Principal Reductions Through Strategic Litigation- Under Homeowner Bill of Rights (CA) III – April 5, 2014 in San Diego, CA
Event on 2014-04-05 09:00:00
Principal Reductions Through Strategic Litigation- Under Homeowner Bill of Rights (CA) III
with Patricia Rodriguez, Esq.
CALIFORNIA STATE BAR APPROVED CLE
April 5, 2014 | San Diego, CA
(9:00 am – 4:00 pm PST)
Location
Carlsbad By The Sea Resort
850 Palomar Airport Rd, Carlsbad, CA 92011
760-476-0800
Instructor
Patricia Rodriguez, Esq.
Rodriguez Law Group, Inc.
Member of the State Bar of California
Admitted in Central, Northern and Eastern Federal District Courts of California
Temple University Law School – J.D.
Temple University Law School – Law Program in Japan
University of Southern California (USC) – B.S. in Business
Ms. Rodriguez obtained her Juris Doctor from Temple University. While there, she participated in their National Trial Team and received exceptional advocacy training from one of the best law school programs in the country. Ms. Rodriguez previously worked for the Camden Public Defenders Office, the Philadelphia Public Defenders Office, the Los Angeles District Attorney’s Office and the Los Angeles Public Defenders Office. She currently runs her own boutique law firm in Los Angeles County specializing in Criminal Defense, Foreclosure Defense, and Bankruptcy Law.
Course Syllabus
Download Syllabus
Trial Techniques:
Courtroom Decorum
Professional attire
Positioning
Verbal Communication
Knowing the judge
Rising/Standing
Addressing the court
Opening Statement
Structure
Impact opener
Clarity of explanation
Strong ending requesting verdict for defendant/plaintiff
Substance
Theory of case
Broad brush strokes
No first person
Emphasize facts, not conclusions
Staging
Clear logical organization
Use of exhibits where appropriate
Good “storytelling”
Direct Examination
Structure
No leading questions
Witness introduction/background
Background appropriate to witness and purpose of testimony
Strong ending
Diminish reliance on notes
Substance
Organization
Description of scene from occurrence and appropriate witness
Description of events and damages
Theory-developed and clear from questions
Completeness
Who? What? When? Where? Why? And How?
Foundation questions
Staging
Demeanor-professional but conversational
Pace and delivery of questions
Cross-Examination
Structure
Form of question-single fact leading question throughout
Diminish reliance on notes
Impeachment
Substance
Organization
Good witness control – repeat questions to get answers when necessary
Staging
Demeanor – appropriate to witness
Placement in courtroom – in jury’s line of vision
Closing
Structure
Impact opener
Develops theory of case
Strong ending requesting verdict for plaintiff/defendant
Substance
Clear forceful explanations of why facts prove theory
Refutation of opponent’s case
Repetition
Alliteration
Rhetorical questions
Staging
Appropriate use of rhetorical devices
Use of exhibits where appropriate
Jury Selection
Preemptory Strikes
For Cause Strikes
Race, Age, Ethnicity, Etc.
Biases
Pre-Litigation
Loan Originators
See Redacted Hybrid Audit
Securitization Audit Experts
See Redacted Hybrid Audit
Non-Judicial Foreclosure (CA)
Notice of Default – Bank is giving the Homeowner notice that according to the Bank HO owes the bank and hasn’t paid
Notice of Trustee Sale – This is notice to the HO the bank is electing to sale the property under the allege authority of the Deed of Trust
Trustee Sale Date – date the bank sales the house
California Civil Procedure 2932.5 – no longer valid claim
Delaying Trustee Sale Dates
Advertisements of Trustee Sale Delays
Litigation – Ownership/Title – CA
Complaint – See Redacted Markham Complaint
When to file?
Upon belief – Plaintiffs allege
Summons; Civil Case Cover Sheet; Attachments; Complaint; Complaint Signature Page; Exhibits
Filing/Serving Defendants – Jurisdiction Specific
Temporary Restraining Orders/Preliminary Injunctions
Bond
Lis Pendens – two page document which attaches the lawsuit over title to the property; thus when its sold at a trustee sale date no one but the bank will buy the lawsuit – bank must buy it back
Answer
Defendant has 30 days to Answer – unless Trustee files objection to non-monetary status – if Plaintiff objects – Defendant is given 30 days from proof of service of objection to non-monetary status
Three choices: Admit, Deny, Demur (motion to dismiss in federal court)
Demur Hearing
Case Management Conference – CMC Trial Set – 6 months out from
Case Management Conference Statement
Discovery Trial – 4 to 5 Days
Form Interrogatories
Special Interrogatories
Request for Documents
Depositions
Litigation – Possession/Unlawful Detainer – CA
Plaintiff must prove three issues
Defendant in possession
Defendant properly served with three day notice to quit
Plaintiff has a duly perfected security interest
Issues when no evidence of securitization
Temporary Restraining Order – temporary stop to the sell of the house
Preliminary Injunction – permanent restraint from selling the house the entire duration of the litigation
Unlawful detainer action
Complaint
Three elements: proper notice; still in possession; plaintiff has right to possess
Answer – 5 days for homeowner; 10 days for renter
Motion to consolidate with matter involving Title
If judgment entered – motion to stay judgment until after Title matter decided – irreparable harm (for actually homeowner residing on premises)
Not granted – must appeal BC by law MUST be granted
Litigation in Bankruptcy Court
Effect of Filing Bankruptcy
On Federal Title Case
On State Title Case
On State/Federal Appeals Case
Automatic Stay
Motion to extend automatic stay
State Court – Title Action Substance
Defendants – Originator, Servicer, Trustee of Securitized Trust; Foreclosure Trustee (if applicable) and MERS (if applicable)
Origination Documents –
Uniform Residential Loan Application
Type of mortgage and terms of loan
Property information and purpose of loan
Borrower information
Employment information
Monthly income and combined housing expense information
Assets and liabilities
Federal Truth-In-Lending Disclosure Statement
Amount of payment
Income v. payment
Buyer’s Closing Statement
New loan charges
Loan processing fee
Banking fee
Appraisal fee
Processing fee
Breach of fiduciary duty
Conspiracy to defraud
Settlement Statement
Adjustable Rate Note
Balloon Rider
Failure to disclose balloon payment Uniform Residential Loan Application
Type of mortgage and terms of loan
Property information and purpose of loan
Borrower information
Employment information
Monthly income and combined housing expense information
Assets and liabilities
Federal Truth-In-Lending Disclosure Statement
Amount of payment
Income v. payment
Buyer’s Closing Statement
New loan charges
Loan processing fee
Banking fee
Appraisal fee
Settlement Statement
Processing fee
Origination Fraud Servicing Fraud
Fraud – Allegations need to meet specificity requirements
Actual Fraud – California Civil Code § 1572(3)(5)
Knowledge of borrower’s lack of ability to afford monthly payments due to income
Violations of Business & Professions Code §17200 Unfair and Deceptive Acts and Practices (UDAP) [Fraudulently Procured Documents];
Robosigners – individuals who signed on behalf of companies they don’t work for, never had any agency relationship, nor were they attorney-in-fact; many of these individuals have admitted publicly in deposition or otherwise that he/she signed 1000s of documents without knowing what the document was, who they were signing on behalf, etc.
Substitution of Trustees, Corporate Assignments, and Assignments are red flags for transfer problem
Violation of UDAP [Fairness Doctrine]
Intentional Misrepresentation
The misrepresentation of a material fact;
Knowledge of falsity (scienter);
Intent to induce reliance
Actual and justifiable reliance on the misrepresentation; and resulting damages
Negligent Misrepresentation
the misrepresentation of a material fact;
false statement is made without a reasonable ground for a belief in the truth of the misrepresented fact
intent to induce reliance;
actual and justifiable reliance on the misrepresentation; and
resulting damage
Fraudulent Concealment
affirmative duty to disclose all material facts;
concealment of facts in order to induce plaintiff to enter into a transaction or relationship;
resulting damage
Cancellation of Contract
California Civil Code §1670.5, §1689, §3412
Existence of written instrument
That is void or voidable
Grounds for rescission / when facts discovered
Reasonable apprehension if left outstanding may cause serious injury to Plaintiff
Violation of Finance Lender Law
California Finance Code §§ 4973, et seq., 22000, et seq. and 50000, et seq.
Plaintiff must allege that their loan is covered under this provision. A consumer loan more than 7K is not covered. No exceptions to this rule have been identified.
Conspiracy to Defraud
Falsification of loan application
Set up borrower for certain default
Waiver/Promissory Estoppel
Contractual issue – bank has told HO to stop making payments to be considered for a modification; thus, the bank has waived any right to enforcement of the terms of the contract under the note; it gave that right up to enforce the contract by telling the home owner to stop making payments; homeowner relied on that waiver, stopped making payments for a modification, is denied modification, – bank cannot then come back and state it is entitled to enforce the payments
Intentional Infliction of Emotional Distress
Outrageous Behavior
Injury Breach of Contract
Make sure to allege all elements
What is the breach? Find a provision in the Deed of Trust to support the breach of contract claim
Breach of Oral Contract
Existence of a contract
Terms that establish obligation
Specify whether contract is oral, written or implied by conduct
Plaintiff’s performance or excuse for non-performance
Defendant’s breach
Resulting damage
Breach of fiduciary duty
Conspiracy to defraud
Falsification of loan application
B. Set up borrower for certain default
Statute of Limitations – The SOL has passed for most if not all of our claims. Therefore, we must allege that Equitable Tolling applies, otherwise, the court may dismiss without leave to amend.
Unjust Enrichment
Unwarranted fees/overcharging
Violation of Buss. & Prof. Code Section 17200 (Overcharging of Fees – Unfair, Business Practices)
Unlawful, Unfair, or Fraudulent business practice
Instituting improper or premature foreclosure to generate unwarranted fees
NOD inflates default amount
NTS shows balance owed which is too hig
Violation of California Civil Code of Procedure 2923.5
NOD filed without due diligence to contact borrower and assess financial situation and explore options to avoid foreclosure
Certificate of compliance by agent
Only applies to owner-occupied principal residence
Only remedy is postponement of sale (Mabry v Superior Court)
California Homeowner Bill of Rights – SB 900
Procedural History
Enacted by CA Senate and Assembly on July 2, 2012
Signed into law by Governor on July 12, 2012
Effective Date: January 1, 2013
Expires: January 1, 2018
Goals of the California Homeowner Bill of Rights
Stabilize CA housing economy
Stop foreclosure abuse by lenders and servicers
Ensure meaningful foreclosure alternatives for borrowers
Meeting the Goals
Expand existing foreclosure protections and add new protections to apply to broadly defined “mortgage servicers”
Prevent mortgage servicers from proceeding with a foreclosure until certain contact with or notice to the borrower
Prevent the recordation of a notice of default or notice of sale while a foreclosure prevention alternative is in process
Require a single point of contact for the borrower once they have requested a foreclosure prevention alternative; and
Give borrowers the right to sue the mortgage servicer for injunctive relief, actual damages and treble damages, for violation of the Act and the right to recover their attorney’s fees and costs if they prevail
Application of the Law
Eligibility
First lien Mortgages and Deeds of Trust
Secured by owner-occupied residential property
Containing no more than four dwelling units
Large Lenders
Most of the provisions of the Act only apply to lenders that foreclose on more than 175 residential properties per year.
Some provisions, including dual tracking, apply to smaller lenders, as well
Exclusions Relevant Provisions
Entity Borrowers
Investment Property
Borrowers in default who are already in bankruptcy
Borrowers who have already surrendered their property to lender
Borrowers who have contracted with someone or an entity whose primary business is advising people on how to extend their foreclosure and avoid their contractual obligations under the loan
Mortgage Servicer Defined
A person or entity who directly services a loan, or who is responsible for interacting with the borrower, managing the loan account on a daily basis either as the current owner of the promissory note or as the current owner’s authorized agent, or subservicing agent to a master servicer by contract.
“Mortgage Servicer” does not include the trustee or the trustee’s authorized agent acting under a power of sale in a deed of trust
Prevent lenders from contracting with separate entities to manage and service the loans to avoid application of the current laws
Dual Tracking
The Act seeks to prevent a lender from proceeding with a foreclosure, while at the same time negotiating with a delinquent residential borrower on a loan modification
If Borrower submits a complete application for modification, the Mortgage Servicer may not record Notice of Default or Notice of Sale until loan modification process has been completed and the time for an appeal of any adverse decision has passed
NOD can be recorded:
If borrower doesn’t accept offer within 14 days
If borrower doesn’t appeal denial within 30 days
If borrower accepts the offer but default
Changes to Loan Modification Process Mortgage servicer is not obligated to evaluate applications from borrowers who have already been evaluated or afforded a fair opportunity to be evaluated for a first lien loan modification prior to January 1, 2013, unless there has been a material change in the borrower’s financial circumstances
Mortgage servicer must provide a written acknowledgement of receipt within five days of the receipt of the document(s) or completed application
Written acknowledgment of receipt to the borrower must include a description of the loan modification process, its timeframes and any deadlines, any expiration dates for documents submitted, and specify any deficiencies in the application
Written response if the lender denies the application. This written notice must include the specific reasons for the denial and the deadline for the borrower to appeal the denial (30 days).
Single Point of Contact Established
Single point of contact throughout the loan modification process and with at least one direct method to reach the point of contact.
The mortgage servicer must ensure that the single point of contact has the knowledge, responsibility and authority to:
Communicate to the borrower the process by which the borrower may apply for available foreclosure prevention alternatives;
Coordinate receipt of all necessary documents and notifying the borrower of any missing documents;
Timely, adequately and accurately inform the borrower of the current status of the foreclosure prevention alternative;
Ensure the borrower is considered for all of the foreclosure prevention options offered by the mortgage servicer; and
Have access to persons with the power to stop foreclosure proceedings
Single point of contact can be a team of personnel, each of whom is knowledgeable about borrower’s current situation
Does not apply to small lenders
Robo-Signing Eliminated
Recorded Documents
Any declaration, notice of default, notice of sale, assignment of a deed of trust, or substitution of trustee recorded in a foreclosure or filed in a court must be accurate and complete and supported by reliable evidence.
Before filing or recording, the mortgage servicer shall have reviewed competent and reliable evidence that substantiates the borrower’s default and the mortgage servicer’s right to foreclose
Civil penalties of ,500 for repeated violations
Beneficiaries
No entity shall initiate the foreclosure process or record a notice of default unless and until it is the holder of the beneficial interest under the mortgage or deed of trust, the original or substituted trustee under the deed of trust, or the designated agent of the holder of the beneficial interest.
No liability for good faith error by trustees resulting from information provided by beneficiary regarding nature and amount of default
New Notice Requirements Postponed Trustee Sale Date
After Notice of Default Recorded
Within 5 days of the recording of a notice of default, the mortgage servicer that offers foreclosure prevention alternatives must send a written notice to the borrower informing the borrower of foreclosure prevention alternative
Does not apply to any borrowers who have already exhausted the loan modification process described above in Civil Code section 2924.6.
Postponement of at least 10 business days require written notice to the borrower of the new sale date and time within five business days of the date of the postponement.
Failure to comply does not invalidate an otherwise valid trustee’s sale
No Application Fees or Late Fees
Prohibits mortgage servicers from charging borrowers application fees for a first lien loan modification or other foreclosure prevention alternative.
Forbids a mortgage servicer from charging borrowers late fees under the loan for the period during which the loan modification is under consideration, while a borrower has filed an appeal of the denial of a loan modification, or the borrower is making timely modification payments.
Right to Sue Mortgage Servicers
Borrowers can sue mortgage servicers for injunctive relief before the trustee’s deed upon sale has recorded, or if it has already recorded, to sue for actual economic damages, if the mortgage servicer has not corrected any “material” violation before the trustee’s deed upon sale recorded.
If a court finds that the violation was intentional, reckless or willful, the court can award the borrower the greater of treble (triple) damages or ,000.
A violation of the Act is also deemed to be a violation of the licensing laws if committed by a person licensed as a consumer or commercial finance lender or broker, a residential mortgage lender or servicer, or a licensed real estate broker or salesman.
Court may award reasonable attorney’s fees and costs to borrower as the prevailing party.
Lenders defense: Compliance
Selling Fraud
Securitization
Mortgage Backed Bonds – bonds are not created equal
Table Funding – illegal for a bank to NOT use its own money
Originator – bank that originated the loan
Sponsor/Seller – middle bank bought note from originator and sold it to depositor to package in the trust – most missed the closing date
Depositor – bank that sold the Note to the investor
Lack of Standing
Cause of Action – yes
Title doesn’t matter – only substance
Each court will determine differently whether or not it is a named cause of action
Injury – each time the note was illegal sold the equity in the home significantly decreased
MERS – Mortgage Electronic Registry
Each time the NOTE was transferred by law there was supposed to be a duly signed assignment (from Originator to Sponsor/Seller to Depositor); this did not occur in most cases.
Every mortgage is supposed to registered on this system
Intended during the 1990s to cut recording costs/fees for the banking industry; also helped hide chain of title from the public
Approximately 65 million mortgages MERS is beneficiary or nominee
Viable Causes of Actions Against MERS
Violation of CCP 2932.5 – not valid
Violation of B&P Code 17200
Wrongful Foreclosure (Lack of Standing) – for failing to transfer the loan to the trust by the closing date – See Glaski v. Bank of America
Agent/Principal Issue
Current Law
Ibanez – Massachusetts (View Oral Arguments)
Phyllis – AL – Summary Judgment – Breach of Contract 3rd Party Beneficiary
In re Doble (2011) WL 1465559 (Bkrtcy.S.D.Cal.)
Bank of New York v. Silverberg, 2011 NY Slip Op 5002, 6.
In Re Jessie M. Arizmendi, 09-19263-PB13, United States Bankruptcy Court, Southern District of California, 2011
Aguilar v, III v. Bear Sterans Resid. MTG., et. al.,
Kanno v. First Liberty Mortgage, Superior Court of California, County of Riverside, Case Number 539556, 2010
O’Dell v. Washington Mutual Bank FA et. al., United States Central District Court of California, CV 10-09195 GAF (PLAx), 2011
Javaheri v. JP Morgan Chase Bank, N.A., et. al. , United States Central District Court of California, CV 10-09195 GAF (PLAx), 2011
SB1259 – AZ statute requiring log of assignments – Passed House/Not Senate
Nevada & Hawaii Statutes requiring assignment logs
Orange County Ruling on 2932.5
Gomes v. Countrywide
Robinson v. Countrywide
Calvo v. HSBC Bank
Lona v. Citibank
Glaski v. Bank of America
Bloomberg Level Three Audit
Shows exactly how many times the note has been sold and into which trust (classes); in some instances the note has been sold multiple times as if it was the first time the Note was sold – CLEAR SECURITIES FRAUD
Shows the note has been paid off – answer to tender rule
Violation of CCP 2932.5
Only applies to deeds of trust
Truth In Lender Act Section 1641(g)
Best Cause of Action
Wrongful Foreclosure
Foreclosure based on fraud, deceit and unenforceable contract
Offering alternatives to foreclosure
Unjust Enrichment
Payments made to entity who is NOT the lawful note-holder
Violations of Business & Professions Code §17200 Unfair and Deceptive Acts and Practices (UDAP) [Fraudulently Procured Documents]
Robosigners – individuals who signed on behalf of companies they don’t work for, never had any agency relationship, nor were they attorney-in-fact; many of these individuals have admitted publicly in deposition or otherwise that he/she signed 1000s of documents without knowing what the document was, who they were signing on behalf, etc.
Agency/Principal Relationship & Power of Attorney – violations of additional statutes to be used as underlying violations of Buss. & Prof. Code Section 17200
Express or implied agreement
Granting authority for one party to act on behalf of another
Actions of agent bind the principal
Substitution of Trustees, Corporate Assignments, and Assignments are red flags for transfer problems
Violation of Cal. Civil Code Section 2934a (Substitution of Trustee)
Trustee named in recorded Substitution acted as trustee prior to date of execution of Substitution = unlawfully initiated foreclosure
Substitution is executed but not recorded prior to or concurrently with NOD
Notice of substitution NOT mailed to all interested parties
Affidavit NOT attached to Substitution confirming that such notice was given
Substitution is effected AFTER NOTD recorded but prior to Notice of Sale
Notice of substitution NOT mailed to all interested parties (i.e. current trustee)
Affidavit NOT attached to Substitution confirming that such notice was given
Notice of Sale MUST be resent with substituted trustee information, otherwise sale is void.
Effective date drastically different from recordation date = evidence of robo signors attempts to comply with time-sensitive regulations/ back-dating of instruments
Security First Rule
Lender must foreclose before looking to borrower’s other assets
Either judicial foreclosure and seek deficiency judgment OR nonjudicial foreclosure
Violation of CCP 726 if lender accepts payments from Plaintiff WHILE foreclosing
HAMP Guidelines – Breach of Contract
Qualification under HAMP guidelines
Trial Period Modification Plan
Borrower complies with all requirements under trial mod
Lender nevertheless fails to provide permanent modification or fails to suspend foreclosure proceedings
Violation of California Civil Code of Procedure 2924
Failure to comply with non-judicial foreclosure requirements
Notice of default, notice of trustee’s sale not sent
Foreclosure sale held within 3 months of filing of NOD
Slander of Title
Publication of dispara
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