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.