You have no items in your shopping cart.
Search
Filters

California Mortgages, Deeds of Trust, and Foreclosure Litigation

Foreclosures, loan modifications and workouts, and borrower bankruptcies—all in one book. Avoid costly mistakes with clear and concise direction from Roger Bernhardt, Chuck Hansen, and other experts; negotiate the best workouts with the commercial forms.

“ . . . quite simply, the leading treatise on the complexities of how to enforce loans secured by California real estate. It is a formidable tool; its organization makes it easy to use, and my colleagues and I use it many times each week.”
Maura O’Connor, O'Connor Cochran LLP, Los Angeles

Foreclosures, loan modifications, and consumer protections—all in one book. Avoid costly mistakes with the most up-to-date guidance, covering both federal and state mortgage law, from Roger Bernhardt, Chuck Hansen, and other experts.

  • Conduct trustee sales (nonjudicial foreclosure)
  • Challenge sales under HBOR; new complaint forms
  • Apply Dodd-Frank Act & CFPB regulations
  • Use benefits of one-action and antideficiency rules
  • Negotiate short sales and receivership sales
  • Underwater property; commercial loan-workout forms
  • Enforce loans against debtors in bankruptcy; lien-stripping
  • Debtor strategies; defending foreclosures & stay relief motions
  • Judicial foreclosure, deficiency judgment, and redemption
  • Rents and leases; priorities; guarantors
OnLAW RE94920

Web access for one user.

 

If you are signed in and a new attorney, your adjusted cost appears below.

$ 405.00
Print RE33920

4th edition, 2 looseleaf volumes, updated 1/18

 

If you are signed in and a new attorney, your adjusted cost appears below.

$ 405.00
Add Forms CD to Print RE23929
$ 59.00
Add OnLAW to print RE94920(40)
$ 99.00
“ . . . quite simply, the leading treatise on the complexities of how to enforce loans secured by California real estate. It is a formidable tool; its organization makes it easy to use, and my colleagues and I use it many times each week.”
Maura O’Connor, O'Connor Cochran LLP, Los Angeles

Foreclosures, loan modifications, and consumer protections—all in one book. Avoid costly mistakes with the most up-to-date guidance, covering both federal and state mortgage law, from Roger Bernhardt, Chuck Hansen, and other experts.

  • Conduct trustee sales (nonjudicial foreclosure)
  • Challenge sales under HBOR; new complaint forms
  • Apply Dodd-Frank Act & CFPB regulations
  • Use benefits of one-action and antideficiency rules
  • Negotiate short sales and receivership sales
  • Underwater property; commercial loan-workout forms
  • Enforce loans against debtors in bankruptcy; lien-stripping
  • Debtor strategies; defending foreclosures & stay relief motions
  • Judicial foreclosure, deficiency judgment, and redemption
  • Rents and leases; priorities; guarantors

1

Basics of Real Property Secured Transactions

  • I. SCOPE OF BOOK 1.1
    • A. Unsecured Versus Secured Loans
      • 1. Unsecured Loans 1.2
      • 2. Secured Loans 1.3
      • 3. Nonconsensual Secured Obligation 1.4
      • 4. Advantages and Disadvantages to Lender of Secured Loan 1.5
    • B. Terminology
      • 1. "Parties" 1.6
      • 2. "Instruments" 1.7
      • 3. "Financing Parties" 1.8
      • 4. "Obligation" 1.9
  • II. THE OBLIGATION 1.10
    • A. Relationship of Obligation to Security 1.11
      • 1. Consideration 1.12
      • 2. Destruction 1.13
      • 3. Type of Obligation 1.14
      • 4. Personal Liability and "Nonrecourse" Loans 1.15
        • a. "Trustor" Versus "Debtor" 1.16
        • b. The "Nonassuming Grantee" 1.17
    • B. Payment Provisions 1.18
    • C. Interest Rates
      • 1. Fixed and Variable Rates 1.19
      • 2. Shared Appreciation Loans 1.20
      • 3. Usury 1.21
      • 4. Tax Treatment of Interest
        • a. To Lender 1.22
        • b. To Borrower 1.23
    • D. Transfers of Note and Deed of Trust 1.24
      • 1. Transferring Note and Deed of Trust Separately 1.25
      • 2. Recordation Requirements 1.25A
      • 3. MERS; Nominee of Beneficiary 1.25B
      • 4. Physical Delivery Required 1.26
      • 5. Escrow Holder's Role 1.27
    • E. Negotiability 1.28
      • 1. Requirements 1.29
      • 2. Holder in Due Course 1.30
    • F. Arbitration Clauses and Unconscionability 1.31
  • III. THE SECURITY INSTRUMENT
    • A. Historical Perspectives
      • 1. Real Property Conveyances 1.32
      • 2. Equity of Redemption 1.33
    • B. Mortgage; Lien Theory of Mortgages 1.34
    • C. Deed of Trust; Applicability of Rules Governing Mortgages 1.35
      • 1. Forms of Deeds of Trust
        • a. Title Company Forms 1.36
        • b. Institutional Lender Forms 1.37
      • 2. Formal Requirements 1.38
      • 3. Parties
        • a. Trustor 1.39
        • b. Trustee 1.40
          • (1) Substitution of Trustee 1.41
          • (2) Involvement in Litigation 1.42
        • c. Beneficiary
          • (1) Must Be Obligee 1.43
          • (2) Relationship to Trustee 1.44
          • (3) Relationship to Trustor 1.45
          • (4) Multiple Beneficiaries and Trustees 1.46
      • 4. Security 1.47
        • a. Fractional Interests
          • (1) Tenancies in Common 1.48
          • (2) Joint Tenancies 1.49
          • (3) Community Property 1.50
        • b. Estates Less Than Fee Simple
          • (1) Life Estates or Terms of Years 1.51
          • (2) Leasehold Mortgages 1.52
          • (3) Reversions 1.53
          • (4) Seller and Buyer Interests 1.54
        • c. Property Already Encumbered
          • (1) Monetary Liens 1.55
          • (2) Nonmonetary Interests 1.56
        • d. Personal Property; Fixtures 1.57
      • 5. Choice of Law 1.57A
    • D. Convertible Mortgages 1.58
    • E. Installment Land Contracts 1.59
      • 1. Documentation 1.60
      • 2. Vendor's Remedies 1.61
        • a. Reinstatement 1.62
        • b. Restitution 1.63
        • c. Protecting Title 1.64
        • d. Damages 1.65
      • 3. Liquidated Damages 1.66

2

Trustee Sales

  • I. CHOOSING THE REMEDY FOR LOANS IN DEFAULT
    • A. Role of Trustee Sale Compared With Other Remedies 2.1
      • 1. Judicial Foreclosure 2.2
      • 2. Sale Under Receivership 2.2A
      • 3. Passive Collection Strategy 2.3
    • B. Attorney's Role
      • 1. Representing Beneficiary-Lender 2.4
      • 2. Representing Junior Secured Creditors
        • a. Reinstatement Rights 2.5
        • b. Right to Notice of Default or Delinquency 2.6
      • 3. Representing Trustor-Borrower
        • a. Trustee Sale Process; Strategies; Credit Scores 2.7
        • b. Home Equity (Distress) Sales 2.8
        • c. Mortgage Foreclosure Consultants 2.9
        • d. Enjoining or Attacking Trustee Sale; Bankruptcy 2.9A
        • e. Lender Liability; Loan Rescission 2.9B
      • 4. Homeowner Bill of Rights 2.9C
    • C. Trustee Sale and Judicial Foreclosure
      • 1. Advantages and Disadvantages to Creditor of Trustee Sale 2.10
      • 2. Reasons to Use Judicial Foreclosure 2.11
    • D. Receivership Pending Foreclosure 2.12
    • E. Election of Remedies 2.13
    • F. Power of Sale Clause
      • 1. Prerequisite to Sale 2.14
      • 2. Language of Power of Sale Clause 2.15
      • 3. Instruments That Include Power of Sale Clause 2.16
      • 4. Cumulative Remedy 2.17
    • G. Constitutionality of Trustee Sales
      • 1. Nonjudicial Foreclosure Not Protected State Action 2.18
      • 2. Impact of Personal Property Due Process Cases 2.19
      • 3. Compliance With CC §2924b Does Not Violate Due Process 2.20
  • II. SPECIAL PROBLEMS IN TRUSTEE SALES
    • A. Substitution of Trustee 2.21
      • 1. Substitution Procedures 2.22
      • 2. Effect of Substitution on Validity of Notices 2.23
      • 3. Substitution Under Multiple Deeds of Trust 2.24
      • 4. Effect of Trustee Substitution or Note Assignment on Trustee's Authority 2.25
      • 5. Trustee Liability 2.26
    • B. Federally Insured or Guaranteed Loans
      • 1. Private Lender Foreclosures 2.27
      • 2. Federal Agency Foreclosures 2.28
    • C. FDIC Interests Protected by Federal Law 2.29
    • D. Servicemembers Civil Relief Act 2.30
    • E. Federal Tax Liens 2.31
    • F. Property Tax Postponement 2.32
  • III. NOTICE OF DEFAULT
    • A. First Steps
      • 1. Selecting Foreclosing Trustee 2.33
      • 2. Authority to Foreclose; Gathering Necessary Information; Multiple Beneficiaries 2.34
      • 3. Foreclosing on Property in Probate 2.35
      • 4. Foreclosure by Association of a Common Interest Development 2.36
    • B. Preparing Notice of Default 2.37
      • 1. Contents of Notice
        • a. California Civil Code Requirements 2.38
        • b. Federal Law Requirements 2.38A
        • c. Contractual Requirements 2.39
        • d. Attachment to Notice: Summary of Key Information 2.39A
      • 2. Unknown or Omitted Defaults 2.40
      • 3. Responding to Requests for Notice; CC §2924b(a) 2.41
    • C. Recording, Mailing, and Publishing Notice
      • 1. Recording Notice of Default 2.42
      • 2. Serving Notice of Default
        • a. Persons Required to Be Served; Methods 2.43
        • b. Persons Not Required to Be Served 2.44
        • c. Address Changes 2.45
        • d. Last Known Address; Due Diligence 2.46
      • 3. Default Notice Is Privileged 2.47
    • D. Special Notice for Unruh Act Deeds of Trust 2.48
    • E. HBOR's Special Notices and Other Requirements in Residential Foreclosures 2.49
      • 1. Prerequisites to Notice of Default; CC §2923.5 2.49A
      • 2. Prerequisites to Notice of Default; All Lending Entities; CC §2923.55 2.49B
      • 3. Encouraging Loan Modifications; Notice to Borrower; CC §§2923.6, 2924.9 2.49C
      • 4. Prohibition of Foreclosure Under HBOR; CC §§2920.7, 2924.11, 2924.18 2.49D
      • 5. Borrowers' Remedies; CC §§2924.12, 2924.19 2.49E
      • 6. Attachment to Notice of Default: Summary of Key Information 2.49F
      • 7. Tables: Determining Applicability of HBOR's Provisions to Borrowers and Lenders 2.49G
    • F. Effect of Failure to Serve Notice of Default 2.50
    • G. Ban on Robosigning of Foreclosure Documents; CC §2924.17 2.50A
  • IV. LOAN REINSTATEMENT RIGHTS
    • A. "Reinstatement" Defined 2.51
    • B. Persons Entitled to Reinstate Loan 2.52
    • C. Time Period for Reinstatement
      • 1. Up to 5 Business Days Before Sale 2.53
      • 2. Extension or Revival of Reinstatement Period
        • a. Sale Postponed 2.54
        • b. Sale Enjoined or Challenged 2.55
        • c. Extension by Agreement 2.56
    • D. Reinstatement Procedure; Payments 2.57
      • 1. Recurring Obligations 2.58
      • 2. Reinstatement of Trustee's and Attorney Expenses 2.59
      • 3. Rejection of Tendered Reinstatement 2.60
      • 4. Rents and Profits; Partial Payments 2.61
  • V. NOTICE OF SALE
    • A. Timing Notice of Sale
      • 1. Notice Period Under CC §2924 2.62
      • 2. Notice Period for Residential Loans Made Between 2003 and 2008
        • a. 90-Day Extension of Foreclosure Date 2.62A
        • b. Lender Exemptions 2.62B
        • c. Public Policy Issues 2.62C
      • 3. Notice Period for Multifamily Residential Property With Public Financing 2.62D
    • B. Notice of Sale; Contents and Attachments
      • 1. Contents of Notice; CC §§2924, 2924f(b) 2.63
      • 2. Attachment to Notice; CC §2923.3 2.63A
      • 3. Notice of Sale to Residential Tenants; CC §2924.8 2.63B
    • C. Recording, Publishing, and Mailing Notice 2.64
      • 1. Serving Notice of Sale 2.65
      • 2. Recording Notice of Sale 2.66
      • 3. Publishing Notice of Sale 2.67
      • 4. Posting Notice of Sale 2.68
    • D. Effect of Noncompliance With Notice Statute 2.69
      • 1. Lack of Adequate Time 2.70
      • 2. Lack of Actual Receipt of Notice 2.71
    • E. Reinstatement After Notice of Sale 2.72
  • VI. REDEMPTION BY TRUSTOR OR THIRD PARTIES 2.73
  • VII. TRUSTEE SALE PROCEDURES
    • A. Conducting Sale
      • 1. Public Auction 2.74
      • 2. Order of Sale; Multiple Securities and Securitized Notes 2.75
      • 3. Who May Bid 2.76
      • 4. Disclosure to Bidders 2.77
      • 5. Bidding Procedures; Credit Bids, Cash, or Checks 2.78
      • 6. Sale to Highest Bidder; Finality; Delivery of Deed 2.79
    • B. Bidding
      • 1. Illegal and Collusive Conduct
        • a. Chilling the Bidding 2.80
        • b. Inflating the Bidding 2.80A
      • 2. Calculating Bid Amount 2.81
        • a. Foreclosing Creditor 2.82
        • b. Junior Secured Creditors 2.83
        • c. Third Party Bidders 2.83A
      • 3. Making Full Credit Bids
        • a. Definition of "Full Credit Bid" 2.84
        • b. Reasons to Make Full Credit Bid 2.85
        • c. Disadvantages of Full Credit Bids 2.86
        • d. Underbidding and Other Lender Strategies 2.87
    • C. Postponing Sale
      • 1. Allowable Reasons for Postponement 2.88
      • 2. Effect on Reinstatement Right 2.89
      • 3. Announcing Postponement 2.90
      • 4. Renoticing Sale 2.91
        • a. When New Notice Required 2.92
        • b. When New Notice Not Required 2.93
        • c. When New Notice May Be Required 2.94
      • 5. Notice of Delay to Taxing Entities 2.95
      • 6. Effect of Postponement 2.96
    • D. Unruh Act Mortgages and Deeds of Trust 2.97
    • E. Trustee's Deed
      • 1. Authority to Convey Title 2.98
      • 2. Priority and Nature of Title 2.99
      • 3. Delivery, Recordation, and Notice of Deed 2.99A
  • VIII. AFTER SALE: POSSESSION, PROCEEDS, AND MAINTENANCE
    • A. Possession Following Sale 2.100
    • B. Rescinding Sale 2.101
    • C. Distributing Sale Proceeds
      • 1. Obligations Paid 2.102
        • a. Notice to Juniors of Surplus Proceeds 2.103
        • b. Junior Advances 2.104
      • 2. Obligations Not Covered 2.105
      • 3. Resolving Disputes Over Proceeds 2.106
      • 4. Effect of Rent Funds Held by Receiver 2.107
    • D. Effect of Homestead on Surplus Proceeds
      • 1. Types of Homestead Exemptions 2.107A
      • 2. Effect of Homestead on Mortgages 2.107B
      • 3. Distribution of Surplus Proceeds in Nonbankruptcy Sales 2.108
      • 4. Distribution of Proceeds From Sale in Pending Bankruptcy 2.109
    • E. Postforeclosure Blight Prevention; CC §2929.3 2.109A
  • IX. INCOME TAX CONSEQUENCES OF FORECLOSURE
    • A. For Borrower 2.110
      • 1. Amount Realized 2.111
      • 2. Character of Gains and Losses 2.112
    • B. For Lender
      • 1. If Third Party Purchases Property 2.113
        • a. Basis 2.114
        • b. Income and Loss 2.115
      • 2. If Lender Acquires Property at Sale
        • a. Seller-Lender 2.116
        • b. Third Party Lender 2.117
  • X. LENDER POSTSALE DAMAGE ACTIONS
    • A. Deficiency Barred After Trustee Sale 2.118
    • B. Actions for Waste
      • 1. Bad Faith Claims Not Barred by Antideficiency Laws 2.119
      • 2. Bad Faith Waste Claims Precluded by Full Credit Bid 2.120
      • 3. Criminal Actions for Intentional Waste 2.120A
    • C. Actions for Fraud After Full Credit Bid
      • 1. Against Borrowers 2.121
      • 2. Against Third Parties
        • a. Pre-Alliance Cases 2.122
        • b. The Alliance Decision 2.123
          • (1) Policy Underlying Alliance 2.124
          • (2) Measure of Damages 2.125
          • (3) Proximate Cause; Burden of Proof 2.126
    • D. Negligence Actions After Full Credit Bid 2.127
    • E. Rationale of Full Credit Bid Rule 2.127A
    • F. Intentional Interference and Conspiracy 2.128
    • G. Insurance and Bond Claims After Full Credit Bid 2.129
  • XI. POSTSALE ACTIONS FOR BENEFIT OF LENDER OR OTHER INTERESTED PARTY
    • A. Assembly Bill 1698: Voiding False or Forged Recorded Document 2.129A
    • B. Criminal Prosecution and Restitution 2.129B
  • XII. TRUSTEE SALE FORMS
    • A. Notice of Default
      • 1. Form: Recordable Notice of Default 2.130
      • 2. Form: Summary of Key Information (Attachment to Notice) 2.130A
    • B. Form: Request for Notice of Default 2.131
    • C. Form: Unruh Act Special Notice 2.132
    • D. Notice of Sale
      • 1. Form: Recordable Notice of Sale for Trustor 2.133
      • 2. Form: Summary of Key Information (Attachment to Notice) 2.133A
      • 3. Form: Notice of Sale for Residential Tenant 2.133B
    • E. Form: Trustee's Deed 2.134
    • F. Form: Petition and Declaration Regarding Unresolved Claims and Deposit of Undistributed Surplus Proceeds of Trustee Sale (Judicial Council Form MC-095) 2.135

3

Judicial Foreclosure

  • I. CHOOSING THE REMEDY
    • A. "Judicial Foreclosure" Defined 3.1
    • B. Considerations in Choosing Judicial Foreclosure
      • 1. Effect on Junior Tax Liens 3.2
      • 2. Lack of Power of Sale Clause 3.3
      • 3. Advantages of Judicial Foreclosure
        • a. Availability of Deficiency Judgment 3.4
        • b. Supporting Appointment of Receiver 3.5
        • c. Resolving Disputes 3.6
        • d. Liquidating Debt 3.7
      • 4. Disadvantages of Judicial Action
        • a. Redemption and Possession 3.8
        • b. Delays, Control, and Costs 3.9
        • c. Effect of Statute of Limitations 3.10
    • C. When to Choose Remedy 3.11
  • II. PREPARING THE ACTION
    • A. Nature of Action 3.12
    • B. Jurisdiction 3.13
    • C. Venue 3.14
    • D. Personal Jurisdiction; Service of Process 3.15
    • E. Statutes of Limitations 3.16
      • 1. Underlying Obligation Governs Time Frame 3.17
        • a. Mortgages 3.18
        • b. Deeds of Trust 3.19
      • 2. Effect of Marketable Record Title Act 3.20
    • F. Title Company Services 3.21
    • G. Federally Insured or Guaranteed Loans 3.22
    • H. Parties
      • 1. Plaintiffs 3.23
      • 2. Defendants
        • a. Owners: Past, Present, and Future 3.24
        • b. Holders of Other Interests in Encumbered Property
          • (1) Tenants 3.25
          • (2) Easement Holders 3.26
          • (3) Vendees Under Land Sale Contracts 3.27
          • (4) Unrecorded Interests 3.28
          • (5) Adverse Owners 3.29
          • (6) Other Lienholders
            • (a) Senior Lienholders 3.30
            • (b) Government Agency as Lien Claimant 3.31
            • (c) Junior Lienholders 3.32
            • (d) Effect of Omitting Junior Lienholder 3.33
        • c. Persons Acquiring Interests After Complaint Filed 3.34
        • d. Persons Liable for Deficiency Judgment 3.35
        • e. Trustee as Defendant 3.36
      • 3. Death or Incapacity of Beneficiary or Trustor
        • a. Beneficiary 3.37
        • b. Trustor 3.38
  • III. DRAFTING FORECLOSURE COMPLAINT
    • A. Checklist: Essential Allegations 3.39
    • B. Foreclosure: Pleading Ultimate Facts
      • 1. Introductory Allegations; Parties 3.40
      • 2. Underlying Note or Other Obligation 3.41
      • 3. Deed of Trust or Other Security Device 3.42
      • 4. Property Descriptions 3.43
      • 5. Hidden Security Devices 3.44
      • 6. Plaintiff's Ownership of Note and Deed of Trust 3.45
      • 7. Interest of Guarantors, Endorsers, or Assuming Grantees 3.46
      • 8. Interest of Other Defendants 3.47
      • 9. Right to Accelerate on Default 3.48
      • 10. Default in Loan Payments 3.49
      • 11. Default in Tax Payments 3.50
      • 12. Default in Insurance Payments 3.51
      • 13. Future Advances; Monetizing Default 3.52
      • 14. Entitlement to Attorney Fees and Costs 3.53
      • 15. Demand for Judgment (Prayer) 3.54
    • C. Application for Receivership 3.55
    • D. Lis Pendens
      • 1. Purpose 3.56
      • 2. Service Requirements 3.57
    • E. Order of Reference 3.58
  • IV. DEFENSES; DEFENDANTS' RIGHTS
    • A. Trustor 3.59
    • B. Junior Lienholders 3.60
    • C. Trustee 3.61
    • D. Defenses to Claims for Deficiency 3.62
    • E. Reinstatement and Presale Redemption Rights 3.63
    • F. Stay of Action Under Servicemembers Civil Relief Act 3.63A
  • V. OBTAINING FORECLOSURE JUDGMENT
    • A. Default, Summary Judgment, and Trial Setting 3.64
    • B. Checklist: Evidence Required for Foreclosure Judgment 3.65
    • C. Defenses; Statement of Decision 3.66
    • D. Judgment (Decree) of Foreclosure
      • 1. Required Elements 3.67
      • 2. Decree Entered as Judgment 3.68
      • 3. Appealability of Decree 3.69
      • 4. Binding Election of Remedies 3.70
  • VI. FORECLOSURE SALE
    • A. Summary of Applicable Procedures 3.71
    • B. Presale Procedures
      • 1. Obtaining Writ of Sale 3.72
      • 2. Preparing Notice of Levy and Notice of Sale 3.73
      • 3. Serving Writ and Notices of Levy and Sale
        • a. Methods of Service; Persons Served 3.74
        • b. Time of Service
          • (1) If No Deficiency Judgment 3.75
          • (2) If Deficiency Judgment Allowed 3.76
    • C. Sale Procedures
      • 1. Location and Order of Sale 3.77
      • 2. Postponement 3.78
      • 3. Eligible Bidders 3.79
      • 4. Bidding Methods and Strategies
        • a. Foreclosing Creditor
          • (1) Credit Bids and Cash Supplements 3.80
          • (2) Disadvantages of Underbidding 3.81
        • b. Other Parties; Cash Bids 3.82
    • D. Setting Aside Sale
      • 1. Statutory Remedy 3.82A
      • 2. Equitable Remedy 3.82B
    • E. Steps Following Sale
      • 1. Disposition of Proceeds 3.83
      • 2. If No Deficiency Allowed; Deed of Sale; Finality 3.84
      • 3. If Deficiency Allowed; Certificate of Sale; Redemption Notice 3.85
  • VII. OBTAINING DEFICIENCY JUDGMENT 3.86
    • A. Application for Deficiency Judgment
      • 1. Procedures; Lender Qualifications 3.87
      • 2. Fair Debt Collection Practices Act 3.87A
      • 3. Sold-Out Junior Creditors 3.87B
    • B. Hearing on Fair Value and Deficiency Amount 3.88
    • C. Entry of Deficiency Judgment 3.89
  • VIII. POSTSALE REDEMPTION
    • A. Legal Basis; Distinguishing Other Rights 3.90
    • B. Who May Redeem 3.91
    • C. Redemption Time Period 3.92
    • D. Amount Needed to Redeem
      • 1. Foreclosure Sale Purchase Price 3.93
      • 2. Unpaid Junior Liens 3.94
    • E. Initiating Redemption 3.95
    • F. Effect of Redemption
      • 1. Statutory Redemption 3.96
      • 2. Nonstatutory Redemption by Agreement 3.97
      • 3. Debtor Protections; CCP §729.080(e) 3.98
      • 4. Equitable Redemption 3.98A
    • G. Possession, Rents, and Profits
      • 1. During Redemption Period 3.99
      • 2. After Debtor Redeems Property 3.100
    • H. If Debtor Does Not Timely Redeem 3.101
  • IX. FORMS
    • A. Form: Complaint for Foreclosure of Deed of Trust 3.102
    • B. Form: Judgment of Foreclosure and Order of Sale 3.103
    • C. Presale Forms
      • 1. Form: Writ of Sale (Judicial Council Form EJ-130) 3.104
      • 2. Form: Notice of Levy (Judicial Council Form EJ-150) 3.105
      • 3. Form: Notice of Sale 3.106
    • D. Postsale Forms
      • 1. Form: Certificate of Sale 3.107
      • 2. Form: Notice of Right of Redemption 3.108
      • 3. Form: Report of Sheriff/Receiver and Account of Sale 3.109
      • 4. Form: Deed of Sale 3.110
    • E. Deficiency Judgment Forms
      • 1. Form: Notice of Motion for Deficiency Judgment 3.111
      • 2. Form: Application for Order and Order Appointing Referee to Appraise Property 3.112
      • 3. Form: Deficiency Judgment Following Foreclosure 3.113

4

Code of Civil Procedure §726(a): The One-Action Rule

  • I. DEVELOPMENT OF CCP §726(a)
    • A. Common Law Background 4.1
    • B. Enactment of CCP §726(a) 4.2
  • II. APPLICATION AND PURPOSES OF CCP §726(a)
    • A. Application to Both Mortgages and Deeds of Trust 4.3
    • B. Purposes of CCP §726(a)
      • 1. Antimultiplicity 4.4
      • 2. Consolidated Foreclosure and Deficiency Judgment 4.5
  • III. EFFECTS OF CCP §726(a)
    • A. Security-First Rule
      • 1. Creditor May Be Required to Proceed Against Security First 4.6
      • 2. Makes Obligation Conditional 4.7
    • B. One-Action Rule
      • 1. Prohibits Multiplicity of Actions 4.8
      • 2. Not Applicable to Trustee Sales 4.9
      • 3. Combined Effect of One-Action and Antideficiency Rules 4.10
    • C. Affirmative Defense and Sanction Aspect of CCP §726(a) 4.11
  • IV. VIOLATIONS OF CCP §726(a) 4.12
    • A. Judicial Foreclosure Actions 4.13
    • B. Cross-Complaints 4.14
    • C. Prejudgment Attachments on Nonpledged Assets 4.15
    • D. Money Actions 4.16
    • E. Proceedings Not Constituting Action
      • 1. Trustee Sale 4.17
      • 2. Interlocutory Proceedings 4.18
      • 3. Self-Help Remedies (Bankers' Liens and Offsets) 4.19
      • 4. Statutory Exception for Pursuing Attachment 4.20
      • 5. Attachment of Guarantor's Property 4.20A
    • F. Other Creditor Activity Not Constituting Action 4.21
    • G. Distinguishing Monetary and Nonmonetary Judgments 4.22
  • V. INVOKING CCP §726(a) 4.23
    • A. As Affirmative Defense 4.24
    • B. As Sanction 4.25
      • 1. Triggering the Sanction 4.26
      • 2. Extent of Sanction: What Rights Are Forfeited? 4.27
      • 3. Wozab Letters 4.28
  • VI. ADDITIONAL EFFECTS OR CONSEQUENCES OF CCP §726(a)
    • A. Parties
      • 1. Guarantors 4.29
      • 2. Codebtors 4.30
      • 3. Junior Secured Creditors 4.31
    • B. Transactions
      • 1. Installment Land Sale Contracts 4.32
      • 2. Hidden Security Instruments 4.33
      • 3. Unsecured and Partially Secured Notes: Fractionalizing Debt 4.34
      • 4. Deeds of Trust Securing Option-to-Purchase Agreements 4.34A
    • C. Secured Money Judgments 4.35
  • VII. WORTHLESS SECURITY EXCEPTION
    • A. Legally Worthless Security 4.36
    • B. Economically Worthless Security 4.37
    • C. Partially Worthless Security 4.38
    • D. Subsequently Worthless Security
      • 1. Destruction of Security 4.39
      • 2. Decline in Value of Security 4.40
      • 3. Without Act or Fault of Creditor 4.41
    • E. Sold-Out Junior Creditor 4.42
      • 1. Participation in Senior Sale 4.43
      • 2. Junior Also Senior Lienholder 4.44
      • 3. Complaint 4.45
      • 4. Form Provision: Allegation of Worthless Security 4.46
  • VIII. PROCEEDINGS NOT BARRED BY CCP §726(a) 4.47
    • A. Fraud 4.48
    • B. Rent Skimming 4.49
    • C. Mistake 4.50
    • D. Waste
      • 1. Waste by Trustor
        • a. Impairment of Security 4.51
        • b. Timing of Waste Action 4.52
      • 2. Third Party Waste 4.53
    • E. Environmentally Impaired Property 4.54
      • 1. Election to Waive 4.55
      • 2. Environmental Indemnities 4.56
      • 3. Right to Enter and Inspect; Appointment of Receiver 4.57
  • IX. CHOICE OF LAW
    • A. Location of Secured Property 4.58
    • B. Application of Federal Law 4.59
  • X. WAIVERS 4.60
    • A. Disguised Waivers 4.61
    • B. Unilateral Waivers by Creditor 4.62
    • C. Waivers Contemporaneous With Making of Loan 4.63
    • D. Subsequent Waivers 4.64
    • E. Executory Waivers 4.65
    • F. Sanction Effect of CCP §726(a) 4.66

5

The Antideficiency Rules

  • I. BACKGROUND AND HISTORY OF ANTIDEFICIENCY LEGISLATION 5.1
    • A. Antideficiency Rules 5.2
    • B. "Deficiency Judgment" Defined 5.3
  • II. PRIVATE SALE DEFICIENCY PROHIBITION (CCP §580d) 5.4
    • A. Purpose of CCP §580d: Equalize Judicial and Nonjudicial Foreclosures 5.5
    • B. Deterrence to Underbidding 5.6
      • 1. Judicial Foreclosures and Postsale Redemption 5.7
      • 2. Nonjudicial Foreclosures and the Ban on Deficiency Judgments 5.8
      • 3. Effectiveness of Protection of Redemption Statutes 5.9
    • C. Sold-Out Juniors 5.10
      • 1. High-Bidding Sold-Out Junior 5.11
      • 2. When Senior and Junior Lienholders Are the Same 5.12
  • III. TIME LIMIT ON SEEKING DEFICIENCY JUDGMENT
    • A. General Rule (CCP §726(b)) 5.13
    • B. Sold-Out Juniors
      • 1. When 3-Month Period Does Not Apply 5.14
      • 2. When 3-Month Period Does Apply 5.15
  • IV. FAIR VALUE LIMITATIONS (CCP §§726(b), 580a) 5.16
    • A. Rationale 5.17
    • B. Definition of "Fair Value" 5.18
    • C. Limits Deficiency Judgments Only 5.19
    • D. Continuing Viability of CCP §580a 5.20
    • E. Fair Value and CCP §726(a) 5.21
      • 1. Not Binding on Nonselling Junior Creditors 5.22
      • 2. Binding on Junior Creditor Who Purchases at Senior Sale 5.23
  • V. PURCHASE MONEY PROHIBITION (CCP §580b)
    • A. Basic Rule and Exceptions 5.24
    • B. Comparison of CCP §580b With Other Antideficiency Rules 5.25
    • C. Scope of CCP §580b
      • 1. Applicable to Standard Transactions 5.26
        • a. Seller Financing 5.27
        • b. Third Party Financing 5.28
      • 2. Effect of Short Sale 5.28A
      • 3. Nonstandard Transactions That Meet Purposes of CCP §580b 5.29
      • 4. Nonstandard Transactions Not Subject to CCP §580b 5.30
    • D. Purposes of CCP §580b 5.31
      • 1. Overvaluation of Property 5.32
        • a. Residential Construction 5.33
        • b. Commercial Construction 5.34
      • 2. Stabilization of Economy 5.35
      • 3. Application of CCP §580b to Third Party Loans 5.36
    • E. Structuring Transactions to Avoid CCP §580b 5.37
    • F. Effect of Attachment Statute 5.38
    • G. Sold-Out Junior Creditors
      • 1. Standard Transaction: Loan Secured by Property Purchased 5.39
      • 2. Nonstandard Transactions
        • a. Roseleaf: Loan Secured by "Other" Security 5.40
        • b. Spangler: Subordination to Construction Loan 5.41
        • c. Application of Spangler Rationale 5.42
        • d. DeBerard and Lawler: Limitation on Spangler Rationale 5.43
      • 3. High-Bidding Purchase Money Sold-Out Junior 5.44
  • VI. SHORT SALE PROHIBITION (CCP §580e) 5.44A
  • VII. APPLICATION OF ANTIDEFICIENCY RULES TO OTHER INSTRUMENTS
    • A. Installment Land Sale Contracts
      • 1. Under CCP §580b 5.45
        • a. Applicable Only to Mortgage Substitutes 5.46
        • b. Installment Land Sale Contracts Distinguished From Purchase and Sale Agreements 5.47
          • (1) Functional Differences 5.48
          • (2) Statutory Differences 5.49
      • 2. Under Other Antideficiency Rules 5.50
    • B. Other Devices That May Be Mortgage Substitutes 5.51
    • C. Unsecured Notes 5.52
    • D. Partially Secured Loans 5.53
  • VIII. SITUATIONS TREATED AS EXCEPTIONS TO ANTIDEFICIENCY RULES
    • A. Mistake 5.54
    • B. Fraud 5.55
    • C. Intentional Interference, Squeeze Outs, and Sham Foreclosures 5.56
    • D. Waste 5.57
      • 1. Bad Faith Waste 5.58
      • 2. Federal Court Treatment of Waste 5.59
    • E. Environmentally Impaired Property 5.60
  • IX. CHOICE OF LAW
    • A. Security Located Out of State 5.61
    • B. Debtor Resides Out of State 5.62
    • C. Application of Federal Law 5.63
  • X. WAIVERS 5.64
    • A. Disguised Waivers 5.65
    • B. Only Debtor Can Waive 5.66
    • C. Contemporaneous Waivers 5.67
    • D. Subsequent and Noncontractual Waivers 5.68
    • E. Distinguishing Contemporaneous From Subsequent Waivers 5.69
    • F. Executory Waivers 5.70
  • XI. REFINANCING; CCP §580b 5.71
    • A. Before January 1, 2013 5.71A
    • B. After January 1, 2013 5.71B
  • XII. ANTIDEFICIENCY LAWS AND BANKRUPTCY 5.72

6

Receiverships, Rents, and Leases

  • I. INTRODUCTION
    • A. Creditor's Limited Right to Possession and Rents 6.1
    • B. Effect of Assignment of Rents Clause 6.2
    • C. Alternative Use of Receivership in Workout of Defaulted Commercial Loan 6.2A
      • 1. Traditional Uses of Receivership: Managing Property 6.2B
      • 2. Alternative Use of Receivership: Selling Property 6.2C
      • 3. Unresolved Issues on Alternative Receivership 6.2D
      • 4. Procedures for Alternative Receivership 6.2E
  • II. POSSESSION AND RENTS BEFORE FORECLOSURE
    • A. Mortgagee in Possession 6.3
      • 1. Rights 6.4
      • 2. Liabilities 6.5
      • 3. Debtor's Consent Required 6.6
      • 4. Entry After Invalid Foreclosure Sale 6.7
      • 5. Acts Not Triggering Mortgagee-in-Possession Status 6.8
    • B. Remedies Absent Assignment of Rents 6.9
      • 1. Damages for Waste
        • a. Legal Basis 6.10
        • b. Effect of Antideficiency and Full Credit Bid Rules 6.11
        • c. Bad Faith and Other Forms of Waste 6.12
      • 2. Liability for Rent Skimming 6.13
      • 3. Injunctive Relief 6.14
      • 4. Receivership—No Assignment of Rents Clause
        • a. CCP §564(b)(2): Waste or Default; Insufficient Security 6.15
        • b. Limited Ability to Collect Rents 6.16
        • c. Other Grounds for Receivership 6.17
        • d. Beneficiary Liability 6.18
  • III. STATUTORY REGULATION OF ASSIGNMENT OF RENTS
    • A. Current and Former Rules 6.19
    • B. Assignment Needed to Collect Presale Rents 6.20
    • C. Traditional Types of Clauses 6.21
      • 1. Absolute Assignment 6.22
      • 2. Assignment as Additional Security 6.23
      • 3. Absolute Assignment Conditional on Default 6.24
    • D. Current Law Abolishes Formal Distinctions Between Types of Clauses 6.25
      • 1. Effect on Absolute Assignments 6.26
      • 2. Effect on Assignments as Security 6.27
      • 3. Effect on Conditional Absolute Assignments 6.28
    • E. Perfection of Assignment of Rents
      • 1. Current Statute; Recording 6.29
      • 2. Former Law 6.30
    • F. Scope of Assignment of Rents 6.31
  • IV. ENFORCING ASSIGNMENT OF RENTS DURING FORECLOSURE
    • A. Former Law 6.32
    • B. Four Enforcement Options Under Current Law 6.33
    • C. Obtaining Appointment of Receiver 6.34
      • 1. Functions of Receiver 6.35
      • 2. Additional Considerations for Appointment of Receiver 6.36
      • 3. Specific Performance of Assignment 6.37
      • 4. Procedures for Obtaining Order Appointing Receiver 6.38
      • 5. Nomination of Property Manager 6.39
      • 6. Powers of Receiver Limited by Order; Appealing Order 6.40
      • 7. Effects of CCP §726 6.41
      • 8. Effects of Antideficiency Laws 6.42
      • 9. Mortgagee in Possession Avoided 6.43
      • 10. Receiver's Duties; Neutrality 6.44
      • 11. Disposition of Rents Collected Before Foreclosure
        • a. Presale 6.45
        • b. Postsale 6.46
      • 12. Attorney Fees; Receiver Fees and Costs 6.47
      • 13. Terminating Receivership on Completion of Foreclosure 6.48
    • D. Obtaining Possession of Rents 6.49
    • E. Making Demand on Tenant
      • 1. Serving Demand 6.50
      • 2. Form of Demand; CC §2938(k) 6.51
      • 3. Tenant's Obligations 6.52
    • F. Making Demand on Trustor 6.53
    • G. Rents Collectible Under CC §2938
      • 1. Accrued, Unpaid Rents 6.54
      • 2. Proceeds; Improper Payments 6.55
      • 3. Gross or Net Rents 6.56
    • H. Priorities of Competing Assignees 6.57
      • 1. Establishing Priority Under CC §2938
        • a. Under Current Law 6.58
        • b. Under Prior Law 6.59
      • 2. If Junior Enforces Earlier
        • a. Current Law; Notice Required 6.60
        • b. Prior Law 6.61
      • 3. If Senior Enforces Earlier 6.62
      • 4. If Junior Reinstates Senior Debt 6.63
      • 5. Priorities in Cash Proceeds 6.64
    • I. Effect on Leases
      • 1. If Lease Has Priority Over Deed of Trust 6.65
      • 2. If Deed of Trust Has Priority Over Lease 6.66
      • 3. If Deed of Trust Lacks Assignment Clause 6.67
    • J. Effect on Tenants
      • 1. Payment of Rent 6.68
      • 2. Termination by Tenants 6.69
      • 3. Termination or Modification by Creditor 6.70
    • K. Charging Trustor Rent 6.71
    • L. When Trustor Files Bankruptcy 6.71A
  • V. RENTS AND POSSESSION AFTER SALE 6.72
    • A. Effect of Judicial Foreclosure Sale
      • 1. Trustor's Right to Possession 6.73
      • 2. Duration of Right to Possession 6.74
      • 3. Rents During Redemption Period 6.75
      • 4. Trustor in Possession 6.76
      • 5. Rights and Duties of Tenants During Redemption Period
        • a. Rent and Security Deposits 6.77
        • b. Eviction 6.78
        • c. Rent Increases 6.79
        • d. Prepaid Rents 6.80
        • e. Postsale Payment of Rents 6.81
        • f. Effect of Expiration of Redemption Period 6.82
    • B. Effect of Trustee Sale
      • 1. Effect on Trustor's Rights 6.83
      • 2. Effect on Leases
        • a. If Lease Has Priority Over Deed of Trust
          • (1) Only Lessor's Interest Foreclosed 6.84
          • (2) If Lease Subsequently Modified 6.85
        • b. If Deed of Trust Has Priority Over Lease 6.86
          • (1) In Judicial Foreclosure Actions 6.87
          • (2) If Junior Tenant Not a Party in Senior Foreclosure Action 6.88
          • (3) If Senior Foreclosure Is by Trustee Sale 6.89
    • C. Provisions Affecting Priority of Leases and Loans 6.90
      • 1. Subordination Agreements 6.91
        • a. Types of Subordination Clauses
          • (1) Automatic Subordination 6.92
          • (2) Executory Subordination 6.93
        • b. Validity of Subordination Clauses 6.94
        • c. Optional Unsubordination 6.95
        • d. Combined Subordination and Unsubordination 6.96
      • 2. Nondisturbance Agreements 6.97
      • 3. Attornment Agreements 6.98
  • VI. FORMS
    • A. Form: Complaint for Specific Performance of Assignment of Rents 6.99
    • B. Form: Notice of Motion for Appointment of Receiver 6.100
    • C. Form: Declaration in Support of Application for Receivership 6.101
    • D. Form: Order Appointing Receiver 6.102
    • E. Optional Judicial Council Forms
      • 1. Form: Ex Parte Order Appointing Receiver and Order to Show Cause and Temporary Restraining Order—Rents, Issues, and Profits (Receivership) (Judicial Council Form RC-200) 6.103
      • 2. Form: Order Confirming Appointment of Receiver and Preliminary Injunction—Rents, Issues, and Profits (Receivership) (Judicial Council Form RC-210) 6.104
      • 3. Form: Order to Show Cause and Temporary Restraining Order—Rents, Issues, and Profits (Receivership) (Judicial Council Form RC-300) 6.105
      • 4. Form: Order Appointing Receiver After Hearing and Preliminary Injunction—Rents, Issues, and Profits (Receivership) (Judicial Council Form RC-310) 6.106
    • F. Form: Notice to Tenant of Demand to Pay Rent 6.107
    • G. Forms for Terminating Receivership
      • 1. Form: Application for Order Directing Receiver to Transfer Possession of Real Property and File Final Accounting 6.108
      • 2. Form: Declaration in Support of Application for Order Directing Receiver to Transfer Possession of Real Property 6.109
      • 3. Form: Order Directing Receiver to Transfer Possession of Real Property and File Final Accounting 6.110

7

Debtor Strategies

  • I. INTRODUCTION 7.1
  • II. DEEDS IN LIEU OF FORECLOSURE 7.2
    • A. Benefits and Risks 7.3
    • B. Tax Effects 7.4
    • C. Form and Contents 7.5
    • D. Actions Accompanying Deeds in Lieu 7.6
    • E. Challenges by Trustor 7.7
      • 1. Instrument as Deed or Mortgage 7.8
      • 2. Immediate or Executory Deed 7.9
      • 3. Deed Executed When Making Loan 7.10
      • 4. Deed Executed After Loan Origination 7.11
      • 5. Validity as a Deed 7.12
    • F. Third Parties
      • 1. Nominee of Beneficiary 7.13
      • 2. Former Beneficiary 7.14
      • 3. Bona Fide Purchaser 7.14A
      • 4. Secondary Market Assignments; Mortgage Electronic Registration Systems (MERS) 7.15
      • 5. Deed From Nontrustor 7.16
    • G. Deeds in Lieu and Junior Creditors
      • 1. Effect on Juniors; Merger Doctrine 7.17
      • 2. Drafting Considerations; Title Insurance 7.18
      • 3. Avoiding Application of Merger Doctrine 7.19
    • H. Effect of Deed in Lieu Being Declared Mortgage 7.20
    • I. Rejecting Deed in Lieu 7.21
  • III. SHORT SALES
    • A. Short Sale Defined 7.21A
    • B. Listing Agreement; Broker Obligations; Indemnity 7.21B
    • C. Senior Lienholders; Antideficiency Laws 7.21C
    • D. Junior Lienholders 7.21D
    • E. Federal Assistance 7.21E
    • F. Short Sale Fraud 7.21F
    • G. Tax Consequences 7.21G
    • H. Escrow; Payoff Demands; Title Insurance; Bankruptcy 7.21H
  • IV. OPTIONS FOR ATTACKING FORECLOSURE SALE
    • A. Judicial Versus Nonjudicial Foreclosure 7.22
    • B. Enjoining or Setting Aside Trustee Sale
      • 1. Requires Court Action 7.23
      • 2. Bringing Action Before or After Sale 7.24
      • 3. Tendering Payment of Debt Owed 7.24A
  • V. ENJOINING TRUSTEE SALE
    • A. Legal and Factual Bases for Enjoining Sale 7.25
      • 1. Statutory Grounds 7.26
      • 2. Provisional Relief 7.27
      • 3. Factual or Procedural Grounds 7.28
      • 4. Contractual Defenses; Payment; Waiver 7.29
      • 5. Form: Demand Letter Requesting Lender or Loan Servicer to Provide Documentation of Loan Claim 7.30
      • 6. Passage of Time 7.31
        • a. Mortgages 7.32
        • b. Deeds of Trust 7.33
        • c. Marketable Record Title Act 7.34
      • 7. Disputed Obligations; Invalid Deeds of Trust 7.35
      • 8. Truth in Lending Act Violations 7.36
      • 9. Improper Procedures
        • a. Procedures Under CC §§2924–2924i 7.37
        • b. Procedures Under SB 1137 and Homeowner Bill of Rights 7.38
        • c. Procedures Under Federal Regulations 7.38A
    • B. Parties to Injunction Action
      • 1. Plaintiffs: Borrowers or Tenants 7.39
      • 2. Defendants 7.40
      • 3. When Tender Is Required in Action for Injunctive Relief 7.41
    • C. Jurisdiction and Venue; Removal to Federal Court 7.42
    • D. Procedures for Obtaining Temporary Restraining Orders and Preliminary Injunctions
      • 1. Complaint to Enjoin Foreclosure 7.43
      • 2. Form: Complaint to Enjoin Foreclosure, and for Declaratory Relief and an Accounting 7.44
      • 3. Distinctions Among Types of Injunctive Relief 7.45
      • 4. TRO or Preliminary Injunction 7.46
        • a. Temporary Restraining Order
          • (1) Checklist: Procedure for Obtaining TRO and OSC 7.47
          • (2) Form: Order to Show Cause and Temporary Restraining Order 7.48
        • b. When Preliminary Injunction Alone Is Sought by Noticed Motion or OSC
          • (1) Checklist: Obtaining Hearing on Preliminary Injunction 7.49
          • (2) Form: Notice of Motion for Preliminary Injunction 7.50
        • c. Bond or Undertaking 7.51
        • d. Amount 7.52
      • 5. Lis Pendens 7.53
    • E. Appealing Temporary Restraining Orders 7.54
    • F. Improper Attempts to Enjoin 7.55
  • VI. SETTING ASIDE TRUSTEE SALE
    • A. Parties to Set-Aside Action
      • 1. Plaintiffs 7.56
      • 2. Junior Creditors 7.57
      • 3. Guarantors 7.58
      • 4. Defendants 7.59
    • B. Factors That Limit Postsale Attacks 7.60
      • 1. Presumption of Validity 7.61
        • a. Trustee's Recitals 7.62
        • b. Statutory Recitals 7.63
        • c. If No Trustee's Deed Issued or If Issued Late 7.64
      • 2. Bona Fide Purchaser (BFP) 7.65
      • 3. Value Versus Sale Price 7.66
      • 4. Inability to Tender Payment of Debt Owed 7.66A
    • C. Grounds for Setting Aside Sale
      • 1. Compared With Grounds for Enjoining Sale 7.67
      • 2. Cases Granting Relief or Allowing Action to Proceed to Set Aside Sale 7.67A
      • 3. Alleging Tender in Action to Set Aside Sale 7.67B
      • 4. Cases Denying Relief to Set Aside Sale 7.67C
      • 5. Commercial Reasonableness 7.68
    • D. Ancillary Relief 7.69
    • E. Alternative Relief; Damages 7.70
    • F. Burden of Proof; Nonjury Trial 7.71
    • G. Jurisdiction and Venue 7.72
    • H. Form: Complaint to Set Aside Trustee Sale and for Damages 7.73
    • I. Lis Pendens 7.74
  • VII. UNLAWFUL DETAINER AND OTHER POSTSALE ACTIONS
    • A. Defending Unlawful Detainer and Related Actions 7.75
    • B. Effect of Federal Law on Evictions 7.75A
    • C. Effect of Eviction Action on Suit to Set Aside Sale 7.76
    • D. Drawbacks of Challenging Sale During Eviction 7.77
  • VIII. LENDER LIABILITY 7.78
    • A. Agreements to Lend 7.79
    • B. Ongoing Duties; Negotiations 7.80
    • C. Calling Loans 7.81
    • D. California Decisions; Risk Analysis 7.82
    • E. Filing Lender Liability Complaint With CFPB 7.82A
    • F. Loan Versus Joint Venture 7.83
    • G. Lender Liability to Third Parties
      • 1. Liability to Bidders or Purchasers in Foreclosure Sales 7.83A
      • 2. Liability to Purchasers in REO Sales 7.83B
    • H. Reporting Lender Liability Claims in Bankruptcy 7.84
  • IX. PROTECTION IN BANKRUPTCY 7.85
    • A. Deciding Whether to File Bankruptcy Petition 7.86
      • 1. Disadvantages of Bankruptcy Filing 7.87
      • 2. Advantages of Bankruptcy Filing
        • a. Lien Reduction or Stripping
          • (1) Lien-Stripping Under BAPCPA 7.88
          • (2) Property Valuation Strategies 7.88A
          • (3) Effect of Lien-Stripping on Debtor Eligibility for Bankruptcy 7.88B
          • (4) Lien-Stripping in Chapter 7 Cases 7.88C
        • b. Debtor's Homestead and Other Exemptions 7.88D
        • c. Postsale Redemption of Property 7.88E
    • B. Bankruptcy Estate 7.89
    • C. Filing Triggers Automatic Stay 7.90
      • 1. Scope and Effect of Automatic Stay
        • a. Effect on Creditors 7.91
        • b. Statutory Exceptions to Stay 7.92
        • c. Remedies for Violation of Stay 7.93
        • d. Transfers by Debtor 7.94
        • e. Who Else Is Protected by Stay? 7.95
        • f. Income Tax and Short Sale Issues for Debtor 7.96
        • g. Effect on Redemption and Reinstatement Rights 7.97
      • 2. Duration of Stay 7.98
      • 3. Relief From Stay 7.99
        • a. Grounds for Relief; Burden of Proof 7.100
        • b. Bad Faith 7.101
        • c. Lack of Adequate Protection 7.102
        • d. When Debtor Has No Equity 7.103
        • e. Single Asset Real Estate Case 7.104
      • 4. Defending Stay Relief Motions on Securitized Loans
        • a. Recurring Issues; Preserving Claims 7.105
        • b. Checklist: Defenses to Stay Relief 7.106
      • 5. Effect of Dismissal or Lifting Stay
        • a. Foreclosure Process Resumed 7.107
        • b. Renoticing or Rescheduling Foreclosure Sale 7.108
    • D. Treatment of Creditor's Claim
      • 1. Invalid Secured Claims 7.109
      • 2. Unrecorded Claims 7.110
      • 3. Fraudulent Transfers 7.111
      • 4. Preferences 7.112
      • 5. Undersecured Claims 7.113
      • 6. Completed Sales 7.114
      • 7. Truth in Lending Act Violations 7.115
      • 8. No Claim or False Claim 7.115A
    • E. Reinstatement and Modification Rights 7.116
      • 1. Reinstatement 7.117
      • 2. Modification
        • a. Home Mortgages 7.118
        • b. "Cram-Down" Powers; Absolute Priority Rule 7.119
        • c. Acceptable Modifications 7.120
    • F. Treatment of Real Property Security During Bankruptcy 7.121
    • G. Postpetition Attorney Fees, Interest, and Charges 7.122
    • H. Default Interest Provisions 7.123
    • I. Postpetition Rents
      • 1. Lender's Entitlement to Rents 7.124
      • 2. Commercial Lodging Property 7.125

8

Payment and Related Disputes

  • I. CHAPTER SUMMARY AND SCOPE 8.1
  • II. LOAN ACCELERATION PROVISIONS
    • A. Acceleration-on-Default Clause 8.2
      • 1. Effect of Absence of Acceleration Clause
        • a. Judicial Foreclosures 8.3
        • b. Power of Sale Clause 8.4
      • 2. Validity of Acceleration Clause 8.5
      • 3. Income Tax Effects of Acceleration 8.6
      • 4. Disclosure of Acceleration Provisions 8.7
    • B. "Due-on" Provisions
      • 1. Types of Clauses
        • a. Acceleration on Transfer of Property 8.8
        • b. Covenant Not to Convey 8.9
      • 2. Historical Development and Validity
        • a. Covenants Not to Convey: Coast Bank and Tahoe Bank 8.10
        • b. Due-on-Encumbrance Clause: La Sala 8.11
        • c. Balancing Quantum of Restraint Against Justification
          • (1) Installment Land Sale Contracts: Tucker 8.12
          • (2) Outright Sales: Wellenkamp and Dawn 8.13
      • 3. Legislative and Industry Responses to Wellenkamp and Dawn
        • a. Federally Chartered Banks and Adjustable Rate Loans 8.14
        • b. Preemption Under Garn Act and Federal Regulations 8.15
          • (1) Loans Secured by Residential Property 8.16
          • (2) Loans Secured by Nonresidential Property 8.17
        • c. California Residential Exemptions 8.18
      • 4. Effect of "Due-on" Clauses
        • a. Enforcement 8.19
        • b. Effect on Reinstatement Rights 8.20
        • c. Covered Transactions; Federal Exemptions 8.21
      • 5. Purchase Option and "Due-on" Clause 8.22
      • 6. Waiver of "Due-on" Clause 8.23
    • C. Discretionary Loan Balance Acceleration 8.24
  • III. LATE CHARGES, DEFAULT INTEREST, AND PREPAYMENT PROVISIONS
    • A. Late Charges
      • 1. Invalidity as Unreasonable Liquidated Damages 8.25
      • 2. Revision of Liquidated Damage Statute: Presumption of Validity 8.26
      • 3. Judicial Interpretation: Ridgley v Topa Thrift
        • a. Garrett Rule on Excessive Late Charges Preserved 8.27
        • b. Indirect Late Charges Invalidated 8.28
      • 4. Late Charges as Interest 8.29
      • 5. Form Provision: Late-Charge Clause 8.30
      • 6. Restrictions on Late Charges for Residential Loans
        • a. Monetary Limitations 8.31
        • b. Pyramiding Prohibited 8.32
        • c. Notice and Disclosure Obligations 8.33
    • B. Default Interest
      • 1. Restrictions on Default Interest for Commercial Loans 8.34
      • 2. Impact of Chapter 11 Bankruptcy Plan 8.35
    • C. Prepayment and "Yield Maintenance" Charges
      • 1. No Automatic Right to Prepay 8.36
      • 2. Justification for Charges 8.37
      • 3. Validity 8.38
      • 4. Waiver of Right to Collect 8.39
      • 5. Types of Prepayment Provisions
        • a. Phrases Construed to Permit Prepayment 8.40
        • b. Prepayment Charge Clause 8.41
      • 6. Lock-In Provisions
        • a. Prohibition on Prepayment for Specified Time 8.42
        • b. Validity of Lock-In Provisions 8.43
      • 7. Yield Maintenance Provisions 8.44
      • 8. Regulation of Prepayment Charges
        • a. Statutory Limitations on Consumer Loans 8.45
        • b. Federal Regulation and Preemption 8.46
      • 9. Prepayment Charges on Accelerated Loans
        • a. After Acceleration on Default 8.47
        • b. Under "Due-on" Clause 8.48
      • 10. Involuntary Prepayment
        • a. Clause Allowing Charges 8.49
        • b. Exceptions: Property Destruction, Condemnation 8.50
      • 11. Tax Considerations
        • a. For Lender 8.51
        • b. For Borrower 8.52
        • c. For Seller 8.53
  • IV. OTHER MONETARY ISSUES
    • A. Payment of Interest on Residential Lender's Funds in Escrow 8.54
    • B. Payment of Multiple Notes 8.55
    • C. Private Mortgage Insurance (PMI)
      • 1. California Law Governing PMI 8.56
      • 2. Federal Law Governing PMI; Preemption 8.56A
    • D. Casualty Insurance 8.57
      • 1. Trustor's Failure to Insure; Force-Placed Insurance 8.58
      • 2. Beneficiary's Failure to Require Loss-Payable Clause 8.59
      • 3. Beneficiary's Failure to Require Insurance 8.60
      • 4. Loss After Foreclosure 8.61
      • 5. Right to Insurance Proceeds
        • a. Lender's Option 8.62
        • b. Using Proceeds to Restore Property 8.63
        • c. Multiple Beneficiaries and Judgment Creditors 8.64
      • 6. Tax Considerations
        • a. For Trustor 8.65
        • b. For Lender or Seller 8.66
    • E. Condemnation and Damage Provisions 8.67
      • 1. Condemnation Awards
        • a. As Substitute Security 8.68
        • b. Impairment of Security Requirement 8.69
          • (1) Standards of Impairment 8.70
          • (2) Application of Impairment Standards 8.71
        • c. Taxation of Condemnation Awards 8.72
      • 2. Damage Awards 8.73
    • F. Taxes, Senior Liens, Impound Accounts 8.74
      • 1. Beneficiary's Right to Advance Funds to Protect Security 8.75
      • 2. Trustor's Failure to Pay Taxes; Advances 8.76
      • 3. Impound Accounts 8.77
      • 4. Failure to Keep Senior Liens Current
        • a. Effect of Senior Lien Foreclosure on Junior Lien 8.78
        • b. Junior Curing Senior Default; Advances 8.79
        • c. Priority of Payments to Cure Tax Default 8.80
      • 5. Interest Rate on Advances 8.81
      • 6. Beneficiary's Right to Cure 8.82
    • G. Shared Appreciation Loans 8.82A
    • H. Attorney Fees 8.83
      • 1. Loan Reinstatement 8.84
      • 2. Redemption and Foreclosure 8.85
      • 3. Accounting and Interpleader Actions 8.86
      • 4. Other Actions
        • a. Multiple Issues; Noncontract Judgments 8.87
        • b. Third Party Claims Against Security 8.88
        • c. Subsequent Owners 8.89
        • d. Actions Involving Trustees 8.90
  • V. PREDATORY LENDING: LOAN PURPOSE AND REPAYMENT ISSUES 8.91
  • VI. RECONVEYANCE 8.92
    • A. Reconveyance and Statement Fees 8.93
    • B. Return of Loan Documents 8.94
    • C. Recitals in Reconveyance 8.95
    • D. Damages to Borrower 8.96
    • E. Substitute Procedures 8.97
    • F. Liabilities and Rights of Party Reconveying 8.98
    • G. Forged Payoff Demand, Request to Reconvey, or Reconveyance 8.99

9

Multiple Security, Obligations, and Parties

  • I. INTRODUCTION 9.1
  • II. FORECLOSING ON MULTIPLE SECURITY FOR ONE OBLIGATION 9.2
    • A. Preliminary Caution: Full Credit Bidding 9.3
    • B. Multiple Parcels of Real Property 9.4
      • 1. One-Action Rule
        • a. General Application 9.5
        • b. Consequences of One-Action Violation 9.6
      • 2. Antideficiency and Fair Value Rules
        • a. Code of Civil Procedure §§580d and 580a 9.7
        • b. Code of Civil Procedure §580b 9.8
      • 3. Single Deed of Trust Versus Separate Deeds of Trust
        • a. One-Action, Antideficiency, and Fair Value Rules 9.9
        • b. Foreclosure Trustees 9.10
    • C. Real Property Rents 9.11
    • D. Real Property and Personal Property 9.12
      • 1. Foreclosure Choices Under Com C §9604(a) 9.13
        • a. Separate Foreclosure 9.14
        • b. Unified Foreclosure 9.15
      • 2. Timing of Election 9.16
      • 3. Application of Real Property Law Protections in Mixed-Collateral Foreclosures 9.17
        • a. Purchase Money Antideficiency Rule 9.18
        • b. One-Action Rule and Security-First Rule 9.19
        • c. Trustee Sale Antideficiency Rule 9.20
        • d. Fair Value Rules and Deadlines 9.21
        • e. Acceleration and Reinstatement Rights 9.22
        • f. Consumer Mixed Collateral 9.23
    • E. Real Property and Insurance 9.24
    • F. Real Property Security Given for Judgments 9.25
  • III. ENFORCING MULTIPLE OBLIGATIONS SECURED BY SAME SECURITY 9.26
    • A. One Creditor, Multiple Notes, Multiple Deeds of Trust on Same Property 9.27
      • 1. When Merger Occurs 9.28
      • 2. Enforcement Issues for Unmerged Obligations 9.29
      • 3. Foreclosure of Junior Deed of Trust
        • a. California Cases 9.30
        • b. Doctrine of Extinguishment (Merger of Rights) 9.31
    • B. One Creditor, Multiple Notes, One Deed of Trust 9.32
    • C. One Creditor, One Note, Multiple Obligors, One Deed of Trust 9.32A
    • D. Multiple Creditors, Multiple Notes, One Deed of Trust 9.33
      • 1. Priority of Rights in Security 9.34
      • 2. Foreclosure 9.35
    • E. Wraparound Loan 9.36
      • 1. Advantages
        • a. Interest Rates 9.37
        • b. Tax Considerations 9.38
        • c. Alters Payment Schedules 9.39
      • 2. Disadvantages
        • a. Usury Risks 9.40
        • b. Foreclosure 9.41
  • IV. PRIORITIES
    • A. Significance of Lien Priority 9.42
    • B. Basic Determinants of Priority
      • 1. First-in-Time Rule 9.43
      • 2. Race-Notice Recordation Statute 9.44
      • 3. Other Requirements for Priority by Recordation
        • a. Instrument Properly Recorded 9.45
        • b. Without Notice of Other Interest 9.46
        • c. Value 9.47
      • 4. Purchase Money Mortgage Priority 9.48
        • a. Subject to Operation of Recordation Laws 9.49
        • b. Liens Against Purchaser 9.50
      • 5. Fixtures
        • a. Priority Rules 9.51
        • b. Right to Remove Fixtures 9.52
    • C. Special Lien Priorities
      • 1. Vendor's Liens 9.53
      • 2. Mechanics Liens 9.54
      • 3. Tax and Assessment Liens 9.55
    • D. Priorities in Bankruptcy 9.56
    • E. Junior Rights to Reinstate, Redeem, Foreclose, and Assert One-Action Rule Violations 9.57
    • F. Priority of Liens Versus Other Real Property Interests 9.58
    • G. Future-Advance and Dragnet Clauses 9.59
      • 1. Validity 9.60
      • 2. Disputes Over Security 9.61
        • a. Preexisting Debts 9.62
        • b. Future Advances 9.63
          • (1) Relationship Between Loans 9.64
          • (2) Reliance on Security 9.65
        • c. Contemporaneous Obligations 9.66
        • d. Undesirable Effects of Dragnet Clause 9.67
      • 3. Lender Disputes Over Priorities 9.68
        • a. Optional Versus Obligatory Advances 9.69
        • b. Revolving Line of Credit Problems 9.70
        • c. Construction Loan Problems 9.71
        • d. Wraparound Loan Problems 9.72
        • e. Actual Versus Constructive Notice 9.73
    • H. Subordination and Release Provisions
      • 1. Definitions 9.74
      • 2. Creating Subordination and Release Provisions
        • a. Recordation Versus Express Contract; Automatic Subordination 9.75
        • b. Role of Subordination and Release Provisions in Land Development 9.76
        • c. Express Subordination and Release Clauses in Purchase Contract 9.77
        • d. Timing Concerns 9.78
        • e. Collateral Agreement for Subordination and Release in Security Instrument 9.79
      • 3. Enforcing Subordination Clauses 9.80
        • a. Relief Against Subordinating Lender 9.81
        • b. Relief Against Other Parties 9.82
      • 4. Subsequent Subordination Agreement 9.83
      • 5. Enforcing Release Clauses 9.84
      • 6. Release Without Express Release Clause; Effect of Marshaling 9.85
    • I. Effect of Loan Modifications on Priority 9.86
    • J. Equitable Subrogation
      • 1. Effect on Priority 9.87
      • 2. Requirements 9.88
      • 3. Exceptions: Knowledge of Intervening Interest; Inexcusable Neglect 9.89
      • 4. Asserting Equitable Subrogation 9.90
    • K. Marshaling of Assets 9.91
      • 1. Two Funds Rule
        • a. Basic Doctrine 9.92
        • b. Common Debtor Rule 9.93
      • 2. Inverse Order of Alienation Rule
        • a. Rule and Limitation 9.94
        • b. Application 9.95
      • 3. Multiple Junior Lienors 9.96
      • 4. Release of Property by Senior Creditor 9.97
  • V. MULTIPLE PARTIES 9.98
    • A. Guarantors and Sureties
      • 1. Definitions and Terminology 9.99
      • 2. Surety Distinguished From Principal Obligor 9.100
      • 3. Prior Distinction Between Guarantors and Sureties Abolished 9.101
      • 4. Examples of Suretyship 9.102
        • a. Explicit Guaranty 9.103
        • b. Co-Obligor 9.104
        • c. Third Party Security 9.105
        • d. Loan Purchase Agreement; Indemnity Agreement 9.106
        • e. Master Lease 9.107
        • f. Unreleased Seller of Encumbered Property 9.108
        • g. Caution: Substance Controls Over Form or Language 9.109
      • 5. Suretyship Formation Issues
        • a. Consideration 9.110
        • b. Statute of Frauds 9.111
        • c. Notice of Acceptance; Knowledge of Principal 9.112
      • 6. Rights and Defenses Arising From Suretyship Status 9.113
        • a. Recourse Against Principal
          • (1) Equity of Exoneration; Reimbursement and Subrogation 9.114
          • (2) Scope of Reimbursement Right 9.115
          • (3) Scope of Subrogation Right 9.116
        • b. Contribution Right Against Cosureties 9.117
        • c. Rights and Defenses Against Creditor
          • (1) Defenses of Principal 9.118
          • (2) Effect of Discharge of Principal 9.119
          • (3) Alteration of Principal Obligation or Impairment of Remedies 9.120
          • (4) First Pursuit of Principal and Principal's Collateral 9.121
          • (5) Defense Based on Duty to Disclose 9.122
      • 7. Applying One-Action and Antideficiency Rules: Overview 9.123
      • 8. One-Action and Antideficiency Rules When Principal's Real Property Secures Principal Obligation
        • a. No Direct Protection of Guarantors
          • (1) Case Law 9.124
          • (2) Rationales in Case Law 9.125
        • b. Arguments for Direct Protection of Guarantors 9.126
          • (1) Effect of 1939 Statutory Change 9.127
          • (2) Policy Arguments 9.128
        • c. Indirect Protection of Guarantors 9.129
          • (1) Civil Code §§2809 and 2810 9.130
          • (2) Union Bank v Gradsky: Estoppel Defense Exonerates Guarantor 9.131
          • (3) Union Bank v Gradsky: Limitations on Estoppel Defense 9.132
      • 9. One-Action and Antideficiency Rules When Guarantor's Real Property Secures Guaranty 9.133
      • 10. One-Action and Antideficiency Rules When Guarantor's Real Property Secures Principal Obligation 9.134
      • 11. Waiver of Rights and Defenses 9.135
        • a. Waivable Rights and Defenses; Effect of Waiver 9.136
          • (1) Suretyship Rights and Defenses 9.137
          • (2) Election of Remedies Rights and Defenses 9.138
          • (3) One-Action and Antideficiency Rights and Defenses 9.139
        • b. Interpretation of Contractual Waivers
          • (1) Case Law Before CC §2856 9.140
          • (2) Civil Code §2856 9.141
        • c. Limitations on Waiver
          • (1) Beyond CC §2856 9.142
          • (2) Within CC §2856 9.143
      • 12. Purported "Guaranty" by Principal Obligor 9.144
        • a. "Debt of Another" 9.145
        • b. Examples: Sham Guaranties 9.146
        • c. Issues Raised by Particular Entity Types
          • (1) Partnerships, Corporations, and LLCs 9.147
          • (2) Revocable Trusts 9.148
          • (3) Spouses 9.149
      • 13. Types of Guaranties
        • a. Guaranties of Payment Versus Guaranties of Collection 9.150
        • b. Continuing Guaranties 9.151
        • c. Limited or Partial Guaranties 9.152
        • d. Completion Guaranties 9.153
        • e. Nonrecourse Carve-Out Guaranties and Springing Recourse Guaranties 9.154
        • f. "Exploding" Guaranties 9.155
      • 14. Transfer of Guaranties 9.156
      • 15. Attachment Against Guarantor When Underlying Debt Is Secured by Real Property 9.157
    • B. Letter of Credit Issuers
      • 1. Definitions and Terminology 9.158
      • 2. Governing Law; Customs and Practice 9.159
      • 3. Legal Relationships Among Parties 9.160
      • 4. Documentary Presentation 9.161
      • 5. Fundamental Principles: "Strict Compliance" and "Independence" 9.162
      • 6. Effect of One-Action and Antideficiency Rules 9.163
      • 7. Unenforceability in Certain Residential Mortgage Loan Transactions 9.164
    • C. Negotiable Instrument Endorsers and Accommodation Parties
      • 1. Liability of Parties to Negotiable Instruments 9.165
      • 2. One-Action and Antideficiency Rules 9.166
      • 3. Division 3 Discharge Defenses of Endorsers and Accommodation Parties 9.167
      • 4. Relationship to Civil Code Suretyship Provisions 9.168
    • D. Subsequent Owners of Property 9.169
      • 1. Effect of Transfers of Encumbered Property: Status of Transferee Generally 9.170
      • 2. Status of Original Trustor 9.171
      • 3. Requirement of a Writing 9.172
      • 4. Effect of Assumption
        • a. Status of Acquiring Grantee 9.173
        • b. Nonassuming Grantee 9.174
        • c. Creditor Status Under Assumption Agreement 9.175
        • d. Third Party Beneficiary Versus Equitable Subrogation Differences 9.176
        • e. Liability of Trustor 9.177
        • f. Liability of Assuming Grantee 9.178
      • 5. Purchase Money Considerations
        • a. When Original Loan Was Not Purchase Money 9.179
        • b. When Loan Was Originally for Purchase Money 9.180
          • (1) Sales by Original Seller 9.181
          • (2) Third Party Lenders 9.182
      • 6. Grantee as Guarantor 9.183

10

Workouts of Problem Loans

  • I. INTRODUCTION
    • A. "Workout" Broadly Defined 10.1
    • B. Rules of Professional Conduct and Laws Governing Workouts 10.1A
    • C. Basic Tools of Workouts
      • 1. Checklist: Loan Contract Documents 10.2
      • 2. Default Notices; Demand Letters
        • a. Distinguish Between Absolute and Conditional Defaults 10.2A
        • b. Form: Default Notice 10.2B
      • 3. Pre-Negotiation Letter
        • a. Purpose and Scope of Pre-Negotiation Letter 10.3
        • b. Form: Pre-Negotiation Letter 10.3A
      • 4. Rights and Liabilities of Lender, Borrower, and Third Parties 10.4
      • 5. Assessing Property Value and Client's Financial Situation 10.5
      • 6. Decision-Making Procedure for Multiple Lenders 10.6
      • 7. Decision-Making Procedure for Multiple Borrowers 10.6A
    • D. Requirements for Lenders Under SB 1137
      • 1. Meet-and-Confer Prerequisites Not Applicable to Nonresidential Trustee Sales 10.7
      • 2. Workouts of Securitized Loans
        • a. Structure; Parties; Servicing 10.7A
        • b. Income Tax Issues for Investors 10.7B
        • c. Lender Obligations Under CC §§2923.6, 2924.9, 2924.10 10.8
    • E. Residential Loan Workouts and Modifications
      • 1. Lender Obligations Under SB 1137; CC §2923.5 10.8A
      • 2. Federal and Private Loan Modification and Refinancing Incentives 10.8B
      • 3. Residential Loan Modification Process 10.8C
      • 4. Residential Modifications Under ABX2 7 10.8D
      • 5. Lender Obligations Under Homeowner Bill of Rights 10.8E
      • 6. Lender Obligation to Provide Single Point of Contact; CC §2923.7 10.8F
      • 7. Short Sale Alternative 10.8G
    • F. Loss Mitigation Procedures Under Dodd-Frank Regulations 10.8H
  • II. LENDER'S INITIAL STRATEGY
    • A. Deciding Whether to Foreclose
      • 1. Determining Causes for Problem Loans 10.9
      • 2. Relationship of Foreclosure Process to Workout Negotiations 10.10
      • 3. Drafting Notice of Default
        • a. Including All Defaults 10.11
        • b. Late Fees and Default Interest 10.12
        • c. Prerequisites to Declaring Defaults 10.13
        • d. Protective Advances 10.14
        • e. Unapplied Funds or Credits of Borrower 10.15
    • B. Deciding Whether to Take Possession of Security
      • 1. Lender's Possession Rights 10.16
      • 2. Relevant Factors 10.17
      • 3. Lender as "Mortgagee in Possession" 10.18
      • 4. Taking Possession Through Court-Appointed Receiver 10.19
  • III. WORKOUT AGREEMENTS
    • A. Workouts Contemplating Avoidance of Foreclosure 10.20
      • 1. Statute of Frauds 10.21
      • 2. Forbearance Agreement
        • a. Purposes of Forbearance Agreement 10.22
        • b. Form: Forbearance Agreement 10.22A
      • 3. Deed in Lieu Escrow Pending Workout Negotiations
        • a. Purpose of Escrow Agreement 10.22B
        • b. Form: Escrow Agreement for Deed in Lieu of Foreclosure 10.22C
      • 4. Loan Modification Agreement
        • a. Purpose and Scope of Loan Modification Agreement 10.23
        • b. Form: Loan Modification Agreement 10.23A
        • c. Usury Considerations 10.23B
        • d. Income Tax Considerations 10.24
        • e. Avoiding Loss of Lender's Lien Priority 10.25
        • f. Future Advances 10.26
        • g. Avoiding Exoneration of Guarantors and Others 10.27
    • B. Workouts Contemplating Lender's Taking Title to Security 10.28
      • 1. Deed in Lieu of Foreclosure 10.29
        • a. Insurance Considerations 10.29A
        • b. When Lease Is Collateral for Loan
          • (1) Ground Leases 10.29B
          • (2) Lender's Considerations 10.29C
        • c. Income Tax Considerations 10.30
        • d. Deed in Lieu of Foreclosure Agreement 10.31
          • (1) Form: Deed in Lieu Agreement 10.31A
          • (2) Form: Deed in Lieu of Foreclosure (Recordable) 10.32
          • (3) Form: Covenant Not to Sue 10.32A
      • 2. Construction Loan Workouts
        • a. When Lender Takes Title During Construction
          • (1) Borrower Assists Lender in Completion 10.33
          • (2) Liability and Insurance Considerations 10.34
          • (3) Completion by Single-Purpose Entity 10.35
        • b. When Receiver Takes Possession and Completes Project 10.36
        • c. Checklist: Issues to Consider in Drafting Workout 10.37
        • d. Construction Workout Agreement: Selected Clauses
          • (1) Form: Provision for Lender to Bid at Foreclosure Sale 10.38
          • (2) Form: Provision for Handling Unpaid Construction Bills 10.39
          • (3) Form: Provision Defining Borrower's Role in Workout 10.40
          • (4) Form: Provision for Determining Proceeds and Profits of Workout 10.41
          • (5) Form: Provision Regarding Effect of Future Litigation on Workout 10.42
  • IV. REMEDIES: LENDER'S CONSIDERATIONS
    • A. Enforcement of Assignment of Rents Through Receivership 10.43
    • B. Necessity for Lender's Underbid at Foreclosure Sale 10.44
    • C. Enforcement of Construction Lender's Right to Complete Construction by Taking Possession Through Receiver 10.45
      • 1. Right to Obtain Court-Appointed Receiver to Complete Improvements 10.46
      • 2. Form: Clause in Construction (Building) Loan Agreement Authorizing Lender or Receiver to Complete Improvements 10.47
      • 3. Form: Provision in Order Appointing Receiver Authorizing Completion of Improvements 10.48
      • 4. Form: Receiver's Certificate for a Borrowing From Lender 10.49
      • 5. Responsibilities for Payment of Net Deficit Operations of Receiver 10.50
    • D. Legal Actions by Construction Lender Against Borrower and Third Parties 10.51
      • 1. Actions on Personal Guaranties of Payment 10.52
      • 2. Actions on Personal Guaranties of Completion 10.53
      • 3. Actions in Tort 10.54
        • a. Fraud 10.55
        • b. Waste 10.56
        • c. Dischargeability in Bankruptcy 10.57
      • 4. Third Persons' Tortious Impairment of Security 10.58
      • 5. Contract Actions By or Against Issuers of Take-Out or Standby Commitments
        • a. Standing to Sue 10.59
        • b. Remedies for Lender's Breach 10.60
      • 6. Actions on Performance Bonds 10.61
      • 7. Lender's Actions Against Title Insurer 10.62
    • E. Underbidding by Lender at Foreclosure Sale
      • 1. Potential Importance 10.63
      • 2. Underbidding and Injunction Bonds 10.64
  • V. REMEDIES: BORROWER'S CONSIDERATIONS
    • A. Reinstatement of Accelerated Loan
      • 1. Requirements of CC §2924c 10.65
      • 2. Reinstatement Rights and Nonmonetary Defaults 10.66
      • 3. Borrower Excused From Tendering Reinstatement 10.67
    • B. Partial Releases While in Default
      • 1. Release Not Conditioned on Absence of Default 10.68
      • 2. Release Conditioned on Absence of Default 10.69
      • 3. Borrower's Remedies for Wrongful Refusal to Allow a Partial Reconveyance 10.70
    • C. Borrower's Action to Enjoin Trustee Sale 10.71
      • 1. Obtaining Injunction 10.72
      • 2. Lis Pendens 10.73
    • D. Borrower's Pre-Trustee Sale Strategy With Multiple Parcels 10.74
    • E. Actions Against Lender After Trustee Sale
      • 1. Action to Set Aside Trustee Sale 10.75
      • 2. Action for Damages for Wrongful Sale 10.76
      • 3. Third Party Claims Against Lender After Trustee Sale 10.77

11

Enforcing Secured Loans Against Debtors in Bankruptcy

  • I. INTRODUCTION
    • A. Scope of Chapter 11.1
    • B. Types of Bankruptcy Relief 11.2
    • C. Commencement, Dismissal, Conversion, and Closure 11.3
    • D. Distinctions Among Debtors, Debtors in Possession, Trustees, and Committees 11.4
  • II. AUTOMATIC STAY
    • A. Overview of Automatic Stay
      • 1. Before BAPCPA (2005 Amendments) 11.5
      • 2. After BAPCPA (2005 Amendments) 11.6
    • B. Scope of Automatic Stay
      • 1. Acts to Create, Perfect, or Enforce Lien 11.7
        • a. Exceptions: Foreclosure Sales
          • (1) Postponing Sale 11.8
          • (2) Recordation of Trustee's Deed to Effect Prepetition Sale 11.9
        • b. Other Exceptions 11.10
        • c. Exceptions Under BAPCPA 11.11
      • 2. Tolling of Redemption and Reinstatement Periods
        • a. Redemption 11.12
        • b. Reinstatement 11.13
      • 3. Foreclosure by Senior Lienholder When Debtor's Only Interest Is Junior Lien 11.14
      • 4. Postforeclosure Eviction 11.15
      • 5. Acts to Recover Claim Against Debtor or Debtor's Property 11.16
    • C. Violation of Automatic Stay
      • 1. Acts Violating Stay Are Void 11.17
      • 2. Rights of Third Party Purchaser at Void Sale 11.18
      • 3. Statutory Damages and Contempt Sanctions 11.19
  • III. RELIEF FROM AUTOMATIC STAY
    • A. Relief Available to Creditors 11.20
    • B. Enforceability of Prepetition Stay Waivers 11.21
    • C. Grounds for Relief
      • 1. Overview 11.22
      • 2. Cause for Stay Relief
        • a. Lack of Adequate Protection 11.23
        • b. Bad Faith 11.24
          • (1) Successive Filings 11.25
          • (2) New Debtor Syndrome 11.26
          • (3) Other Relief Based on Bad Faith 11.27
        • c. Other Cause for Stay Relief 11.28
      • 3. Lack of Equity and Property Not Necessary for Effective Reorganization 11.29
        • a. Determining Whether Equity Exists 11.30
        • b. Necessity of Property for Effective Reorganization 11.31
      • 4. Single Asset Real Estate 11.32
    • D. Procedure for Obtaining Relief From Automatic Stay
      • 1. Motion for Relief From Stay
        • a. Creditor's Pleadings 11.33
        • b. Responsive Pleadings 11.34
        • c. Preliminary Hearing 11.35
        • d. Final Hearing 11.36
        • e. Ex Parte Relief 11.37
        • f. Discovery 11.38
        • g. Evidence
          • (1) Burden of Proof 11.39
          • (2) Encumbrances 11.40
          • (3) Value of Property 11.41
      • 2. Agreement for Relief From Stay
        • a. Overview and Approval 11.42
        • b. "Drop Dead" Agreement 11.43
        • c. Periodic Payment Agreement 11.44
        • d. Protection of Junior Lienholder 11.45
    • E. Practical Considerations and Planning
      • 1. Debtor Considerations
        • a. Client Interview; Anticipating Requests for Relief From Stay 11.46
        • b. Checklist: Preliminary Hearing 11.47
        • c. Final Hearing 11.48
      • 2. Secured Creditor's Considerations
        • a. Gathering Information From Creditor 11.49
        • b. Checklist: Preliminary Hearing 11.50
    • F. Enforcing and Challenging Stay Relief Orders and Agreements
      • 1. Enforcing Orders and Agreements 11.51
      • 2. Vacating Order on Changed Circumstances 11.52
      • 3. Modifying Stay Relief Agreement in Plan 11.53
      • 4. Preclusive Effect of Findings in Stay Relief Litigation 11.54
      • 5. Appeals 11.55
  • IV. ENFORCING LIEN ON RENTS
    • A. Perfection of Lien on Rents 11.56
    • B. Impact of Bankruptcy on Perfection 11.57
    • C. Impact of Bankruptcy on Existing Receivership 11.58
    • D. Application of Rents 11.59
  • V. OBTAINING CREDIT SECURED BY ESTATE ASSETS
    • A. Overview 11.60
    • B. Unsecured Administrative Priority Debt 11.61
    • C. Unsecured Superpriority Debt and Debt Secured by Unencumbered Property or Junior Liens 11.62
    • D. Debt Secured by Equal or Senior Liens 11.63
    • E. Postpetition Advances on Secured Guaranty 11.64
    • F. Appeals From Borrowing Orders 11.65
  • VI. USE, SALE, LEASE, OR ABANDONMENT OF PROPERTY
    • A. Overview of Debtor in Possession or Trustee Authority 11.66
    • B. Use of Cash Collateral 11.67
      • 1. Stipulated Authority 11.68
      • 2. Court Approval 11.69
    • C. Adequate Protection of Secured Lender's Interest in Noncash Collateral 11.70
    • D. Superpriority Claim for Insufficient Adequate Protection 11.71
    • E. Bankruptcy Sales of Collateral
      • 1. Overview; Employment of Real Estate Broker 11.72
      • 2. Sales Free and Clear of Liens 11.73
      • 3. Procedure Governing Sales 11.74
      • 4. Collusive and Other Improper Sales 11.75
      • 5. Credit Bidding at Bankruptcy Sale 11.76
    • F. Abandonment of Collateral 11.77
    • G. Surcharge of Secured Creditor's Collateral 11.78
    • H. Appeals 11.79
  • VII. AVOIDANCE POWERS
    • A. Legal Basis; Limitations 11.80
    • B. Unrecorded Real Property Interests: 11 USC §544 11.81
    • C. Avoidable Preferences: 11 USC §547
      • 1. Prima Facie Preference Action 11.82
      • 2. Defenses to Preference Actions 11.83
      • 3. Insider Preferences 11.84
      • 4. Effect of Avoided Preferential Transfer 11.85
    • D. Fraudulent Transfers: 11 USC §§544, 548 11.86
    • E. Unauthorized Postpetition Transfers: 11 USC §549 11.87
    • F. Judicial Liens Impairing Homestead Exemption: 11 USC §522 11.88
  • VIII. TREATMENT OF SECURED CLAIMS IN BANKRUPTCY
    • A. Overview of Claims Process 11.89
    • B. Secured and Unsecured Claims
      • 1. Allowance of Secured Claims: 11 USC §506
        • a. Oversecured and Undersecured Lien Claims 11.90
        • b. Valuation of Lien Claims 11.91
        • c. Undersecured Claims; Lien-Stripping 11.92
      • 2. Undersecured Claims in Chapter 11 Cases; Election Under 11 USC §1111(b) 11.93
      • 3. Recovery of Interest and Reasonable Attorney Fees and Costs
        • a. By Oversecured Creditor 11.94
        • b. By Unsecured Creditor 11.95
  • IX. REORGANIZATION PLANS: CHAPTERS 11, 12, AND 13
    • A. Overview of Plans 11.96
    • B. Chapter 11 Plans
      • 1. Parties and Claims
        • a. Who May Propose Plan 11.97
        • b. Contents of Chapter 11 Plan 11.98
        • c. Classification of Claims Under 11 USC §1122; Impact of §§1111(b) and 1129(b) 11.99
        • d. Impaired Classes 11.100
        • e. Modification of Secured Claims 11.101
        • f. Modification of Claims Secured Only by Principal Residence 11.102
      • 2. Voting on Plan; Disclosure Statement 11.103
      • 3. Confirmation of Chapter 11 Plan 11.104
        • a. Other Bankruptcy Code Requirements 11.105
        • b. Plan Proposed in Good Faith 11.106
        • c. Plan Acceptance by Impaired Classes 11.107
        • d. "Best Interests" of Impaired Creditors 11.108
        • e. "Cram Down" of Impaired, Dissenting Classes; Absolute Priority Rule 11.109
          • (1) Make Deferred Cash Payments 11.110
          • (2) Sell Collateral Free and Clear of Lien 11.111
          • (3) Provide Indubitable Equivalent 11.112
        • f. "New Value" Exception to Absolute Priority Rule 11.113
        • g. Feasibility Requirement 11.114
        • h. Other Plan Confirmation Requirements 11.115
      • 4. Preclusive Effect of Plan Confirmation 11.116
      • 5. Interpretation and Modification of Plan 11.117
      • 6. Appeals From Confirmation Orders 11.118
    • C. Chapter 13 Plans
      • 1. Individual Debt Adjustment; Qualifying Debtors 11.119
        • a. Nondischargeability 11.119A
        • b. Chapter 13 Versus Chapter 11 11.119B
      • 2. Contents and Duration of Chapter 13 Plan 11.120
        • a. Modification of Secured Debt 11.121
          • (1) Due Process Issues 11.122
          • (2) Home Mortgages 11.123
          • (3) Multiunit Properties; Boarders 11.124
          • (4) Personal Property 11.125
          • (5) Junior Liens; Creditor Strategies 11.126
        • b. Cure of Defaults and De-Acceleration 11.127
        • c. Postsale Redemption 11.127A
      • 3. Confirmation and Cram Down in Chapter 13
        • a. Plan Confirmation Requirements 11.128
        • b. Cram Down of Secured Creditors 11.129
        • c. Cram Down of Unsecured Creditors 11.130
      • 4. Preclusive Effect of Plan Confirmation 11.131
      • 5. Modification of Chapter 13 Plan 11.132
    • D. Chapter 12 Plans
      • 1. Overview of Chapter 12 11.133
      • 2. Special Definition of "Adequate Protection" 11.134
      • 3. Power to Sell Property Free and Clear 11.135
      • 4. Contents of Chapter 12 Plan 11.136
        • a. Modification of Secured Debt 11.137
        • b. Cure of Defaults and De-Acceleration 11.138
      • 5. Confirmation and Cram Down in Chapter 12
        • a. Plan Confirmation Requirements 11.139
        • b. Cram Down of Secured Creditors 11.140
        • c. Cram Down of Unsecured Creditors 11.141
      • 6. Preclusive Effect of Plan Confirmation 11.142
      • 7. Modification of Chapter 12 Plan 11.143
  • X. EFFECT OF BANKRUPTCY DISCHARGE
    • A. Effect of Discharge 11.144
    • B. Exceptions to Discharge 11.145
  • XI. APPEALS FROM BANKRUPTCY COURT DECISIONS
    • A. Overview; Stay Pending Appeal 11.146
    • B. Expedited Timing for Notice of Appeal 11.147
    • C. Appeal to Bankruptcy Appellate Panel or District Court 11.148
    • D. Mootness as Grounds for Dismissal 11.149
      • 1. Appeals From Asset Sale Orders 11.150
      • 2. Appeals From Plan Confirmation Orders 11.151
      • 3. Appeals From Borrowing Orders 11.152

12

Lender and Broker Liability

  • I. THEORIES OF LIABILITY
    • A. Introduction 12.1
    • B. Primary Theories of Lender Liability
      • 1. Breach of Contract 12.2
        • a. Contract Claim Theories 12.3
        • b. Oral Contracts; Promissory Estoppel 12.4
      • 2. Fraud; Negligent Misrepresentation 12.5
        • a. Income Documentation 12.6
        • b. Aiding and Abetting Fraud; Conspiracy 12.7
        • c. Promissory Fraud 12.8
        • d. Causation Requirement 12.9
      • 3. Duress 12.10
      • 4. Negligence 12.11
        • a. Construction Loans 12.11A
        • b. Nonconstruction Loans 12.11B
          • (1) Loan Underwriting 12.11C
          • (2) Loan Modification, Servicing, and Collection 12.11D
        • c. Breach of Contract Versus Negligence 12.11E
      • 5. Conversion 12.12
      • 6. Defamation 12.13
      • 7. Infliction of Emotional Distress 12.14
      • 8. Potential Statutory Liability: Summary of Federal and State Law 12.15
    • C. Developing Theories of Lender Liability 12.16
      • 1. Constructive Fraud on Basis of Fiduciary Duty 12.17
        • a. When Loan Broker Acts as Fiduciary 12.18
        • b. When Lender Acts as Fiduciary 12.19
        • c. Barrett and Commercial Cotton 12.20
        • d. Loan Assignments and Participation Contracts 12.21
      • 2. Covenant of Good Faith and Fair Dealing
        • a. Basis and Scope 12.22
        • b. Damages: Tort Versus Contract
          • (1) Tort: Special Relationship Required 12.23
          • (2) Lending Cases Denying Tort Damages 12.24
          • (3) Denial of Existence of Contract 12.25
        • c. Lending Cases Denying Contract Damages 12.26
      • 3. Unfair Business Practices 12.27
      • 4. Improper Control Over Borrower 12.28
        • a. Construction Lending 12.29
        • b. Business Lending 12.30
      • 5. Unconscionability 12.30A
    • D. Loan Broker Liability
      • 1. Licensing Required 12.31
      • 2. Acts Prohibited by License Laws 12.32
      • 3. Other Statutes Regulating Brokers
        • a. Real Property Loan Law 12.33
        • b. Other State and Federal Laws 12.34
      • 4. Common Law Duties 12.35
      • 5. Remedies Against Brokers; Limitations on Liability 12.36
  • II. LIABILITY IN LOAN ORIGINATION 12.37
    • A. Liability in Loan Application Phase
      • 1. State Tort and Contract Law 12.38
      • 2. Federal Law; Preemption 12.39
    • B. Liability in Loan Commitment Phase 12.40
      • 1. Loan Commitment as Contract 12.41
      • 2. Option to Borrower Versus Opportunity to Borrow 12.42
      • 3. Oral Commitments; Collateral Agreements
        • a. Statute of Frauds 12.43
        • b. Parol Evidence Rule 12.44
        • c. D'Oench Doctrine and FIRREA 12.45
      • 4. Unauthorized Commitments 12.46
      • 5. Loan Assignment 12.47
        • a. Holder in Due Course Doctrine 12.48
        • b. Successor Under FDIC Receivership 12.49
      • 6. Failure of Conditions Precedent; Waiver of Conditions 12.50
      • 7. Checklist: Commitment Letter Procedures 12.51
    • C. Liability in Loan Documentation and Closing 12.52
      • 1. Variations From Terms of Commitment Letter; Unwarranted Delays in Closing 12.53
      • 2. Conduct in Negotiations 12.54
      • 3. Waiver of Jury Trials 12.55
      • 4. Mandatory Arbitration Clauses 12.56
      • 5. Checklist: Loan Documentation Procedures 12.57
    • D. Disclosure of Material Adverse Information 12.58
      • 1. Lender to Borrower 12.59
      • 2. Broker to Borrower 12.60
      • 3. To Guarantors and Insurers 12.61
  • III. LIABILITY IN LOAN ADMINISTRATION 12.62
    • A. Relationship Between Lender and Borrower
      • 1. Communication Strategy and Policies 12.63
      • 2. Effect on Loan Transaction and Liability
        • a. Creating Fiduciary or Special Relationships 12.64
        • b. Formalizing New Agreement or Changes to Loan 12.65
      • 3. Effect of Assignment or Securitization 12.66
    • B. Loan Documentation
      • 1. Reviewing Initial Documentation 12.67
      • 2. Relying on Loan Document Terms 12.68
      • 3. Further Documentation and Notice 12.69
      • 4. Waiving or Modifying Loan Terms 12.70
    • C. Lender Control and Interference 12.71
    • D. Loan Payoff; Reconveyance 12.72
    • E. Checklist: Loan Administration Guidelines 12.73
  • IV. LENDER LIABILITY IN WORKOUTS
    • A. Analysis of Lender's Position 12.74
      • 1. Liability to Borrower 12.75
      • 2. Liability to Third Parties 12.76
      • 3. Exposure to Environmental Liability 12.77
    • B. Staffing During Loan Workouts 12.78
    • C. Duty to Negotiate 12.79
    • D. Liability Arising From Workout or Refinancing Negotiations
      • 1. Oral Representations; Parol Evidence Rule 12.80
      • 2. Trial Loan Modifications Plans 12.81
      • 3. Promissory Estoppel 12.81A
    • E. Liability for Precipitous Action 12.82
    • F. Structuring Workout Agreement 12.83
    • G. Checklist: Guidelines for Lenders During Workouts 12.84
  • V. LENDER LIABILITY IN FORECLOSURE PROCESS 12.85
    • A. Action for Wrongful Foreclosure 12.86
    • B. Grounds for Wrongful Foreclosure Action 12.87
      • 1. Existence of Default 12.88
      • 2. Nonmonetary Defaults 12.89
      • 3. Proper Notice 12.90
      • 4. Manner of Sale 12.91
      • 5. Conduct of Sale
        • a. Statutory Formalities; Authority to Foreclose 12.92
        • b. Bid-Chilling or Control 12.93
      • 6. Adequacy of Price 12.94
    • C. Measure of Damages for Wrongful Foreclosure 12.95
    • D. "Bad Faith" Foreclosure and Other Sources of Liability 12.96
    • E. Waiver of Lender Liability Claims in Bankruptcy 12.97
    • F. Environmental Concerns 12.98
      • 1. Federal Environmental Law Issues 12.99
      • 2. State Environmental Law Issues 12.100
    • G. Checklist: Guidelines for Lenders During Foreclosure Process 12.101
  • VI. POSTFORECLOSURE LENDER LIABILITY CONCERNS
    • A. Clearing Title to Property 12.102
      • 1. Priority Concerns 12.103
      • 2. Stop Payment Notice Claims 12.104
      • 3. Other Claims by Suppliers and Laborers 12.105
      • 4. Title Insurance for Foreclosed Properties 12.106
    • B. Foreclosure Actions and Actions Against Guarantors 12.107
    • C. Actions by Purchasers After Foreclosure Sales 12.108

13

Special Issues in Consumer Residential Mortgage Loans

  • I. CHAPTER SCOPE
    • A. Introduction 13.1
    • B. Potential Statutory Liability Under Federal and State Law 13.2
  • II. FEDERAL PREEMPTION
    • A. Summary of Preemption Applicable to Mortgage Lending 13.3
    • B. Preemption Under Dodd-Frank (CFPA)
      • 1. Summary of CFPA Amendments 13.3A
      • 2. Section 1041; Relationship to State Law; Conflicts
        • a. CFPA Conflicts 13.3B
        • b. Enumerated Consumer Law Conflicts 13.3C
      • 3. Section 1042; Preservation of State Enforcement Powers 13.3D
      • 4. Section 1043; Preservation of Existing Contracts 13.3E
      • 5. Sections 1044 and 1045; Preemption of State Law Affecting National Banks and Subsidiaries
        • a. State Consumer Financial Laws: Definition 13.3F
        • b. Preemption Standards and Scope 13.3G
        • c. Preemption Determination Procedures 13.3H
        • d. Subsidiaries and Affiliates of National Banks 13.3I
      • 6. Section 1046; Preemption of State Law Affecting Federal Savings Associations 13.3J
      • 7. Section 1047; Exceptions to Visitorial Standards for National Banks and Federal Savings Associations 13.3K
  • III. SUMMARY OF CALIFORNIA RESIDENTIAL LENDING STATUTES
    • A. Financial Code; Finance Lenders Law 13.4
    • B. SB 1137 and Homeowner Bill of Rights 13.5
    • C. Foreclosure Rescue and Foreclosure Consultation Statutes 13.6
    • D. Suspending or Closing HELOCs 13.6A
  • IV. SUMMARY OF ELDER ABUSE LAWS
    • A. Financial Elder Abuse 13.7
    • B. Regulation of Reverse Mortgages 13.8
      • 1. Effect of Due Date on Nonborrower Spouse 13.8A
      • 2. Notice to Borrower Before Foreclosure 13.8B
  • V. SUMMARY OF FEDERAL RESIDENTIAL LENDING STATUTES
    • A. TILA and Regulation Z: Truth in Lending 13.9
      • 1. History of TILA 13.10
      • 2. Sources of TILA Law 13.11
      • 3. Lenders and Loans Governed by TILA 13.12
        • a. Loans Subject to TILA Disclosures 13.13
        • b. Rescission Versus Damages 13.14
        • c. Dodd-Frank Additions Affecting Loan Originating and Servicing 13.15
        • d. Dodd-Frank and HFA Amendments: Identity of Noteholder; Notice of Note Transfer 13.16
    • B. HOEPA: Home Ownership and Equity Protection Act of 1994 13.17
      • 1. "Open-Ended Credit Loan" Defined 13.18
      • 2. Required Disclosures 13.19
      • 3. Limited or Prohibited Loan Practices 13.20
      • 4. HOEPA Changes Effective October 1, 2009 13.21
      • 5. HOEPA Changes After Dodd-Frank 13.22
    • C. Real Estate Settlement Procedures Act of 1974 13.23
      • 1. RESPA Disclosures; Settlement Statement (Before January 1, 2010) 13.24
      • 2. RESPA Disclosures; Settlement Statement (Effective January 1, 2010) 13.25
      • 3. RESPA Disclosures; Settlement Statement (Amendments Effective After Dodd-Frank) 13.25A
    • D. CFPB Regulations Integrating TILA and RESPA Disclosures for Consumer Loans (Effective in 2015) 13.25B
      • 1. Purpose of TRID; Effective Dates 13.25C
      • 2. Applicability of TRID; CFPB Forms 13.25D
      • 3. Content and Timing Requirements
        • a. Loan Estimate 13.25E
        • b. Closing Disclosure 13.25F
      • 4. Lender Liability 13.25G
    • E. Fair Housing Laws 13.26
      • 1. Statute of Limitations 13.27
      • 2. Actions Under 42 USC §3605 13.28
      • 3. Redlining Prohibited by FHA 13.29
      • 4. Discriminatory Rescue Services 13.30
      • 5. Gender Discrimination Under FHA 13.31
    • F. Federally Insured and National Bank Loans 13.32
    • G. Racketeer Influenced and Corrupt Organizations Act (RICO) 13.33
    • H. False Claims Act 13.34
  • VI. RESIDENTIAL MORTGAGE LOANS UNDER DODD-FRANK ACT
    • A. Dodd-Frank Overview and Effective Dates 13.35
    • B. Table: Effective Dates for Dodd-Frank Act Title X (§§1001–1100H) (Bureau of Consumer Financial Protection) 13.35A
    • C. Table: Effective Dates for Dodd-Frank Act Title XIV (§§1400–1498) (Mortgage Reform and Anti-Predatory Lending Act) 13.35B
    • D. Dodd-Frank's Lender Obligations During Loan Underwriting 13.36
      • 1. Consumer's Ability to Repay Loan 13.37
        • a. Introduction 13.38
        • b. Section 1411—Ability to Repay
          • (1) General Requirements 13.39
          • (2) Income Verification 13.40
          • (3) "Nonstandard" Loans 13.41
          • (4) Refinancing "Hybrid" Loans to "Standard" Loans 13.42
        • c. Section 1412-Qualified Mortgages
          • (1) Safe Harbor for Qualified Mortgages and Rebuttable Presumption for Higher-Priced Transactions 13.43
          • (2) Criteria for Qualified Mortgages 13.44
          • (3) Balloon-Payment Qualified Mortgages 13.45
      • 2. Underwriting Standards for TILA Higher-Priced Mortgage Loans 13.45A
        • a. Underwriting and Prepayment Penalties 13.45B
        • b. Escrow Rule and Impound Accounts 13.45C
      • 3. Appraisal Standards
        • a. Introduction 13.46
        • b. Appraisal Independence Provisions
          • (1) Scope 13.47
          • (2) Coercion to Affect Valuations Prohibited 13.48
          • (3) Mischaracterization of Value 13.49
          • (4) Prohibition on Conflicts of Interest 13.50
            • (a) Employment by Creditor or Affiliate 13.51
            • (b) Larger Creditor Safe Harbor 13.52
            • (c) Smaller Creditor Safe Harbor 13.53
          • (5) Prohibition on Extension of Credit if Creditor Has Knowledge of Violation of Independence or Conflict-of-Interest Rules 13.54
        • c. Customary and Reasonable Compensation
          • (1) Scope 13.55
          • (2) Presumptions of Compliance With Duty to Pay Customary and Reasonable Compensation to Fee Appraisers 13.56
            • (a) First Presumption of Compliance 13.57
            • (b) Second Presumption of Compliance 13.58
        • d. Appraisal Requirements for Higher-Risk/Higher-Priced Mortgages 13.59
        • e. Minimum Requirements for Appraisal Management Companies 13.59A
      • 4. Mandatory Arbitration Prohibited 13.60
  • VII. PREDATORY LENDING LITIGATION
    • A. Historical Background 13.61
    • B. Summary of Predatory Lending Practices 13.62
    • C. Preliminary Considerations
      • 1. Tort Versus Contract Damages 13.63
      • 2. Checklist: Predatory Lending Facts 13.64
    • D. Summary of Predatory Lending Remedies (Former Parties; Sources and Theories of Liability) 13.65
    • E. Statutory Remedies 13.66
      • 1. Rescission Remedies Under Truth in Lending Act
        • a. Rights to Rescind 13.67
          • (1) Statute of Limitations; Statute of Repose 13.68
          • (2) Scope of Remedy; Effect of Sale, Foreclosure, Transfer, Bankruptcy, or Refinancing 13.69
          • (3) Assignee Liability 13.70
          • (4) Right to Rescind May Be Used Defensively 13.71
        • b. Inaccurate Disclosures Trigger Rescission Right 13.72
          • (1) Annual Percentage Rate 13.73
          • (2) Finance Charge; Amount Financed; Total Payments 13.74
          • (3) Disclosure Requirements Under Dodd-Frank Amendment to TILA 13.75
        • c. Rescission Procedure 13.76
        • d. Tender Issues 13.77
      • 2. Other Remedies Under TILA
        • a. Injunctive Relief 13.78
        • b. Damages Under TILA Before Dodd-Frank 13.79
        • c. Damages Under TILA After Dodd-Frank 13.80
        • d. Attorney Fees 13.81
        • e. Lender's Title Insurance for TILA Violations No Longer Available 13.82
      • 3. Remedies Under RESPA
        • a. Private Right of Action for Violations 13.83
          • (1) Section 6: Disclosure of Loan Servicing Transfer 13.84
          • (2) Disclosure of Noteholder's Identity 13.85
          • (3) Section 6: Qualified Written Requests 13.86
          • (4) Section 6: Private Right of Action; Class Actions 13.87
          • (5) Section 8: Kickbacks, Fee-Splitting, Unearned Fees 13.88
          • (6) Section 9: Title Companies 13.89
        • b. Section 10: Impound Accounts 13.90
        • c. RESPA's Statute of Limitations 13.91
    • F. Common Law Remedies
      • 1. Fraud 13.92
      • 2. Breach of Fiduciary Duty 13.93
      • 3. Negligence 13.94
      • 4. Breach of Covenant of Good Faith and Fair Dealing 13.95
    • G. Procedural Issues
      • 1. Foreclosure Issues 13.96
      • 2. Postforeclosure Issues 13.97
      • 3. Preemption 13.98
    • H. Comparing Potential Remedies
      • 1. Rescission; Restitution; Modification 13.99
      • 2. Damages
        • a. General Measure of Damages
          • (1) Breach of Contract 13.100
          • (2) Tort 13.101
          • (3) "Benefit of the Bargain" Rule in Fiduciary Breach Cases 13.102
        • b. Treble Damages in Actions Involving Senior Citizens or Disabled Persons 13.103
        • c. Punitive Damages; CC §§3294, 3345 13.104
      • 3. Attorney Fees 13.105
    • I. Special Problems
      • 1. Holder in Due Course Sanitization 13.106
      • 2. Antideficiency Rules 13.107
        • a. Purchase Money Loans 13.108
        • b. Nonjudicial Foreclosures 13.109
        • c. Sold-Out Junior Issues 13.110
      • 3. Workout Strategies on Residential Loans 13.111
      • 4. Negligent Appraisals 13.112
      • 5. Bankruptcy 13.113
        • a. Of Borrower 13.114
        • b. Of Lender or Its Officers 13.115
    • J. Other Resources
      • 1. Government Websites 13.116
      • 2. Legal Aid Providers and Attorney or Consumer Resources 13.117

CALIFORNIA MORTGAGES, DEEDS OF TRUST, AND FORECLOSURE LITIGATION

(4th Edition)

January 2017

TABLE OF CONTENTS

 

File Name

Book Section

Title

CH02

Chapter 2

Trustee Sales

02-130

§2.130

Recordable Notice of Default

02-130A

§2.130A

Summary of Key Information (Attachment to Notice)

02-131

§2.131

Request for Notice of Default

02-132

§2.132

Unruh Act Special Notice

02-133

§2.133

Recordable Notice of Sale for Trustor

02-133A

§2.133A

Summary of Key Information (Attachment to Notice)

02-133B

§2.133B

Notice of Sale for Residential Tenant

02-134

§2.134

Trustee’s Deed

CH03

Chapter 3

Judicial Foreclosure

03-039

§3.39

Checklist: Essential Allegations

03-065

§3.65

Checklist: Evidence Required for Foreclosure Judgment

03-102

§3.102

Complaint for Foreclosure of Deed of Trust

03-103

§3.103

Judgment of Foreclosure and Order of Sale

03-106

§3.106

Notice of Sale

03-107

§3.107

Certificate of Sale

03-108

§3.108

Notice of Right of Redemption

03-109

§3.109

Report of Sheriff/Receiver and Account of Sale

03-110

§3.110

Deed of Sale

03-111

§3.111

Notice of Motion for Deficiency Judgment

03-112

§3.112

Application for Order and Order Appointing Referee to Appraise Property

03-113

§3.113

Deficiency Judgment Following Foreclosure

CH04

Chapter 4

Code of Civil Procedure §726(a): The One-Action Rule

04-046

§4.46

Form Provision: Allegation of Worthless Security

CH06

Chapter 6

Receiverships, Rents, and Leases

06-099

§6.99

Complaint for Specific Performance of Assignment of Rents

06-100

§6.100

Notice of Motion for Appointment of Receiver

06-101

§6.101

Declaration in Support of Application for Receivership

06-102

§6.102

Order Appointing Receiver

06-107

§6.107

Notice to Tenant of Demand to Pay Rent

06-108

§6.108

Application for Order Directing Receiver to Transfer Possession of Real Property and File Final Accounting

06-109

§6.109

Declaration in Support of Application for Order Directing Receiver to Transfer Possession of Real Property

06-110

§6.110

Order Directing Receiver to Transfer Possession of Real Property and File Final Accounting

CH07

Chapter 7

Debtor Strategies

07-030

§7.30

Demand Letter Requesting Lender or Loan Servicer to Provide Documentation of Loan Claim

07-044

§7.44

Complaint to Enjoin Foreclosure, and for Declaratory Relief and an Accounting

07-047

§7.47

Checklist: Procedure for Obtaining TRO and OSC

07-048

§7.48

Order to Show Cause and Temporary Restraining Order

07-049

§7.49

Checklist: Obtaining Hearing on Preliminary Injunction

07-050

§7.50

Notice of Motion for Preliminary Injunction

07-073

§7.73

Complaint to Set Aside Trustee Sale and for Damages

07-106

§7.106

Checklist: Defenses to Stay Relief

CH08

Chapter 8

Payment and Related Disputes

08-030

§8.30

Form Provision: Late-Charge Clause

CH10

Chapter 10

Workouts of Problem Loans

10-002

§10.2

Checklist: Loan Contract Documents

10-002B

§10.2B

Default Notice

10-003A

§10.3A

Pre-Negotiation Letter

10-022A

§10.22A

Forbearance Agreement

10-022C

§10.22C

Escrow Agreement for Deed in Lieu of Foreclosure

10-023A

§10.23A

Loan Modification Agreement

10-031A

§10.31A

Deed in Lieu Agreement

10-032

§10.32

Deed in Lieu of Foreclosure (Recordable)

10-032A

§10.32A

Covenant Not to Sue

10-037

§10.37

Checklist: Issues to Consider in Drafting Workout

10-038

§10.38

Provision for Lender to Bid at Foreclosure Sale

10-039

§10.39

Provision for Handling Unpaid Construction Bills

10-040

§10.40

Provision Defining Borrower’s Role in Workout

10-041

§10.41

Provision for Determining Proceeds and Profits of Workout

10-042

§10.42

Provision Regarding Effect of Future Litigation on Workout

10-047

§10.47

Clause in Construction (Building) Loan Agreement Authorizing Lender or Receiver to Complete Improvements

10-048

§10.48

Provision in Order Appointing Receiver Authorizing Completion of Improvements

10-049

§10.49

Receiver’s Certificate for a Borrowing From Lender

CH11

Chapter 11

Enforcing Secured Loans Against Debtors in Bankruptcy

11-047

§11.47

Checklist: Preliminary Hearing

11-050

§11.50

Checklist: Preliminary Hearing

CH12

Chapter 12

Lender and Broker Liability

12-051

§12.51

Checklist: Commitment Letter Procedures

12-057

§12.57

Checklist: Loan Documentation Procedures

12-073

§12.73

Checklist: Loan Administration Guidelines

12-084

§12.84

Checklist: Guidelines for Lenders During Workouts

12-101

§12.101

Checklist: Guidelines for Lenders During Foreclosure Process

CH13

Chapter 13

Special Issues in Consumer Residential Mortgage Loans

13-064

§13.64

Checklist: Predatory Lending Facts

 

Selected Developments

January 2017 Update

Book Enhancements in This Update

The Homeowner Bill of Rights (HBOR) does not apply to every lender making a residential mortgage loan. For newly added tables summarizing how to determine the applicability of the HBOR to both borrowers and lenders, see §2.49G.

The litigation form in §7.44, Complaint to Enjoin Foreclosure, and for Declaratory Relief and an Accounting, was substantially amended to accomplish two goals: (1) The amendments make it easier for attorneys to plead causes of action for injunctive relief on the basis of several different fact patterns arising from new case and statutory developments, including temporary injunctions under the HBOR, and (2) the amendments add options for pleading around the often misunderstood "tender rule."

The litigation form in §7.73, Complaint to Set Aside Trustee Sale and For Damages, was substantially amended to accomplish three goals: (1) The amendments make it easier for attorneys to plead causes of action for equitable relief to set aside the foreclosure on the basis of several different fact patterns arising from new case and statutory developments, (2) the amendments add options for pleading around the "tender rule," and (3) a fifth cause of action was added for damages for wrongful foreclosure.

In §§13.35A–13.35B, the newly added tables show (1) effective dates for both Title X of the Dodd-Frank Act (§§1001–1100H) (Bureau of Consumer Financial Protection) and Title XIV of the Dodd-Frank Act (§§1400–1498) (Mortgage Reform and Anti-Predatory Lending Act) and (2) effective dates for their respective implementing regulations to make it easier for attorneys who have to litigate under the difficult-to-calculate effective dates for both the statute and its regulations, some of which were so ambiguous they had to be determined in case law.

A new section has been added, §8.56A, summarizing the more important provisions of the Homeowners Protection Act (HPA) (12 USC §§4901–4910), which requires cancellation of the otherwise mandatory private mortgage insurance or mortgage guaranty insurance (PMI) when the principal balance is scheduled to reach 78 percent of the original value of the property. In contrast, California law allows the borrower to cancel the PMI when the loan-balance-to-value ratio decreases to 75 percent under CC §2954.12(a). The HPA preempts all state laws related to requirements for obtaining or maintaining PMI, but only to the extent that the state laws are inconsistent with the HPA.

California Supreme Court decisions and their impacts. The supreme court extended the antideficiency protection of CC §580b to a short sale of property involving a purchase money loan. See Coker v JPMorgan Chase Bank (2016) 62 C4th 667, cited in §§5.24–5.25, 5.28A, 5.35–5.36, 5.70, 7.21C, 9.8, 9.124.

The supreme court also held that borrowers have standing to challenge an assignment of the promissory note and deed of trust as void and expressly disapproved numerous California court of appeal opinions holding to the contrary. See Yvanova v New Century Mortgage Corp. (2016) 62 C4th 919, discussed in §§1.11, 2.9A, 2.25, 2.34, 7.15, 11.89, 12.92, 13.96.

California courts of appeal immediately began to differ on how to apply the ruling in Yvanova, particularly on the issue of whether a defective assignment of the note is merely voidable or void. Compare, e.g., Yhudai v IMPAC Funding Corp. (2016) 1 CA5th 1252 and Saterbak v JPMorgan Chase Bank (2016) 245 CA4th 808 (defective loan assignment rendered transaction and subsequent foreclosure merely voidable) with Sciarratta v U.S. Bank (2016) 247 CA4th 552 (following Yvanova in holding that foreclosure sale was wrongful in that trustee was not proper trustee at time of sale and thus sale was void, or alternatively, party that ordered sale and acquired property by way of credit bid was neither holder of note nor beneficiary of deed of trust). See §§2.25, 7.15, 7.67C, 12.86, 13.61.

Moreover, subsequent decisions do not agree on whether Yvanova permits a preemptive injunction action that challenges the note assignment before the sale. Compare Saterbak v JPMorgan Chase Bank (2016) 245 CA4th 808 (affirmed dismissal of preforeclosure claim) with Brown v Deutsche Bank (2016) 247 CA4th 275 and Lundy v Selene Fin., LP (ND Cal, Mar. 17, 2016, No. 15-cv-05676-JST) 2016 US Dist Lexis 35547 (both indicated that same reasoning set forth in Yvanova would apply to preforeclosure suits because borrower should not have to wait until improper foreclosure sale is over before bringing court challenge). See §§7.15, 7.24, 13.2, 13.61, 13.86, 13.96.

Trustee sales. Although a trustee's actions in a nonjudicial foreclosure and the execution of statutory foreclosure procedures may be privileged under CC §47(c)(1), the court in Lundy v Selene Fin., LP (ND Cal, Mar. 17, 2016, No.15-cv-05676-JST) 2016 US Dist Lexis 35547 allowed the borrowers' claims for mistakes of the trustee to proceed against the loan servicer who made the substantive decision to foreclose. See §§2.26, 2.47.

The applicability of the federal Fair Debt Collection Practices Act (FDCPA) to state-governed nonjudicial foreclosure proceedings is unsettled in the Ninth Circuit, with one court of appeal panel and the majority of district courts rejecting applicability. See Ho v ReconTrust Co. (9th Cir 2016) 2016 US App Lexis 18836 (because statutory phrase "debt collector" is notoriously ambiguous, causing other circuits to disagree on whether foreclosure-related activities constitute debt collection, court declined to construe FDCPA in manner that interferes with California's statutory scheme for conducting nonjudicial foreclosures). See §2.38A.

A temporary measure (effective Jan. 1, 2017) protects homeowners who live in and inherit residential property but are not borrowers on the loan. Under CC §2920.7, on notification from someone claiming to be a successor in interest that a borrower has died, a mortgage servicer must allow a confirmed successor to either assume the loan or apply for a loan modification. See §2.49D.

As part of reinstating a defaulted loan, the beneficiary may require the trustor to pay the trustee's properly incurred expenses, including trustee and attorney fees, on which there is a statutory cap in CC §§2924c(d) and 2924d(a). The table in §2.59 was updated to reflect the increases authorized by legislation enacted in 2016.

Title 18 USC §1343 allows criminal prosecution of defrauding purchasers of residential property or mortgage lenders by use of wire, radio, or television; in a recent Ninth Circuit case, U.S. v Lindsey (9th Cir 2016) 827 F3d 865, the court found that evidence suggesting that the lenders negligently or intentionally disregarded the borrower's fraudulent misrepresentations when reviewing his loan applications was inadmissible. See §2.129B.

Debtor strategies. The supreme court will review a court of appeal decision that limited applicability of California's anti-SLAPP statute (CCP §§425.16–425.18) in a mortgage case, Crossroads Investors, LP v Federal Nat'l Mortgage Ass'n (review granted July 27, 2016, C072585; superseded opinion at 246 CA4th 529) (court of appeal ruled that plaintiff's claim involved lender's unprotected activity in failing to provide payoff information as required by law), cited in §§7.1, 7.23, 12.1.

Several federally sponsored loan modification programs terminated in 2016. The Home Affordable Modification Program (HAMP) no longer accepted certain loan modification applications after December 31, 2016, but will continue to process applications received before the termination date through September 30, 2017. The Making Home Affordable (MHA) Program also terminated on December 31, 2016. See §§7.21E, 10.8B.

The Mortgage Forgiveness Debt Relief Act of 2007 and its extending amendments allowed exclusion of income realized as a result of debt reduction on a taxpayer's principal residence resulting from a loan modification, workout, short sale, foreclosure, deed in lieu of foreclosure, or other loan restructuring. Subsequent amendments extended the Act through January 1, 2017, and allow discharges of indebtedness occurring after January 1, 2017, to be excluded from gross income under federal law if discharged by an arrangement evidenced in writing before January 1, 2017. IRC §108(a)(1)(E)(ii); Pub L 114–113, §151(b), 129 Stat 2242. A California bill (SB 907 (2016)) that would have retroactively extended similar tax relief to discharges occurring on or after January 1, 2014, and before January 1, 2017, was vetoed by the Governor on September 13, 2016. See §7.21G.

The tender rule requires a borrower seeking to either enjoin or set aside a trustee sale to tender in its complaint (and demonstrate the ability to pay) the amount owing. On tender issues for claims arising from unfair or fraudulent business acts or practices, see Majd v Bank of America (2015) 243 CA 4th 1293 (tender requirement did not apply to plaintiff alleging unfair business claims based on foreclosure occurring during loan modification process). See §§7.24A, 12.27.

Although CC §2924(a)(6) forbids an entity from initiating a trustee sale unless it is the holder of the beneficial interest under the deed of trust, the original or substituted trustee under the deed of trust, or the designated agent of the holder, the court in Lucioni v Bank of America (2016) 3 CA5th 150 held that a borrower may not use §2924(a)(6) to temporarily enjoin a pending sale under the HBOR. See §§7.38, 7.44.

For recent state and federal court cases allowing the prevailing borrower to recover attorney fees even if a temporary restraining order or preliminary injunction is ultimately vacated because the lender or servicer cures its violations of the HBOR requirements, see §§7.38, 7.55.

In defending preforeclosure injunction actions or postforeclosure damages actions, many lenders and their servicers will remove the case to a federal district court on the basis of diversity jurisdiction. This rule requires complete diversity of citizenship (i.e., no plaintiff and no defendant can be citizens of the same state), but an exception applies if a party was fraudulently joined in the action. Weeping Hollow Ave. Trust v Spencer (9th Cir 2016) 831 F3d 1110 (refused to apply exception in purchaser's action to quiet title against bank's competing lien following foreclosure by homeowners' association). See §7.42.

To qualify for removal from state to federal court on the basis of diversity jurisdiction, the matter in controversy must exceed the sum or value of $75,000, exclusive of interest and costs. But in Vergara v Wells Fargo Bank (CD Cal, Mar. 17, 2015, No. SACV 15–00058–JLS (RNBx)) 2015 US Dist Lexis 32984, the district court held that when the plaintiff seeks to enjoin a foreclosure sale pending the loan modification, the amount in controversy does not include the full amount of the loan. See §7.42.

Bankruptcy cases. When the debtor files a Chapter 7—or if the case is converted to a Chapter 7 or if a trustee is appointed in a Chapter 11—the bankruptcy trustee has the authority and obligation to settle or sell property of the estate for the benefit of creditors, causing the debtor to lose control over the claims the debtor has against others, including creditors who make claims against the debtor. See, e.g., Goldstein v Stahl (In re Goldstein) (BAP 9th Cir 2015) 526 BR 13. See §§7.84, 7.87, 11.46.

Bankruptcy cases can be difficult for the debtor to terminate, because they involve the administration of an estate for the benefit of many other interests rather than being a two-sided civil dispute. See recent cases that differ with each other on the standards governing a debtor's right to voluntarily dismiss his or her bankruptcy case in §§7.87, 11.3.

Representations regarding a debtor's assets in his or her Schedules and Statement of Financial Affairs are crucial in a bankruptcy, and misrepresentations are punishable. See, e.g., Elliot v Weil (In re Elliot) (Elliott III) (BAP 9th Cir 2016) 544 BR 421 (debtor's voluntary transfer of real property and concealment of asset precluded claim for homestead exemption). See §§7.87, 11.88.

The absolute priority rule, which in essence requires that a cram-down plan provide that creditors be paid in full before the debtor can retain an interest in property of the estate, applies to both business entity and individual Chapter 11 debtors under 11 USC §1129. The Ninth Circuit has joined several other circuits in holding that the debtor can retain only postpetition property added to or taken into the estate by 11 USC §1115(a). See Zachary v California Bank & Trust (9th Cir 2016) 811 F3d 1191. See §§7.87, 7.119, 11.109.

Although it is clear that a bankruptcy court lacks authority to deny a debtor leave to amend exemptions under 11 USC §105(a) absent a statutory basis, the court may determine whether there are grounds under bankruptcy law or state law for denying an exemption. See, e.g., Elliott v Weil (In re Elliott) (Elliott III) (BAP 9th Cir 2016) 544 BR 421 (debtor's voluntary transfer of real property and concealment of asset violated Bankruptcy Code and precluded claim for homestead exemption); In re Lua (Bankr CD Cal 2015) 529 BR 766 (amended homestead exemption was disallowed on basis of equitable estoppel). See §§7.87, 11.88.

The Ninth Circuit in HSBC Bank USA v Blendheim (In re Blendheim) (9th Cir 2015) 803 F3d 477 held that lien-stripping is permissible in a Chapter 13 case because nothing in the Bankruptcy Code prevents it (even without a discharge), as long as the debtor's plan otherwise complies with requirements of the Bankruptcy Code. But it also held that a lien avoided during a Chapter 13 case will remain permanently avoided, even when the debtor is ultimately barred from receiving a discharge. See §§7.88, 11.25, 11.90, 11.126.

In a "Chapter 20," the wholly unsecured deed of trust is not added to the amount of the general unsecured debt under 11 USC §109(e) when the debtor receives a discharge relieving the debtor of personal liability for the underlying note secured by the deed of trust, even when the Chapter 7 case has not yet closed. Free v Malaier (In re Free) (BAP 9th Cir 2015) 542 BR 492. See §§7.88B, 11.92, 11.126.

Under 11 USC §522(p)(1), bankruptcy law imposes a statutory cap on the homestead exemption that a debtor can claim despite applicable state law exemptions. In Caldwell v Nelson (In re Caldwell) (BAP 9th Cir 2016) 545 BR 605, the court concluded that the transfer of title from an LLC to the family trust did not constitute an interest that was acquired by the debtor to limit his homestead claim, within the meaning of §522(p)(1), because Nevada law protected the debtor's homestead rights; thus, the statutory cap did not apply. See §7.88D.

A Chapter 7 bankruptcy trustee may be entitled to an extended objection period for a claimed homestead exemption when the debtor falsely represents the real property as his or her homestead to avoid administration and the trustee reasonably relies on those statements. Whatley v Stijakovich-Santilli (In re Stijakovich-Santilli) (BAP 9th Cir 2015) 542 BR 245. See §§7.88D, 11.88.

After a foreclosure has been completed, the borrower may obtain a stay of a pending eviction action by filing a bankruptcy petition, but the eviction will not be stayed if the petition is filed after the eviction judgment has been entered and the writ of possession issued. Eden Place, LLC v Perl (In re Perl) (9th Cir 2016) 811 F3d 1120 (borrower no longer has legal or equitable interest in property after California state court issues unlawful detainer judgment and writ of possession). See §§7.91, 11.15.

The Bankruptcy Code's requirement of "reasonably equivalent value" of the property price in a sale during bankruptcy is satisfied by a regularly conducted and noncollusive sale. See Tracht Gut, LLC v County of Los Angeles (In re Tracht Gut, LLC) (9th Cir 2016) 836 F3d 1146 (because California tax sales have same procedural safeguards as mortgage foreclosure sales, price received at tax sale conducted in accordance with state law conclusively established "reasonably equivalent value"). See §§7.111, 11.86.

Under 11 USC §506(a), a creditor's claim that is undersecured may be bifurcated into separate secured and unsecured claims. See First S. Nat'l Bank v Sunnyslope Hous. Ltd. Partnership (In re Sunnyslope Hous. Ltd. Partnership) (rehearing granted Sept. 22, 2016; former opinion at (9th Cir 2016) 818 F3d 937) (involving valuation of secured interest in real property under §506(a) when debtor exercised cram-down option under 11 USC §1325(a)(5)(B); on appeal, Ninth Circuit held that value of bank's secured interest should not be reduced by impact of affordable housing restrictions). See §7.113.

In Chapter 11 cases, for a debt to be reinstated, the debtor's plan must provide for the cure of defaults. Under Wells Fargo Bank v Beltway One Dev. Group, LLC (In re Beltway One Dev. Group, LLC) (BAP 9th Cir 2016) 547 BR 819, when the Chapter 11 plan does not provide a cure for a prebankruptcy default, the bankruptcy court must apply the presumption of allowability for the contractual default rate in determining the postpetition interest rate to which the oversecured lender is entitled, as long as the rate is not unenforceable. See §7.117.

Courts in the Ninth Circuit are split on whether the cure of a loan default nullifies the consequences of the default, including default penalties such as higher interest, and allows the debtor to reinstate the original interest rate under a confirmed reorganization plan. See, e.g., Pacifica L 51 LLC v New Investments Inc. (In re New Investments Inc.) (9th Cir 2016) 2016 US App Lexis 19929, cited in §§7.117, 11.94, 11.100.

A debt secured only by a home mortgage on the debtor's principal residence cannot be modified under a Chapter 13 plan. In the case of In re Garrido-Yarnis (Bankr SD NY 2016) 545 BR 459, the bankruptcy court held that as long as a tax lien on the debtor's real and personal property retains any value, the entire tax lien is considered secured and cannot be avoided. See §§7.118, 11.92.

For a recent bankruptcy court decision addressing usury in the context of loan modifications, including a forbearance, see In re Arce Riverside, LLC (Bankr ND Cal 2015) 538 BR 563. See §10.23B.

Some recent courts conclude that under 11 USC §362(c)(3)(A), the stay is terminated with respect to the debtor, the debtor's property, and the property of the estate. But others rule that termination under §362(c)(3)(A) applies only to the debtor and his or her property but remains in effect with respect to the property of the estate. See §11.6.

The failure to rectify prior violations of the automatic bankruptcy stay once the creditor is aware of the bankruptcy case may constitute willfulness that is sanctionable. Carter v Barber (In re Carter) (BAP 9th Cir, Apr. 22, 2016, No. EC-14–1581-KuDTa) 2016 Bankr Lexis 1838 (unpublished opinion) (failure to take affirmative steps to remedy prior stay violations constituted continuing willful violation). See §11.19.

Although emotional and punitive damages are also available for stay violations under certain circumstances, courts are reluctant to create a "cottage industry" for emotional and punitive damages. See In re Bourke (Bankr D Mont 2015) 543 BR 657 (denying emotional distress damages when stay violations were less severe than those involved in other cases and could not be quantified separately from stress debtor had endured prior to bankruptcy). See §11.19.

In a bankruptcy sale free and clear of liens under 11 USC §363(f), it is particularly important to list the liens and other interests that will attach to the proceeds of sale if it is not obvious that a creditor has an interest. If not listed, the creditor may have the burden of requesting adequate protection at the time of the sale hearing, since retroactive adequate protection is rarely granted. BMO Harris Bank v Vista Mktg. Group (In re Vista Mktg. Group) (Bankr ND Ill 2016) 548 BR 502. See §11.74.

On what conditions and terms in a transfer of real property in bankruptcy are considered to constitute a sale free and clear of liens, see In re NNN Parkway 400 26, LLC (Bankr CD Cal 2014) 505 BR 277. See §§11.76, 11.111.

After abandonment of property of the bankruptcy estate, liens attached to the property will remain on the property, even if they have no value. A creditor may not request the court to value its lien as having no value for the purpose of receiving a distribution on its unsecured claim after the property is no longer property of the estate. Rabobank v Beardsley (In re Beardsley) (BAP 9th Cir, Aug. 28, 2015, BAP No. NC-14–1230-DKiTa) 2015 Bankr Lexis 2898. See §11.77.

A bankruptcy trustee may pursue a fraudulent transfer action under California's version of the Uniform Voidable Transactions Act (CC §§3439–3439.14), which is incorporated into the trustee's avoidance powers under 11 USC §544. See, e.g., Ezra v Seror (In re Ezra) (BAP 9th Cir 2015) 537 BR 924 (trustee action to avoid deeds of trust), cited in §11.86.

On enforceability of contractual default interest rates, see Wells Fargo Bank v Beltway One Dev. Group, LLC (In re Beltway One Dev. Group, LLC) (BAP 9th Cir 2016) 547 BR 819 (presumption of default interest rate applies to postpetition pre-effective date interest, subject to equitable considerations). See §11.94.

In the Ninth Circuit, determining whether claims are similar enough to preclude separate classification is a question of fact, reviewable under the clearly erroneous standard. See Franklin High Yield Tax-Free Income Fund v City of Stockton (In re City of Stockton) (BAP 9th Cir 2015) 542 BR 261 (failure to separately classify capital market creditor's $30 million deficiency claim was neither impermissible nor unfairly discriminatory). See §11.99.

A Ninth Circuit panel will rehear the issue of valuing the lender's collateral under 11 USC §506(a) when a junior creditor is involved. First S. Nat'l Bank v Sunnyslope Hous. Ltd. Partnership (In re Sunnyslope Hous. Ltd. Partnership) (rehearing granted Sept. 22, 2016, No. 12–17241; former opinion at (9th Cir 2016) 818 F3d 937) (valuation of senior secured creditor's real property collateral under §506(a) could not be reduced by junior creditor's affordable housing restrictions when debtor was retaining property). See §11.110.

For higher-income debtors who have completed Chapter 13 plan payments before the end of the applicable commitment period, courts have adopted local Chapter 13 plans that authorize Chapter 13 trustees to enforce the plan to increase the applicable commitment period and the return to creditors. See In re Mast (Bankr SD Cal 2015) 541 BR 487 (interpreting Southern District California Bankruptcy Court local Chapter 13 plan). See §11.120.

In Chapter 13 cases, the debtor's encumbered property typically consists of a car and a home, although a debtor may sometimes own income-producing real property. As in Chapter 11 plans, the Bankruptcy Code draws a distinct line between the treatment of home mortgages and other secured debt by providing that a Chapter 13 plan may modify the rights of secured creditors, but not if the creditor's claim is secured only by the debtor's principal residence. On the multitude of conflicting authority on the meaning of "secured only by the debtor's personal residence," see recent cases discussed in §§11.123–11.125.

The Ninth Circuit as a whole is reviewing a decision of a Ninth Circuit panel about whether the bankruptcy appellate panel has the jurisdiction to hear a petition for a writ of mandamus, which arose from the dismissal of an action for a lender's violation of the automatic stay in conducting a foreclosure. See Ozenne v Chase Manhattan Bank (In re Ozenne) (9th Cir 2016) 818 F3d 514, rehearing en banc granted (9th Cir 2016) 828 F3d 102. See §11.148.

After entry of the order authorizing the property sale, new facts may come to light that plausibly call into question the good faith of the purchaser. When the issue of whether the appeal of the order might be moot under 11 USC §363(m) is critical to the disposition of the appeal, the appropriate procedure is a limited remand to permit the bankruptcy court to hear and consider the new facts. Zuercher Trust v Schoenmann (In re Zuercher Trust) (BAP 9th Cir, Feb. 22, 2016, BAP No. NC–14–1440–KuWJu) 2016 Bankr Lexis 542 (unpublished opinion). See §11.150.

Guarantors and suretyships. By referring to rights and defenses that a guarantor or surety "may" have under the one-action and antideficiency rules, CC §2856(a)(3) leaves open the question whether such rules do, in fact, benefit a guarantor or surety directly when the obligation is secured by real property. But §2856(a)(3) provides that to whatever extent those rules do apply to a guarantor or surety, they are waivable, unlike the unenforceability of waivers by the principal. See, e.g., LSREF2 Clover Prop. 4 v Festival Retail Fund 1 (2016) 3 CA5th 1067 (also held that when lender neither structures transaction nor knows, at time of making loan, of borrower's (or affiliate's) failure to follow corporate formalities, sham guaranty defense does not apply); CADC/RAD Venture 2011–1 LLC v Bradley (2015) 235 CA4th 775. See §§9.124, 9.139, 9.147.

In First Intercontinental Bank v Ahn (9th Cir 2015) 798 F3d 1149, the Ninth Circuit held that California law governed the interpretation of an attorney fee clause in a dispute between the bank and the guarantor on a real property secured loan, despite a Georgia choice-of-law provision in the guaranteed promissory note that would have imposed a unilateral right to fees. The court found that CC §1717's reciprocal right to attorney fees reflected a fundamental state policy. See §9.141.

Loan servicing, lender liability, and consumer mortgage claims. In late 2014, the Consumer Financial Protection Bureau (CFPB) proposed amendments to the servicing regulations, including the extension of protection to the initial borrower's successors in interest and the coordination of the servicing rules with other consumer lending regulations. The CFPB released the final rule in 2016, shortly before this book's update went to press. See 81 Fed Reg 72160 (Oct. 19, 2016), cited in §10.8H.

For examples of recent state and federal cases finding that allegations of lender negligence or fraudulent misrepresentations made by a lender or its servicer have been sufficiently pleaded as well as discussion of the split in authority regarding the duty of care element, see Daniels v Select Portfolio Servicing (2016) 246 CA4th 1150, 1167 (lender's employee negligently or falsely represented that lender had not received financial documents submitted by plaintiffs in support of loan modification application) and other cases cited in §§12.5, 12.11, 12.11D.

In Orcilla v Big Sur, Inc. (2016) 244 CA4th 982, the court of appeal held that the plaintiffs had stated a valid claim to set aside a wrongful foreclosure primarily on the basis of a theory of unconscionability because the monthly payments required under the loan and the loan modification exceeded their income by more than $1000. See §§7.67A, 7.73, 12.30A.

Some courts require strict adherence to the requirements for relief under Bus & P C §17200. See Aghaji v Bank of America (2016) 247 CA4th 1110 (allegations that defendants charged improper loan fees and failed to credit plaintiffs' mortgage loan payments did not state cause of action under Unfair Competition Law (UCL)). See §12.27.

Effective January 1, 2017, the Commissioner of Business Oversight has the discretion to require a lender engaging in residential mortgage lending activities described in Fin C §50003(2)(m) to continuously maintain a minimum tangible net worth of an amount greater than $250,000, but that amount must not exceed the net worth required of an approved lender under the Federal Housing Administration. Fin C §50201(a). See §12.31.

The lack of a private right of action under the HAMP does not leave borrowers without remedies. One federal court of appeal, in George v Urban Settlement Servs. (10th Cir 2016) 833 F3d 1242, upheld claims alleged against the bank and its loan servicer, which acted in concert with other entities to further the common goal of wrongfully denying applications for loan modifications under HAMP to eligible borrowers. This case and other recent cases arising from failed loan modifications are discussed in §§12.81–12.81A, 13.33.

Some recently decided reverse mortgage cases hold that certain federal government regulations (i.e., those that primarily govern the relationship between the reverse mortgage lender and the government as the insurer of the loan) do not give the borrower a private cause of action in contract unless the regulations were expressly incorporated into the lender-borrower agreement. See, e.g., Johnson v World Alliance Fin. Corp. (5th Cir 2016) 2016 US App Lexis 13125 (unpublished opinion); Chandler v Wells Fargo Bank (9th Cir 2016) 637 Fed Appx 413, 2016 US App Lexis 3375 (unpublished opinion). See §13.8.

The 30-day notice required before foreclosure on reverse mortgages is for the benefit of only the borrower and not the heirs or the estate of the borrower. See Chandler v Wells Fargo Bank, supra (upheld district court's application of 2008 guidance). But under more recently issued guidance, which supersedes the ruling in Chandler, heirs may satisfy the debt by paying the mortgage balance or 95 percent of the current appraised value of the property, whichever is less. See §13.8B.

A Sixth Circuit panel held that a borrower cannot rescind the loan because of an assignee's failure to notify the borrower of the assignment of the deed of trust, because Congress authorized only actual and statutory damages for violations of 15 USC §1641(g). See Robertson v U.S. Bank (6th Cir 2016) 831 F3d 757, cited in §13.16.

Under regulations governing "higher-priced mortgage loans," creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within 3 days after a consumer applies for any mortgage loan secured by a consumer's principal dwelling, such as a home-improvement loan or a refinance of an existing loan. Recent changes to the regulations in 12 CFR §1026.35(b)(2) reduced the creditors' asset-size exemption from $2.060 billion to $2.052 billion as the threshold for creditors who must comply. See §13.21.

HUD amended its fair housing regulations in 2016 to formalize standards for use in investigations and adjudications involving alleged harassment. This amended rule defines "quid pro quo" and "hostile environment harassment" as prohibited under the Fair Housing Act (FHA) (see 24 CFR §100.600) and adds illustrations of discriminatory housing practices that constitute such harassment (see 24 CFR §§100.60, 100.65, 100.80, 100.90, 100.120, 100.130, 100.135). See §13.26.

Fannie Mae and Freddie Mac are not officers, employees, or agents of the United States for purposes of the False Claims Act. U.S. ex rel Adams v Aurora Loan Servs. (9th Cir 2016) 813 F3d 1259 (upheld dismissal of claims alleging that defendants certified that loans purchased by Fannie Mae and Freddie Mac were free and clear of certain homeowner association liens and charges when they were not). See §13.34.

In a California court of appeal case, U.S. Bank v Naifeh (2016) 1 CA5th 767, the defaulting borrower properly rescinded under the Truth in Lending Act (TILA), but the lender did not acquiesce. Afterward, the borrower recorded eight documents asserting that the lender no longer had any interest in the property. Then the lender foreclosed and sued the borrower to quiet title, and the borrower defensively raised rescission under TILA. The case was remanded so the trial court could determine what equitable procedure might return the parties to the status quo, including at what point in the litigation and how much the borrower should be required to tender. See §13.77.

When a mortgage servicer inadequately responds to a Qualified Written Request on a RESPA-covered loan by merely denying any error in the amount of payment it has demanded without giving the borrower a written explanation, this kind of failure may be actionable as an unreasonable investigation that prevented the servicer from discovering and appropriately correcting the account error. Renfroe v Nationstar Mortgage (11th Cir 2016) 822 F3d 1241. See §13.86.

About the Authors

Roger Bernhardt, who received his B.A., M.A., and J.D. degrees from the University of Chicago, is Professor of Law at Golden Gate University, San Francisco. He is also the editor of CEB's California Real Property Law Reporter and the author of Real Property in a Nutshell (West Publishing, 5th ed 2005), Bernhardt and Burkhart's Black Letter Outline on Property (West Publishing, 5th ed 2006), California Real Estate Finance (Carolina Academic Press, 5th ed 2008), Casebook on Real Property (Carolina Academic Press, 2005), and Bernhardt's California Real Estate Laws (Deerings, 2015). Admitted to practice law in both California and New York, Professor Bernhardt is a member of the American Law Institute, the American College of Real Estate Lawyers, and the American College of Mortgage Attorneys.

Charles A. Hansen, B.A., 1973, University of California, Los Angeles; J.D., 1977, University of California, Berkeley, School of Law, is a partner in Wendel, Rosen, Black & Dean, Oakland, with a focus on real estate, commercial, and secured transactions litigation. He has been retained as a consultant and expert witness in a variety of transactional and state and federal court litigation matters relating to commercial and real estate lending, real estate transactions, mortgages, trust deeds, brokers, escrow, title insurance, commercial leasing, real estate development, guaranties, and personal property secured transactions. He teaches real property secured financing law at the University of California, Berkeley, School of Law and is a frequent lecturer on mortgage remedies for CEB.

Chapter 7

Louis J. Esbin, B.S., 1981, Albany State (SUNY); J.D., 1984, Golden Gate University, San Francisco, contributed to chapter 7. Mr. Esbin has practiced law as the owner of Esbin Law Offices in Stevenson Ranch since 1993, where he provides bankruptcy, corporate formation, transactional, and merger and acquisition services to clients throughout California. He represents both corporate and individual clients, including small emerging businesses, corporations, and individuals, as debtors and creditors. Mr. Esbin counsels his clients on approaching their matters with a practical cost-benefit analysis. He is a founding board member of the Santa Clarita Valley Bar Association, a founding member of the Central District Consumer Bankruptcy Attorneys Association, a California Certified Legal Specialist in Bankruptcy Law (State Bar of California), and a member of the Financial Lawyers Conference and California Bankruptcy Forum.

Chapter 9

Michael T. Andrew, B.S., 1974, Regis College, Denver; J.D., 1979, Stanford Law School, Palo Alto, contributed to chapter 9. Mr. Andrew is of counsel with Dentons US LLP, San Diego. Mr. Andrew practices and consults in the areas of real and personal property secured transactions, commercial law, and business bankruptcy. His primary practice is representing real property secured lenders in matters ranging from negotiation, structuring, and documentation of loan transactions to enforcement and bankruptcy. He is a frequent lecturer and writer on commercial and bankruptcy law, and he has taught at Stanford Law School, the University of Colorado School of Law, and the University of San Diego School of Law.

Chapter 10

Randy Sugarman, B.A., M.B.A., Stanford University, contributed to chapter 10. Mr. Sugarman, a certified public accountant, is the managing partner of Sugarman & Company LLP, San Francisco. He serves as a financial consultant on loan workouts and bankruptcies for a wide range of industries, including construction, financial institutions, professional service firms (including accounting, engineering, and law), and real estate investment. He provides litigation support to both defense and plaintiff legal counsel, prepares financial analyses, and provides expert witness testimony on management and financial issues. Mr. Sugarman has assumed management responsibilities, implemented cost controls, negotiated with creditors, and supervised the orderly liquidation of assets. He acts as a State Court Receiver, Federal Bankruptcy Trustee, Assignee for Benefit of Creditors, and Examiner. Substantial portions of chapter 10 were based on chapter 1 of 2 California Real Property Financing (Cal CEB 1989), written by Bernard Kolbor, Aaron M. Peck, and Stephen E. Traverse and updated in 2003 by Joan M. Cambray, Martin M. Fleisher, and Timothy S. Williams.

Chapter 11

Richard M. Adler, B.A., 1981, University of California, Santa Barbara; J.D., 1984, University of California, Davis, School of Law, was the original author of chapter 11 and an update author for several years on the third edition. An attorney in Berkeley, Mr. Adler specializes in bankruptcy, including business restructuring and creditors' rights. He represents financially distressed public and private companies, creditors, and other interested parties including lessors, purchasers of assets, and creditors' committees in connection with matters related to financial workouts and restructurings, bankruptcy cases, and assignments for the benefit of creditors.

Mark S. Bostick, B.A., 1978, University of California, Berkeley; J.D., 1983, University of San Francisco School of Law, has been an update author, contributing editor, or consultant for chapter 11 continuously since 2007. Mr. Bostick is a partner in Wendel, Rosen, Black & Dean, Oakland, and represents debtors, committees, trustees, creditors, and other interested parties in bankruptcy proceedings and workouts. He has served as lead counsel to debtors in possession or trustees in Chapter 11 bankruptcy cases for a wide range of companies. He also represents numerous official and informal creditors' committees, trustees, and receivers. His practice emphasizes bankruptcy administration and litigation. He is a member of the California Bankruptcy Forum, the Alameda County Bar Association, the American Bankruptcy Institute, and the National Association of Bankruptcy Trustees.

Chapter 12

Kurt F. Eggert, B.A., Rice University, Houston; J.D., University of California, Berkeley, School of Law, contributed to chapters 12 and 13. Mr. Eggert is a professor of law at Chapman University School of Law, Orange. He has published several articles in legal journals on the holder in due course doctrine, the securitization of mortgages, mortgage servicing issues, and the subprime mortgage market. He is a former member of the Federal Reserve Board's Consumer Advisory Council and has testified to Congress on mortgage issues. Previously, he litigated mortgage and other consumer finance issues at Bet Tzedek Legal Services, a legal aid organization.

Chapter 13

Pamela D. Simmons, J.D., Lincoln Law School of San Jose, contributed to chapter 13. Ms. Simmons is a partner with Simmons & Purdy, Soquel. She represents homeowners on mortgage loan and loan servicing issues. Before private practice, she was an assistant district attorney prosecuting real estate, mortgage, and other white-collar fraud in Santa Cruz County. Since 1995 she has represented borrowers in litigation on violations of federal and state lending laws, including the Truth in Lending Act (TILA) and the Homeowner Bill of Rights (HBOR). One of her specialized skills involves the "audit" of payment records provided by lenders. She teaches secured real estate transactions at Lincoln Law School in San Jose. Ms. Simmons regularly speaks on mortgage-related matters to real estate professionals, homeowners, elders, and investors and at the American Bar Association's annual real estate symposia.

About the 2017 Update Authors

Michael T. Andrew is an annual update author for chapter 9. See his biography in the About the Authors section of this book.

Elizabeth Berke-Dreyfuss, B.A., 1976, Ohio State University, Columbus; M.A., 1978, Lone Mountain College, San Francisco; J.D., 1984, University of San Francisco, is a partner with Wendel, Rosen, Black & Dean, LLP, Oakland, specializes in bankruptcy, and is an update author for chapter 11 as well as CEB's Ground Lease Practice (2d ed Cal CEB). She has substantial Chapter 11 experience and represents creditors, trustees, and debtors in bankruptcy and insolvency matters for businesses and high net worth individuals. She assists companies transitioning from public to private ownership and in recapitalization; she represents both sellers and buyers in asset sales through the bankruptcy process.

Mark S. Bostick is an annual update author for chapter 11. See his biography in the About the Authors section of this book.

Kevin Brodehl, B.A., with High Honors, 1995, University of California, Santa Barbara; J.D., 1998, University of California, Davis, is a partner with Wendel, Rosen, Black & Dean, LLP, Oakland, and assisted in updating nearly all chapters in the 2017 update. He specializes in real property litigation involving secured transactions, deeds of trust, foreclosure and antideficiency, receivership, development agreements, joint ventures, and commercial leases. He also handles civil appeals and writs in the California courts of appeal and federal courts of appeals and litigates in the areas of business and intellectual property. He teaches at the University of California, Berkeley, School of Law and presents MCLE classes for California attorneys on the subject of mortgage law.

Louis J. Esbin assisted in updating chapter 7. See his biography in the About the Authors section of this book.

Tracy Green, B.A., 1979, University of California, Santa Cruz; J.D., 1984, University of San Francisco, is a partner with Wendel, Rosen, Black & Dean, LLP, Oakland, in the firm's insolvency practice and is an update author for chapter 11. Tracy represents clients in all aspects of their dealings with financially troubled companies. She represents debtors, creditors' committees, creditors, and trustees in connection with Chapter 11 reorganizations and liquidations, out-of-court workouts, buying and selling assets, assignment for the benefit of creditors, avoidance actions (fraudulent conveyances, preferences, and equitable subordination), and Chapter 7 liquidations. She also represents parties in commercial disputes and secured transactions.

Kent K. Qian, B.S., 2004, Georgia Institute of Technology; M.S., 2006, Ohio State University; J.D., 2009, University of Chicago Law School, is currently a staff attorney at the National Housing Law Project (NHLP) in San Francisco and is an update author for chapters 2, 7, and 10. He practices in appellate law and leads both the NHLP's national efforts to protect the rights of tenants in foreclosed properties and its project in California advocating for homeowners in foreclosure. Before joining the NHLP, Mr. Qian served as a San Francisco Rent Board Commissioner in 2012 and as a law clerk at the Sargent Shriver National Center on Poverty Law in Southern California.

Additional Update Authors

Daniel J. Mulligan, B.A., 1975, and M.A., 1982, University of California, Berkeley; J.D., 1982, University of California School of Law, Berkeley, is a partner with Jenkins Mulligan& Gabriel LLP, San Diego, and is an update author for chapter 13. He specializes in real property and lending litigation, as well as consumer rights law, including class litigation. He is a leading member of the plaintiffs' bar on consumer lending issues and regularly speaks for meetings of the California State Bar Association, the American Bar Association, the American Conference Institute, the National Consumer Law Center, and the National Association of Consumer Advocates. Daniel also continues a practice in antitrust law, serving as co-counsel in a number of indirect purchaser claims for consumer goods.

Darcelle K. Pruitt, B.S., 1991 (Urban and Regional Planning), California State Polytechnic University, Pomona; J.D., 2004, University of California, Davis, is an attorney and planning consultant in Aptos, and is an update author for chapter 13. She specializes in environmental and land use law. She was a research attorney for the state courts and has collaborated on legal research related to the mortgage crisis with the Simmons & Purdy Law Firm. Darcelle is active in the Environmental Law and Real Property Law Sections of the California State Bar and has written and spoken on the California Environmental Quality Act, conservation easements, and land trusts for county bar and real estate associations.

2017 Consulting Editors

Roger Bernhardt, Chuck Hansen, and Pamela D. Simmons were consulting editors on this update for all chapters. See their biographies in the About the Authors section of this book.

2017 Update Consultants

Michael P. Brody of Lightwell Advisors, PC, Walnut Creek

Darya S. Druch, Oakland

Glen L. Moss of Moss& Murphy, Hayward

Randy Sullivan of Patton & Sullivan LLP, Pleasanton

OnLAW System Requirements:
Desktop: Windows XP, 7 or 8, Mac OS 10.8
Mobile: iOS6, iOS7, Android 4.2
Firefox, Chrome, IE and Safari browsers

Note: OnLAW may work with some devices running older versions of these Operating Systems or Windows RT; however, functionality is not guaranteed.

Please see FAQs for more details.
Products specifications
PRACTICE AREA Real Property
PRODUCT GROUP Publication
Products specifications
PRACTICE AREA Real Property
PRODUCT GROUP Publication