FIRM Commentary:

A District Court rejected borrower’s “dual tracking” claims based on a rejected SHORT SALE application, but the Court granted a Preliminary Injunction based on Bayview Loan Servicing’s 2013 foreclosure activity which occurred BEFORE the servicer made a determination on borrower’s 2010 loan modification application.

The take away:  there is no shortage of Borrowers who attempted to secure a loan modification since 2008 before listing the property for SHORT SALE.  If you are facing an uncooperative servicer on issues ranging from PRICE, to the refusal to delay SALE DATE or refusal to agree to a SECOND Mortgage pay-off, the chances of closing the deal will substantially increase if an Attorney can find evidence of a violation of the California Home Owner Bill of Rights regardless od when the Loan Mod application was submitted.

The case expands the use of the Homeowner Bill of Rights as a tool to prevent foreclosure sales and facilitate loan modifications and SHORT SALES.  Homeowners and real estate agents are advised to have evidence reviewed by an attorney and evaluated for the viability of legal action.

In Ware v. Bayview Loan Servicing, LLC, No. 13-CV-1310 JLS (NLS) (S.D. Cal. Oct. 29, 2013), the borrower sought a preliminary injunction based on borrower’s CC 2923.6 dual tracking claim. Ware v. Bayview Loan Servicing, LLC, 2013 WL 4446804 (S.D. Cal. Aug. 16, 2013). On this motion to dismiss, the court again rejected borrowers’ dual tracking claims based on a rejected short sale application (CC 2923.6 only applies to modifications) and on borrowers’ 2013 modification application based on a barebones allegation of changed financial circumstances. The protections from foreclosure that extend to loan modification process do not extend to Short Sales unless all lien holders have approved the deal.

However, the court granted the preliminary injunction based on the idea that they never received a proper answer as to a 2010 loan modification request and found borrowers’ Borrowers alleged dual tracking based on servicer’s 2013 foreclosure activity, which occurred before servicer made a determination on borrowers’ 2010 modification application.

“Because [borrowers] have a first lien loan modification application pending after January 1, 2013, [HBOR] applies.” Servicer’s non-retroactivity argument is misplaced. HBOR is not retroactive, but borrowers allege violations of HBOR that occurred after its enactment. The motion to dismiss on this third dual tracking claim was denied.

The “unfair” prong of a UCL claim requires conduct that was misleading, against legislatively stated public policy, or “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.”  Borrower’s valid dual tracking claim based on a 2010 modification application and 2013 foreclosure activity could be deemed unfair under the UCL. This “unethical, oppressive, and injurious conduct” “would substantially injure consumers without any countervailing benefits to consumers or competition.” Borrowers’ requisite harm is evidenced by the foreclosure and their UCL claim survived the motion to dismiss.

Negligence claims require a duty of care owed from servicer to borrower. Generally, banks owe no duty to borrowers within a typical lender-borrower relationship. Many courts use the Biankaja test to determine whether a duty of care existed between a financial institution and borrower. This court found a possible duty of care under Biankaja’s six-factor test, even without a TPP or permanent modification in place. Interestingly, the court used res ipsa loquitur to assume “serious defects” in servicer’s record-keeping abilities, evidenced by their inability to make a determination on borrowers’ three year-old modification application. “[Servicer] could very well owe [borrowers] a duty of care to keep proper records. . . . and to timely respond to loan modification applications.” Servicer’s motion to dismiss borrowers’ negligence claim was denied.  (Source:  Alexandra Oatman)

 

 

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