California Homeowner Bill of Rights Empowers People Fighting to Stay in Their Home

Posted on February 26, 2013 by David Pivtorak

The California Homeowner Bill of Rights was designed to protect homeowners from unfair practices by lenders and mortgage servicers during the foreclosure process. It was written to make borrowers aware of proper procedure before and during a foreclosure, the resources that they have to guide them through foreclosure, and what they can do if they have found that the lenders or mortgage servicers have not followed the law during the process.

After the “National Mortgage Settlement” in 2012, California Governor Jerry Brown agreed to sign California Assembly Bill 278 into law. The bill, which was designed by California Attorney General Kamala Harris, mimics the same service standards of the National Mortgage Settlement. All mortgage loan officers must abide by the California Homeowner Bill of Rights regardless of their involvement in the National Mortgage Settlement.

Sections 4 and 5 focus on the process of face-to-face interviews between the lender and the borrower before a foreclosure can be commenced, which allows the homeowner to seek out alternatives to foreclosure.

These sections also contain the procedures that mortgage servicers must follow to ensure “due diligence” when serving a borrower with a delinquency notice. A servicer must send the borrower a first-class letter, and call the borrower a minimum of three times during the morning, afternoon and evening. The servicer must also follow-up by sending a certified letter. They should also be able to provide a toll-free telephone number with live agents to take all calls. If the servicer has an active website, then it must provide a toll-free telephone number and a section which suggests documents for the borrower to gather before speaking with a mortgage servicer agent.

Section 6 of the Bill states that the borrower, if facing financial difficulty, must be notified by a mortgage servicer, trustee, mortgagee, authorized agent or beneficiary that they have the right to request a copy of their promissory note, a copy of their deed of trust/mortgage, a copy of assignments or deed of trust that would be needed to allow the servicer to foreclose, and a copy of their payment history highlighting the most recent period where they were no more than 60 days behind in payment. This set of rules favors the borrower because, in most cases, mortgage servicers aren’t required to keep copies of every single one of the documents previously mentioned. They may only have three out of four documents required to continue with the foreclosure. Since the Bill was written, there has been an increase in companies that offer to keep records in order to furnish the mortgage services with the proper documents when the time comes for them to supply the borrower with the requested copies.

There are also regulations preventing foreclosure on a home while there is a pending loan modification application or workout plan on a first mortgage; this is known as “dual-tracking,” which is covered in section 7. The Bill specifies that the benefits of the loan or workout plan must be greater than the benefit of foreclosing to the borrower. If the borrower’s loan modification application has been denied, then the Bill offers the borrower the gift of time. The borrower will have no less than 31 days after they have received notice of denial to appeal the rejected application.

The borrower has the right to direct contact with the person or group that has the authority to prevent the foreclosure from moving forward, which is referred to as the “single point of contact” in section 9. The borrower benefits from the “single point of contact” because it allows them the opportunity to discuss alternatives to foreclosure with the bank’s representatives.

In order to proceed with a non-judicial foreclosure, the mortgagee, beneficiary, trustee or their agents must first file a notice of default in the public records three months and 20 days prior. They must also file a notice of sale 20 days prior to the actual sale date.
Section 10 describes other provisions that would ensure that the filing of the notice of default is valid. The notice of default may only be filed by the beneficiary under the mortgage or deed, the original trustee or substituted trustee if on the deed of trust, or an agent assigned by the beneficiary on the deed of trust.

Section 12 of the Bill explains that if the borrower hasn’t already attempted to use all of the resources as an alternative to foreclosure, such as the first lien loan modification process, then another servicer may suggest other alternatives to the borrower. The servicer would then be obligated to communicate with the borrower in writing and state that the borrower is eligible for evaluation for foreclosure prevention; if it is or is not necessary for the borrower to submit an application, how to obtain an application, and an explanation on the application process. The manner in which the borrower’s application is processed is also covered in the Bill. While the application is pending, the servicer may not file a notice of default or a notice of sale. The borrower cannot be charged for application fees, processing fees, or any other fees related to the prevention of foreclosure by the servicer. The Bill also prevents servicers from collecting late payment fees during a pending application or while the borrower is appealing a denied application, as long as the borrower is making their loan modification payments on time or any foreclosure prevention method is being considered or in process.

Accuracy of documentation is highly stressed in the Bill. The servicer must keep accurate and authentic documentation regarding a homeowner’s loan. Having reliable evidence is also necessary when submitting documents such as a declaration, notice of default, notice of sale, assigning a deed of trust, or substituting a trustee. If there are any mistakes made, such as inaccuracy or lack of evidence, the servicer may be fined up to $7,500 per mortgage or deed of trust by the court. The borrower would also have the right to file suit for financial damages based on these regulations.

The California Homeowner’s Bill of Rights has received a great deal of positive feedback. The Bill has been in effect since January 1, 2013. Many predict that the provisions of the Bill will soon be replicated and used in other states.

California Eliminates Dual Tracking in Foreclosure Actions

Posted on November 21, 2012 by David Pivtorak

Throughout the foreclosure crisis, California lenders have been free to employ a practice known as “dual tracking.” This practice has allowed mortgage lenders to forge ahead with foreclosure actions, including property sale, irregardless of whether they were simultanously engaged in loan modification discussions with borrowers. In fact, “dual tracking” is a practice that many mortgage investors have long required lenders to pursue in order to expedite the foreclosure process to the extent possible.

The practice of dual tracking has presented serious problems for borrowers facing the prospect of home foreclosure. Many borrowers have been lulled into an illusory sense of security thinking that they were protected from foreclosure while engaged in good faith loan modification negotiations with lenders, only to be blindsided by a foreclosure sale in the midst of this process.

Additionally, communication channels between lenders and borrowers have frequently become muddled as simultaneous actions were being taken by different lending departments, making it very difficult for a borrower to obtain a clear picture of the status of his or her loan at any given point in time.

To address the serious problems created by dual tracking, California has now made this practice illegal. On October 3, 2012, a negotiated settlement took effect that bars this practice by five of California’s largest mortgage lenders including Bank of America, Citi, JP Morgan Chase, Wells Fargo, and Ally. On January 1, 2013, California’s prohibition of dual tracking, the first such law in the United States, becomes applicable to all mortgage lenders.

Beginning in January, homeowners will have a right to sue lenders who continue to engage in the practice of dual tracking. Under this law known as The Homeowner Bill of Rights, banks found to have violated the law may be forced to pay attorneys’ fees incurred by the borrower. In addition, lenders may be hit with statutory civil damages of up to $50,000 per violation. Perhaps most importantly, borrowers will be able to obtain an injunction halting foreclosure proceedings if able to demonstrate a willful, intentional, or reckless violation of the law.

If you are a California homeowner that has been subject to the practice of dual tracking, you are urged to contact a Forclosure Lawyer at The Pivtorak Law Firm by calling (415) 484-3009, or click here to request a free, confidential consultation online.

Can a Non-Party’s Bankruptcy Put the Brakes On Your Personal Injury Lawsuit?

Posted on March 5, 2012 by David Pivtorak

A U.S. District Court judge in Georgia has ruled that Wal-Mart can not stop individuals from bringing personal injury lawsuits against the retail giant for allegedly defective gas cans sold to consumers. Wal-Mart attempted to halt the lawsuits because the supplier of the gas cans, Blitz U.S.A., was currently under bankruptcy protection. The company’s lawyers argued that Blitz’s indemnification of Wal-Mart created enough of a connection between the two companies to bring Wal-Mart under the protection of Blitz’s bankruptcy. The court, however, disagreed, reasoning that there was no such close connection and that allowing the suits to go forward would not cause irreparable harm to the bankrupt party. For more information on this case, you can read the full article at the San Francisco Chronicle’s web page.

The reason this story caught our eye is because we had a nearly identical question of law arise in one of our personal injury cases where the court also ruled in our favor after extensive motion work. Our facts were slightly different: Our client was injured after being rear-ended by an employee of a large corporation (to protect the identities of the parties involved, let’s call it “LC”), who was driving a company vehicle at the time. Shortly before we filed suit, LC filed for a Chapter 11 business bankruptcy. At that point, we knew that if we sued LC as well as the driver our case would be put on indefinite hold (possibly for years) while LC’s reorganization dragged along in the system. We also knew after all that time our client’s claim against LC would most likely be discharged in the bankruptcy anyway.

Armed with this knowledge, we made a strategic decision and filed suit only against the driver. Our adversaries, adeptly understanding the ramifications of our choice, tried to halt our lawsuit by claiming that the defendant was protected by the automatic stay in LC’s bankruptcy case. Our contention was that the defendant, as an agent of LC, was separately liable for her own torts and therefore was independently liable for the car accident.

After much back-and-forth, a motion was filed by the defendant to stay our case while LC’s bankruptcy played out. We knew that if we lost this motion, our case was ostensibly finished. Luckily, the law in this area was fairly developed and there was a lot of good precedent for us.

In the Ninth Circuit, two cases specifically discuss these issues in some detail: In re Chugach Forest Products, Inc. and Matter of Lockard. But we had to convince the court that these cases applied to our situation even though, factually, they were not 100% on point. Fortunately, the court in Chugach and Lockard outlined the law substantially enough, allowing us to assert our position with confidence.

The law spelled out in the cases is more or less straightforward: The automatic stay in bankruptcy protects only the debtor and not third-parties who are independently liable to plaintiff. The courts have created a very narrow exception to this rule in “unusual circumstances” where there is a very close connection in the financial interests of the debtor and the third-party, where it would cause irreparable harm to the bankruptcy debtor to allow the third-party to be sued. The third-party’s mere right to indemnification from the debtor, however, is not an unusual circumstance that warrants applying the automatic stay.

As a result, we saw this as a simple issue: Defendant, as LC’s agent, was independently liable for the rear-end collision and our client’s injuries. As a result, we were free to bring a personal injury action against only the agent and not LC. Because LC was not a party to this lawsuit, its bankruptcy should not have any effect on our litigation unless LC could show some irreparable harm to its reorganization efforts as a result. But LC couldn’t do this because a mere employer-employee connection didn’t put the parties in an interlaced financial relationship where transactions affecting one automatically affected the other. Furthermore, the employee’s right to indemnification simply wasn’t enough of an “unusual circumstance” under the law to justify putting a stop to our lawsuit.

In the end, the court agreed with our reasoning and declined to suspend our lawsuit because of LC’s bankruptcy. After being allowed to continue the case was ultimately settled resulting in a very happy and grateful client.

Wells Fargo Loan Modification Class Action

Posted on April 19, 2010 by David Pivtorak

The Pivtorak Law Firm, as lead co-counsel, has filed a class action lawsuit against Wells Fargo as a result of an allegedly deceptive forbearance-to-loan modification program. This action was commenced in the federal district court for the Northern District of California on April 19, 2010.

The lawsuit alleges that Wells Fargo deceitfully attempted to collect payments from defaulted California residential mortgage borrowers by sending them a letter evidently promising to stop foreclosure proceedings and to approve them for a loan modification if they showed that they could make three monthly trial plan payments. In reality, however, the letter promised nothing and most borrowers who made all three payments according to the agreement were not offered a loan modification but were subsequently foreclosed on by Wells Fargo, the suit says. Plaintiffs allege that this program was initiated by Wells Fargo in order to circumvent the protections of California’s anti-deficiency laws, which prevent banks for pursuing homeowners’ personal money or property after a foreclosure sale.

The form letter sent to borrowers by Wells Fargo said that the bank had “good news.” The letter also said that, according to financial information provided by the homeowner, they were qualified for a trial program showing they can make regular payments. The suit alleges that the letter also contained other language that easily led borrowers to believe that their long and difficult struggle to make their mortgage payments was over. Unfortunately, according to the lawsuit, their nightmare was just beginning.

Plaintiffs argue that instead of offering a three-month trial plan that is supposed to convert into a loan modification like the government’s Home Affordable Modification Program (“HAMP”), Wells Fargo intentionally gave borrowers the wrong impression that they were being offered such a program. Instead, the suit says, Wells Fargo collected as many payments as it could from California residential borrowers before foreclosing on their homes.

On Jan. 3, 2011, Judge Joseph C. Spero ruled against Wells Fargo in its motion to dismiss Plaintiffs’ Rosenthal Fair Debt Collection Act and unfair competition law claims. This ruling means that Plaintiffs have standing to pursue statutory damages against Wells Fargo for its unfair debt collection practices and restitution for payments borrowers made as a result of the bank’s collection letter as well as injunctive and declaratory relief, pending class certification.

UPDATES:

February 22, 2011 – Managing Partner, Steve Berman, and his colleague Tom Loeser of the law firm of Hagens Berman Sobol Shapiro, LLP, associated into the case and will serve as co-lead counsel, representing homeowners in the case against Wells Fargo.