President’s Message ...................................... 4
FEATURED ARTICLES
• Learning the Hard Way .............................. 6
• Pressure Cooker Lessons .......................... 8
• Awarding of Attorney Fees ...................... 10
• Demolition of Property ............................. 12
• California’s One Action Rule .................... 14
• Tax Sale Redemption in TN ..................... 16
• The Doctrine of Snoozeth-Looseth .......... 18
LEGISLATIVE UPDATES
• The Certainties of Life .............................. 20
• Washington State Senate Bill .................. 21
EDUCATION NEWS
• La Jolla Will Host 2007 Conference ........ 24
MEMBERSHIP NEWS
• Gary Wisham Elected UTA President ...... 26
• Interview with Gary Wisham .................... 27
• Committees Seeking Volunteers .............. 29
• Interview with Nick Salamone ................. 30
Inside This IssueContinued on page 1
Summer 2008
The dark and stormy
California foreclosure
River is overflowing
On January 1, 2008, California
entered its worst foreclosure
crisis since the downturn of
the early 1990s. In the first quarter of
2008, default notices rose to the high-
est level in fifteen years. Over 100,000
California homes
are in foreclosure,
and almost one-
third of existing
home sales are
foreclosure sales.
Foreclosures in
Riverside and San
Bernardino coun-
ties are up 161
and 156 percent,
respectively, compared to just one year
ago.
Th e rise in foreclosures will create new
foreclosure-related civil litigation, in-
cluding individual actions against trust-
ees and benefi ciaries alleging wrongful
foreclosure and class actions against in-
stitutional trustees and lenders alleging
violations of California’s Unfair Compe-
tition Law (“UCL”).
California’s statutory provisions regu-
lating the conduct of non-judicial fore-
closure sales are strict. Courts have
imposed liability for minor deviations
from the statutory requirements. As
the foreclosure crisis worsens in the
upcoming months, trustees and benefi -
ciaries should review and update their
internal procedures for requesting,
noticing, and conducting non-judicial
foreclosure sales.
Taking steps now
– before the liti-
gation fl ood gates
open – can re-
duce the ultimate
cost of defending
against the inevi-
table increase in
foreclosure-relat-
ed litigation.
Described below are some common is-
sues that arise in foreclosures and rec-
ommendations for procedures trust-
ees and benefi ciaries should consider
incorporating into their foreclosure-
related business operations. For both
trustees and benefi ciaries, these simple
and aff ordable steps should help reduce
litigation exposure.
Avoiding Costly Mistakes in the Midst of California’s Current Foreclosure Crisis: Practical Advice for Trustees and Beneficiaries in Nonjudicial ForeclosuresBy Antony D. Nash, Esq., and John J. McNutt, Esq.,
Luce, Forward, Hamilton & Scripps LLP
PRESIDENT’S MESSAGE ............................................. 4FEATURED ARTICLES• A Legislative Matrix .................................................... 6• The “F” Word .............................................................. 8• The IRS Finally Responds........................................ 10 • Harsh Facts Make Good Law ................................... 12• Can Trustee Recover Attorney’s Fees? ..................... 14• Nonjudicial Foreclosure in New York ........................ 16• Rescission Under TILA ............................................. 18• Loss Mitigation.......................................................... 20• Beneficiary and Trustee: Litigation Parties ............... 22STATE NEWS• California: Endgame for Mortgage Bills .................... 24• Washington: New Duties for Trustees ...................... 26• Utah Legislative Changes ........................................ 28• Massachusetts 90-Day Right to Reinstate ............... 30• Colorado Updates..................................................... 32• Michigan: Pending Legislation .................................. 34• Proposed Changes in Illinois .................................... 36• Oregon: Implementing New Procedures .................. 38• New State Laws Affecting Foreclosure..................... 40CASE LAW UPDATES• Four Foreclosure Cases Worth Review ................... 44UTA AND INDUSTRY NEWS• UTA Considers Challenge to Local Ordinance ......... 46• Federal Foreclosure Bills .......................................... 47• UTA Membership Brochure ...................................... 47EDUCATION NEWS• Annual Conference Info ............................................ 48• Texas “Foreclosure 101” ........................................... 49• Certification DVD Available....................................... 50MEMBERSHIP NEWS• Members on the Move.............................................. 52• Interview with June Christy....................................... 52
Inside This Issue
Continued on page 54
For both trustees and beneficiaries, these simple and
affordable steps should help reduce litigation exposure.
Production
Editor: Richard Meyers
UTA Executive Director
Consultant: Martin T. McGuinn, Esq.
Kirby & McGuinn
United Trustees Association
2030 Main Street, Suite 1300
Irvine, CA 92614
(949) 260-9020 • www.unitedtrustees.com
Disclaimer
This journal is presented by the United Trustees Association
(“UTA”). UTA encourages the open discussion of current events
and issues relating to the non-judicial foreclosure process. UTA
does not endorse the views and opinions expressed by any author,
contributor and/or advertiser. UTA does, however, recognize the
First Amendment right of every author or contributor to express
his or her views.
The views of any person expressed herein do not necessarily repre-
sent those of the UTA, its directors, officers or members, nor are
they to be construed, in whole or in part, as legal advice. For legal
advice, please consult an attorney.
Copyright, 2008, UTA. All rights reserved. No part of the UTA
Quarterly may be reprinted without permission. For permission,
write to UTA, 2030 Main Street, Suite 1300, Irvine, CA 92614.
The UTA Quarterly is distributed four times a year by the United
Trustees Association. This journal is published to provide its read-
ers with useful material concerning new and thought-provoking
developments, practices and trends in the trustee-related indus-
tries.
To ensure that you receive a copy of the UTA Quarterly, become a
UTA member. To obtain membership information, write to UTA,
2030 Main Street, Suite 1300, Irvine, CA 92614. Or visit www.unit-
edtrustees.com
We encourage UTA members, as well as our other readers, to con-
tribute articles. Any ideas, comments and suggestions that you have
for the UTA Quarterly would be appreciated. Please forward your
remarks to the editor.
Advertising Information
The following companies have
advertised in this issue of UTA Quarterly.
Thank you for your support!
Adleson, Hess & KellyCalifornia Mortgage Bankers Association
Daily JournalFirst American Title
FIS Default SolutionsForeclosure Solution
Interface, Inc.Law Office of Rex C. Anderson
Legal LeagueMark Chernoff Insurance Broker
NDExNorth American Title
Orange Coast TitlePriority Posting and PublishingReliable Posting & Publishing
RSVPServiceLink
Stewart Title of CaliforniaTrustee’s Assistance Corp.
United Trustees Association
Potential advertisers include title companies, posting and publish-
ing services, legal newspapers, computer services and attorneys.
Anyone servicing the foreclosure industry is a possible advertiser.
The cooperation and support of the UTA membership is necessary
to make the UTA Quarterly and the Annual Education Conference
successful. Please ask your representative to place an ad.
For advertising information,
Contact Richard Meyers(949) 260-9020
Mission Statement
To foster, improve and promote integrity of services in the
default mortgage servicing industry through a level of excel-
lence, education, local outreach and legislative advocacy.
3
United Trustees Association Summer 2008
4
Spring 2008 United Trustees Association
New Products and Programs Featured This Year
UTA has introduced several new
products and programs this
year. 153 of our industry’s staff
have now taken our new California
Foreclosure 101 course. On August 15th,
our Texas Foreclosure 101 course will
debut in Houston, taught by two excellent
instructors, Mary Speidel, Esq., of Codilis
& Stawiarski and Jim DeLoach, Esq., of
Butler & Hosch. I would like to publicly
acknowledge Mary Speidel for the work
she has done in coordinating the materi-
als for this terrific course.
Additionally, UTA has made a DVD of the
Basic California Foreclosure Certification
Course (CA-1) available to members.
The DVD course instructor is the very
popular Randy Newman of National
Foreclosure Service. Order your DVD
today and let everyone in your company
who processes foreclosures in California
view it, along with the course materials. If
you or anyone on your team subsequently
desires to take the certification exam to
become a Trustee Sale Officer, our office
will coordinate that with you.
This year, along with the 2008 Member
Directory, our members received a beau-
tiful new four-page UTA Membership
Brochure. Members are encouraged to
order complimentary copies of the bro-
chure in order to encourage prospective
members to join UTA. The brochure will
also be used by our staff when we are
promoting the Association.
We have also greatly expanded the state
nonjudicial foreclosure legislative sum-
maries on our website (and in the UTA
Quarterly), with updates now from twen-
ty-eight states. This would not be possible
without the contributions from so many
of our members who take the time to let
their industry colleagues know what per-
tinent legislation and new laws are taking
hold in their states. Thank you.
In Sacramento, UTA has worked to make
sure that the trustee role in the foreclosure
process was more accurately reflected
in comprehensive foreclosure legislation
that is likely to reach the Governor’s desk,
and that duties do not fall to trustees that
more properly belong to others.
We have also successfully worked
to ensure that new IRS regulations in
California on notice of nonjudicial sale
be clarified. Finally, we are addressing
municipal ordinances that place unfair
and burdensome tasks on trustees with
respect to maintenance requirements.
We have an ambitious project on the
horizon – the development of several
different ‘Guide(s) to Foreclosure Law’
providing members with up-to-date stat-
utory language in various states as well as
other essential references.
You many have noticed that for the first
time, we have advertised in industry pub-
lications and have started the process of
providing articles to industry publications
from UTA affiliated authors. UTA is the
only association whose primary focus is
nonjudicial default-servicing issues – and
everyone in any related service or com-
pany needs to know what we do and what
services we provide.
Our annual fall conference and trade
show arrives November 16-18th (with
certification classes on the 15th). This
year we are returning to the site of the
conference two years ago - the Red Rock
Resort, Casino and Spa. The education
sessions will again be top-notch and we
anticipate having more booths than ever
before. Please visit the UTA website to
view the conference program and to reg-
ister, as well as to watch a new video fea-
turing pictures from recent conferences.
Finally, we do expect the hotel rooms to
sell out, so please make your reservations
early. Rooms for UTA attendees at the
five-star resort are an unbelievable $149
per night.
As you can see, UTA has been as busy as
its members!
Gary Wisham is the President of Allied Trustee Services and serves as the President of UTA. He can be reached at [email protected].
Gary Wisham2008 UTA President
5
PresidentGary WishamEducation Committee Co-Chair Allied Trustee Services 3721 Douglas Blvd., Suite 345 Roseville , CA 95661 [email protected]
Vice PresidentDeborah BrignacCalifornia Reconveyance Company9200 Oakdale Avenue N110612Chatsworth, CA 91311- [email protected]
Chief Financial OfficerMarsha Townsend, Finance Committee ChairForeclosureLink, Inc.5006 Sunrise Blvd., Suite 200Fair Oaks, CA [email protected]
SecretaryElizabeth KnightPLM Lender Services, Inc.46 N. Second StreetSuite ACampbell, CA 95008408/[email protected]
Vickie L. AdamsEducation Committee Co-Chair27876 MazagonMission Viejo, CA [email protected]
Phillip M. Adleson, Corporate Counsel Adleson, Hess & Kelly577 Salmar Avenue, 2nd Floor Campbell, CA 95008 [email protected]
Deborah BrignacCalifornia Reconveyance Company9200 Oakdale Avenue N110612Chatsworth, CA 91311- [email protected]
Michael R. Brooks, Esq.Jolley Urga Wirth Woodbury & Standish3800 Howard Hughes ParkwaySuite 1600Las Vegas, NV 89169702/[email protected]
Jim DeLoachButler and Hosch13800 Montfort DriveSuite 300Dallas, TX 75240972/[email protected]
Jeremy R. HarmonFirst American Title - NDTS3 First American WaySanta Ana, CA [email protected]
Rande JohnsenTrustee Corps2112 Business Center Drive2nd Floor, Suite 201Irvine, CA [email protected]
Martin T. McGuinn, Esq.Legal Resources Committee Chair Kirby & McGuinn, APC 600 B Street, Suite 1950 San Diego, CA [email protected]
Jane MyrickSecurity Title Agency3636 North Central AvenueSuite 140Phoenix, AZ 85012602/[email protected]
Margaret A. Padilla, CTA-PAC ChairCal-Western Reconveyance CorporationPO Box 22004 525 East Main Street El Cajon, CA 92022-9004 [email protected]
Susan PettemMembership Committee Chair Fidelity National Default Solutions15661 Red Hill Avenue, Suite 201 Tustin, CA [email protected]
Julie D. Randall Union Bank of California P.O. Box 85416 San Diego, CA 92186 [email protected]
Chris RebhuhnRegional Trustee Services 616 First Avenue, Suite 500 Seattle, Washington 98104 [email protected]
Ronald D. Roup, Esq.Legislative Committee ChairRoup & Associates, A Law Corporation 23101 Lake Center Drive, #310Lake Forest, CA 92630 [email protected]
Richard Meyers, Executive Director ex officio United Trustees Association 2030 Main Street13th Floor Irvine, CA [email protected]
UTA 2008 OFFICERS AND DIRECTORS
Spring 2007 United Trustees Association
Featured Article
6
Summer 2008 United Trustees Association
Iusually like to start with a theme quote from a famous per-
son. For this article, I really liked Winston Churchill’s reply
to Bessie Braddock’s remark “Winston, you’re drunk!” in
1946 to which he replied: “And you, madam, are ugly. But in
the morning I shall be sober” 1
With the perfect storm atmosphere of the sky-rocketing num-
ber of foreclosures in California, interest rate change adjust-
ments, tight money, falling values,
surplus REOs, and an election year,
the California legislature has seized
upon the opportunity to correct it.
I mean, they are legislators who are
paid to introduce bills, and if you
can’t introduce or co-author a bill
to correct the foreclosure and REO
problems caused by the California
real estate market, then you’re just
not doing your job. And, you are
not going to let the federal govern-
ment, the Federal Reserve, the financial markets, or any actu-
ally qualified institution steal your fodder. It’s your time. It’s
your lime light.
I had heard that Xavier House, our attorney from my “A
Legislative Smudge” UTA Quarterly article in 2006, was now a
congressman. He apparently had made so much money repre-
senting homeowners trying to figure out how to exercise their
post-foreclosure right of redemption after passage of S.B. 137,
that he ran for office. And, with that name, how could he lose?
I caught up with Senator Xavier House for an interview and
he confirmed that the California legislature wanted us to live in
a perfectly harmonic world and that they would do everything
in their regulatory power to legislate these problems away. I
asked him about some of the bullet points of these proposed
regulations, including:
SB. 1137, which has passed the California Senate and will likely
pass the Assembly and become law this Fall with at least the
following regulations:
Bullet Point: Meet and Confer requirements for loan
modifications or work-outs prior to initiat-
ing a foreclosure.
Q. “So, you’re shifting the responsibility of the borrower to
contact the lender if they’re having problems, to the lender
contacting the borrower?”, I asked.
A. “Sure, if the owner won’t
do it for themselves, we’ll make the
lender do it for them,” he replied.
I sensed no balking, sweating, or
nervousness. It made perfect sense
to him.
Q. “But, the owner would have
to be in default. What about the
owners who are trying to keep
out of default or who now have negative equity in their
homes?”
A. “We’ll leave that phase to the federal government to revise
the Bankruptcy Code. You have to let the Feds have their
day, too” stated Senator House. “Someday, I could be one
of them, you know, and I’ll need some fertile fields to plow.”
(I swear he said “futile fields” the first time, but I didn’t
have it on tape.)
Q. “Is it true there was a requirement for Kumbaya to be play-
ing in the background of the meet and confer?”
A. “No, I proposed it as a nice touch, but others thought it was
going too far.” I somehow found comfort in this recogni-
tion of limits.
A Legislative MatrixBy Ronald D. Roup, Esq., Roup & Associates
Continued on page 58
“…if you can’t introduce or co-author a bill to correct the foreclosure
and REO problems caused by the California real estate market, then
you’re not doing you’re job.
Spring 2007 United Trustees Association
Featured Article
8
Summer 2008 United Trustees Association
The “F” Word, Part IBy Elizabeth Knight, PLM Lender Services
What is it about the “F” word that is so bad? Why is
it so tainted? Well, probably because when kids
are growing up their parents and teachers tell them
never to say the “F” word. Well, here we are all grown up and
I can tell you, the “F” word is still a bad word. The “F” word we
hear everyday is (I am looking over my shoulder to see who is
listening) “foreclosure.”
Now, I must admit, I am very used to that word. It is, after all,
one part to my livelihood. It doesn’t scare me, it doesn’t usually
make me feel bad and I actually use the “F” word around my
children. For many brokers, foreclosure has not been a part of
their everyday life. Many actually say that they have never had
one in their portfolio – whether that means they have never had
to start a foreclosure or whether
they never have had a foreclosure
proceed all the way through sale
is always the question. For those
who have not had experience with
foreclosure, that must mean they
have been in the business less than
13 years or so (prior to the last 18
months), the golden years, the thriving years where bad loans
were saved simply because the value of property continued to
increase.
And now, here we are in 2008 and the market has changed.
Many foreclosures are not only actually being started, but are
going all the way through to trustee sale and are reverting to the
benefi ciaries. It is important to prepare in two diff erent ways
for this market, changes as to the servicing of existing loans and
changes in the way brokers underwrite new loans.
First, on the servicing side – what servicing companies start
encountering in this market are receiving VOM’s (Verifi cation
of Mortgage), sending VOM’s and then having the company call
and ask for changes to be made to the VOM. Th is may have
happened somewhat before. It is now happening a lot more.
Some things are very cut and dry on VOM’s. Other times, there
can be some honest creative comments written which can pos-
sibly get the loan out of the broker’s portfolio, get full payoff s
in the investors’ pockets and get the payoff s received earlier.
It is important, however, to be sure that the information that is
given is correct and your credibility cannot be challenged later.
Fraud is not an alternative, although I must say many broker
and agents we have been encountering requesting these VOM’s
do not have such qualms. Th e funny part about that is most of
them are not “private investor” placement brokers or agents.
Th ey are attempting to place these borrowers into sub-prime
products (yes, they do still exist).
Remember that creativity and honesty are all in the presenta-
tion. If the servicing fi rm receives a
VOM on an account which is ques-
tionable, someone of authority who
can be creative, yet honest should
complete the VOM. Remember,
that some loans just have “F” writ-
ten all over them and there is noth-
ing the servicing entity can do or
say to make it look any better. Just
know that if there is not enough equity, that loan is not going
to be re-written.
Secondly, once the loan falls delinquent, it is important to take
action. Th e servicer cannot wait until it is four or fi ve or even
three months delinquent. As soon as the loan is two months
delinquent, it is important to review this fi le to see what the
recovery potential is. Remember that the market has changed
and the values in most areas are going down. For every month
that the account is delinquent, this can be money which may
refl ect a loss to the lender. Remember as well, it is not just the
interest on their loan, but the interest on the underlying liens as
well as taxes which may not be paid as well as declining value.
The analysis of what type of action should be commenced,
including forbearances or commencing a foreclosure and what
type of a foreclosure can be calculated on a form. Knowing
It is important to prepare in two different ways for this market…
9
United Trustees Association Summer 2008
Featured Article
the approximate value of the property at the time of the delin-
quency and what the potential value may be in four months is
key. Some loans would always be started while others may not.
A first Deed of Trust on an owner occupied residence is one of
the “always” and a third Deed of Trust on a property which has
seriously declined in value and was written at 75% LTV may
need much analysis.
Elizabeth M. Knight is President of PLM
Lender Services, Inc., an independent trustee
service which specializes in foreclosures, pri-
vate investor loan servicing, loan documenta-
tion, bulk assignments, reconveyances and
REO disposal. Elizabeth has been in the fore-
closure and loan servicing field since 1981. She has been in the
real estate field (with emphasis on escrow prior to 1981) since
1977. She currently holds the position of Director on the board
of the California Mortgage Association as well as Director on
the board the United Trustees Association. Elizabeth is a gradu-
ate of St. Mary’s College with her Bachelor’s degree in Business
Management. She is a court qualified expert in the field of fore-
closure and is a licensed California Real Estate Broker. She can
be contacted at [email protected].
Spring 2007 United Trustees Association
Featured Article
10
Summer 2008 United Trustees Association
In August of 2007, the IRS issued new regulations regulating
how and where trustees were to give notices of sale to the IRS
where an IRS lien was filed 30 days before the nonjudicial
foreclosure sale. (72 F.R. No. 139, pp. 39737-39740; Regulation
§ 301.7425-3T; See, IRC § 7425(b).) Prior regulations required
that notices of sale (“NOS”) be sent
to the “district director (marked for
the attention of the Chief, Special
Procedures Staff”) in the district
“in which the sale is to be con-
ducted”. (Reg. § 301.7425-3(a)(1).)
These positions were eliminated
by the Restructuring and Reform
Act of 1998 (Public Law 105-206;
herein “RRA”). The new regulation
was intended to address uncertain-
ty regarding where notices should be sent in California created
by the RRA.
In an attempt to remedy internal IRS issues, California IRS
offices issued a bulletin entitled: “Mailing Addresses for Internal
Revenue Service Foreclosure/Redemption and the Technical
Services (Advisory) Group Addresses” (“Local Bulletin”). The
Local Bulletin was widely distributed to trustees as guidance
regarding where trustees should mail notices of trustee’s sale to
the IRS. Unfortunately, there was no legal authority for such a
“Local Bulletin” and it directly conflicted with the August 2007
official regulation and related IRS publications. For a more
complete explanation of the problem and for copies of the
regulations, publications, UTA’s counsel’s letters to the IRS and
IRS’s response, see our prior articles on the UTA Website.
In an attempt to clarify the issue, on November 5, 2007, as cor-
porate counsel for the United Trustees Association (“UTA”), we
sent a letter to the IRS pointing out the confl icts between the
Local Bulletin and already existing IRS regulations and publica-
tions. Having received various verbal responses from diff erent
people at the IRS, we sent a follow-
up letter on May 14, 2008. Finally,
on June 17, 2008, as counsel for
UTA, we received a response from
Ric Reynolds, Advisor, Department
of the Treasury, Internal Revenue
Service.
According to Mr. Reynolds June 17,
2008 letter, the IRS current position
is as follows:
• The “Local Bulletin” has been withdrawn. Trustees cannot
rely on the Local Bulletin for instructions regarding where
to mail notices.
• Trustees are to comply with the notice of sale require-
ments set forth in Regulation § 301.7425.3T, and with the
instructions set forth in Publication 786.
• Trustees and others wishing to comply with the notice
requirements of § 301.7425-3T must use the addresses set
forth in Publication 4335.
• The IRS will start enforcing the policy set forth in Mr.
Reynolds’ June 17, 2008 letter on July 1, 2008.
The IRS Finally Responds to UTA’s Request for Clarification on the Handling of Notices of Sale in Nonjudicial Foreclosures (New Rule Effective July , )By Phillip M. Adleson, Esq., Corporate Counsel for the United Trustees Association,
Adleson, Hess & Kelly
Do not follow the old Local Bulletin as your notices of sale after July 1, 2008, may result in a notice of inadequacy and your
notice may not terminate the IRS lien.
11
United Trustees Association Summer 2008
Featured Article
The New Regulation and Related
Publications: A Review
The IRS has now adopted the UTA’s position (consistent with
the new IRS regulations) regarding how and where notices of
sale are to be sent to the IRS in nonjudicial foreclosure sales
where the IRS has a tax lien of record 30 days prior to the trust-
ee’s sale. Effective August 20, 2007, new final regulations were
issued by the IRS regarding where to send notice of a nonjudi-
cial sale. (72 F.R. No. 139, pp. 39737-39740; See, IRC § 7425(b).)
Prior regulations required that notices of sale (“NOS”) be sent
to the “district director (marked for the attention of the Chief,
Special Procedures Staff”) in the district “in which the sale is
to be conducted”. (Reg. § 301.7425-3(a)(1).) These IRS posi-
tions at the IRS were eliminated, creating uncertainty regarding
where notices should be sent.
Regulation § 301.7425-3T provides in pertinent part:
“[A] notice . . . of a nonjudicial sale shall be given, in
writing by registered or certifi ed mail or by personal
service, not less than 25 days prior to the date of sale
(determined under the provisions of § 301.7425-2(b)),
to the Internal Revenue Service (IRS) offi cial, offi ce
and address specifi ed in IRS Publication 786, “In-
structions for Preparing a Notice of Nonjudicial Sale
of Property and Application for Consent to Sale,” or
its successor publication. Th e relevant IRS publica-
tions may be downloaded from the IRS Internet site
at http://www.irs.gov. Under this section, a notice of
sale is not eff ective if it is given to an offi ce other than
the offi ce listed in the relevant publication. . . .”
Publication No. 786 (Instructions for Preparing a Notice of
Nonjudicial Sale of Property states:
“Where to Submit Your Notice or Application.
IRS, Attn: Technical Services Advisory Group Man-
ager
Address your . . . notice to the IRS offi ce in which the
lien was fi led [not where the sale is to be conduct-
ed]. Use Publication 4235, Technical Services Adviso-
ry Group Addresses, to determine where to mail your
request.)”
Regulation § 301.7425-3T refers counsel and trustees to
Publication 786. As quoted above, Publication 786 (Rev. 1-
2006) references that notices should be sent to the IRS Office
in which the lien was filed as referenced in Publication 4235.
In IRS Publication 4235 (Rev. 3-2008), under “California”,
it is required that notices of sale for much of the Northern
California Counties be mailed to the Oakland IRS office.
Regulation § 301.7425-3T states: “Under this section, a notice
of sale is not effective if it is given to an office other than the
office listed in the relevant publication. . . .” Therefore, the
Regulation and official publications may require a mailing to
Oakland for properties in certain Northern California areas.
(Pub. 4235 Rev. 1-2006).
Conclusion
Do not follow the old Local Bulletin as your notices of sale after
July 1, 2008, may result in a notice of inadequacy (Letter 1840)
and your notice may not terminate the IRS lien. Notices of sale
should comply with Reg. § 301.7425-3T and publications 786
and 4235.
1 Th e following articles are on the UTA website (http://www.unitedtrust-ees.com) and contain links to all of the IRS regulations, the IRS Local Bul-letin, letters from UTA’s counsel to the IRS and the June 17, 2008, letter from the IRS: “Th e IRS Finally Responds to UTA’s Request for Clarifi ca-tion on the Handling of Notices of Sale in Nonjudicial Foreclosures. (New Rule Eff ective July 1, 2008)” and “Cause I’m the Taxman: New Regulations, Publications and Local Bulletins Create Confusion on Trustees Giving the IRS Notice of Nonjudicial Sale”.)
2 Th e IRS letter, dated June 17, 2008 can be found on the UTA website.
Phillip M. Adleson is a senior shareholder in the
law firm Adleson, Hess &Kelly. Mr. Adleson has
represented lenders, trustees, mortgage brokers,
investors and title companies in amicus curiae
briefs and in action in the trial courts. He can be
reached via email at [email protected].
Spring 2007 United Trustees Association
Featured Article
12
Summer 2008 United Trustees Association
In a case of first impression, the court in Amalgamated
Bank v. Superior Court (Corinthian Homes) 149 Cal.
App.4th 1003 (2007) ruled that on a motion to expunge
a lis pendens after judgment against the claimant and while an
appeal is pending, the trial court must grant the motion unless
it finds it more likely than not that the appellate court will
reverse the judgment.
The case arose under a harsh fact situation: PTF was the
beneficiary of a note secured by a deed of trust on property
owned by Winncrest. PTF filed a judicial foreclosure action
against Winncrest. The trial court entered judgment allowing
a sale of the property with a right of redemption, with the debt
adjudicated as slightly more than $17,000,000.00. As judgment
creditor, PTF requested that the
Sacramento County Sheriff sell the
property to the highest bidder and
a sale date was set. The eventual
successful bidder, Palmbaum, had
$10,000,000.00 in available funds
to bid at the sale, and PTF intended
to place an opening bid of approxi-
mately $6,500,000.00. The bidder
for PTF got stuck in traffic that
morning in his commute from San Francisco and arrived min-
utes after the sheriff ’s gavel fell. Because there was no one else
at the sale, Palmbaum bid only $2,000.000 for the property
and the sheriff ’s deed of sale was delivered to Palmbaum. PTF
filed an action to set aside the sale and recorded a lis pendens.
Palmbaum, the successful bidder, made a motion for summary
judgment which was granted. Thereafter, Palmbaum made a
motion to expunge the lis pendens which was also granted. PTF
then filed a petition for writ of mandate. The Amalgamated
case was decided on the petition for writ of mandate.
In order to reach its’ conclusion, the Amalgamated court traced
the history of lis pendens law in California. Before 1992, a lis
pendens was very easy to record and very difficult to remove.
Under former California Code of Civil Procedure Section
409.1, as long as a lis pendens was filed for a proper purpose
and in good faith , the trial court could not remove it until the
litigation was finally terminated against the party filing the lis
pendens, Malcolm v. Superior (1981) 29 Cal.3d 518, 523-524.
The pre-1992 law was ripe for abuse. A lis pendens could be
recorded against property and used as a bludgeon to force the
property owner to settle a case since the property could not be
sold or financed without the lis pendens being removed, and
the lis pendens could not be removed until the lawsuit was
finally adjudicated.
The lis pendens law was substantially revised in 1992. The
old good faith and proper pur-
pose standard of section 409.1 was
removed in favor of section 405.32,
which says In proceedings under
this chapter, the court shall order
that the notice be expunged if the
court finds that the claimant has
not established by a preponder-
ance of the evidence the probable
validity of the real property claim.
Section 405.3 defines probable validity as more likely than
not that the real property claimant will prevail against the
defendant in the action.
The Amalgamated Court had to decide the following novel
issue: By what standard should an appellate court decide
whether to issue a write of mandate relieving the losing real
property claimant from the effect of an expungement order
while his or her appeal is pending? The legislature in the 1992
amendment only addressed the standard of proof when faced
with an expungement motion before trial. The Amalgamated
court found that it had to deny the motion unless the claimant
established the probable validity of the real property claim .
There is no shift of the burden of loss from the actual identity theft victim to a third party duped by the thief.
Harsh Facts Make Good LawBy Kirk Rimmer, Esq., Law Offi ces of Kirk S. Rimmer
13
United Trustees Association Summer 2008
Featured Article
The Amalgamated court ruled as follows: By enacting a signifi-
cant overhaul of lis pendens law, the Legislature has signaled its
intent that, unless a real property claim is likely to succeed in
court, a lis pendens should not remain in place while the litiga-
tion wends its way to final disposition. Applying the ‘probable
validity’ standard in the Court of Appeal as well as the trial
court best serves that goal. We therefore conclude that, in
deciding a writ petition under section 405.39 after judgment
and pending appeal, an appellate court must assess whether the
underlying real property claim has probable validity as that
term is used in section 405.3, i.e., whether it is more likely than
not the real property claim will prevail at the end of the appel-
late process... Where an unsuccessful real property claimant
appeals a judgment of the trial court and petitions for interim
mandamus review, we will conduct prima facie review of the
probable success of the underlying appeal.
As a side note, the Amalgamated court also reiterated the rule
that a sheriff ’s sale of real property pursuant to Code of Civil
Procedure Section 701.680 is absolute and may not be set aside
for any reason
Kirk Rimmer, a longtime UTA member, is an
attorney in Sacramento emphasizing real prop-
erty and foreclosure litigation. He is currently
general counsel to several foreclosure trustee com-
panies. He can be reached via telephone at (916)
930-9661 or vial email at [email protected].
Spring 2007 United Trustees Association
Featured Article
14
Summer 2008 United Trustees Association
It is a well-known fact that in times of economic downturn,
like today, there is a dramatic increase in the number of
residential foreclosures. Only the number of lawsuits that
sprout alongside these foreclosures rivals this surge. For bet-
ter or for worse, trustees often find themselves caught in the
middle of these disputes.
Foreclosure trustees are usually named for three reasons. First,
because there are claims for injunctive or declaratory relief, and
the trustee is considered a necessary party. Second, because the
Plaintiff is motivated by the deep
pocket factor (but has no genuine
basis for stating a claim against
the trustee): the more corporate
defendants, the greater the chance
of receiving a favorable settlement.
Third, because there are specific
allegations of wrongdoing or omis-
sions against the trustee.
Under the first two scenarios, the best course of action is the
option afforded by Civil Code Section 2924l. This section
enables the trustee to file a declaration of nonmonetary status,
indicating that it has no interest in the outcome of the case, and
believes that it was named in the action solely because of its role
as trustee and not because of any wrongful acts or omissions. 1
By doing so, the trustee can avoid all litigation expenses from
the onset of the lawsuit. While there is no statutory equivalent
to Civil Code Section 2924l in federal courts, most bankruptcy
and district court judges are receptive to stipulations that allow
the trustee to remain in the sidelines in exchange for an agree-
ment to be bound by nonmonetary judgments.
By contrast, the third situation is more problematic. If a trustee
is required to appear and defend itself, the question becomes,
whether a trustee can recover its attorneys fees against the
plaintiff if it ultimately prevails in the action. The answer to
that question rests in the application of a set for rules pertain-
ing to the enforcement of attorney fee provisions in contracts.
Generally speaking, several California opinions have held in
dicta that foreclosure trustees can recover their attorneys’ fees
if they prevail in an action for wrongful foreclosure.2 These
opinions tend to place foreclosure
trustees in the same category as
beneficiaries for purposes of recov-
ering attorneys’ fees. However,
whether a trustee will prevail on a
motion for fees is far from being
clear cut: a trustee’s chance of pre-
vailing will depend on a variety
of factors, including 1) whether the action is one based on
contract 2) whether at least one of the parties could be held
liable for attorneys fees under the fee provision 3) whether the
attorneys fee provision of the deed of trust is sufficiently broad
to encompass the claims raised in the action, and 4) whether
the trustee is deemed to be the prevailing party.
Under California law, attorneys fees must be permitted either
by contract, or by statute. Although there is no California stat-
ute that provides for the recovery of attorney fees in a wrongful
foreclosure setting, Civil Code Section 1717 provides that the
prevailing party in an action on a contract, is entitled to their
attorneys’ fees. Therefore, the threshold question is whether
the action is one on the contract. Fortunately, since wrongful
foreclosure actions typically relate to the parties’ duties and
Can a Trustee Recover Attorney’s Fees and Costs Incurred in Defending Against a Wrongful Foreclosure Claim?By T. Robert Finlay, Esq., Wright, Finlay & Zak, LLP and Sonia A. Plesset, Esq., Wright,
Finlay & Zak, LLP
The answer [to the headline question] is – it depends.
15
United Trustees Association Summer 2008
Featured Article
obligations under the Deed of Trust, they are often “based on
contract”, and fulfill that aspect of Civil Code Section 1717.
The next factor to consider is whether there is an attorney fee
provision in the Deed of Trust and its breadth. It is important
to note that whether or not to grant a fee motion rests within
the court’s discretion. Because of this, some judges look for
ways to spare borrowers who have already gone through the
hardship of losing their home, from the added burden of an
attorney fee judgment. These judges will look for a way “out”
by focusing on the attorneys’ fee provision, and in doing so
declare that the attorneys’ fee provision is not broad enough to
encompass the type of claims presented.
Another wildcard that contributes to mixed results under
Civil Code Section 1717 is the question of who may invoke the
attorneys’ fee provision. While trustors and beneficiaries are
parties to note and deed of trust, and may readily be subjected
to their terms, the same cannot be said of trustees. Trustees
are never signatories, and more often than not, are not even
the trustees originally named in the loan documents. This begs
the question of whether trustees are even parties to the con-
tract. Some courts have held that they are3, while others have
held otherwise.4 However, other cases have suggested that the
question is not whether the party is a signatory, or even a party
to the contract, but whether the opposing party would recover
its attorneys fees if it were the prevailing party.5 For instance,
at least one court has held that the nonassuming grantees of
the borrower could recover fees under the deed of trust.6 The
court’s reasoning related back to the reciprocity provision of
CC 1717. The court reasoned that if the nonassuming grantee
wanted to reinstate or payoff the obligation in order to redeem
the property, he would have to pay the beneficiary’s advances
under the deed of trust, including attorneys fees. In other
words, the grantees were negatively impacted by the attorneys’
fee/corporate advance provision of the deed of trust. The court
further reasoned that if they could be negatively impacted by
that provision, reciprocity under 1717 entitled them to its ben-
efits as well.7
Based on the foregoing, one can argue that irrespective of
whether the trustee is a party to the contract, its rights and
duties are governed by its terms. The trustee’s duties do not
exist in a vacuum: the trustee’s conduct is dictated at least
in part, by the provisions of the deed of trust. Accordingly, it
appears that the better question is not whether the trustee is a
party to the contract, but whether the action seeks to enforce
various provisions of the deed of trust. More often than not,
the answer is yes.
Another key element considered by the courts in reviewing a
motion for attorneys’ fees, is whether the moving party can
be declared the “prevailing party.” If plaintiff voluntarily dis-
misses the action before a final adjudication, the general rule
is that attorneys fees are not recoverable.8 In most instances,
the trustee is the prevailing party if it wins the action through
a demurrer for which no amendment is permitted, through a
motion for summary judgment, or at trial. In these cases, not
declaring the winning party the “prevailing party” constitutes
abuse of discretion. 9 However, in cases that are not as clear
cuts, courts use their equitable power to make the ultimate
decision. In those instances, one of the factors utilized by
courts is the extent to which the party seeking to be declared
the prevailing party has met its litigation objectives.10
In sum, whether or not a trustee will prevail on a motion for
attorneys’ fees will depend on the parties, the scope of the
provision, and the circumstances of the case. However, before
embarking on a fee motion, there are some practical consid-
erations that include cost effectiveness and collectability. One
must consider the Plaintiff ’s solvency and the time and cost
that will have to be expended in collecting on the judgment. On
the other hand, if the Plaintiff is likely to file an appeal, a size-
able attorney fee awards can present a good bargaining chip to
prevent the filing of the appeal or to obtain an early dismissal.
Because of the uniqueness of each situation, it is advisable for
trustees to discuss with their attorney the likelihood that they
will recover their attorneys’ fees, prior to diving deep into liti-
gation with the borrower.
1 CC 2924l(a). It has been suggested that if a court fi nds that a trustee ap-peared or defended an action unnecessarily, it may be grounds for the court to deny the trustee the right to recovery attorneys’ fees. See, Bern-hard, Mortgage and Deed of Trust Practice, Section 8:83, citing Field v. Acres (1937) 9 Cal. 2d. 110.
Continued on page 60
Spring 2007 United Trustees Association
Featured Article
16
Summer 2008 United Trustees Association
Nonjudicial foreclosure does indeed exist in New York
– although it is not surprising that the fact is not
so widely known. The immediate reason is that the
procedure has no application to residential properties, which
obviously diminishes it utility. But when it is available it has
meaning. The procedure began in 1998 and has been extended
a number of times, the latest until July 1, 2009.
First, a historical footnote: non-judicial foreclosure was a part
of New York statutory law dating back before the great depres-
sion. For a number of reasons, though – due process concerns
and the reluctance of title companies to insure the titles chief
among them – the power was almost never used.
Meanwhile, New York attorneys well recognized that non-
judicial or power of sale meth-
ods employed in almost half the
states in the nation was far more
efficient than the judicial version
in the Empire State where actions
consuming years are not unheard
of. The genesis of what became
the new Article 14 of the Real
Property Actions and Proceedings
Law was the effort of a New York State Bar Association task
force intending to shortcut the time-consuming judicial fore-
closure process generally in New York State. Although large
commercial foreclosures in particular tended perhaps to suffer
unduly from protracted delays, there was no intention to con-
fine the prospective streamlined statute to commercial cases
and exclude residential properties. When the bar association
draft went through the legislative process, however, residential
properties were excluded as subjects for non-judicial foreclo-
sure. Although the statute is not labeled as applying essentially
to non-residential properties, such is its actuality. The statute
carefully considered the infirmities of the old and intended to
address them so that an efficacious, practical result could be
achieved. Although its non-judicial approach clearly provides a
faster method of foreclosure – to the extent the statute applies
at all – it still has a number of judicial aspects. For example,
among others, court authority must be sought when the
United States holds a junior interest to be extinguished, when
a receiver is desired, and to pursue either surplus monies or a
deficiency judgment.
The procedures of Article 14 for power of sale foreclosure are
available for a mortgage upon real property in the state so long
as the mortgage contains a power of sale provision, which is
defined as a provision that upon a mortgage default or a default
upon a note, bond or other obligation secured thereby, the
mortgagee has the right to sell the mortgaged property. Having
met those preliminaries, the mortgage is entitled to be fore-
closed in the matter prescribed for a nonjudicial proceeding for
foreclosure by power of sale pursuant to Article 14.
Four prerequisites, however, must
be fulfilled. These are technical but
would typically be taken care of
(such as the need to record the
mortgage) so need not be reviewed
here. Awareness that this needs to
be considered should suffice
Exception to Power of Sale Foreclosure
Exceptions to the availability of power of sale foreclosure
essentially confine it to residential buildings of more than five
units outside of New York City, although the foreclosure would
have to leave leases intact, and commercial premises anywhere
in the state. The procedure is not available for a mortgage on
real property improved solely by:
• A residential building of less than six dwelling units; and
• A residential condominium unit in a residential building
owned in condominium form of ownership; and
• A residential building owned by a qualified cooperative
apartment corporation; and
Nonjudicial Foreclosure in New York – What’s the Story?By Bruce J. Bergman, Esq, Berkman, Henoch, Peterson & Peddy, P.C.
Nonjudicial foreclosure does indeed exist in New York – although it is not surprising
that the fact is not so widely known.
17
United Trustees Association Summer 2008
Featured Article
• A building in which the number of units occupied by resi-
dential tenants equals or is greater than sixty-five percent
of the total number of units in the building located in a city
with a population of one million or more, which means
New York City.
Power of sale foreclosure is likewise unavailable for a mortgage
on property containing residential apartment units where the
foreclosure would seek or would result in foreclosure, termina-
tion, modification or impairment of a tenants’ interest in any
lease for a residential unit in the mortgaged property or of the
tenant’s possessory rights pursuant thereto.
Impediments – When the Borrower Can Opt Out
Even for the narrow category of instances where power of
sale foreclosure remains available, there is an ability on the
borrower’s part to either opt out or challenge imposition of the
procedures. These opt-outs apply separately to mortgages in
existence prior to the effective date of the statute and those in
existence subsequent to the effective date of the statute.
Mortgages Predating
If the mortgage to be foreclosed – or the extension, amend-
ment, modification or consolidation thereof – was executed
prior to the effective date of the statute, then the borrower may
require that further foreclosure proceedings be conducted judi-
cially. The borrower accomplishes this by written notice to the
mortgagee delivered by registered or certified mail, or by such
other method as may be specified in the mortgage, with certain
time requirements and with minimal content essentials.
Mortgages Subsequent to
If the mortgage to be foreclosed non-judicially was executed
after 1998, then the borrower can apply for an order directing
that further proceedings be conducted judicially and for a tem-
porary restraining order staying further proceedings pending
hearing of the application. The borrower must then support
the application with facts of one or more of the following alle-
gations:
• That the mortgage does not contain a power of sale clause
or some other provision permitting foreclosure in a non-
judicial manner; and/or
• That the mortgage obligation is invalid or not otherwise
due; and/or
• That the mortgagor is not in default under the mortgage
or otherwise has a meritorious defense to the foreclosure;
and/or
• That the mortgagee has not complied with the terms and
conditions of Article 14; and/or
• That under the facts and circumstances presented, undue
hardship to the mortgagor would result from allowing the
foreclosure to proceed non-judicially.
Should the application be granted, the foreclosure must then
proceed judicially unless the court subsequently orders other-
wise. Should the application be denied, then the sale pursuant
to Article 14 may proceed non-judicially.
Problems for Mortgagees with Opt-Out Provision
One of the problems with judicial foreclosure in New York that
prompted exploration of revivifying non-judicial foreclosure
was the time necessary to complete a mortgage foreclosure
action. Although much of the time consumed in a judicial
foreclosure involves achieving the various plateaus, congested
court calendars (particularly downstate) are a major compo-
nent of burdensome durations. The provisos of the power of
sale procedure greatly reduce the time, primarily be eliminat-
ing the need to invoke court involvement. (In some instances,
engagement of the court becomes necessary.)
Opting out of the post-July, 1998 mortgage may not be auto-
matic, but the legislature was generous in excavating an escape
route – or at least, a time killer. Aside from the need for a
power of sale provision in the mortgage, the next four grounds
to argue against the abbreviated course open the door to con-
tention and mischief.
Continued on page 62
Spring 2007 United Trustees Association
Featured Article
18
Summer 2008 United Trustees Association
Because of the current economic climate and the
mortgage industry meltdown which are preventing
Borrowers from refinancing their Mortgage Loans,
Borrowers are turning to litigation attorneys to file lawsuits
for monetary damages against Mortgage Brokers, Mortgage
Lenders and Mortgage Servicers alleging federal and state
statutory and regulatory violations ranging from unfair and
deceptive trade practices to fraud.
We are also seeing a substantial
increase in the number of litigation
matters filed or claims brought
against Mortgage Lenders and
Mortgage Servicers alleging vio-
lations of the federal Truth-in-
Lending Act (15 USC Section 1601
et seq.) (“TILA”). These lawsuits
allege violations ranging from inac-
curate Finance Charge calculations to failure to provide two
accurately-completed copies of the Notices of Right to Cancel
that the originating Mortgage Lender is required to provide to
each Borrower and any other person who has an interest in the
Secured Property.1
The penalties for violations of TILA can be severe. If the litiga-
tion is brought within one year after the closing date and the
Borrower can demonstrate that there are errors in the calcula-
tion of the Finance Charge, APR, Payment Schedule, Total of
Payments or the Amount Financed (collectively, the “Material
Disclosures”)2 in the TILA Federal Box Disclosure Statement
that exceed the applicable tolerances,3 the Borrower would be
entitled to statutory damages of $2,000.00, actual damages and
attorneys’ fees and costs.4
If the litigation is brought more than one year after the
Mortgage Loan closing but there are violations in the Material
Disclosures that exceed the applicable tolerance and the
Mortgage Loan is secured by a mortgage or deed of trust on
owner-occupied residential property, actual damages and
statutory damages would be barred by the one-year statute of
limitations.5 i Nonetheless, the Borrower would have a claim
against the Mortgage Lender and Mortgage Servicer for rescis-
sion under Section 125 of TILA (15 USC Section 1635). 6
In addition to violations of the
Material Disclosures in the TILA
Federal Box Disclosure Statement
beyond the applicable tolerances,
there is another basis on which
a Borrower would be entitled to
rescind their owner-occupied
refinance Mortgage Loan under
Section 125 of TILA. That basis
would arise in the event that the
closing or settlement agent fails to give each Borrower and any
other person who has an interest in the Secured Property two
accurately-completed Notices of Right to Cancel.7
The failure of the Mortgage Lender to advise the closing or
settlement agent of the requirement that the settlement agent
must provide two accurately-completed copies of the Notice of
Right to Cancel to each Borrower and persons with an interest,
or the failure of the settlement agent to provide the accurately-
completed copies of the Notice to each Borrower and person
with an interest, are the primary reasons for rescission claims
under TILA.
Please note that the right of rescission under Section 125 of
TILA extends for a period of three years after the date of clos-
ing as opposed to the one year for statutory and actual dam-
ages.8
It is necessary for Escrow and Title companies to train their employees
and notaries to provide accurate TILA disclosures to Borrowers in order to avoid lawsuits for indemnity.
Rescission Under TILA: What This Means for Trustees, Escrow Officers, Title Companies and ServicersBy T. Robert Finlay, Esq., Wright, Finlay & Zak, LLP and Julie L. Greenfi eld, Esq.,
Wright, Finlay & Zak, LLP
19
United Trustees Association Summer 2008
Featured Article
What Happens in a Rescission?
A validly tendered rescission can be an extraordinary wind-
fall for the Borrower. In order to exercise the right of rescis-
sion, the Borrower must tender back to the Mortgage Lender
or Mortgage Servicer the original principal balance of the
Mortgage Loan minus all fees and prepaid interest paid at the
closing, plus any interest and fees paid to the Mortgage Lender
or Mortgage Servicer during the term of the Mortgage Loan
(the “Rescission Amount.”).
For example, if Borrower has a $500,000 Mortgage Loan, has
paid $15,000 in fees and costs at the closing and has paid
$25,000 in interest each year for two years, the Borrower
would be required to give back to the Mortgage Lender or
Mortgage Servicer in a TILA rescission the sum of $435,000.00,
which is the Rescission Amount. By paying back only the
Rescission Amount, the Borrower has just received a windfall
of $65,000.00.
How Is a Rescission under TILA Tendered?
In order to exercise the right of rescission, the Borrower must
tender or request a rescission via written correspondence sent
by the Borrower to the original Mortgage Lender and/or cur-
rent Mortgage Loan Servicer stating that they want to rescind
the Mortgage Loan under TILA. The correspondence should
provide the Borrower’s name, address and loan number. The
Borrower is not required to tell the Mortgage Lender or
Mortgage Servicer the reasons why they are rescinding, but
most will if asked.
What Should the Mortgage Lender or Mortgage
Servicer Do When Rescission is Tendered to Them?
When a Mortgage Lender or Mortgage Servicer receives a
Notice of Right to Cancel or a written communication from
the Borrower stating that the Borrower is exercising his or
her right to rescind the Mortgage Loan under TILA and the
Borrower’s tender of rescission is a valid one, the TILA statute
and Regulation Z literally provide that the Mortgage Lender
is required to release or reconvey its security interest in the
Secured Property within 20 days of receipt of the tender.9
This language has been in the federal statute since 1969 and has
never been amended by Congress. However, because literally
following the statute could enable an underhanded Borrower to
fleece a Mortgage Lender of the entire amount of the Mortgage
Loan by filing a Chapter 7 Bankruptcy petition to wipe out
all unsecured claims after the Mortgage Lender releases the
security interest, the majority of federal Courts have followed
an equitable theory to govern TILA Rescissions: the Mortgage
Lender or Mortgage Servicer is not required to release or
reconvey the security interest in the Secured Property unless
and until the Borrower first tenders the Rescission Amount.10
However, if the Mortgage Lender or Mortgage Servicer does not
respond to the Borrower’s tender of rescission within 20 days
of receipt, the Mortgage Lender or Mortgage Servicer could be
liable to the Borrower for statutory damages of $2,000.00 for
failing to honor the tender of rescission. Upon receipt of a ten-
der of rescission, the Mortgage Lender or Mortgage Servicer
should record the date on which the tender was received and
should promptly forward the tender to its in-house or outside
counsel to handle going forward.
What If the Tender of Rescission is Sent to
the Trustee, Escrow or Title Company?
There may be occasions in which the Borrower may send a
tender of rescission to a Trustee on their Deed of Trust, the
title company or the Escrow Company or Settlement Agent in
connection with the Mortgage Loan transaction because they
do not know where to send it.
The only entities liable to a Borrower for a rescission under
TILA Section 125 are the Mortgage Lender and assignee of the
original Mortgage Lender. The Borrower cannot sue a Trustee,
Escrow Company or Settlement Agent, or title company for
damages and rescission under TILA. However, it is incumbent
upon the Trustee, Escrow Company or Settlement Agent, and
title company which receives a written tender of rescission
from the Borrower to promptly forward it to the Mortgage
Servicer. Although a tender of rescission sent to someone
other than the Mortgage Lender or Mortgage Servicer may not
be a valid tender, nonetheless, the tender should be directed
promptly to the Mortgage Lender or Mortgage Servicer so that
Continued on page 63
Spring 2007 United Trustees Association
Featured Article
20
Summer 2008 United Trustees Association
…if a loan modification is considered by a lender, a careful analysis of
the applicable state law should be made so as not to lose priority.”
Loss Mitigation and Protecting Lien SuperiorityBy Samuel S. High, Esq., Wilson & Associates
Loss Mitigation serves as a useful tool for lenders and
servicers, which can allow certain borrowers to avoid
foreclosure, affording both parties with the opportunity
of long term success. Often, loss mitigation takes the form of
loan modification. Loan modification agreements are an effec-
tive way of coming to terms acceptable to both parties involved
in the transaction; however, these agreements can come with
certain risks.
Loan modification can take many different forms, including
those which add additional loan provisions, adjust the interest
rate, extend the date of maturity, or increase the loan amount.
One must be cautious of potential problems that may occur
due to the existence of subordinate liens. In concert with the
elements of a loan modification
agreement, subordinate liens may
create priority issues that should
be examined and resolved prior to
entering into any new agreement.
Of course, prior to any modifi-
cation, one should obtain a title
search. If there are any liens on
the property, then the law of each
applicable state should be thor-
oughly examined. Different states have different standards of
when a lien may lose its priority. Some states look to whether
the agreement results in what could be deemed “new money”,
as in that which would substantially alter the character of the
original loan. Some states focus on whether subordinate lien
holders are prejudiced and their security interest is negatively
affected. Some changes that benefit the borrower, such as a
reduction in interest rate, do not impair the subordinate lien
holder and therefore would not be an issue. However, some
courts have taken a much broader position as what changes,
absent consent of subordinate lien holders, cause priority to
be lost.
In 1942, the Arkansas Supreme Court discussed the question of
whether a mortgage loses its priority if the mortgagee allows a
renewal mortgage. The Court in Tell v. Harnden, 204 Ark. 103,
161 S.W. 2d 1 (1942), found that priority is not affected when
the debt is the same and the collateral is not released from the
lien. Tell discussed a theory akin to equitable subrogation, as it
relates to the restoration of priority, noting factors such as good
faith and the absence of culpable negligence.
In a later Arkansas case, Peoples Bank of Imboden v. Burgess,
57 Ark.App. 68, 942 S.W.2d 264 (1997), the Arkansas Court
of Appeals held that a bank lost priority, despite its intent not
to do so, after it entered into an “extension agreement” which
reduced the interest rate and quarterly payments of an original
note and mortgage. In that case,
the amount of the loan equaled
the unpaid balances of three previ-
ous loans, and the bank provided
receipts reflecting payment of the
indebtedness on two of the loans. In
affirming the lower court’s decision
that the bank had released its first
lien, the Court of Appeals empha-
sized several factors, including the
fact that new funds were used to
pay off other loans, the interest rate was modified, and there
were different parties to the transaction. In its decision, the
Court pointed out without further explanation that the bank
could have taken steps to protect its status.
Cases such as First Fidelity Bank, N.A., N.J. v. Bock, 279
N.J.Super. 172, 652 A.2d 262 (1994) illustrate the affect of state
statutes on these scenarios. In First Fidelity Bank, the Superior
Court of New Jersey looked to a statute under which a mort-
gage that has undergone modification relates back to the origi-
nal mortgage for priority purposes. See N.J.S.A. 46:9-8.2. The
Court held that the issuance of subsequent promissory notes
21
United Trustees Association Summer 2008
Featured Article
coupled with the satisfaction of the original note, constituted
loan modification. Id. The Court noted that no “new money”
was advanced, and that while the subsequent notes extended
maturity dates and amended loan terms, the mortgagee and
mortgagor never intended to release the mortgage, nor was it
released on record. Id.
The Restatement Third of the Law of Property, Mortgages, §
7.3(b) provides that if a senior mortgage (or the underlying obli-
gation) is modified, the mortgage as modified retains priority
as against junior interests in the real estate, except to the extent
that the modification is materially prejudicial to the holders of
such interests and is not within the scope of a reservation of
right to modify. Looking at this general rule, as well as in the
examples cited above, it is clear that if a loan modification is
considered by a lender, a careful analysis of the applicable state
law should be made so as not to lose priority.
In sum, lenders and servicers should explore all available
options with their local counsel in order to avoid unintended
consequences associated with the loss mitigation process.
Sammy High is an attorney in the Litigation
Department of Wilson & Associates. He received
his education from the University of Central
Arkansas (BS 1998) and the William H. Bowen
School of Law (JD 2001). He was admitted to the
Bar of the State of Arkansas in 2001, and he is
licensed to practice before the 8th Circuit. His primary areas of
practice are foreclosure law and mortgage banking litigation. He
can be contacted via [email protected].
Spring 2007 United Trustees Association
Featured Article
22
Summer 2008 United Trustees Association
In Washington Mutual Bank v. Blechman, 157 Cal.
App.4th 662 (Cal.App.2d Dist. 2007), property owned
by Robert A. Blechman (“Blechman”) was sold at a
trustee’s sale by Washington
Mutual Bank (“WAMU”) and its
trustee, California Reconveyance
Company (“CRC”) to Gladmac, Inc.
(“Gladmac”). Blechman filed suit
against all other parties seeking to
set aside the trustee’s sale. Facing
demurrers from WAMU and CRC,
Blechman dismissed WAMU and CRC. Blechman proceeded
against Gladmac and obtained a default judgment, which
declared that the trustee’s sale was null and void and that
Gladmac had the right to recover its purchase price from the
sellers.
WAMU and CRC then filed a separate lawsuit to establish that
the trustee’s sale was valid and that neither had any liability to
anyone for the completed trustee sale. Gladmac cross com-
plained alleging that it had good, clear, marketable title to the
property.
The action proceeded to trial with the court finding that
WAMU and CRC were indispensable parties to the prior
action and that the default judgment entered in the original
action was not only ineffective against them, but subject to
collateral attack. In addition, the court confirmed that the sale
to Gladmac was valid.
Blechman appealed. On appeal the court ruled that “[i]t takes
little analysis or discussion to conclude that WAMU and
CRC were indispensable parties to the prior action.” Id at 668.
Blechman did not dispute this finding but rather focused on
an argument that such a ruling does not affect Gladmac as
Gladmac cannot overturn the judgment previously entered
against them that ruled that the sale was invalid. The court of
appeal summarized this position as “ludicrous” as a trustee’s
sale cannot be valid as to one party
and invalid as to another party.
As Blechman failed to join all the
necessary parties in the previous
litigation, the judgment obtained
therein was essentially illusory and
had no effect on the remaining
parties.
Matthew Podmenik, Esq., is an ssociate at McCarthy & Holthus,
LLP and primarily represents loan servicing entities, lenders,
and trustees in lender-borrower litigation. He can be contacted
via email at [email protected].
…a trustee’s sale cannot be valid as to one party and invalid as to another party.
The Beneficiary and Trustee of a Deed of Trust Were Necessary Parties to Litigation Seeking to Invalidate a Trustee SaleBy Matthew Podmenik, Esq., McCarthy & Holthus, LLP
Want the Latest
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Visit
www.unitedtrustees.com
and click on “Industry NewsClips!”
Spring 2007 United Trustees AssociationFall 2007 United Trustees AssociationSpring 2007 United Trustees Association
State News
Summer 2008 United Trustees Association
24
Like litigation, real estate deals, or nonjudicial foreclo-
sures for that matter, the world of legislation moves
from a series of deadlines to deadlines. For the California
legislature, the 2008 legislative year is entering the final three
months, and a host of bills affecting mortgages and foreclo-
sures are hanging in the balance. Policymakers are determined
to do something about subprime mortgages and the rise in
defaults and foreclosures, and we will soon have a view of the
endgame.
The most far-reaching bill in this
area, and probably the one most
likely to be enacted, is SB 1137
(Perata). Various real estate groups,
including UTA, worked for months
on the language of the bill, which
has as its centerpiece a requirement
that lenders make diligent attempts
to contact borrowers prior to
recording notices of default. UTA
worked to make sure that the trustee role in the foreclosure pro-
cess was more accurately reflected in the bill, and that duties do
not fall to trustees that more properly belong to others. With
all organized real estate opposition to the bill removed, SB 1137
passed the Senate on a narrow, largely party-line vote of 28-10,
with Democrats in support and Republicans opposed.
Moving over to the Assembly, SB 1137 received another party-
line vote in the Banking and Finance Committee, and will
move to the Assembly floor for a vote in the next few weeks.
At the same time, however, a series of mortgage bills are mov-
ing over to the Senate from the Assembly, where their fate
is uncertain. In other words, the various bills must not only
navigate the waters between Democrats and Republicans, but
also between the Senate and Assembly. Beyond that, Governor
Schwarzenegger will have the ultimate say in signing or vetoing
bills which reach his desk. So, even though the legislative year
is quite far along in California, the outcome in the mortgage
and default arena is highly uncertain.
At this point, what is known is this: SB 1137 proposes to
add a requirement to contact borrowers on owner-occupied
residential mortgages at least 30 days prior to NOD. Special
transition rules will apply to NODs already of record when
the bill becomes effective. The contact obligation will become
operative 60 days after the effective date of the bill. Additional
provisions of the bill require posting and mailing notices to
potential tenants, who will be provided with a uniform 60 days
after the trustees sale before evic-
tion. The bill also imposes a state
requirement on owners to maintain
properties after foreclosure, with
very significant penalties for non-
compliance.
While the Assembly will be acting
on SB 1137, the Senate will con-
sider a number of bills relating to
mortgage products and servicing. AB 1830 (Lieu), for example,
would create extensive new limitations on nontraditional,
subprime, and high-cost mortgages. The bill addresses issues
such as prepayment penalties, balloon payments, yield spread
premiums, ability to repay, and others. Another bill, AB 2359
(Jones), would eliminate holder in due course protections for
high-cost mortgages, and yet another, AB 2740 (Brownley),
would enact very extensive new Civil Code provisions on loan
servicing.
While the real estate community in general has “gone neu-
tral” on SB 1137, most groups remain strongly opposed to
the Assembly bills mentioned above. The contention is that
the availability of mortgage capital in California will be very
significantly disadvantaged if these bills become law. But the
leadership in the Assembly is just as strong in pushing for these
changes as Senator Perata is in advocating for SB 1137.
California: Endgame for Mortgage BillsBy Michael Belote, Esq., California Advocates
The most far-reaching bill … and probably the one most likely
to be enacted, is SB 1137.
United Trustees Association Fall 2007United Trustees Association Summer 2008
State News
25
Finally, making the whole situation a real Rubik’s Cube is the
overlay of potential changes at the federal level to Regulation
Z. If various bills are enacted in California, and Reg Z changes
become effective, lenders and servicers will have to figure out
which changes apply to whom.
With SB 1137 looming, UTA is poised to report promptly to
members when and if the bill becomes operative. Stay tuned!
Michael Belote has represented the United
Trustees Association for over twenty-five years
before the California legislature and state regu-
lators. Mike’s activities in the legislative process
have spanned a broad array of issues, including
financial services, real estate, health care, and
the judiciary and local government. He can be emailed at mbe-
HOA Foreclosure Bill Intro-duced Again in California
State Senate
California State Senator Denise Ducheny (D-San Diego)
has introduced legislation in the California State Senate,
SB 1511, that would:
• Provide super priority for HOA assessment over the fore-
closing lender for a period of 180 days prior to the sale
and would discourage lenders from loaning on common
interest developments and from participating in workout
agreement with homeowners. Lenders opposition is sure
to be strong on this bill as it could represent a huge loss of
income on properties subject to HOA dues.
• The requirement that beneficiary or trustee’s send the
HOA the name and mailing address of the successor may
be difficult or impossible with respect to third party pur-
chasers.
“This is yet another service the trustee has to perform with-
out compensation,” said Phil Adleson, Esq., UTA’s Corporate
Counsel. “In essence, this bill would make it difficult or impos-
sible for HOAs to collect HOA dues from homeowners who
enjoy the benefits of the HOA and then shift the burden of
preforeclosure HOA dues to the lender. This would exacerbate
the credit shortage and make it more difficult for consumers to
obtain purchase money or refinance loans secured by CIDs.”
UTA is working with the sponsor on acceptable language. The
bill has been referred to the Judiciary Committee.
Initial California Foreclosure Report Bill Will Not Be
Pursued: Similar Legislation May Be Introduced
Although Senator Ellen Corbett (D-San Leandro) has
decided not to pursue SB 1375, legislation that would
have provided for the use of some form of foreclosure
report instead of a TSG, it is possible that similar legislation
may be introduced again this session. SB 1375 would have per-
mitted reimbursement of costs of a title search product as an
alternative to a trustee’s sale guarantee.
SB 1375 would have provided: “as an alternative to the fee for
a trustee’s sale guarantee, [the trustee may charge] the costs of
a title and court records search” (New Product). The bill was
introduced by Senators Corbett, Midgen and Perata purport-
edly to “reduce the costs associated with the reinstatement of a
mortgage for California homeowners facing foreclosure.”
“A trustee would have been put into the position of taking risks
dictated as cost savings by the beneficiary instead of the assur-
ance of a TSG,” said Ron Roup, UTA’s Legislative Committee
Chair
Some of the concerns UTA noted, that were raised by the leg-
islation were:
Continued on page 64
Spring 2007 United Trustees AssociationFall 2007 United Trustees AssociationSpring 2007 United Trustees Association
State News
Summer 2008 United Trustees Association
26
Effective June 12, 2008, Washington Substitute Senate
Bill 5378 amended Washington’s Deed of Trust Act
(RCW 61.24.005 et seq.) as follows:
• SSB 5378, Section 1, amends RCW 61.24.010 to add two
new subsections:
o Subsection (3) legislatively reverses Cox v. Helenius,
a landmark Washington Supreme Court decision in
which the court ruled that a foreclosure trustee in
Washington owes limited fi duciary duties to the bor-
rower as well as the lender. Th e new subsection pro-
vides that a trustee “shall have no fi duciary duty or
fi duciary obligation to the grantor or other person
having an interest in the property subject to the deed
of trust.”
o Subsection (4) muddies the waters by imposing a new
duty upon the trustee. Th e trustee will be required to
“act impartially between the borrower, grantor and
benefi ciary.” Th ere is no guidance in the amendment
or in the legislative history concerning what conduct
or omission might be deemed to breach this duty.
Eff ect: Given the ambiguity, this amendment should
not materially change how trustees deal with or make
concessions to borrowers.
• SSB 5378, Section 2, amends RCW 61.24.030 as follows:
RCW 61.24.030(6) requires a trustee to “maintain” (instead
of merely to “have”) a “street address in this state where
personal service may be made” and, raising the ante for
out-of-state trustees, “the trustee must maintain a physical
presence and have telephone service at such address”;
Effect: This amendment will affect trustees without an
actual office in Washington.
• SSB 5378, Section 3, amends RCW 61.24.0040(2), pertain-
ing to the form of the Notice of Foreclosure, to add the
following language:
o Immediately following the itemized fi nancial informa-
tion, the following new paragraph is inserted:
To pay off the entire obligation secured by your Deed
of Trust as of the ______ day of _____, 20__, you must
pay a total of $______ in principal, $______ in interest,
plus other costs and advances estimated to date in the
amount of $______. From and after the date of this no-
tice you must submit a written request to the Trustee
to obtain the total amount to pay off the entire obli-
gation secured by your Deed of Trust as of the payoff
date.
o In the paragraph that begins “You may reinstate your
Deed of Trust”, the amendment inserts “or to pay off
the entire indebtedness” in the fourth sentence be-
tween “reinstate” and “may”. Also in that fourth sen-
tence, the amendment inserts “or the payoff amount”
between “reinstatement” and “so”.
o In the same paragraph, after the fi fth sentence (ending
in “OTHER DEFAULTS AS OUTLINED ABOVE”),
the amendment inserts the following new sentence:
“Th e Trustee will respond to any written request
for current payoff or reinstatement amounts within
ten days of receipt of your written request”.
Effect: These changes affect the form of Notice of
Foreclosure the trustee must send (with a new payoff
statement requirement in the notice), the time a trustee
has to “respond” to a reinstatement or payoff quote (ten
days) and the method by which a reinstatement or payoff
quote request is communicated (writing). Concerning the
ten days to “respond” to a reinstatement or payoff request,
it is not at all clear whether the response may simply be
“we’re working on it” or whether an actual quote must
New Duties for Trustees in new Washington LawBy David Fennell, Esq., Routh Crabtree Olsen, PS
United Trustees Association Fall 2007United Trustees Association Summer 2008
State News
27
be provided. As with most of these changes, too, the
consequences of non-compliance are not at all clear (i.e.
damages claim, suspension of interest accrual, rendering
foreclosure invalid?).
New, Expensive Postponement
Notice Requirements
• SSB 5378, Section 3, also amends RCW 61.24.040(6), relat-
ing to postponements, as follows:
o In the fi rst sentence of subsection RCW 61.24.040(6),
“has no obligation to, but” is inserted between “trust-
ee” and “may”.
o Creates a new subsection (a) creating additional notice
requirements for postponements as follows:
(a) a public proclamation at the time and place
fi xed for sale in the notice of sale and if the contin-
uance is beyond the date of sale, by giving notice
of the new time and place of the sale by both fi rst
class and either certifi ed or registered mail, re-
turn receipt requested, to the persons specifi ed in
RCW 61.24.040(1)(b)(1) and (ii) to be deposited in
the mail (i) not less than four days before the new
date fi xed for the sale if the sale is continued for up
to seven days; or (ii) not more than three days after
the date of the continuance by oral proclamation if
the sale is continued for more than seven days;
Eff ect: For trustees, this is the most burdensome aspect of SB
5378. For servicers, it is the most expensive. Coupled with the
abrogation of the fi duciary duty standard, excusing the trustee
from any obligation to postpone a sale is a helpful litigation de-
fense. Having to mail the notice of postponement to the bor-
rower, the grantor and all junior lienholders, however, is an ad-
ditional, burdensome step made all the more risky by requiring
the trustee to mail the postponement notice no later than the
Monday following the sale. Without timely mailing of the no-
tice, the postponement is arguably invalid and, therefore, the
foreclosure cannot be further sustained. Th e trustee will in-
cur signifi cant additional expense in making sure its vendor
fully complies with this new postponement notice require-
ment. Servicers should expect to see much higher postpone-
ment costs in Washington.
• SSB 5378, Subsection 4, amends RCW 61.24.045 to clean
up the suggested form of request for notice of trustee’s sale
by removing suggested dates in the 1900’s and inserting
suggested dates in the 2000’s.
Effect: This has no effect on trustees as trustees do not prepare
requests for notice. This is purely a statutory housecleaning
matter.
• SSB 5378, Subsection 5, amends RCW 61.24.130(1) to
insert “legal or equitable” in the first sentence between
“proper” and “ground”. It also amends RCW 61.24.130 by
adding a subsection (6), which provides that “(6) The issu-
ance of a restraining order or injunction shall not prohibit
the trustee from continuing the sale as provided in RCW
61.24.040(6).
Effect: These changes relate to the right to pursue issuance
of a restraining order to enjoin a trustee’s sale and the right
of a trustee to postpone a sale that has been enjoined. The
change to (1) likely will be of little import to trustees and
only marginally more important to borrowers and lenders.
The addition of (6) is rather silly because a trustee already
seemingly has the ability to postpone the trustee’s sale dur-
ing the pendency of a restraining order pursuant to RCW
61.24.130(5).
• SSB 5378, Subsection 6, amends RCW 61.24.135 by insert-
ing the following new sentence immediately after the first
sentence:
Th e trustee may decline to complete a sale or deliver the
trustee’s deed and refund the purchase price, if it appears
that the bidding has been collusive or defective, or that the
sale might have been void.
Eff ect: Th is change should be treated by the trustee as sug-
gesting, albeit ambiguously, that a trustee may refuse to issue a
trustee’s deed if there are possible problems with a sale. Unfor-
tunately, the legislature has not exactly defi ned what constitutes
Continued on page 68
Spring 2007 United Trustees AssociationFall 2007 United Trustees AssociationSpring 2007 United Trustees Association
State News
Summer 2008 United Trustees Association
28
Utah: Legislative Enactments in Impacting Real EstateBy Stuart T. Matheson, Esq., Matheson, Mortenson, Olsen & Jeppson, P.C.
There were a number of laws enacted during the 2008
General Session of the Utah Legislature which impact
real property, either directly or indirectly. The follow-
ing is a summary of some I thought relevant to our industry.
(HB = House Bill; SB = Senate Bill; all statutory references are
to the Utah Code Annotated, (1953), as amended, unless oth-
erwise noted.)
HB 48: Mobile Home Owners’ Rights. Amends §57-16-6
and enacts §57-16-18. Provides that in circumstances of
a change of land use or condemnation, nine (9) months
advance notice must be provided to tenants, during which
period the rents cannot be increased. The nine month
notice provision does not apply in cases of condemnation.
If a person who is not a resident of the park at the time of
the initial notice becomes a tenant, a landlord shall provide
notice to the prospective tenant of the proposed land use
change before the tenant occupies the space. Finally, no
municipality may enact any ordinances which govern the
closure of mobile home parks.
HB 56: Assumption of Indebtedness on Residential
Real Property. Amends §7-7-44 and repeals §57-15-
1, Legislative findings; §57-15-2, Provision for accelera-
tion or increased interest on assumption unenforceable
– Exception; §57-15-3, Substantial impairment of lender’s
prospect of prompt and full payment; §57-15-4, Charge
assessed by secured party for assumption – Limitation;
§57-15-5, Property subject to chapter; §57-15-6, Exempt
lenders; §57-15-7, Calling entire balance on impairment of
security; §57-15-8, Procedure for assumption -- Request to
lender -- Effect of failure to request -- Approval or refusal
by lender -- Information furnished by lender; §57-15-8.5,
Acceleration or maturing an indebtedness – Conditions
authorizing -- Exemption of loans sold to federal agen-
cies; §57-15-9, Liability for damages caused by viola-
tion; §57-15-10, Severability of provisions; and §57-15-11,
1.
2.
Limitation on enforcement of due-on-sale clauses.
HB 128: Utah Residential Mortgage Practices Act
Amendments. Amends §61-2c-102 and -103. This
bill modifies definitions; provides that a principal lend-
ing manager may act as a mortgage officer; requires the
Division of Real Estate to make rules providing a combined
licensing process related to a principal lending manager
maintaining a license as an entity if certain conditions are
met; and makes technical and conforming amendments.
HB 346: Division of Real Estate Related Amendments.
Amends §61-2-5.5; §61-2-13; §61-2-20; §61-2-21; §61-
2b-2; §61-2b-6; §61-2b-8; §61-2b-18; §61-2b-21; §61-2b-
22; §61-2b-24; §61-2b-25; §61-2b-26; §61-2b-27; §61-2b-
28; §61-2b-29; §61-2b-30.5; §61-2b-31; §61-2b-33; §61-
2c-202; §61-2c-206; §61-2c-403; §61-2c-502; and enacts
§61-2c-405. This bill addresses rulemaking by the Real
Estate Commission; addresses fines that may be imposed;
addresses firms; addresses disciplinary actions that may
be imposed under provisions related to real estate bro-
kers and agents, the Real Estate Appraiser Licensing and
Certification Act, and the Utah Residential Mortgage
Practices Act; provides for registration of trainees under
the Real Estate Appraiser Licensing and Certification Act;
addresses terminology for experts under the Real Estate
Appraiser Licensing and Certification Act; modifies crimi-
nal penalties under the Real Estate Appraiser Licensing
and Certification Act and the Utah Residential Mortgage
Practices Act; addresses the hours required of prelicens-
ing education for mortgage licensing including providing
for rulemaking; removes grandfathering language related
to principal lending manager; provides for deposit of cer-
tain fees into the Residential Mortgage Loan Education,
Research, and Recovery Fund; and makes technical and
conforming amendments.
3.
4.
United Trustees Association Fall 2007United Trustees Association Summer 2008
State News
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HB 486: Wrongful Liens and Wrongful Judgment Liens.
Amends §38-9-1; §38-9-2; §38-9-4; and §38-9a-201. This
bill includes a notice of interest and other encumbrances
within the definition of “wrongful lien”; addresses the
impact of various wrongful lien provisions on a notice of
interest and other encumbrance; increases the statutory
amount that may be recovered by a person against whom
a wrongful lien is recorded. It increases the statutory dam-
ages for refusal to release a wrongful lien from $1,000.00
to $3,000.00 or actual damages and increases the statutory
damages for a false and groundless lien from $3,000.00 to
$10,000.00; and makes technical changes.
SB 27: Trustees Sale – Process for Excess Proceeds.
Amends §57-1-29. This bill lengthens the period of time
during which a person may contest another person’s claim
against the excess proceeds from a trustee’s sale of real
property from 20 days to 45 days; and makes technical
changes.
SB 92: Real Property Recording Amendments. Amends
§17-21-1; §17-21-12; §57-1-5; §57-1-5.1; §57-3-105; §57-
3-106; §72-5-309. This bill addresses policies and proce-
dures established by a county recorder; requires a county
recorder to endorse a document upon acceptance, instead
of upon receipt thereby modifying the prior first in time
rule, creating a first accepted priority; addresses a tenancy
by the entirety clarifying that such an estate is a joint ten-
ancy; requires an affidavit concerning a terminated inter-
est in real property due to death to be accompanied by a
government-issued document certifying the death; forbids
certain documents from being presented for recording
; allows the governor or governor’s designee to record a
notice of acknowledgment of an R.S. 2477 right-of-way,
with supporting documentation; and makes technical
changes. [NOTE: this bill was opposed by lawyers, the
title insurance industry and the financial industry. It
significantly impacts lenders, purchasers, title insur-
ance companies, and real property lawyers.]
SB 114: Notary Public Revision. Amends §46-1-7. This
bill allows an attorney to notarize a document when the
attorney is named in the document if the attorney is only
named as representing a signer or another person named
in the document; and makes technical changes.
5.
6.
7.
8.
SB 134: Mortgage Fraud Act. Amends §61-2-21; §61-2b-
33; §76-10-1602; and enacts §61-2c-405; §67-5-26; §76-
6-1201 to -1204. This bill establishes penalties for certain
conduct governed by the Real Estate Appraiser Licensing
and Certification Act and the Utah Residential Mortgage
Practices Act; requires the attorney general to hire a mort-
gage fraud prosecutor; enacts the Mortgage Fraud Act,
including: creating the crime of mortgage fraud; estab-
lishing penalties; and providing definitions; and includes
mortgage fraud as an illegal activity under the Pattern of
Illegal Activity Act.
Mr. Matheson is a co-founder and current presi-
dent of the law firm of Matheson, Mortensen,
Olsen & Jeppson, where he practices in the areas
of lender representation, creditors’ rights and real
property law. He earned his B.A. degree from the
University of Utah (History) and his J.D. degree
from Brigham Young University, J. Reuben Clark Law School,
charter class. Mr. Matheson has served as trustee and officer on
various non-profit boards, organizations, and committees,
including the New Lawyer Continuing Legal Education
Committee for the Utah State Bar, of which he has been a mem-
ber since 1976. He has published nationally, and is a frequent
presenter at CLE seminars related to real property, foreclosure,
creditors’ rights and bankruptcy. Representative clients include
several of the nation’s largest lenders as well as regional and
local financial institutions. He can be reached via email at
9.
Spring 2007 United Trustees AssociationFall 2007 United Trustees AssociationSpring 2007 United Trustees Association
State News
Summer 2008 United Trustees Association
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Massachusetts: New -Day Right to Reinstate Notice Required for Massachusetts Residential Foreclosures Effecive May By Patricia Antonelli, Esq., and Charles A. Lovell, Esq., Patridge Snow & Hahn, LLP
The new Massachusetts Chapter 206 of the Acts of 2007
“An Act Protecting and Preserving Homeownership”
makes changes to a number current Massachusetts
laws which affect foreclosure practice and post-foreclosure
accounting, post-foreclosure evictions, loan origination, loan
modification, and mortgage lender/broker loan officer licens-
ing. The effective date for the foreclosure provisions is May 1,
2008, while the other provisions have varying effective dates. A
summary of the changes to Massachusetts foreclosure practice
follows.
90-day Right of Reinstatement to Cure Monetary Default
Before Acceleration
• Amends Massachusetts General Laws, Chapter 244, §35A
and applies to residential mortgage loans in default,
encumbering borrower-occupied, 1 to 4-family homes
accelerated after May 1, 2008;
• Borrower is entitled to a one-time, 90-day right to cure a
monetary default before the loan can be accelerated, and
borrower allowed such right one time in 5 years;
• The burden is on the mortgage holder or servicer to deter-
mine if borrower is occupying the home; do not rely upon
the occupancy status of the property when the loan origi-
nated;
• The DOB and the Massachusetts Attorney General’s Office
vow to strictly enforce the 90-day right to reinstate;
• An undecided issue remains regarding whether or not a
borrower is entitled to a 90-day right to reinstate when
the loan was a business-purpose loan, which included a
personal guaranty secured by a mortgage on a residential
property. According to Chapter 244, §35A, the borrower in
the example is entitled to a 90-day right to reinstate (even
though the loan was a business-purpose or commercial
loan);
• The 90-day notice must be mailed (“served”) by first class
mail to the last known address of borrower or mortgagor
and, during the 90-day cure period, mortgage holders and
servicers are prohibited from commencing foreclosure,
from charging or collecting any attorneys’ fees or other
costs of collection except late fees or per diem interest. A
DOB representative has stated that mortgage holders and
servicers can pay taxes, insurance, and other municipal
charges during the 90 days, although this is not clear in the
statute;
• An unresolved issue currently being considered by DOB is
whether the legal fees and costs incurred during the 90-day
period for entering into a loan modification agreement or
a deed-in-lieu of foreclosure, may be charged to the bor-
rower or mortgagor.
The 90-Day Letter Must Include:
• A description of the default and amount needed to cure;
the actual date by which the borrower or mortgagor must
cure (90 days after service of the notice) and consequences
if borrower or mortgagor fails to reinstate (acceleration);
• The name, address and local or toll free phone number for
a person to whom payment must be made and the name,
address and local or toll free phone number for the person
in the department to whom disputes about the arrearage
or default should be addressed. This requirement raises a
potential problem for the privacy and safety of the “per-
sons” who are named. The industry wants to substitute
“collection manager” or a like title for a “person’s” name
(the DOB and industry representatives are studying this
issue);
• The name of any current or former mortgage broker who
was involved in the loan and, after July 1, 2008, the name
United Trustees Association Fall 2007United Trustees Association Summer 2008
State News
31
of any loan originator who was involved in the loan;
• A statement that the mortgagor or borrower may be eli-
gible for assistance from MassHousing and the DOB, and
the toll free or local phone numbers of those agencies.
Mortgage holders and servicers may want to include HUD
counseling information and VA information.
Additional Requirements:
• An affidavit certifying compliance with Chapter 244,
§35A and a copy of the 90-day letter must be filed with
Land Court complaint. The affidavit must be signed by
an individual at the mortgage holder or servicer attesting
to the mailing of the 90-day letter. A representative of the
DOB suggests that the affidavit be signed by a mailroom
employee or other employee with personal knowledge of
the mailing of the 90-day letter;
• The Massachusetts Land Court has alerted foreclosure
attorneys that, in the event a foreclosure complaint is not
accompanied by the required affidavit and 90-day letter, it
will require a statement explaining why no 90-day letter
accompanies the complaint (e.g., the loan was a business
purpose loan; the property is more than 4 units; the bor-
rower does not live there; the borrower already received
one 90-day right to reinstate within a 5-year period and is
not entitled to another one). As of this writing, it is uncer-
tain as to whether the Land Court will refuse to accept for
filing complaints that do not include this information;
• Chapter 244, §35A requires that within 5 business days of
filing a foreclosure complaint in the Land Court (referred
to by the DOB in the attached FAQ’s as a “petition under
the Soldiers’ and Sailors’ Civil Relief Act), a copy of the 90-
day letter be filed with the DOB. The DOB has stated it
will not accept any papers in connection with this require-
ment by facsimile, by mail or in person. Instead, to comply
with the DOB filing requirement, the information must
be input electronically in an on-line database which the
DOB is currently developing. The DOB’s representative
stated that only foreclosures that are actually commenced
by filing in Land Court are to be input into the database;
the database is not set up for input on every 90-day letter
sent;
• The DOB hopes to have the database up and running
by May 1, 2008 (go to www.mass.gov/dob); however, of
concern to the industry is the DOB’s statement that the
password used to create the record (when the first filing is
input) will be the only password that will later be able to
access the record in the database to input the foreclosure
sale results (also required by the new law). Thus, it is cru-
cial that the party who made the initial input of informa-
tion into the DOB database either be the same party or that
the initial password utilized is readily available to the party
who must input additional information when the foreclo-
sure is complete;
• Mortgage holders and servicers may continue to expect
inquiries from the DOB requesting a 60-day stay of fore-
closure upon inquiry from a borrower, and
• The Governor, the DOB, the Attorney General, legislators,
and consumer advocates believe that mortgage holders
and servicers have an absolute obligation to reach out to
borrowers during the 90-day period to explore loan modi-
fications, forebearance agreements, loan restructuring,
refinancing and other avenues to avoid foreclosure and
loss of property.
Accounting for Disposition of Proceeds:
• Mass. Gen. Laws Chapter 183 §27 is amended to provide
that the mortgage holder or “representative of the mort-
gage holder” (could be a servicer or foreclosure attorney)
must, within 60 days of receipt of the proceeds from a
foreclosure, provide an itemized written accounting to the
mortgagor or borrower mailed to his last known address
setting forth an accounting of the sales proceeds. The
accounting must include sales price, legal fees, auctioneer
fees, publication fees, “other fees” and amount of surplus,
if any. This provision was effective November 29, 2007.
• In addition to providing an accounting to the mortgagor
or borrower, the mortgage holder or servicer is required
to notify the DOB, in writing, of the date of the foreclo-
sure sale and the purchase price at the foreclosure sale. As
stated earlier, the DOB will not accept any facsimiles, mail
or in person delivery of the written documentation that is
required by the new law. The sole means of compliance will
be for mortgage holders and servicers (or their represen-
tatives) to input the required information into the DOB’s
database – recall the concern that the first password that
created the record when the foreclosure was commenced
Continued on page 66
Spring 2007 United Trustees AssociationFall 2007 United Trustees AssociationSpring 2007 United Trustees Association
State News
Summer 2008 United Trustees Association
32
The 2007-2008 session of the Colorado legislature was
pretty tame as it related to real estate matters. Although
the escalating number of foreclosures is certainly on the
minds of all it is believed that the major reform in 2007 is being
given time to swing into full force and therefore, the bills for-
warded addressing these were few. We have taken a survey of
what we believe to be the highlights of the session’s legislation
and provided a brief overview below.
HB - Track Residential Well Ownership
After January 1, 2009, when a buyer of residential real estate
enters into a purchase transferring a well, the buyer shall com-
plete a change in ownership form for the well which will then
be recorded in the Public Records under the Division of Water
Resources. A person then acting as a settlement agent in such a
transaction shall be obligated to within sixty days after closing,
submit this form to the Division with as much information as
is available, and the Division shall be responsible for obtaining
additional well registration information directly from the buyer
as necessary.
HB - Joint Tenancy in Real Property
This amendment to the statute clarifies the treatment of
property held in joint tenancy, acknowledging the doctrine of
the four unities of Time, Title, Interest and Possession. This
amendment also acknowledges that Joint Tenancy, without
further agreement and disclosure at the time of conveyance,
conveys an equal property interest among the joint tenants.
HB- Foreclosure of Lien on Time Share Estate
This bill creates more efficient method for a Plaintiff to act
on foreclosure of multiple time shares where those time share
units are similarly situated. A Plaintiff may commence a single
judicial foreclosure action against multiple obligors with
separate time share estates and the junior lienors thereto, if
the judicial foreclosure action involves a single common inter-
est community; the declaration giving rise to the right of the
association to collect assessments creates default and remedy
obligations that are substantially the same for each obligor;
the action is limited to a claim for judicial foreclosure; and
there is not an allegation with respect to any obligor, that the
association’s lien is prior to any security interest. Following the
issuance of any order, the individual time share estates will be
subject to individual foreclosure sales and the plaintiff bringing
such actions will be deemed to have waived any claims against
a defendant for a deficiency remaining after the foreclosure
of the lien for assessment and for attorney fees related to the
foreclosure action.
HB- Notice Foreclosure Temporary Timeout
This bill affects all foreclosures filed after August 1st 2008. The
first portion of this bill requires lenders or servicers, where
the default is a failure to make payments, to at least thirty
days before filing a foreclosure and at least thirty days after
default, to mail a notice addressed to the debtor at the address
shown on its records, containing the telephone number of the
Colorado Foreclosure Hotline and the direct telephone number
of the holder’s loss mitigation or home retention department.
The second portion of this bill creates a state fund through June
of 2010 to support local housing authorities, public nonprofit
corporations, or private nonprofit corporations for the sole
purpose of providing outreach and notice of foreclosure pre-
vention assistance to persons in danger of foreclosure and to
communities with high foreclosure rates.
Robert J. Hopp is the Managing Partner of Robert
J. Hopp & Associates, based in Denver, Colorado.
Throughout his practice, he has served businesses
and individuals in both real estate transactional
and litigation matters focusing on real estate,
entity structure, formation, mergers and acquisi-
tions. He can be reached via email at r.hopp@hopplawfirm.
com.
Colorado Legislative UpdateBy Robert J. Hopp, Esq., Robert J. Hopp & Associates
Spring 2007 United Trustees AssociationFall 2007 United Trustees AssociationSpring 2007 United Trustees Association
State News
Summer 2008 United Trustees Association
34
Michigan: Pending Legislation and Bankruptcy Rule Changes
It has been a relatively slow year in Michigan with regard to
legislation that affects lenders and mortgagees. However,
there have been some amendments to the recording stat-
utes that have become law. Specifically, the acts require that
any instrument sent for recording with the register of deeds
have the first five digits of a mortgagor’s social security number
removed. This would include mortgages, assignments, deeds
and affidavits. (See: 2007 PA 53, amending MCL 565.491 et
seq.; 2007 PA 54, amending MCL 565.451; 2007PA 55, amend-
ing MCL 565.581; and 2007 PA 56, amending MCL 565.201 et
seq).
However, there is pending legislation before the Michigan leg-
islature that lenders should be keeping an eye on. HB 5340, in-
troduced October 2007, would eff ectively put a moratorium on
foreclosures in Michigan. Specifi cally, the bill would prohibit
a mortgagee from accelerating the debt if less than 18 months
have passed since the fi rst default. Since the debt could not be
accelerated during the fi rst 18 months, the default could only
include actual installments that had not been paid.
Th is bill is still in the legislature and there has been little move-
ment on it at this time.
Amendments to the Eastern District of Michigan’s Local
Bankruptcy Rules took eff ect on May 5, 2008. Mortgage lend-
ers may wish to note the following changes.
2015-5 Creditors have 30 days from the date of the Trustee’s
fi nal report to object to the report. Most mortgage claims
continue beyond the life of the plan however, this is an impor-
tant deadline to note if a defi ciency claim has not been paid.
3001-2 Payment adjustments must be fi led with the court and
must be served on the trustee and debtor’s counsel 45 days pri-
or to a payment change. Debtor then has 21 days to object to
such change. Th is rule primarily pertains to changes in mort-
gage payments due to interest rate and escrow adjustments.
3003-1 Proof of claims are due within 90 days of the fi rst 341
hearing.
9013-5 A statement of corporate ownership must be fi led in
any contested matter where a corporation is a party. Th is is a
statement which must be fi led when a motion is fi led on behalf
of a corporation. A motion for relief is considered a “contested
matter”. Th e statement identifi es any corporation that directly
or indirectly owns 10% or more of any class of the corporation’s
equity interests.
9014-1 A moving party must seek concurrence of opposing
counsel before a motion is fi led and the motion shall affi rma-
tively state that such concurrence was requested on a specifi ed
date. Furthermore, if a response is fi led, a motion may only
be withdrawn upon stipulation of the moving and responding
parties.
Information provided by Rose
Marie Brook, Esq. and Jonathan
Engman, Esq., Fabrizio & Brook.
They can be contacted at
respectively.
Spring 2007 United Trustees AssociationFall 2007 United Trustees AssociationSpring 2007 United Trustees Association
State News
Summer 2008 United Trustees Association
36
Proposed Legislative Changes in IllinoisBy Jill D. Rein, Esq., Pierce & Associates
The current economic and political climates have brought
about a slew of proposed additions/changes in legisla-
tion in Illinois affecting the mortgage servicing indus-
try. Following are summaries of a few of the proposed changes
that will have an effect on the servicing industry if ultimately
passed. These proposed bills, with the exception of the City
of Chicago Vacant Building Ordinance, can be viewed in their
entirety by going to www.ilga.gov.
HB – Amends the Illinois
Mortgage Foreclosure Statute
Current Status – On 5/23/08 the House extended the Final
Action Deadline to May 31, 2008. We anticipate that this bill
will pass as is.
Summary of Changes:
Requires that a Homeowner Notice be attached to each
summons. The Notice must be in English and Spanish and
the exact form of the notice is set forth in the amended
statute. The Notice advises defendants of their rights in
relation to the following areas:
Possession
Ownership
Reinstatement
Redemption
Surplus
Workout Options
Payoff Amount
Get Advice
Lawyer
Proceed With Caution
2. Requires the mortgagee provide a payoff demand state-
ment within 10 business days of receipt of a written
request by the mortgagor. The payoff must include figures
good through 30 days or until the date of the judicial sale,
whichever is shorter, and must include estimated charges.
1.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
Failure to deliver the required payoff statement within 10
business days may subject the mortgagee to actual dam-
ages or $500 if no actual damages are sustained.
3. Allows the court to award reasonable attorney’s fees and
costs to a defendant who prevails in a motion, an affirma-
tive defense or a counterclaim in the foreclosure action.
SB – Homeowner Protection Act
Current Status – On May 21, 2008 the House Consumer
Protection Committee had debate on this and ultimately the
sponsor withdrew the bill (because the votes were not there);
however on May 23, 2008 the House extended the final Action
Deadline to May 31, 2008. We do not anticipate this bill will
pass.
Summary: This is a new bill that creates the Homeowner
Protection Act. The bill addresses new notice and reporting
requirements:
Notice Requirements
1. A servicer send a notice advising the borrower that he or
she may with to seek approved credit counseling after a
loan becomes 30 days delinquent.
2. The notice gives the borrower a 30 day grace period to
seed counseling during which time the servicer can take
no legal action
3. If during the 30 day grace period an approved counseling
agency contacts the servicer and advises the borrower is
seeking counseling shall not institute legal action within 30
days of that notice.
4. The borrower or counselor is then to offer a debt manage-
ment plan to the servicer. If the plan is accepted, and com-
plied with, no legal action can be taken. If the plan is not
accepted or not complied with legal action can be taken at
that time.
United Trustees Association Fall 2007United Trustees Association Summer 2008
State News
37
Reporting Requirements
1. Requires the servicer to submit to the Secretary of Financial
and Professional Regulation on the 20th business day of
every other month information about loans they are ser-
vicing for the proceeding two months that includes:
Number of loans being serviced
Numbers of loans being serviced that are in default
Information on loss mitigation activities including:
i. Number of loan refinanced into more affordable
of fixed loans
ii. Number of loans for which borrower had sought
housing or credit counseling
iii. Number of workouts entered into by the servicer
iv. Proactive steps taken by the servicer to identify
borrowers at a heightened risk of default
d. Number of foreclosure actions commenced
e. Any other information the Secretary may deem neces-
sary, including geographic information
2. This section would be repealed on December 31, 2010
SB – Amends the Illinois Code of
Civil Procedure to Grant Tenants
involved in Foreclosure Proceedings
Additional Possessory Rights
Current Status – On 5/23/08 the House extended the Final
Action Deadline to May 31, 2008.
Summary: Where a tenant is timely on their rent, or timely
written notice of to whom and where a tenant should pay their
rent has not been provided to the tenant or where the tenant
has made a good faith effort to make rental payment the fol-
lowing must happen:
Any order of possession must allow the tenant to retain
possession for 120 days following notice of a supplemen-
tal petition for possession or through the duration of the
lease, whichever is shorter – or –
No forcible detainer action may be filed until 90 days after
a notice of intent to file the action has been served on the
tenant.
a.
b.
c.
1.
2.
City of Chicago Vacant Building Ordinance
Current Status: Changes in Ordinance still being debated
– This is a City of Chicago Ordinance not an Ordinance that
will effect other cities in the state of Illinois
Summary: The changes would involve:
Increase in registration fees for vacant buildings from an
annual fee of $100 to a fee of $250 for the first 6 months
of vacancy with a stepped up increase of $250 for each six
month period thereafter
Mandatory interior and exterior inspections
An increase in the original fine of a minimum of $200 to a
maximum of $1000 a day to a minimum of $500 a day
A definition of both interior and exterior maintenance
standards
Interior – no junk, debris, sound floors, roofs, walls,
stairs, no leaking pipes, deadbolts on exits doors, pest
free
Exterior – all exits must have lighting from dusk to
dawn
5. Plywood allowed to cover open doors/windows only
allowed for 6 month, then steel panels or theft prevention
system required.
Jill D. Rein is a shareholder and a Managing
Attorney of the Foreclosure Department at Pierce
and Associates, PC. Jill concentrates her practice
in all areas of foreclosure, default servicing and
related litigation. She is a graduate of IIT-Chicago
Kent College of Law and was admitted to the
State of Illinois and Federal bars in 1990. Jill is a member of the
Chicago Bar Association, the Illinois Mortgage Bankers
Association, the MBA, USFN and AFN. Jill conducts numerous
in-house training seminars for clients and is a regular panelist
at client attorney summits on topics related to Foreclosure,
Property Preservation, Evictions and Building Violations. She
can be emailed at [email protected].
1.
2.
3.
4.
a.
b.
Spring 2007 United Trustees AssociationFall 2007 United Trustees AssociationSpring 2007 United Trustees Association
State News
Summer 2008 United Trustees Association
38
HB 3630 which added new procedural and practi-
cal requirements for trustees handling nonjudicial
foreclosures in Oregon was signed into law by the
Governor on March 11th. The Spring Issue of UTA Quarterly
contained an article written by David Fennell, Esq., Routh
Crabtree, Olsen that provided details on the bill, which
became effective June 9th. Notices must be used from and
after that date. The contact information, provided to UTA from
David Fennell, is printed below:
OAR --
Contents of Foreclosure Notices
The sender of a notice form required by 2008 Or Laws, ch. 19, §
20 must enter in the form and format adopted by this rule:
The statewide telephone contact number for handling
consumer queries as 800-SAFENET (800-723-3638)
The telephone number of the Oregon State Bar’s Lawyer
Referral Service as 503-684-3763;
The Oregon State Bar’s Lawyer Referral Service toll-free
number as 800-452-7636;
The website address of the Oregon State Bar as http://
www.osbar.org;
The website address for the organization providing more
information and a directory of legal aid programs as
http://www.oregonlawhelp.org.
Stat. Auth.: 2008 Or Laws, ch. 19, § 20
Stat. Implemented: 2008 Or Laws, ch. 19, § 20
Hist.: New.
OAR --
Contents of Foreclosure Notices
The sender of a notice form required by 2008 Or Laws, ch. 19, §
20 must enter in the form and format adopted by this rule:
1.
2.
3.
4.
5.
The statewide telephone contact number for handling
consumer queries as 800-SAFENET (800-723-3638)
The telephone number of the Oregon State Bar’s Lawyer
Referral Service as 503-684-3763;
The Oregon State Bar’s Lawyer Referral Service toll-free
number as 800-452-7636;
The website address of the Oregon State Bar as http://
www.osbar.org;
The website address for the organization providing more
information and a directory of legal aid programs as
http://www.oregonlawhelp.org.
Stat. Auth.: 2008 Or Laws, ch. 19, § 20
Stat. Implemented: 2008 Or Laws, ch. 19, § 20
Hist.: New.
OAR --
Contents of Foreclosure Notices
The sender of a notice form required by 2008 Or Laws, ch. 19, §
20 must enter in the form and format adopted by this rule:
The statewide telephone contact number for handling
consumer queries as 800-SAFENET (800-723-3638)
The telephone number of the Oregon State Bar’s Lawyer
Referral Service as 503-684-3763;
The Oregon State Bar’s Lawyer Referral Service toll-free
number as 800-452-7636;
The website address of the Oregon State Bar as http://
www.osbar.org;
The website address for the organization providing more
information and a directory of legal aid programs as
http://www.oregonlawhelp.org.
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.
Oregon Implements New Procedural Requirements for Trustees
United Trustees Association Fall 2007United Trustees Association Summer 2008
State News
39
Stat. Auth.: 2008 Or Laws, ch. 19, § 20
Stat. Implemented: 2008 Or Laws, ch. 19, § 20
Hist.: New.
OAR --
Contents of Foreclosure Notices
The sender of a notice form required by 2008 Or Laws, ch. 19, §
20 must enter in the form and format adopted by this rule:
The statewide telephone contact number for handling con-
sumer queries as 800-SAFENET (800-723-3638)
The telephone number of the Oregon State Bar’s Lawyer
Referral Service as 503-684-3763;
The Oregon State Bar’s Lawyer Referral Service toll-free
1.
2.
3.
number as 800-452-7636;
The website address of the Oregon State Bar as http://
www.osbar.org;
The website address for the organization providing more
information and a directory of legal aid programs as
http://www.oregonlawhelp.org.
Stat. Auth.: 2008 Or Laws, ch. 19, § 20
Stat. Implemented: 2008 Or Laws, ch. 19, § 20
Hist.: New.
4.
5.
40
Summer 2008 United Trustees Association
State News
Idaho Amends Notice of Default Requirements: Senate Bill 1431, Effective date July 1st, 2008. This new law in Idaho will require trustees to provide a Notice of Default to all individuals who own an interest in the subject property. Additionally, the new law will require that the Notice of Default be accompanied by a notice that warns borrowers to be careful of persons who offer to “save” their homes from foreclosure.
Idaho Enacts the Uniform Power of Attorney Act: Senate Bill 1335, Effective date July 1st, 2008: This new law in Idaho repealed the laws regulating powers of attorney and enacted the Uniform Power of Attorney Act. — (Update provided by Buckley Kolar, LLP).
Washington Allows Electronic Recording of Documents: House Bill 2459, Effective date June 11th, 2008: This new law allows documents to be electronically recorded pursuant to the Uniform Real Property Electronic Recording Act.
Washington Enacts New Residential Mortgage Lending Laws, Makes Mortgage Fraud a Felony and Amends Notice of Default Requirements: House Bill 2770, Effective June 12, 2008. These new residential mortgage lending laws are applicable to all financial institutions. The term “financial institution” includes state-licensed mortgage lenders and brokers, as well as state-chartered banks and credit unions. Under the new law, financial institutions are prohibited from making a payment-option or hybrid ARM containing a prepayment penalty that will extend beyond the date occurring 60 days prior to the loan’s initial reset date.
The law also requires financial institutions to provide a disclosure summary of all material loan terms and prohibits nega-tive amortization on loans subject to the Guidance on Nontraditional Mortgage Product Risks and the Statement on sub prime Mortgage Lending. Licensed mortgage lenders and brokers are additionally prohibited from steering borrowers into loans with less favorable risk grades than the borrowers would otherwise qualify for under the lender’s current underwrit-ing guidelines. In addition, the bill makes mortgage fraud a felony and amends Washington’s non-judicial foreclosure law to require the inclusion of an additional statement on the notice of default. — (Reprinted with permission from Buckley Kolar, LLP).
Maryland Enacts Foreclosure, Mortgage Fraud Legislation: H.B. 361, enacted on April 3, 2008 provides protections to distressed homeowners. The law addresses the regulation of “foreclosure consultants and foreclosure rescue transac-tions.” The law also creates additional provisions regarding the sale or transfer of a “residence in default.” The other new law in Maryland, H.B. 360 enacts the Mortgage Fraud Protection Act, and criminalizes mortgage fraud.
Ralph Wutscher, Esq., of Roberts Wutscher provided UTA with a quick summary of the new Maryland legislation, from a more detailed summary written by Marjorie Corwin, Esq., of Gordon Feinblatt.The new Maryland laws among other things provide for:
Additional information to be included in residential mortgage loan security instruments;
Foreclosure waiting periods of 90-days after default and 45-days after sending the notice of intent to foreclose;
1.
2.
New State Laws
41
United Trustees Association Summer 2008
State News
Affecting Foreclosures
Mortgage fraud liability, applicable to lenders, borrowers and others involved in the settlement process; and
Eliminated and narrowed exemptions from the state “foreclosure rescue” statute for title insurers, title agents, real estate brokers and salespersons, mortgage brokers, mortgage lenders, and mortgage loan owners, other than banks and other insured depository institutions, and their subsidiaries and affiliates.
Minnesota Amends Foreclosure Law and Authorizes Electronic Document Recording: On April 25, Minnesota Governor Tim Pawlenty signed a bill (H.F. 3516) to amend Minnesota’s foreclosure law and authorize electronic record-ing of documents. The new law requires the name of the transaction agent, mortgage servicer, and mortgage originator to be recorded on the notice of pendency, notice of sale, and certificate of sale. The new law also creates a Statewide Foreclosure Data Collection group to study the most efficient and cost-effective way to develop and implement an elec-tronic filing system for foreclosure data. Lastly, the new law authorizes electronic recording and signing of documents in connection with any law that requires, as a condition for recording, respectively (i) that a document be an original, on paper, or another tangible medium, or in writing, or (ii) that a document be signed. The foreclosure notice requirements become effective August 1, 2008; the Statewide Foreclosure Data Collection group electronic filing study is effective immediately; and the authorization for electronic recording and signing of documents is effective July 1, 2008.
Minnesota Changes Redemption Period: Governor Tim Pawlenty recently signed H.F. No. 3474. affecting the Redemption Period in the State of Minnesota. — (Reprinted with permission from BuckleyKolar, LLP).
New York Assembly Passes Mortgage Foreclosure Legislation: On May 7, the New York State Assembly passed four bills that included financial assistance for borrowers facing foreclosure and a foreclosure moratorium. The legislation would (i) provide $25 million in temporary financial assistance to homeowners with sub-prime or unconventional mort-gages facing foreclosure, capped at an amount equal to three months of mortgage payments and provide legal services and counseling to assist certain homeowners in default or foreclosure, (ii) establish requirements on all home loans, including (A) establishing a lender’s responsibility to verify a borrower’s ability to repay loans and to verify income, (B) establishing an agency relationship between the mortgage broker and borrower, and (C) prohibiting practices such as balloon payments, negative amortization and prepayment penalties, (iii) allow a court to delay the actual order to transfer title when faced with the foreclosure of a sub-prime mortgage under specific conditions for no more than one year in order to allow the mortgagor to apply for relief, and (iv) require mortgage lenders and brokers to provide consumers with a bill of rights pamphlet that must be read and signed by the consumer prior to applying for a mortgage, enumerating all information that a prospective homeowner needs to know in order to make a decision about a home loan including how to file a complaint with the Banking Department or the Department of State. The bills have been sent to the state senate. (Reprinted with permission from BuckleyKolar, LLP) .
Virginia Legislation Places Additional Requirements on Servicers: VA SB 797 places additional requirements on servicers pertaining to foreclosure notification and forbearance.
3.
4.
42
Summer 2008 United Trustees Association
State News
New Hawaii Law Requires Mortgagee to be Represented by Attorney with Office in the State: On June 4th, Hawaii Governor Linda Lingle signed legislation (SB 2454) into law that would require the mortgagee to provide the party in breach of the mortgage agreement with the contact information, including the electronic address, of the mortgagee’s attorney who must be physically located and licensed in Hawaii; and ensure that the different non-judicial foreclosure processes include provisions for interested parties to receive sufficient notice and obtain information about the intent to foreclose, amounts to cure the mortgage default, fees and costs, and public sales of the mortgaged property.
More New State Laws Affecting Foreclosures
JUDGE C. DARNELL JONES
After a city council resolution
calling for a moratorium on
foreclosures, the Philadelphia
sheriff ’s office canceled an April auc-
tion of foreclosed homes. Now, at the
urging of a judge, mortgage companies
and consumer groups in Philadelphia
have begun discussions to make loans
more affordable
According to the Wall Street Journal,
under Judge C. Darnell Jones II of Court
of Common Pleas of Philadelphia, “a lender or its agent would
indicate on a foreclosure filing that the borrower lives in the
house. The court would then arrange for free counsel for the
homeowner and set up a conciliation hearing between lender
and borrower. The negotiations would ideally lead to modified
loan terms or some other arrangement that would keep bor-
rowers in their homes…The judge indicated that foreclosure
auctions would likely be suspended, at least through May, for
homeowners qualified for the negotiated settlement.” Michael
McKeever, an attorney representing lenders stated that lenders’
legal rights were not protected and disagreed with the sheriff ’s
decision.
Sheriff’s Decision to Cancel Auction Leads to Philadelphia Judge Urging New Loans
44
Featured Article
Spring 2007 United Trustees AssociationSummer 2008 United Trustees Association
XXXXXXXX —Continued from page 44
Spring 2007 United Trustees Association
Case Law
Summer 2008 United Trustees Association
Four Foreclosure Cases Worth ReviewBy Martin T. McGuinn, Esq., Kirby & McGuinn, APC
Bedik v. Stewart Title Guarantee Company
() WL (unpublished)
CASE SUMMARY
Stewart sought to recover from the seller of property
an overpayment of sales proceeds received as a result
of an incorrect lender’s payoff demand. The case has
important implications for lenders, escrow and title compa-
nies. The trouble started because an incorrect loan number
was provided by the seller for use by escrow in obtaining the
payoff demand. The lender, Financial Freedom, relying only on
the loan number, submitted a payoff demand. Stewart sent pay-
ment to Financial Freedom based upon a demand that showed
the wrong borrower, loan number and property address. Two
months later after receipt of the funds and escrow had been
long closed Financial Freedom demanded additional funds
required to pay off the correct loan. Stewart which insured the
buyer, paid Financial Freedom and sued the seller.
The Court of Appeal reversed the Summary Judgment in favor
of Stewart. It ruled under Civil Code section 2941(e) a benefi-
ciary is bound by its statement in response to a request for a
payoff demand after the close of escrow and a demand must
be issued within 21 days under Civil Code section 2943(a)(4).
The Court noted that even though Financial Freedom submit-
ted a wrong payoff demand on the wrong property it’s lien
against the correct property had been satisfied. Stewart’s deci-
sion to honor its obligation under the title policy by paying
off Financial Freedom made it a volunteer for whom equitable
recovery was not permitted, even on the basis of unjust enrich-
ment in the case.
The opinion clearly blames the lender for relying solely upon
the loan number rather than the name, address or Social
Security number of the borrower. In the Court’s analysis, it is
easy for someone requesting a loan payoff to make a one-digit
mistake on a loan number and harder to get the other data
wrong. The reasoning may be considered unrealistic given that
most major lenders have call-in 800 numbers generating pay-
off demands rather than relying strictly on written demands.
However it makes it clear that the risk of incorrect payoff infor-
mation will be shifted to the lender rather than to the former
owner. Note however, that the borrower does not always get off
scot free in these situations. The lender who did not receive the
correct loan payoff would be able to pursue the borrower even
on a purchase money deed of trust on an unsecured basis to
avoid unjust enrichment.
Cameron v. U.S. Bank
(2007) WL 1366085 ( unpublished)
CASE SUMMARY
Borrower filed an action against the bank to set aside a foreclo-
sure sale for breach of contract, fraud, and breach of statutory
duties, resulting in the first appeal in which the lender pre-
vailed. The Court of Appeal reversed the finding the notice of
default the lender used to be invalid and that the lender could
not foreclose based upon the notice of default. The notice of
default purported to be based on a tax deficiency but identified
the default as installments of principal, interest, accrued late
charges and/or impounds.
The case returned to the trial court and the trial court awarded
the lender $67,830.00 in attorneys’ fees and $4,286.00 in costs
pursuant to Civil Code section 1717 and the provisions of
Paragraph 7 of the deed in trust. The lender argued that Valley
Bible Center v. Western Title Ins. Company (1983) 138 Cal. App.
3d 931 supported the bank’s request for fees since it prevailed
on all the causes of actions except being able to proceed with its
foreclosure sale under the NOD it previously filed.
The Court of Appeal held it was an abuse of discretion to award
fees when the borrowers halted the foreclosure sale. Even
though the borrowers were not successful in litigating several
of their claims, they were successful in achieving their overall
objective by showing that the notice of default was invalid.
Under such circumstances the bank was not the prevailing
party and not entitled to an award of fees.
45
United Trustees Association Summer 2008
Featured Article
United Trustees Association Summer 2008
Case Law
Why This Case Is Important To Trustees And Lenders
This case points out that winning most claims asserted by
the borrower and being able to record a new notice of default
does not equate to a victory such that a lender may be entitled
to add its attorney’s fees and costs to a second foreclosure. In
this case, the lender will forego $70,000.00 which incurred in
attorney’s fees defending a lawsuit plus the cost of the second
appeal which it will not recover from the borrowers. If primar-
ily tort claims are litigated under standard FHLMC/FNMA
loan documents, do not count on fees being awarded to you
for a successful defense of the litigation.
Circle Star Center Associates, LP v. Liberate Technologies
(2007) 147 Cal.App.4th 1203
CASE SUMMARY ATTORNEYS’ FEES
Plaintiff ’s landlord leased commercial space to the tenant.
When Liberate went into default and the parties could not
reach a resolution, Circle Star’s attorney wrote to Liberate and
copied the lender on the building about Liberate’s conduct. Th e
tenant, Circle Star, contended that the statements in the let-
ter were defamatory and six months later Liberate moved out
and fi led a Chapter 11 petition. After defending Liberate’s at-
tempt to reduce its liability to Circle Star from $45,000,000.00
to $8,000,000.00, Circle Star was successful in getting the bank-
ruptcy dismissed. After the bankruptcy was dismissed Circle
Star, fi led a breach of lease defamation and conversion against
Liberate. It also sought recovery of more than $1,200,000.00 in
attorneys’ fees incurred by Circle Star in the bankruptcy case.
Th e trial court held that the landlord was not entitled to claim
the attorney’s fees based on bankruptcy law because the fees
were expended litigating primarily federal law issues. Whether
the law was changed by Travelers v. PG&E, 30 127 S. Ct. 199
(2007) remains an open issue.
Th e Court of Appeal reversed the decision fi nding that the
proposition that an unsecured creditor could not recover at-
torney’s fees incurred from pursuing pure bankruptcy issues.
However, none of the cases cited involved the right of a party
to seek fees in state court after dismissal of the bankruptcy.
Th e Court of Appeal held that the diff erence in posture of the
bankruptcy case was the key. Th us, Circle Star’s claim was not
against the bankruptcy estate and would not diminish the estate
to the detriment of other creditors and Liberate’s bankruptcy
was dismissed. A dismissal unless otherwise ordered “re-vests
property of the bankruptcy estate in the entity in which the
property was vested immediately prior to the commencement
of the case.” Th us, under Bankruptcy Code section 349(b)(3),
the eff ect of the dismissal is to undo the bankruptcy case as far
as practical and restore all the parties’ rights and interest to the
position they found themselves at the beginning of the case.
Why This Case Is Important To Trustees And Lenders
Th is case can be cited for the proposition that after a bank-
ruptcy case is dismissed a creditor may have the right to re-
cover its legal fees incurred for litigating issues in the bank-
ruptcy context after dismissal of the bankruptcy case. Whether
or not such a recovery is possible will depend primarily upon
the language of the note and deed of trust or other loan docu-
ments between the borrower and the lender. While the stan-
dard FNMA/FHLMC documents probably do not likely cover
most tort claims asserted by borrowers against the lender, they
would cover attempts by the borrower to cram down the lend-
er’s interest or otherwise reduce the lender’s claim in bank-
ruptcy proceedings.
Wolfe v. George, 486 F.3d 1120 (9th Cir 2007)
Molski v. Evergreen Dynasty Corp.,
500 F.3d 1047 (9th Cir. 2007)
(2007) WL 2458547 (9th Cir)
Moran v. Murtaugh, Miller, Meyer and
Nelson LLP, 40 Cal. 4th 780 (2007)
CASE SUMMARY - VEXATIOUS LITIGANTS
California’s vexatious litigant statute Code of Civil Procedure
section 391, et seq. defi nes a vexatious litigant as a pro se liti-
gant who has lost at least fi ve pro se lawsuits in the preced-
ing seven years, sued the same defendants for the same alleged
Continued on page 70
46
Summer 2008 United Trustees Association
State News
Spring 2007 United Trustees Association
UTA and Industry News
Summer 2008 United Trustees Association
UTA Considers Challenge to Local Ordinances That
Require Trustees to Inspect, Register, Secure and Maintain
Properties in Foreclosure With No Compensation
Following the lead of other local jurisdictions like the
Cities of Palmdale and Chula Vista, the County of
Riverside’s (California) Board of Supervisors has passed
an emergency ordinance (Ordinance Number 880), effective
May 13, 2008 that imposes mandatory duties upon trustees
with respect to residential properties in foreclosure. Important
elements of the Riverside County ordinance include:
• The trustee or beneficiary must inspect the property prior
to recording the Notice of Default;
• If, based upon the inspection, the trustee or beneficiary
determines that the property is vacant or shows evidence
of vacancy, the trustee or beneficiary must register the
property and pay an annual registration fee;
• If the property is not vacant or there is no evidence of
vacancy, the trustee or beneficiary must inspect the prop-
erty once a month during the foreclosure and register,
secure and maintain the property if, at any time, the prop-
erty is vacant or shows evidence of vacancy;
• If the property is vacant or shows evidence of vacancy,
then the beneficiary or trustee must secure and maintain
the property generally by hiring a local property manager
no more than 40 miles from the property;
• A sign must be placed in the window of the property advis-
ing the public (including vandals) of the contact informa-
tion of the local property manager.
• Trustees and beneficiaries who violate the statute risk
administrative fines as well as civil penalties of up to
$1,000.00 per day, per property, and all administrative
costs including abatement, attorney fees, and other costs.
Under most of the local ordinances the responsibilities of the
trustee and benefi ciary continue until the foreclosure is rescind-
ed, the property is sold to a third party purchaser or the lender
obtains the property through a deed-in-lieu of foreclosure.
Although the Riverside Ordinance has already passed, UTA ap-
peared at a public forum held by the County of Riverside on Fri-
day, June 27th where the County explained the ordinance and
took comments from the public. UTA’s Legal Counsel, Phil
Adleson, Esq., Executive Director Richard Meyers and Legisla-
tive Committee Chair Ron Roup, Esq., were in attendance.
UTA is considering challenging at least one of the
local ordinances as being unenforceable for various
reasons, including an argument that the ordinance is
unconstitutional. Th is will be a costly endeavor and will
require substantial donations even though UTA’s attorneys
will reduce their normal fees to support the eff ort. Th is is
not an amicus eff ort but an actual court trial challenge to
the ordinance. Appeal of the result is likely regardless of
which way the trial court rules.
UTA legal eff ort could cost more than $50,000. As
UTA’s budget does not include funds for this critical
and important eff ort, UTA cannot proceed without
substantial contributions from its members and its
supporters. UTA urges all members and supporters to
immediately contribute to the “UTA Ordinance Fund”.
Simply mail your check to:
Attention “UTA Ordinance Fund”
United Trustees Association
2030 Main Street
Suite 1300
Irvine, CA 92614
A trustee fi ghting this on its own (when confronted by unfair
and excessive penalties) could easily spend $50,000 to $100,000
defending the case. Th e best approach is as a group.
UTA believes that once it successfully challenges one of these
ordinances, others will be easier to challenge. Ultimately, cities
will be more cautious in writing such ordinances that attempt
to expand the role of the trustee.
47
United Trustees Association Summer 2008
State News
United Trustees Association Summer 2008
UTA and Industry News
If you are aware of or familiar with other similar local (county
or city) ordinances that have passed, please forward them to
the UTA offi ce for our review. We will post these ordinances
on the UTA website so members can determine whether they
must do pre-notice of default inspections.
“Foreclosure Prevention Act of ” Expected to Pass
Congress: President Bush Threatens Veto
PRESIDENT BUSH SAYS HE WILL VETO FORECLOSURE RELIEF
LEGISLATION
President Bush sur-
prised Democratic
sponsors of the
Foreclosure Prevention
Act, by stating that he
would veto the bill. The
Democratic sponsors, led
by Senator Chris Dodd of
Connecticut and Senator
Harry Reid of Nevada, the
Senate Majority Leader,
had believed that the
administration supported
key provisions of that bill,
and other bills, introduced
in the House of
Representatives by
Congressman Barney Frank
(D-MA) and Speaker Nancy Pelosi (D-CA), among others.
Although the legislation had not been considered yet by the
Senate as of press time, a deal had been reached in the Senate
on the bill, and companion legislation had passed the House
of Representatives by a vote of 266-154. The House legislation
would underwrite $300 billion in new loans and is estimated by
proponents to keep as many as 500,000 houses from foreclos-
ing.
The Democratic leadership bill, known as “The Foreclosure
Prevention Act of 2008” contains provisions from earlier legis-
lation, S. 2636, introduced by Senator Harry Reid (D-NV) and
S. 2338, introduced by Senator Christopher Dodd (D-CT). This
legislation does not include bankruptcy legislation, S. 2136,
previously introduced by Senator Dick Durbin (D-Ill).
“We are indeed fortunate to have had the bankruptcy amend-
ment provisions dropped from the bill,” said Ron Roup, Roup
& Associates, UTA’s Legislative Committee Chair. “There was
an urgency to move forward with a bill on a bipartisan and
expedited basis due to the current mortgage crisis situation.
However, amending the Bankruptcy Code to allow bankruptcy
judges to modify the debtor’s residential mortgage would likely
have increased the interest rates for all borrowers, even those
not affected by the mortgage crisis. The bankruptcy amend-
ment provision would have been a lengthy process as demon-
strated by the nearly ten years it took to pass the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005
(BAPCPA) and would have been an anchor on the desired
legislations.”
New UTA Membership Brochure Available
UTA has a new membership brochure, designed to both
provide current members with a better understand-
ing of the many benefits of UTA membership and to
help recruit new members into the association. The beautiful
four-color brochure divides membership benefits into four
broad categories (Education, Communication, Networking &
Business Growth; and Legal Initiatives) and includes ten mem-
ber testimonials.
If you would like complimentary copies of the UTA Brochure
to distribute to potential members, please contact the UTA
office.
Spring 2007 United Trustees Association
Education News
48
Summer 2008 United Trustees Association
Annual Education Conference is Loaded with Hot Topics
THE RED ROCK WILL HOST THE 2008 CONFERENCE
UTA’s 33rd Annual
E d u c a t i o n
Conference, held
at the Red Rock Resort in
Las Vegas, November 16-
18th will once again fea-
ture the hottest, most
exciting and relevant edu-
cation sessions for attend-
ees. This year’s confer-
ence will feature general
sessions on Foreclosure
Scams; Challenges to
Foreclosure; as well as the ever-popular Case Law Updates;
Bankruptcy Panel; Legislative Updates. Breakout sessions will
be held on HOAs; HUD Issues and FHA Foreclosure; and
Redemption Proceedings; Bankruptcy 101 and the Injunction
Process; and Municipal Ordinances / Differences in Operation
Regarding REOs.
In addition to the MCLE accredited sessions, this year’s meet-
ing features a trade show, an exciting Monday evening dinner/
social networking event in the Red Rock’s “Cherry Lounge”;
a social golf tournament; a social bowling tournament; many
exciting raffle giveaways and UTA’s Foreclosure Certification
Course and Exams for California, Arizona and Nevada (offered
on Saturday).
Retuning to the site of the 2006 Conference, this year’s confer-
ence will be held at the Red Rock Resort and Spa, the first bil-
lion-dollar resort to be built off the Las Vegas strip, featuring
the most expensive rooms built in Las Vegas. Each elegantly
appointed room is filled with luxury amenities, including 42”
high-definition plasma TVs, 15” LCD TVs in the bathroom;
iPod docking stations, guest robes and slippers, automated
private bars and “ooh-la-la” linens. All rooms offer spectacular
views of the Las Vegas strip or the Red Rock Mountains. The
resort also features a three-acre pool and beach area.
Attendees from last year’s conference gave very high marks to
the speakers, the social dinner event, and the golf event. This
year’s program promises to be even better, so plan on attend-
ing the conference. The conference brochure and registration
information will be available by both mail and online at the
UTA website, www.unitedtrustees.com in July.
“We take great pride and care in the content of our sessions,
the fun networking events and a trade show that allows trust-
ees and servicers to spend more face time with each other
than at virtually any other conference in the industry,” said
UTA President and Conference Chair, Gary Wisham of Allied
Trustee Services.
We thank Platinum Sponsors First American National Default
Title Services and FIS Default Solutions; and Silver Sponsors
Foreclosure Solution, Reliable Posting & Publishing, and
RSVP.
Annual Conference Hotel Room Reservations Are Available
Hotel room reservations are now being accepted for
the 2008 UTA Annual Education Conference &
Trade Show. Certification Courses will be held on
Saturday, November 15th. The annual golf tournament and
Bowling Event will be on Sunday, November 16th (the opening
reception is Sunday evening). The education sessions will be
held Monday and Tuesday, November 17-18th. UTA’s annual
dinner event will be Monday evening.
This year’s annual conference and trade show will be held at the
Red Rock Resort, Casino & Spa. Room rates at the five-star
resort will be an unbelievable $149 per night single/double
for UTA conference registrants. To reserve your hotel room,
please contact the hotel directly at 1-866-767-7773 and
note that you are with the”UTA”. The Red Rock Resort will
honor these rates three (3) days prior and three (3) days follow-
ing our conference dates, based on availability. To guarantee
availability and rates, reservations must be made prior to
October 5th.
49
United Trustees Association Fall 2007
Education News
United Trustees Association Summer 2008
Because there is a major convention in Las Vegas during these
dates, we recommend that you make your reservations as soon
as possible to guarantee a room in the resort. Remember, you
can cancel your room reservation without penalty three days
prior to the conference.
Annual Conference Offers
Bowling Fun & Golf Tournament
16TH ANNUAL GOLF TOURNAMENT AT ARROYO CLUB AT RED ROCK
Remember to
mark your cal-
endars for
Sunday November 16th.
That’s the day that UTA
will offer two social net-
working activities at the
33rd Annual Conference
in Las Vegas.
For the first time, UTA will offer a fun bowling event – held
right at the Red Rock Hotel & Casino’s VIP Bowling Suites.
The beautiful VIP lanes add a twist to the traditional bowling
experience - providing contemporary lounge style seating with
leather sofas, giant LCD screens, a state-of-the art sound sys-
tem and privately hosted beverage service.
Prizes will be awarded for highest score and for special ‘chal-
lenges’, including, bowling with your feet; bowling between
another team member’s legs; spinning three times and bowling;
and bowling off of one foot.
Not to be outdone, the 16th Annual UTA Golf Tournament
will be held at the beautiful Arroyo Golf Club at Red Rock. The
Arroyo course is an Arnold Palmer Signature Course 6,883
Yard Par 72 links style layout with Bermuda grass fairways and
Bentgrass greens. Coordinated by Jeremy Harmon of First
American National Default Title Services, the golf tourna-
ment will again feature prizes for winning team; longest drive;
and closest to the pin. High value hole-in-one prizes will again
be offered.
California & Texas Foreclosure Courses
Offered
MARY SPEIDEL
Don’t miss these opportunities to
take UTA’s California and/or
Texas Foreclosure 101 courses:
July 12th, (Saturday) 10:00 am – 2:00 pm:
The three-hour California Foreclosure 101
course will be taught in San Diego and cov-
ers basic industry terminology; what fore-
closure is; and what information the lender
provides, and why. After taking the course, attendees will have
an understanding of all phases in the trustee’s timeline. The
course reviews and provides samples of relevant documents
as well as basic information concerning TSGs and other title
issues.
Course Instructors are Randy Fernando, Orange Coast Title
and Randy Newman, National Foreclosure Service. This
course is sponsored by Trustee’s Assistance Corporation.
August 15th, (Friday) 1:30 pm – 4:30 pm: The Texas
Foreclosure 101 course will be taught in Houston and will
cover industry terms, loan documents, the foreclosure time-
line, Texas non-judicial foreclosure flow chart and other issues
designed for employees who are new in the default/foreclosure
industry in Texas.
Course instructors are Jim DeLoach, Esq., of Butler & Hosch,
Mary M. Speidel, Esq., of Codilis & Stawiarksi Stawiaski,
and Jay Jacobs of Land Records of Texas. This course is spon-
sored by Land Records of Texas and Foreclosure Solution.
To register for any of these upcoming UTA events, visit the
UTA website, unitedtrustees.com.
Spring 2007 United Trustees Association
Education News
50
Summer 2008 United Trustees Association
California Basic Foreclosure Certification Course
Available on DVD
DVD CA-I INSTRUCTOR RANDY NEWMAN
UTA’s California Basic
Foreclosure Certification
Course (CA-1) is now available
on DVD. The DVD course is three
hours in length total and includes pow-
erpoint summary slides along with the
course instruction. An accompanying
CD produces all of the written course
materials and exhibits.
The Basic Foreclosure Certification
Course Syllabus includes: Outline of state foreclosure proce-
dures; Monetary and non-monetary defaults; Judicial v. non-
judicial foreclosures; What a Lender provides to the Trustee;
What a Trustee does; Notice of Default (NOD); What a Lender
receives from a Trustee; Review of Trustee’s Sale Guarantees;
Reinstatement; Notice of Sale (NOS); Presale Redemption;
Sale; Trustee’s Deed; Proceeds of Sale; Bankruptcy.
After completing the course, an exam can be scheduled at a
location and time of convenience or you may challenge the
exam at the annual conference in Las Vegas. The Trustees Sale
Officer certification exam is a one-hour open book exam and
costs $100.
Randy Newman, the DVD Course Instructor, is one of the
principals of National Foreclosure Service. Since 1982, he has
been involved in real estate when he began work as a parale-
gal. Licensed as an attorney in New York since 1989 and New
Jersey since 1994, Randy has personally represented hundreds
of buyers, sellers, owners, and lenders in connection with the
sale, purchase, finance, lease, and foreclosure of residential and
commercial real property throughout the United States.
Randy holds a BBA in Accounting and is licensed as a real estate
broker in California. Randy is certified by the United Trustees
Association as a Trustee Sale Officer, Level II California. Randy
has previously been an adjunct assistant professor of business
law and currently teaches Real Estate Principles to aspiring
new real estate licensees and trains new real estate agents on
contracts and real estate transactions in California.
To purchase the CA-1 Basic Foreclosure Certification Course
and materials for $100, contact the UTA office.
Watch a Video Montage from
Recent UTA Conferences
Visit
ww.unitedtrustees.com
and click on “annual conference”
Spring 2007 United Trustees Association
Membership News
52
Summer 2008 United Trustees Association
Members on the Move
Barrett Burke Wilson Castle Daffin & Frappier is now
Barrett Daffin Frappier Turner & Engel, LLP. The
Law firm is still managed by the same management team
with the addition of Steve Turner and Brian Engel. Michael
Barrett continues in his role as Chairman and Mary Daffin
as Managing Partner … We spotted a photo of Linda Orlans
Esq., of Orlans in the pages of Conde Nast Portfolio … Martin,
Leigh, Laws & Fritzlen, P.C. has been selected as one of
Kansas City’s Top 10 Small Businesses of the Year by the Kansas
City Chamber of Commerce …. Berry Laws III was quoted
in the Pittsburgh Post-Gazette and other McClatchy-owned
newspapers in a article on foreclosures … Calabasas, California
based All Valley Trustee, a nonjudicial foreclosure trustee, has
hired Michael S. Goldstein as Executive Vice President of
Marketing. He will handle client relations, marketing, training
and educational opportunities, as well as be responsible for
forming the new national attorney network. Prior to joining
All Valley, he was with the LOGS Network for over 20 years
as vice president of marketing … Chris Bolger, formerly with
First American National Default Title Services, is the new
Senior Vice President, Default Title/TSG Operations with
ServiceLink. Chris will be responsible for all operating ele-
ments of the business, service delivery to clients, and develop-
ing and providing innovative Default Title products. … We hear
that Andy Fragassi, VP Operations Manager, of FIS Default
Solutions is the proud father of a new baby boy, Luke Bradford
Fragassi … Julie Leah Greenfield, is the Managing Attorney
of Wright, Finlay & Zak’s new Compliance, Regulatory and
Licensing Practice Group ... To assist lenders who are seeking
assistance in modifying borrowers delinquent loan obligations
using standard loss mitigation and loan modification forms
National Default Exchange (NDEx) and Barrett Daffin
Frappier Turner & Engel, L.L.P. announced that they are
presently working with national lenders and NeighborWorks
to assist lenders with their loan modifications and other loss
mitigation tools through document preparation initiatives
… Hank Lopez, formerly with Countrywide is the new VP,
Business Development with RSVP.… Jeff Pugh, formerly
Vice President Division Counsel with First American Title is
the new Senior Vice President TSG Division Director, with
First American National Default Title Services.
June Christy: Technology Investment Key to
Improving Workflow
JUNE CHRISTY
We spoke with June Christy
of Standard Trust Deed
Service and RSVP about
the future of the nonjudicial default
servicing industry, her company and
of course – herself.
Tell us about your background and how you got into the indus-try.
I have 35-plus years in the foreclosure industry. In my first
job with a bank I processed FHA and VA claims following
the foreclosure sale. I was then employed by T. D Service
Company and TAC for about 23 years. I have been with
Standard Trust Deed Service Co and RSVP in the capacity of
Vice President of Operations for 7 years.
Can you give us a brief background of your company?Standard Trust Deed Service Co. was founded in 1987 and
provides nonjudicial foreclosure services to banks, credit
unions, mortgage companies, as well as small investors and
other independently owned companies.
Founded in 1994, RSVP serves the outsourcing needs of
law firms and trustees by providing posting, publishing and
auctioneering services in support of real estate foreclosure
processing. RSVP is the largest firm in its industry segment
with a presence in 18 states, and the District of Columbia.
Tell me something unique about your company?We have a loyal and experienced team of employees who
pride themselves on their exacting attention to detail. Our
average employee has 11 years of experience in foreclosure
processing.
How is the current growth in foreclosures affecting what you do?
It’s challenging us to work smarter so we can meet the
53
United Trustees Association Summer 2008
Membership News
growth in volume required by our customers. We are invest-
ing in technology that improves our workflow and signifi-
cantly reduces the potential for error. Thanks to technology
and a willingness to challenge the status quo, every day we’re
identifying new ways that we can exceed our customers’
expectations for responsiveness and flexibility.
How are you keeping up?We are developing automated processes for accepting and
processing orders, from typesetting to ad scheduling and
placement and coordinating auctions. This is enabling us to
provide faster service even as order volume grows.
We are also evaluating software that will allow for paperless
processing of foreclosure orders and enable us to operate
more efficiently for our foreclosure customers.
What service has the most potential for growth?Extending the reach of our posting, publishing and auction-
eering services to new states so we can create a national solu-
tion for our customers.
What do you enjoy most about your job?I enjoy building strong teams to deliver an exceptional prod-
uct to our clients.
What are your responsibilities?Day-to-day operation of both RSVP and Standard Trust
Deed Service Co.
What motivates you? How do you motivate others?Happy customers motivate me! I motivate other with a posi-
tive attitude and proper training. I try to instill that a team
working together gets the job done, not just one person. For
example, you will often find me filing when no one else has
the time. (I have always believed that if you look at the glass
half full rather than half empty life seems to go smoother.)
What is your proudest accomplishment with your company?
Being able to handle a huge increase in volume with few
errors.
What is your company’s greatest challenge over the next year? Or over the next several years?
In the near term, our greatest challenge is to completely re-
engineer and automate our workflow so we can process more
volume in more states without increasing staff. Longer term,
we want to involve our customers and trading partners in
automating order submission, verification and processing to
achieve greater efficiency and create more capacity.
What does your company get out of – or hope to get out of – its membership in UTA?
We want to participate in dialogue and education to help our
employees develop their knowledge and credentials, improv-
ing our value to our customers.
How do you spend time outside of work? What are your hobbies?
Outside of work I enjoy Bocce Ball, reading and spending
time with my family.
54
Featured Article
Spring 2007 United Trustees AssociationSummer 2008 United Trustees Association
XXXXXXXX —Continued from page 54Avoiding Costly Mistakes —Continued from page 1
Implementing these recommendations will help trustees
and benefi ciaries to safely navigate the treacherous foreclo-
sure river.
Bankruptcy Filings Create
Additional Risks of Liability
Before sailing across the river, fi rst check your boat for dan-
gerous leaks.
Th e rise in foreclosures will likely result in a corresponding
rise in bankruptcies fi led by homeowners desperate to stave off
foreclosure. Trustees and benefi ciaries beware! Th e interac-
tion between federal bankruptcy law and state foreclosure law
is complex. In addition to the strict requirements of Civil Code
section 2924 (which regulates foreclosures), federal bankruptcy
law adds another thick stack of rules and regulations.
One of the biggest landmines in the bankruptcy code is that
bankruptcy judges have the authority to award damages to the
debtor – including attorneys’ fees and punitives – for willful
violations of the automatic stay. (See 11 U.S.C. section 362(h).)
Th is creates an incentive for members of the plaintiff ’s bar to
sue trustees and benefi ciaries for perceived or actual violations
of the automatic stay. In an era when the vast majority of homes
in foreclosure will have little or no equity at the time they are
sold at a trustee’s sale, alleging violations of the automatic stay
(with a potentially lucrative award of attorneys’ fees from the
bankruptcy court) may be the only way for contingency fee at-
torneys to fi nd paid work in the foreclosure arena. As a con-
sequence, trustees and benefi ciaries should consider taking a
less aggressive approach when attempting to foreclose against
property owned by a debtor operating under the protection of
the automatic stay.
Further, any act taken by a creditor in violation of the stay is
void ab initio, rather than merely voidable. Th is means that any
trustee’s sale that was completed while the debtor was under
the protection of the automatic stay (or under the protection of
Bankruptcy Rule 4001’s ten-day grace period following a mo-
tion for relief from stay) will be set aside. One of the safe har-
bors for a trustee or benefi ciary facing this situation is that only
federal courts have jurisdiction to adjudicate alleged violations
of the automatic stay.
While the automatic stay is the most common tool used by a
debtor to preclude a foreclosure sale, the bankruptcy code in-
cludes another type of stay that bankruptcy trustees can use to
prevent foreclosures. Specifi cally, 11 U.S.C. section 105 autho-
rizes a bankruptcy court to issue a discretionary stay even after
a secured creditor has been granted relief from the automatic
stay and is advancing through the foreclosure process. Section
105 stays are rare but trustees and benefi ciaries must remain
aware of their power and potential ability to invalidate foreclo-
sure sales.
Issue: How can trustees and benefi ciaries reduce the risks as-
sociated with bankruptcy cases?
Solutions: (1) Send written notice of the bankruptcy filing to
all potentially interested parties (including the trustor) as soon
as you learn of it, along with an explanation of the trustee’s right
to postpone the sale and the trustor’s and junior lienors’ obliga-
tion to remain informed about the postponements; (2) Video-
tape all sale postponements resulting from the bankruptcy fil-
ing; (3) Verify that the debtor and all junior lienors have actual
notice of any order lifting the automatic stay or dismissing the
case; and (4) Videotape the actual sale of the property, when it
eventually occurs.
Trustees Must Act with Precision
When Noticing the Trustor’s Default
and Noticing the Trustee’s Sale
To cross the river, everyone holding a oar has to row in uni-
son and toward the same destination.
Civil Code section 2924 requires trustees to act with precision
when noticing the trustor’s default and subsequently noticing
the trustee’s sale. Even slight deviations from the statutory pro-
cedures can result in an illegitimate trustee’s sale.
55
United Trustees Association Summer 2008
Featured Article
Trustors can and will challenge both the content of the Notice
of Default and Notice of Sale as well as the timing of the re-
cording, publishing, mailing, or posting of those documents.
With respect to the content of the Notice of Default, trustees
should work with benefi ciaries to clearly and accurately list on
the fi rst page of the Notice of Default every alleged violation that
justifi es foreclosure on the property. Th ere is a safe harbor for
trustees but it is a good idea to verify the information with the
benefi ciaries. Small mistakes on the Notice of Default can lead
to large litigation down the road. For example, if the promissory
note contains a grace period for late payments (i.e., payment is
due on the fi rst day of the month but not offi cially considered
late until the fi fteenth day of the month), then if the trustee is
commencing foreclosure on a day of the month prior to expira-
tion of that grace period (i.e., the tenth day of the month) the
trustee should not include that month in calculating the Notice
of Default amount. If necessary, the missed payment will be ac-
counted for at reinstatement as a recurring obligation. Taking
this precaution will ensure that the redemption amount in the
Notice of Default is correct as of the date of recording.
With respect to the timing of the recording and mailing of the
Notice of Default, trustees should mail themselves an extra
(and exact) copy of the Notice of Default and retain the un-
opened (postmarked) envelope in their records. Th is will pro-
tect against future challenges by the trustor or junior lienors on
the issues of whether the Notice of Default was mailed in time
and whether the mailed copy included every page. Trustees can
save themselves a lot of heartache by simply putting in place
internal control systems that verify that critical documents are
mailed on time.
As an extra bit of insurance, trustees can upload key documents
56
Featured Article
Spring 2007 United Trustees AssociationSummer 2008 United Trustees Association
to a public webpage. Th is will create additional internal quality
control and will serve as an additional tool for trustees to use to
prove that trustors and junior lienors had actual knowledge of
the trustee’s sale.
Trustees can obtain additional peace of mind by verifying – pri-
or to sale – that documents sent to be recorded were actually
recorded in their entirety (without missing pages) and are as-
sociated with the correct property.
Although trustees bear the brunt of the work when it comes to
noticing and conducting a trustee’s sale, benefi ciaries are also
at risk. For example, a benefi ciary could be exposed to liability
if it improperly requests the sale of a home or fails to provide
the trustee with updated contact information for the borrower,
notably the borrower’s current mailing address if diff erent than
the property address.
Issue: How can trustees reduce the risks associated with notic-
ing the trustor’s default and noticing the trustee’s sale?
Solutions: Trustees should: (1) Mail themselves extra copies
of the Notice of Default and Notice of Sale and retain the un-
opened, postmarked envelopes in their records; (2) Upload to a
public Webpage electronic copies of key documents at the same
time that those documents are recorded, mailed, published, or
posted; and (3) Verify prior to sale that necessary documents
were mailed on time and were actually recorded in their en-
tirety (without missing pages) on the correct property.
Don’t Mess with Near Tender – If the
Trustor’s Pre-Sale Offer to Cure the
Default then Postpone the Sale
Don’t run aground on the shoals of near tender.
Civil Code section 2924 authorizes trustors and junior lienors
to redeem property in foreclosure by tendering the amount
necessary to cure the default that caused the foreclosure.
Trustees must use care in calculating the redemption amount.
As a general rule, trustees may rely in good faith on the infor-
mation provided by the benefi ciary regarding the amount in de-
fault. Nevertheless, the safe harbor is tiny and there are count-
less scenarios that could wipe out the trustee’s immunity in this
area. Trustees must take great care in calculating the redemp-
tion amount. Th ere is little room for error.
Trustees must also scrutinize whether an attempted tender is
adequate to cure the default and redeem the property. A good
rule of thumb is that any tender that is within 25 percent of the
amount in default should cause the trustee to postpone the sale.
Th ere is no real safe harbor for trustees who fail to accept what
turns out to be adequate tender, and an improper sale could
result in signifi cant liability for the trustee.
Issue: How can trustees reduce the risks associated with ten-
der off ers?
Solution: Trustees should postpone sales if the attempted ten-
der is within 25 percent of the amount in default.
Post Sale Issues
You’re not safe until the boat’s out of the water and on dry
land.
Th e law provides trustees a second chance to double check the
validity of the sale. To perfect a trustee’s sale, trustees must re-
cord the Trustee’s Deed within 15 days of the sale. Th is is a win-
dow of opportunity for a trustee to review all facts and issues
related to the sale. A trustee has the power to rescind a sale and
should do so prior to recording the Trustee’s Deed if there is a
legitimate concern that a particular sale was invalid. If the red
fl ags are serious enough, a trustee should also consider contact-
ing the trustor and junior lienors directly to confi rm that they
received notice of the sale and had an opportunity to attend.
With respect to preparing and recording the Trustee’s Deed,
trustees should use common sense. Misspellings of formal
names or miscalculations of amounts can result in future litiga-
tion, even if meritless. It is critical that trustees include on the
Trustee’s Deed the notice recitals described in Civil Code sec-
tion 2924(c), which provide additional protection to the trustee
should a trustor or junior lienor challenge a sale.
Th e fi nancial cost of redoing a sale is far less than the fi nancial
cost of future litigation. When in doubt, postpone and evalu-
ate.
57
United Trustees Association Summer 2008
Featured Article
Dissuading Frivolous Suits with the
Specter of Attorneys’ Fees
Sometimes a bigger boat is the best way to cross the river.
One underreported aspect of the battle between trustees, ben-
efi ciaries, and trustors is that trustees and benefi ciaries are not
powerless to protect themselves from frivolous litigation. Many
deeds of trust include an attorneys’ fee clause that grants both
the benefi ciary and the trustee the right to collect from the trus-
tor any attorneys’ fees incurred by the benefi ciary or trustee in
defending against a trustor’s wrongful foreclosure action. Th e
“magic language” of an attorneys’ fee clause in a deed of trust is
a wonderful asset for a trustee facing a frivolous action.
Although the appellate courts have not issued any recent rul-
ings on the issue, trustees should feel confi dent in seeking re-
covery of attorneys’ fees from trustors. In the case of a trustor
that is organized as a single purpose entity (typically a LLC), a
trustee should (if the specifi c facts justify it) allege that the cor-
porate trustor is nothing more than the alter ego of the natural
person in control of the trustor. By doing so, the trustee can
seek to recover attorneys’ fees from both the single purpose en-
tity (which will likely have no assets following the foreclosure
and be judgment proof) and the person or entity in control of
the trustor (which will likely have assets available to satisfy an
award of attorneys’ fees).
Finally, Civil Code section 2924l provides another piece of pro-
tection for trustees. If a trustee is named as a defendant in a
civil action solely in its capacity as trustee, rather than being
named for wrongful acts or omissions on its part in performing
its duties as a trustee, then the trustee may fi le a Declaration
of Nonmonetary Status. Filing such a declaration may allow a
trustee to opt-out of the action and avoid any liability or legal
fees.
In the rising tide of foreclosure-related civil actions, trustees
and benefi ciaries must use care when commencing, noticing,
and conducting non-judicial foreclosures. Taking simple, af-
fordable precautions can reduce long-term liability and legal
costs.
Antony D. Nash and John J. McNutt
are senior associates in the Real
Estate and Environmental
Litigation Group at Luce Forward
Hamilton & Scripps, LLP, and reg-
ularly defend trustees in foreclo-
sure-related civil actions and class action litigation. Luce also
has an experienced bankruptcy practice group to assist on all
bankruptcy issues that arise in foreclosure litigation. Mr. Nash
and Mr. McNutt can be reached at [email protected] and jmc-
[email protected] respectively.
Need…
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Spring 2007 United Trustees AssociationSummer 2008 United Trustees Association
Bullet Point: A written notification to the occupant
of the property to be posted and mailed
with the Notice of Sale. The notice is to
contain statutory language in English and
all the recognized secondary languages
of California - Spanish, Chinese, Korean,
Vietnamese, and Tagalog, which con-
stitute approximately 83 percent of all
Californians who speak a language other
than English.2
Q. “That statute is for a contract negotiated in a language
other than English. Why apply it to mortgage loan docu-
ments approved by Fannie Mae and Freddie Mac in
English?”
A. “We don’t know what language the occupant speaks, and
we want everyone to be apprised in their native tongue as
to anything that might affect their peaceful enjoyment of
their dwelling.” His chest was swelling and I was getting
worried about his blood pressure.
Q. “Are you going to require utility disconnect notices to be
in all six languages, too?” and at first he seemed deflated.
Then, I felt like I had only stoked the flames of regulation
as the senator pondered the question.
Bullet Point: The tenant after a foreclosure is now given
sixty (60) days, instead of thirty (30) days
after the foreclosure sale before an eviction
can be commenced.
Q. “If the occupants have the Notice of Sale and a six-lan-
guage notification and posting prior to sale and then get an
additional sixty days after the foreclosure, aren’t they really
getting 3 to 4 months to live for free on the property?”
A. “Perhaps they can save up for a down payment to purchase
a house and help ease the mortgage crisis in our state.”
replied the optimistic senator.
Q. “But, it’s at the expense of the lender. Why not give them 6
or 9 months for a bigger down payment?”, and again I felt
like I was giving him ideas and I withdrew the question.
A. B. 2359 - This bill was pending in the Assembly and as of
May 15, 2008 proposed to eliminate the Holder-in-Due-Course
protections of the institutional lender from the acts of the
originating loan broker.
Bullet Point: Any loan purchased after January 1, 2009
would be subject to the same claims and
defenses that the borrower could assert
against the original loan broker or lender.
Q. “Why leave the institutional investor holding the bag for
any alleged representations of some loan broker who made
the paperwork look proper?”
A. “We have to hold someone responsible for those dastardly
acts.”
Q. “How about the loan broker who committed them?”
A. “We’ve already regulated them, and we’re tightening up
more. But, they’re all in the Cayman Islands now.” Now I’m
starting to understand his logic.
Shortly after my meeting with Xavier, I purchased the com-
plete Matrix (Warner Bros, 1999) set of DVDs to watch with
my boys. I really needed to go back and watch the first movie
since I didn’t remember that much. My 14 year-old diagnosed
me with Alzheimers and told me it was about AI (and I really
didn’t remember Allen Iverson driving through the cast for lay
ups). I was quickly informed in a condescending manner that
AI means “Artificial Intelligence.” It seems that in the future,
Artificial Intelligence, a.k.a. the Machines, rival and overtake
Humans for superiority and create a Matrix world, that we
all live in, which is nothing more than a computer program
of electronic simulations of the world around us regulated by
their Agents to keep Humans entertained while they use us
as batteries for their energy needs.3 Well, I couldn’t resist the
corollary to today’s legislative atmosphere.
Legislative Matrix —Continued from page 6
59
United Trustees Association Summer 2008
Featured Article
Of course, the legislature is the Artificial Intelligence4,
who created a Matrix of legislation to regulate the Humans,
who I figure are the taxpayers, in order to syphon off their
Energy, which has to be our tax dollars. Xavier would make a
good Agent Smith of the Matrix, but he’d have to lose some
weight and move a lot faster than presently in the Senate.
Neo, the leader of the Humans who have escaped the Matrix
and can hack into and out of it, will be named at the UTA
Annual Conference in Las Vegas this November. Send your
“Nominations for Neo” to Richard Meyers, the UTA executive
director. He’ll appreciate the attention.
Don’t get me wrong. I agree with regulations to correct the
causes of the problems (“cause-regulations”). But with all the
bills attempting to regulate the result (“result-regulations”)
before the market can adjust to the problems, it just seems to
create new problems. The subjective ambiguities as to what
is a good faith effort, undefined terms, assignee liability, and
translations could become the basis for a plethora5 of judicial
challenges to the statutory non-judicial foreclosure process.
So, I asked Senator House about how all these proposed result-
regulations appear to just create new problems to replace the
old ones.
“It’s self-propagating”, he replied. “It provides clean up legisla-
tion for the next term, and with term limits, I just might return
to the practice of law to take advantage of these ambiguities
again,” said the Senator with a sparkle in his eye. “You know the
Trial Lawyers Association is a major contributor to my cam-
paign.” I resisted the temptation to express my wish that he go
self-propagate himself and just wished him well in the upcom-
ing election. You never know when you’ll need an attorney. Or,
a senator for that matter.
As I drove home, I kept thinking about “The spoon doesn’t
exist” scene from The Matrix and tried to remind myself that
it’s not life as programed by the Legislative Matrix, it’s life as it
really exists.
Hopefully, we’ll all wake up sober, and not ugly. After all,
Abraham Lincoln and Neo are my American Idols.
1 Although sometimes attributed to Lady Astor, Churchill’s bodyguard con-fi rmed that it was Bessie Braddock, who was known as “Battling Bessie” from Liverpool and not shy about her 50”- 40”- 50” size frame.
2 Honest. California Civil Code 1632(3). I have friends who are German, Italian and Russian, and don’t understand why they’re left out.
3 Th e late Gene Siskel and Roger Ebert probably did a better review, but they couldn’t successfully oppose a restraining order.
4 You can go where you want with that one. Th is article is too short for me to go there.
5 I spelled that right the fi rst time! (If it means what I think it means.)
Ronald Roup has been a member of the California
State Bar since 1980 and is the principal of Roup
& Associates located in Lake Forest, California.
For over twenty years, his practice has empha-
sized a full spectrum of legal services for loss
mitigation and asset management for secured
creditors and title companies, including judicial and nonjudi-
cial foreclosure services, and legal representation for loan
default work-outs, bankruptcy, eviction, title matters, and
lender defense. Ron is UTA’s Legislative Committee Chair and
can be contacted at [email protected].
Want an Update on State
LegislativeActivity?
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and click on “Legislative Advocacy”
60
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Spring 2007 United Trustees AssociationSummer 2008 United Trustees Association
2 Valley Bible Center v. Western Title Ins. Co., 138 Cal. App. 3d 931, 188 Cal Rptr. 335 (1983); Saucedo v. Mercury Savings & Loan Association, 111 Cal App. 3d 309, 168 Cal. Rprt. 552 (1980)
3 See, Bank of Italy Nat. Trust & Sav. Ass’n v. Bentley (1933) 271 Cal. 644; Lancaster Sec. Inv. Corp. v. Kessler(1958) 159 Cal. App. 2d 649.
4 See, Hatch v. Collins, 225 Cal. App. 3d 1104 (1990)
5 See, Schmidt & Co. v. Berry (1986), 183 Cal. App. 3d 1299
6 See, Saucedo v. Mercury Savings & Loan Association, infra
7 Id.
8 See Civil Code Section, 1717(b)(2); subject to some exceptions outside the scope of this article.
9 See, Pacifi c Custom Pools, Inc. v. Turner Const. Co. (2000) 79 Cal. App. 4th 1254.
10 Hsu v. Abbara (1995) 9 Cal 4th 863
Robert Finlay is a partner with Wright, Finlay &
Zak, LLP and member of the UTA, CMBA, MBA
and AFN. He specializes in representing lenders,
foreclosure trustees and title companies in mort-
gage and title related litigation throughout
California. As a firm, Wright, Finlay & Zak, LLP
represents and advises its lending and trustee clients on a vast
array of mortgage and finance issues in California and Nevada,
including but not limited to, Wrongful Foreclosure actions,
Judicial Foreclosures and Receiverships, Accounting disputes,
lender and broker Repurchase disputes, Predatory lending
issues, as well as FDCPA, FCRA, TILA, RESPA, HOEPA and
other Federal and State statutory matters. Mr. Finlay can be
reached at (949) 477-5050 or via email at rfinlay@wrightlegal.
net.
Sonia Plesset’s practice areas includd litigation
and representation involving mortgage banking,
loan servicing, general business and real estate
matters, and bankruptcy and eviction. She earned
her B.A. from UCLA and her J.D. from Loyola
Law School. She can be reached at splesset@
wrightlegal.net.
Can Trustee Recover Attorney’s Fees? —Continued from page 60
Want to read UTA’s By-Laws
or Code of Ethics?
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Although ultimately proving the point is far more difficult,
claiming the mortgage is invalid because of fraud in the induce-
ment is hardly an unheard of assertion. Then there is the claim
that the mortgage is not due because the mortgagee gave an
extension, or was irresolute in some correspondence on the
subject or erroneously rejected a remittance or misapplied a
check. Then there is waiver, unconscionable conduct, bad faith,
and the lower grade laches or unclean hands, among hosts of
others.
And might not a mortgagor successfully argue pursuant to the
“undue hardship” standard: “I can refinance this mortgage in
five months. In a judicial foreclosure case, which wouldn’t con-
clude for twelve months, I would obtain all the funds to save
the property and satisfy the mortgage. But in this rapid power
of sale proceeding, the foreclosure will be over before I can get
the money. I will suffer under hardship!” Maybe. Moreover,
undue hardship is an ill-defined phrase. It is difficult to predict
what a court might do, particularly when loss of property and a
business is in the offing.
If a mortgagor’s assault on the non-judicial proceeding is suc-
cessful, the hapless mortgagee endures all the time generated in
starting the power of sale case and then attempting to fend off
the attack. Defeat confines the remedy solely to judicial fore-
closure, and whatever time would have been saved by the non-
judicial method thereby proved illusory. Even if the borrower’s
offensive is routed, the apparent economy of the power of sale
procedure is considerably reduced.
Conclusion
This brief discussion of power of sale in New York does not
explore the considerable detail of the statute; there is consider-
ably more to it. But the details are not the point. That it exists,
but does not quite live up to all expectations, is the message.
Particularly for commercial foreclosures pursued essentially on
consent, power of sale is especially welcome. Beyond that, New
York’s reputation as a difficult state to prosecute a foreclosure
remains intact.
Mr. Bergman, author of the three volume treatise,
Bergman on New York Mortgage Foreclosures,
Lexis Nexis Matthew Bender(rev. 2008), is a part-
ner with Berkman, Henoch, Peterson & Peddy, P.
C. in Garden City, New York, a member of the
USFN, the American College of Real Estate
Lawyers and the American College of Mortgage Attorneys. He is
listed in Best Lawyers in America and his biography appears in
Who’s Who in American Law. He can be reached at b.berg-
Nonjudicial Foreclosure in New York —Continued from page 17
Discount Offered if
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63
United Trustees Association Summer 2008
Featured Article
they can discuss how to proceed with their counsel.
Claims of Indemnity by Mortgage
Lenders and Mortgage Servicers
Although Borrowers cannot sue any entity other than a
Mortgage Lender or Mortgage Servicer for TILA violations,
Mortgage Lenders and Mortgage Servicers are now routinely
filing cross –complaints against Escrow and Title Companies
for indemnity based upon the failure of the Escrow or Title
Company to provide two accurately-completed copies of the
Notice of Right to Cancel and the TILA Federal Box Disclosure
to each Borrower and person with an interest in the Secured
Property. They are asking for damages in the amount of the
windfall to the Borrower that is a loss to the Mortgage Lender
or Mortgage Servicer.
In our above example involving the $500,000 rescinded
Mortgage Loan, the Mortgage Lender or Mortgage Servicer
would be seeking damages of $65,000.00 plus attorneys’ fees
(which can be in the tens of thousands of dollars) against the
Escrow or Title Company if the rescission has resulted from
the failure to provide the Borrower with two accurately-com-
pleted copies of the Notice of Right to Cancel. This is only one
Mortgage Loan rescission.
How Can Escrow Companies, Settlement Agents
and Title Companies Avoid Liability for Indemnity
to Mortgage Lenders and Mortgage Loan Services
in Connection with TILA Rescission claims?
As you can see in the above examples, the penalties for viola-
tions of TILA that enable a Borrower to rescind can be harsh.
Escrow Companies, Settlement Agents and Title companies
involved in the closing of Mortgage Loan transactions must
establish procedures and must train their notaries and employ-
ees who handle closings to be certain to accurately complete
the Notices of Right to Cancel and to give two accurately-com-
pleted copies of the Notice of Right to Cancel to each Borrower
and person with an interest. Failure to do so could result in
punitive liability that Escrow Companies, Settlement Agents
and Title Companies cannot afford.
1 15 USC Section 1635 and Regulation Z Section 226.23(a)(1). 2 Regulation Z Section 226.23(a)(3) fn.47.3 Th e applicable tolerance for the Finance Charge is $100.00 which in-
creases to ½ of 1% of the principal balance in a refi nance transaction but decreases to $35.00 if the Mortgage Loan is in foreclosure (i.e., the No-tice of Default has been fi led). 15 USC Section 1605(f ); Regulation Z Sec-tion 226.18(d)(1); Regulation Z Section 226.23(g); Regulation Z Section 226.22(a)(2)-(4).
4 15 USC Section 1640(a).5.i. 15 USC Section 1640(e).6 Assignee liability is found in 15 USC Section 1641.7 Regulation Z Section 226.23(b)1).8 15 USC Section 1635(f ).9 15 USC Section 1635(b).10 Palmer v. Wilson, 502 F.2d 860(9th Cir. 1974).
Robert Finlay is a partner with Wright, Finlay &
Zak, LLP and member of the UTA, CMBA, MBA
and AFN. He specializes in representing lenders,
foreclosure trustees and title companies in mort-
gage and title related litigation throughout
California. As a firm, Wright, Finlay & Zak, LLP represents and
advises its lending and trustee clients on a vast array of mort-
gage and finance issues in California and Nevada, including but
not limited to, Wrongful Foreclosure actions, Judicial Foreclosures
and Receiverships, Accounting disputes, lender and broker
Repurchase disputes, Predatory lending issues, as well as
FDCPA, FCRA, TILA, RESPA, HOEPA and other Federal and
State statutory matters. Mr. Finlay can be reached at (949) 477-
5050 or via email at [email protected].
Julie Leah Greenfield, is the Managing Attorney
of Wright, Finlay & Zak’s new Compliance,
Regulatory and Licensing Division. She has more
than 30 years of experience working in-house with
some of the nation’s largest prime and subprime
mortgage lenders. Ms. Greenfield specializes in federal and state
laws and regulations governing mortgage loan origination and
servicing as well as Federal and State licensing, fair lending,
predatory lending, privacy, disclosure, usury, advertising, origi-
nation and servicing laws and regulations, as well as loan sales,
repurchases and secondary marketing. She can be reached at
Recission Under TILA —Continued from page 19
64
Summer 2008 United Trustees Association
State News
TSG prices are regulated by the California Department
of Insurance and a borrower cannot be charged a fee in
excess of that regulated fee in a nonjudicial foreclosure. At
this time, SB 1375 places no limitation or regulation over
the price for this new product which is being touted as
reducing costs to the borrower.
Neither the nature of the product nor information about
who may provide the product is made clear in SB 1375.
The New Product is not a “guarantee” product containing
specific assurance regarding the information needed by a
trustee to process a nonjudicial foreclosure. Therefore, if
the New Product contains incorrect information, relied
upon by the trustee in processing the nonjudicial foreclo-
sure, will the product have the benefits and protections of
a TSG?
There appears to be no requirements for a company pro-
ducing the New Product, therefore, trustees and beneficia-
ries may incur liability because of the error of the producer
of the New Product with no recourse other than suing the
producer who may be insolvent or judgment proof.
There is uncertainty whether the new product would pro-
vide information for mailings relating to the general index
for tax liens, ERISA liens, etc. which may result in the
failure to give appropriate notice to the taxing authorities
resulting in foreclosed sales being rescinded and started
over or in the tax liens remaining on the foreclosed prop-
erty creating potential liability for the Trustee or benefi-
ciary.
When TSG’s are purchased, it is generally easy for the pur-
chaser at the trustee’s sale to obtain post-sale title insur-
ance. Title companies may be hesitant to issue post-sale
title insurance policies on properties following trustee’s
sale where a TSG was not used.
1.
2.
3.
4.
5.
6.
Because the New Product does not provide the protec-
tions of a TSG, and there is no assurance that the producer
will indemnify the trustee or beneficiary, it is feared that
restarts and rescissions of sales will increase. The result
could be increased neighborhood blight as there would
be a greater number of properties left vacant, or with
occupants who do not have an interest in maintaining the
properties, for longer periods of time.
If the new product is less expensive, but a trustee chooses
a TSG, it raises the question of whether there would be
exposure to liability for not choosing a less expensive
product but less complete product.
Finally, the legislation circumvents the provisions of the
Insurance Code for TSGs which is incorporated in CC §
2924c(c) as a limitation on the cost of the TSG.
UTA worked with a coalition regarding the legislation, includ-
ing the California Land Title Association.
7.
8.
9.
Initial CA Foreclosure Report Bill Will Not Be Pursued —Continued from page 25
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Summer 2008 United Trustees Association
State News
is the only password that can go back in to the database
and add the additional required information to the record.
Thus, it will be absolutely crucial that the original party
who opened the record on a foreclosure keep track of the
password that was utilized to open the initial record.
The 90-day right to reinstate requirements of Chapter 244,
§35A take effect on May 1, 2008 and apply to applicable mort-
gages which have been accelerated or where foreclosures are
completed prior to May 1, 2008. Note again that the account-
ing requirements of Chapter 183 §27 took effect on November
29, 2007.
Identification of Mortgage Brokers and Mortgage Loan
Originators on Recorded Mortgages and Assignments
• Chapter 183, §6D provides that for any mortgage loan
originated after November 29, 2007, mortgages and
assignments of mortgages on 1-4 family owner-occupied
homes must include either an endorsement of the name,
post office address and license number of the mortgage
broker involved in the loan, the loan originator respon-
sible for placing the loan or a notation that “no mortgage
broker or loan originator is involved.” The loan origina-
tor identification requirement is not effective until July 1,
2008 because that is the date that loan originators must be
licensed by Massachusetts. The DOB has stated that in the
event of a complaint on this requirement, a statement from
the mortgage holder or servicer that it has no information
and cannot determine if a mortgage broker or loan origina-
tor was involved will not be acceptable to the DOB; and
• Chapter 183, §6D states that the failure to include the
required information on the mortgage or assignment
will not affect the validity of the documents so that the
Registries of Deeds should not reject deficient documents
for recording. In spite of the statutory reference, we have
been advised that there are Registries that are refusing to
accept deficient documents for recording.
In her practice, Ms. Antonelli advises creditors,
lending institutions, banks and mortgage compa-
nies about creditors’ rights in foreclosures, bank-
ruptcies and collection matters and works with
clients to assist in and enforce compliance with
Rhode Island and Massachusetts law. She can be
reached at [email protected].
Mr. Lovell’s practice includes the representation of
creditors in litigation, bankruptcy and state court
receivership matters, as well as class action
defense of lenders, including TILA and HOEPA
complaints. He is the Chair of the Firm’s Creditors’
Rights Practice Group and advises lending insti-
tutions, banks and mortgage companies on creditors’ rights mat-
ters and works with these institutions to enforce their rights
under Rhode Island and Massachusetts law. He can be reached
Massachusetts Intermediate Appeals Court Upholds
Fremont Preliminary Injunction
The Massachusetts appellate court judge upheld the
preliminary injunction entered against Fremont
Investment and Loan, preventing Fremont from initiat-
ing or advancing foreclosures on loans that are deemed “pre-
sumptively unfair” without prior approval from the court.
The appellate court noted that “[i]t has long been understood
that a factor to be considered in determining whether a prac-
tice should be deemed unfair is whether it is ‘within at least
the penumbra of some common-law, statutory, or other estab-
lished concept of unfairness.”
Massachusetts Legislation —Continued from page 31
67
United Trustees Association Summer 2008
State News
Moreover, the court also noted that “[t]he fact that particular
conduct is permitted by statute or by common law principles
should be considered, but it is not dispositive on the question
of unfairness.” According to the appellate court, because the
loan terms at issue (see our update below) were not explicitly
authorized under state or federal law, Fremont could not qual-
ify for the exemption under the Massachusetts UDAP statute
for conduct permitted under state or federal law.
The Massachusetts State court had granted a motion for a
preliminary injunction against Fremont Investment & Loan,
barring Fremont from initiating or advancing foreclosures on
mortgage loans that the Court deemed “presumptively unfair
loans” unless certain conditions are met.
The court held that a loan is “presumptively unfair” if it pos-
sesses the following characteristics:
• The loan is an adjustable rate mortgages with an introduc-
tory period of three years or less:
• The loan has an introductory or “teaser” interest rate that
is at least three percent lower than the fully-indexed rate;
• The borrower has a debt-to-income ratio that would have
exceeded 50% (not based on stated-income application
representations, but upon other evidence of income), cal-
culated using the fully-indexed rate; and
Fremont extended 100% financing or the loan has a substantial
prepayment penalty or penalty that lasts beyond the introduc-
tory period.
Information provided and written by Ralph Wutscher, Esq. of
Roberts Wutscher. Mr. Wutscher can be contacted via email at
68
Summer 2008 United Trustees Association
State News
“defective” bidding or under what circumstances a sale might
be deemed “void”. It also begs such questions as “Do we need to
draw a distinction between void and voidable sales?” and “Will
a court still recognize a trustee’s common law ability to condi-
tion the fi nality of its auctions?”
Because it is unclear whether this amendment will be deemed
to have retroactive eff ect, trustees should follow the statute for
all foreclosures pending on the amendment’s eff ective date,
June 12, 2008.
SHB
Substitute House Bill 2770, Section 22, eff ective June 12, 2008,
amends RCW 61.24.030(7) to add a new subsection (k). RCW
61.24.030(7) mandates the contents of the notice of default.
New subsection (k) requires the following additional language
to be inserted “prominently . . . at the beginning of the notice”
of default if the home is owner-occupied:
You should take care to protect your interest in your home.
This notice of default (your failure to pay) is the first step
in a process that could result in you losing your home. You
should carefully review your options. For example:
• Can you pay and stop the foreclosure process?
• Do you dispute the failure to pay?
• Can you sell your property to preserve your equity?
• Are you able to refinance this loan with a new loan from
another lender with payments, terms, and fees that are
more affordable?
• Do you qualify for any government or private hom-
eowner assistance programs?
• Do you know if filing for bankruptcy is an option?
What are the pros and cons of doing so?
Do not ignore this notice; because if you do nothing, you
could lose your home at a foreclosure sale. (No foreclosure
sale can be held any sooner than ninety days after a notice
of sale is issued and a notice of sale cannot be issued until
thirty days after this notice.) Also, if you do nothing to pay
what you owe, be careful of people who claim they can help
you. There are many individuals and businesses that watch
for the notices of sale in order to unfairly profit as a result
of borrowers’ distress.
You may feel you need help understanding what to do.
There are a number of professional resources available,
including home loan counselors and attorneys, who may
assist you. Many legal services are lower-cost or even free,
depending on your ability to pay. If you desire legal help in
understanding your options or handling this default, you
may obtain a referral (at no charge) by contacting the coun-
ty bar association in the county where your home is located.
These legal referral services also provide information about
lower-cost or free legal services for those who qualify.
Because it would be time-consuming to verify in every case
whether the home is owner-occupied, we recommend includ-
ing this blurb in every notice of default.
David Fennell is a founding partner and senior
counsel in Routh Crabtree Olsen, PS. David rep-
resents financial institutions in foreclosure, bank-
ruptcy, and litigated matters. David is one of the
industry leaders in the mortgage banking and
default servicing industry. He is a member of the
Real Property and Probate section of the Washington State Bar;
USFN (and a former board member); and is a past Fellow of the
American College of Mortgage Attorneys. He can be reached via
email at [email protected].
Washington Legislation —Continued from page 27
70
Spring 2007 United Trustees AssociationSummer 2008 United Trustees AssociationSummer 2008
Case Law
wrongs after losing, repeatedly fi led meritless papers, or used
frivolous tactical devices, or who has already been declared a
vexatious litigant for similar reasons. Defendants in such law-
suits can move for an order requiring security by showing that
the plaintiff is a vexatious litigant and has no probability of pre-
vailing. A court may, on its own motion or on a defendant’s,
enter a pre-fi ling order which prohibits a vexatious litigant
from fi ling a new litigation in the courts in pro per without fi rst
obtaining leave of the presiding Judge of the court where the
litigation is proposed to be fi led. Th e presiding judge can allow
the litigation to be fi led only if it appears the litigation has merit
and not been fi led for purposes of harassment or delay. In addi-
tion, it allows the Court to require the vexatious litigant to post
a bond before being able to fi le suit.
Analysis
Wolfe v. George was a case where a declared vexatious litigant
attacked the statute on unconstitutional grounds. Th e Ninth
Circuit Court Appeals dismissed the constitutional challenge
upholding that the statute is rationally related to a legitimate
state purpose. Pointing out the obvious, the vexatious litigant
tied up a great deal of the court’s time denying time to litigants
with substantial cases. In addition, it found that the state has
an interest in protecting defendants from harassment by frivo-
lous litigation just as it has an interest in protecting people from
stalking.
In Molski v. Evergreen Dynasty Corp., Molski appealed two
orders declaring him a vexatious litigant and ordering him to
obtain leave of court before fi ling any further Americans with
Disability Act (“ADA”) suits in the United States District Court
for the Central District of California. Th e District Court’s order
barred Molski’s attorneys from fi ling similar suits. Th e Court
found that Molski’s numerous and similar complaints against
numerous small businesses were lacking in credibility. Th e
District Court concluded that Molski’s motivation in bringing
these numerous type suits was to extract cash settlements from
defendants. Th e Ninth Circuit concluded that it had satisfi ed
due process requirements in apprising Molski and his attorneys
of the court’s intent to issue this release and that the Order was
narrowly tailored to this vexatious litigant’s wrongful behavior.
In Moran v. Murtaugh, Millet, et al., the Court held that a para-
legal who had been hired by a law fi rm that was fi red for failure
to reveal a felony conviction was required to post costs before
proceeding with the instant litigation. Th e Court held that the
Court could make the determination of whether or not a party
qualifi es as a vexatious litigant on the basis of declarations fi led
in support of the security motion. Th us, the Court can weigh
the declarations and the evidence in making its ruling and fi t
within due process standards.
Why These Cases Are Important To Trustees And Lenders
Th ese cases all collectively will be of assistance to lenders and
their counsel in proceeding in future cases where pro per liti-
gants continue to litigate issues that have previously been lost
or to attack the lender’s actions. Th e vexatious litigant statutes
provide the means at which counsel can research the pro per
litigant’s prior actions to see if the case may qualify for relief
under the statute. Th e fact that a pro per litigant who has been
fi ling numerous suits against the lender and the trustee over
a disputed foreclosure sale can be prohibited from proceeding
unless he or she posts a signifi cant cash bond may be the death
knell of that litigant’s continued ability to cost clients money
and unnecessary expense.
Martin T. McGuinn, Esq., a real estate and credi-
tors’ rights litigator, is a principal in the law firm
Kirby & McGuinn, who focuses his practice in the
representation of lenders, servicers, receivers and
trustees in complex bankruptcy, foreclosure and
lender liability litigation, including class action
suits. He can be reached via email at mmcguinn@kirbymac.
com.
Four Cases Worth Review —Continued from page 45