tell the debtors nor their counsel.  The debtors learned about the rescission a month or two later and asked for the keys back.  The bank gave them the keys.  When they moved back into the property, the tress were dead, appliances gone, the place was ransacked, and the HOA had assessed a $20,000 penalty for not taking care of the place.  The bank not only refused to pay for the damages but demanded that the debtors pay the mortgage for the time when it owned the property.  Read more…

Sciarratta – State of Void Sales post Yvanovva

Sciarratta v. U.S. Bank National Assn, 2016 WL 2941194 (California Court of Appeal, Nares, J., May 18, 2016)

Issue: Must a foreclosure sale be set aside where the foreclosing lender is not the actual owner of the loan at the time of the sale, or must the borrower show prejudice first?

Holding: Yes, “a homeowner who has been foreclosed on by one with no right to do so—by those facts alone—sustains prejudice or harm sufficient to constitute a cause of action for wrongful foreclosure.”

APPEAL from a judgment of the Superior Court of Riverside County, John Vineyard, Judge. Reversed and remanded.

Nares Huffman O’Rourke

The lender here filed a Notice of Default. Subsequently it assigned the loan to a different bank. Shortly after the foreclosure sale, the original lender assigned the loan to yet a second different bank who purportedly “purchased” the property at the sale. The court agreed that the lender that foreclosed was not the owner of the note at the time of the foreclosure. The borrower brought an action for wrongful foreclosure and the lender argued that there was no prejudice to the borrower since the conflicting transfers were paperwork mistakes and either way, the borrower was in default and had not cured. The trial court agreed with the lender and dismissed the case. Read more…

Reviewing the Anti-Deficiency Rules

I was reading an article today about the Heritage Financial litigation that has been going on the past few years – until Heritage filed chapter 7 in Texas.  I want to remind myself of the existing anti-deficiency rules in California and the anti-fraud rules.

C.C.P. § 726(g)

(g) [the right of a lender to sue for fraud] does not apply to loans secured by single-family, owner-occupied residential real property, when the property is actually occupied by the borrower as represented to the lender in order to obtain the loan and the loan is for an amount of one hundred fifty thousand dollars ($150,000) or less, as adjusted annually, commencing on January 1, 1987, to the Consumer Price Index as published by the United States Department of Labor.

The anti-deficiency rules apply to 1) land-sale contracts, 2) purchase money loans from the seller of the property, 3) purchase money loans from lenders on SFR or less than 4 units including refis of those loans. Read more…

Two Peas in Pod: Foreclosure + Fraudulent Sale

Think about this — a month before a debtor files bankruptcy, you buy his rental property at a foreclosure sale at a significant deal – 70% of the market value. Great deal!     Debtor then files bankruptcy and seeks to avoid the sale and take back his property from you because the debtor did not receive reasonably equivalent value in return, and thus a hidden “constructive fraudulent transfer.”

Under §548, a trustee (or debtor) may avoid a transfer made prepetition if the transfer was based upon actual fraud or if the transfer of the property resulted in the debtor receiving “less than reasonably equivalent value” in exchange (called constructive fraud).

So – how do we tell whether the Debtor received ‘reasonably equivalent value‘ in his prepetition foreclosure sale?

Read more…

One Action Rule

Be careful Banks – in California you get one bite at the apple in collecting a deficiency judgment against a homeowner (or possible debtor in bankruptcy).

For creditor attorneys - make sure you’ve complied with the ‘one action rule,’ or you waive your client’s right in a deficiency judgment against the former homeowner.

For debtor attorneys -  if the creditor has violated the ‘one action rule,’ and are seeking to recoup against your debtor-client now, make sure to object to their proof of claim under §502(b)(1), such that the claim is unenforceable against the debtor under state law. Read more…

Wrongful Foreclosure – What is “Tender”

I usually try to stay away from what might appear to be blatant advertising for my firm.  But this is an exception.  And besides, its bragging rather than advertising.

Matt Resnik did a masterful job at the Court of Appeals downtown on Tuesday.  He filed a wrongful foreclosure action for a client to undo a foreclosure.  The bank of course demurred and the court, on the second try, dismissed the case with prejudice.  The court ruled that “tender” means actually paying the bank the entire amount owed as a condition of being permitted to pursue the wrongful foreclosure.  That is clearly not what the code says.  The code says the Plaintiff must – in the complaint – allege “plausible” tender.  The Court of Appeals seemed to agree.  We will find out in a few months.