By Steve Vondran, Esq. who is practicing Real Estate, Bankruptcy, and Foreclosure Defense in Arizona and California where he is licensed to practice law.  He also holds a real estate broker’s license in both states as well.  Prior to becoming an attorney, Mr. Vondran also was a mortgage loan officer which has given him insight into the current financial crises.  He can be reached at steve@vondranlaw.com or (877) 276-5084.  The following is general legal information only, and is not to be construed as legal advice, or a substitute for legal advice.  The following information may not be updated or accurate, and is simply provided as general information and things to think about if you are facing foreclosure in California or Arizona.  For specific questions, please contact a foreclosure defense attorney on your area.  Please do not post confidential information on my blogs and do not send us confidential information in emails as we cannot guarantee the confidentiality of such.  No attorney-client relationship is formed until a retainer agreement is signed.

One of the key things we must figure out as foreclosure defense lawyers is whether or not your loan was “sold-off on the secondary market” and/or “securitized” and sold to investors on wall street (ex. hedge funds, pension funds, foreign investors, insurance companies, etc.).

Common Scenario: Your sub-prime ARM was originated by Countrywide.  Countrywide then sells the loan to Wells Fargo and Wells Fargo works either holds the note, and/or sells it off to an investment banker to securitize the loan.  Countrywide, as loan originator, knowing it was going to sell off your loan, may not have cared much about any predatory lending issues such as:

(1) Ability to afford the payment after the loan adjusts (ex. option ARM loans / pick-a-pay); See our website discussing Option ARMS / Pick-a-Pay Loans atwww.OptionArmLawyer.com

(2) Inflated appraisals that helped get the loan funded;

(3) Lack of full, fair, and conspicuous disclosures as required under RESPA, Truth in Lending law (TILA), required ARM disclosures (Ex. CHARMS booklet), and Credit score / FICO disclosures;

(4) Failure to provide two completed copies of a notice of right to cancel to each borrower with the dates for recsission accurate and filled in (note failure to provide proper copies of this critical disclosure document can create an EXTENDED THREE YEAR RIGHT TO RESCIND YOUR LOAN (you can learn more about loan rescission at www.RescindMyLoan.net);

(5) Stated income that may be false, trumped up, and/or not properly verified when the circumstances suggest it would be prudent to verify;

(6) Excessive (and perhaps hidden) fees, including yield spread premiums (YSP);

(7) Failure to provide contracts in the foreign language of the borrower (California Civil Code Section 1632)

(8)   Reverse Redlining / Discriminatory Lending

(9)  Steering borrowers into sub-prime loans (ex. 2/28 or 3/27 ARM loans).

(10)  Violations of HOEPA

And the list goes on – check your facts with your lawyer.

Countrywide, and other “originating lenders” may not have cared much about the consequences of the loan they underwrote (i.e. whether or not the toxic and predatory loan would be affordable after the interest rate adjusted, and whether or not the loan would land you foreclosure in next few years) mainly because the originating lenders, in many cases, were committed to selling the loan literally before you signed the loan documents.  They knew they were going to be paid by a third party to buy the loan, and either hold it for an investment, or securitize it sell it off on wall street.

Again, these originating “lenders” in many cases were not even “lending” their own money, and may have funded the loan out of a credit line provided by a third party, such as an investment bank.  Whatever the case, loans were originated by the droves, and sold off and securitized loans, while the originating “lender” was simply “cashed-out” by being paid the balance of the loan plus a fee.

This creates the potential for an originating lender to care more about volume,  than quality of loans.   IN many cases, investment bankers set the standards for the types of loans they would purchase, and the originating lender literally mass-produced loans that would wind up securitized in loan pools and sold to Wall Street investors.

Once your loan is sold off, the third party buying the loan will claim they took the note in good faith with no notice of claims and defenses, and therefore, under the eyes of the law, they should be deemed a HOLDER IN DUE COURSE (which in most cases, immunizes the purchasing lender from facing a whole host of claims and defenses a borrower may want to raise, including predatory lending claims – the claims and defenses a holder in due course must answer to are discussed below).

The end result then, is that the originating, as we have seen, can merely file for bankruptcy if the ‘heat gets too hot in the kitchen’ (i.e. if they are the subject of potentially expensive class action lawsuits challenging their predatory loans).

What this creates is a situation where the originating lender manufactures and creates the “garbage in” loans (loans that are destined for a loan pool) and the purchasing lender who buys the loan from the originating lender winds up securitizing these loans into loan pools, having them rated, and eventually pitching this “garbage out” to Wall Street Investors who are lead to believe these loan pools represent sound investments in Americas strength in the housing market.

Meanwhile, the borrower, the victim of predatory lending, has literally nowhere to turn to seek redress for loan non-compliance and predatory lending (at least that is the lenders and loan servicer’s position).  The broker and/or originating lender may be bankrupt, and the Trustee of the Loan Trust, Loan Servicer, and Wall Street Investors all claim they have no liability because they had nothing to do with the original predatory lending issues.  This is the situation many people face when trying to get a loan modification.   Although forensic audits are being done, many homeowners will run up against the “holder in due course” issue.

The loan servicer is, in many cases, servicing the loan on behalf of the Wall Street Investor (note that the loan is likely in a Special Purpose Vehicle (SPV) with a bunch of other notes, and the Trustee of a Trust, in most cases, is speaking on behalf of the Investors.  The Investors do not want any part of coming forward and claiming ownership of the notes, and they do not want to get involved in the foreclosure process.  They want their income stream, and NOT to fight predatory lending lawsuits that they know (at least they NOW know) are predatory in many cases.

As many of you realize, the loan servicer is often the entity you must contact to seek a loan modification.  The loan servicer too, claims no liability or responsibility for any predatory lending that may have occurred during the origination of the loan.  They will claim “we are just servicing the loan on behalf of the investor.”

Again, in securitized loans, the investor is the Wall Street Investor who is seeking a portion of the income stream from the loan pool of which your loan is a part of.  Of course they didn’t tell you about this loan pool when your loan was originated, or that your note would comprise part of the loan pool.   All you knew is that the loan “might” be sold off to a third party.

So the question becomes, when seeking a loan modification, and following a loan audit, which parties, if any, can be held liable for predatory lending detected at the loan origination stage?

Again, the lender who purchased your loan will usually assert that they have no liability, as will the investment banker (who in many cases set the guidelines for the loans to be purchased and often gave credit lines to originating sub-prime lenders), nor will the Wall Street Investor or Loan Servicer.  Simply put, everyone will point fingers at the originating lender and will claim you have no lawsuit to leverage against them as they are “holders in due course” and not liable for any other parties mortgage lending loan violations.

What then do we try to accomplish as Foreclosure Attorneys trying to halt foreclosure of your property?

(1)      We review your loan file and look for predatory lending violations against the broker and/or originating lender. The broker (assuming you used one in the transaction) owed you a fiduciary duty that requires, among other things, that they fairly disclose material loan terms to you and to look out for your best interest (instead of theirs) and basically put you into the best loan for you given your financial condition.  The lender, who “backs” the broker, at least in our opinion, has a duty to properly underwrite your loan to ensure that you will be able to pay it back.  To us, a lender arguably “aids and abets” the broker by providing products designed to fail (ex. the option arm loan), and by allowing other predatory lending practices listed above to be perpetrated against a borrower.  Note however, that Courts have generally held that a lender, as opposed to broker, owes you NO FIDUCIARY DUTY in a loan transaction.

(2)      We ascertain to whom the loan may have been  sold-off to and ascertain whether or not the loan was securitized, as many loans were over the last several years.  If the loan was sold off (as many were), we realize we will be dealing with a “holder in due course” argument that the lender will maintain, but normally won’t discuss during the loan modification stage.  At this point, we must determine what claims, if any, can be made against the loan assignee.

The best claim is where the originating lender never sold off the loan, and rather, services its own loan in its portfolio (called a “portfolio loan”).  In these cases, the originating lender is responsible for its own garbage and cannot point fingers at other entities, such as a loan broker.  You should note, that this is the precise reason why loans get sold off in the first place (why not transfer the loan, and the liability to someone else and get “cashed out” for your efforts).

Another type of claim that we think may have some viability is the situation where, for example, Countrywide originates the loan (ex. option arm loan), then sells off the loan on the secondary market, yet RETAINS the right to Service the Loan. In these cases, it is our opinion that Countrywide continues to “enjoy the fruits” of what may be a predatory loan (ex. the option ARM loan – aka “pick-a-pay”).  In these circumstances, should Countrywide be deemed a holder in due course (HDC) and be permitted to avoid liability by claiming it is no longer the owner of the loan and that they are just a loan servicer for the new investor of the loan?  We do not see that as a fair outcome.

Another good scenario for applying the findings in a forensic loan audit, is the situation where you can make some type of connection between the secondary market and the predatory lender and/or where you have Truth in Lending (TILA) or HOEPA material violations that allow you to make some type of Claim against the loan assignee, whether a major lending institution or trustee claiming ownership of a loan under a trust.  Potential causes of action such as civil conspiracy, joint venture liability, aiding and abetting tort violations, and TILA and HOEPA are discussed below.

NOTE: One way to find out whether or not your loan was sold off and securitized on the secondary market is to use some free online search tools.  Here are some tools for you to look up your property to see if Freddie or Fannie (Government Sponsored Enterprises – Quasi Private Companies) own your loan:

Does Freddie Mac own your loan?

https://ww3.freddiemac.com/corporate/

Does Fannie Mae own your loan?

http://loanlookup.fanniemae.com/loanlookup/

Freddie and Fannie typically securitized conventional loans, and they claim to be the holder / owner of the certain loans they securitize.  You can also try to call your lender and just ask them: “do you own the loan or are you just servicing it on behalf of an investor” (sometimes they will tell you, and sometimes, strangely enough, they will keep the owner of your loan a SECRET if you can believe that).

You may also want to send in a Qualified Written Request under RESPA and/or a request under 15 U.S.C. 1641(f) to demand that the loan servicer produce the name, address, and telephone number of the holder of the loan or master loan servicer.  They are required to tell you this under Federal Law (that being said, do not be surprised if they blow you off – this is the response we get in many cases, again, if you can believe it).  Why is that?  Because they do not want you to know who owns your loan, in some cases, because they cannot “produce the note” and prove they have the right to collect loan payments and/or foreclosure on your property.   In some cases they would prefer to simply keep you ignorant.

You can also send out “debt validation letters” following the lender / loan servicer / collection companies attempts to collect a debt (i.e. calling you to discuss your past-due mortgage payments).

(3)  We send out legal demand letters highlighting the best case possible for liability against the lender and/or loan servicer and/or trustee of a trust acting on behalf of Wall Street Investors.  This may be to assert a TILA rescission claim and discussing a potential tender strategy, to outlining a HOEPA violation triggering rescission, or arguing for “aiding and abetting” liability, etc.  Again, keep in mind, if there is not some type of connection to the originating lender (ex. the original lender sold off the loan and is now profiting from it by acting as loan servicer) it may be tough to raise a strong legal claim against the loan assignee or trustee of a trust, aside from TILA extended rescission rights or other grounds for rescission or the filing of an injunction.

NOTE:  Some possible grounds for filing for an injunction (which may get the attention of a loan servicer acting on behalf of the investors) that can result from a loan audit are:

(1)       TILA right of rescission (for “material” TILA violations)

(2)       HOEPA (hi cost loan) violations

(3)       Failure to follow Arizona or California foreclosure laws (ex. 2923.5 declarations in CA)

(4)       Wrongful Foreclosure (ex. failure to clarify amounts owed pursuant to a Qualified Written Request which disputes such; or where the breach was already cured through a loan modification agreement (see our website at www.TrialPlanFraud.com for more information on Trial Plan scams and bad faith dealing we are seeing in conjunction with loan modifications)

(5)       Unconscionable Loans that should not be enforced (ex. predatory option arm pick-a-pay monthly adjustable loans)

(6)       Fraud in the origination of the loan which can be tied to the lender (especially a portfolio loan)

(7)       Violations of California Civil Code Section 1632 – Foreign language contracts)

(8)       Other equitable grounds for enjoining your foreclosure sale (contact a foreclosure defense attorney to discuss).

These are just a few sample grounds that can be reviewed, and raised where applicable to seek an injunction.  In other cases, the aggrieved borrower may be have nothing more than a claim against the originating broker/lender who may now be defunct following a BK during the mortgage meltdown.

Note: Some borrower’s want to assert fraud against “the whole system” (broker, originating lender, investment banker that securitizes loan, trustee of the trust, loan servicer, etc.).  This approach should be thought through to make sure you actually have good-faith claims to assert against each party.  A frivolous “sue everybody” approach is not without consequence.

(4) In addition to trying to “audit” (look-for) for predatory lending and foreclosure violations, we also try to “create” legal violations (that’s right, if the loan servicer cannot comply with simple legal requirements they too can become potential defendants).  To do this we send out qualified written requests; demands to validate debts; and demands to identify the holder of the loan.

While we would concede that in many cases the loan servicers had nothing to do with the origination of the loan and the predatory lending practices that may have occurred, however, there are legal rights that California and Arizona homeowners facing foreclosure have, that the loan servicers (who can also be predatory themselves) must comply with upon making proper requests.  Two of the main things they are required to do are:

(a) They must respond to Qualified Written Requests.  They are fairly good at this in our opinion, but their responses are often late, or often lacking in detail.  They must acknowledge the QWR within 20 days, and address any valid issues within 60 days.  They must also cease reporting negative credit during this period.  Failure to comply creates legal violations against the loan servicer, and,

(b) They must identify the holder of the loan or master loan servicer (name, address, and phone number) as set forth above.  Note that they rarely comply with this request.  Given that many loans were securitized and managed by a “trustee of the trust” they will rarely provide you any meaningful information in this regard.  Again, they seem to prefer to keep this a secret.

(c) There are some other items that arguably must do including following foreclosure laws, rules, and regulations when they are working with other parties seeking to foreclose on behalf of the “investor” of the loan.  For example, they may be required to give (or may voluntarily give) declarations in the Notice of Default (ex. the California Civil Code Section 2923.5 declaration that certifies that the “beneficiary” of the loan, or their “authorized” agent – for example, the loan servicer claiming to be the authorized agent of the beneficiary –  has contacted the borrower to assess their financial situation, and discussed loan modification options).  In securitized loans, this may raise issues involving who the true beneficiary is.  If you do not know who the true and real beneficiary is (ex. the true lender who is entitled to loan payments) then how can you ascertain who the “authorized agent of the beneficiary” is?  And if you do not know the answer to that questions, how can you confirm there was any compliance with 2923.5?  If there is no compliance with 2923.5 (or it least if the loan servicer, trustee, and lender cannot prove who the true owner of the loan is) then why should the foreclosure be allowed to proceed where compliance with California Foreclosure laws cannot be proved where challenged?  We discuss more about this issue at our www.ProduceTheNoteAttorney.com website.

The bottom line is, that despite the fact that your loan was sold off, and potentially securitized, and despite the fact that the lenders, loan, servicers, and/or trustees will claim they are “holders in due course” we nevertheless attempt to identify, assert, and stand up for our clients legal rights.  This is not to say there are absolute rights to stop foreclosure in every case.  Some loans may be simply too old, or may be non-predatory in nature, that finding and asserting legal leverage may be tough.  Not all loans are predatory.  But the point is to approach every foreclosure defense case as setting up a case for potential litigation.

Too many times people come to us after hiring loan modification companies, or even other attorneys who did nothing more than submit tax returns and pay stubs (i.e. they did nothing or very little to investigate whether a legal case can be made to stop foreclosure, if necessary, and to present their findings to a loan servicer).  While the servicer may not care much about potential litigation (again, they see themselves as innocent parties to the transaction and to securitization in general) nevertheless we believe it makes sense to approach these cases as if preparing for a lawsuit, for no other reason than that it may actually be required.

We have seen people squander their TILA rescission rights because they thought they had hired a loan modification company or loan modification law firm to assist them.  However, not protecting your TILA rescission rights (of course you have to find these rights first) especially where you had a legal right to rescind against the loan assignee, and where you had an ability to “tender” as required under TILA, is truly a shame to see, and in my opinion creates malpractice liability exposure for the attorney who did nothing but send in a hardship letter and patted himself on the back for helping a homeowner in distress.  Both the real estate broker posing as a loan modification company, and the “foreclosure defense law firm” both assume legal liability for not investigating and protecting a homeowners TILA, and/or other rescission rights.  If for no other reason, that is justification for having your loan file audited, especially where you have equity, or near-equity in the property or some other means to tender following rescission.  For more information about tender and rescission see our website at www.RescindMyLoan.net

At any rate, this list goes on.  The point is, as Foreclosure Defense Attorneys, we are looking to see if there is any way to leverage a loan modification (or at times a short sale) against the subsequent purchasers of the loan, and/or the loan servicers and final investors of the loan (which may be largely insulated from lawsuits under the holder in due course doctrine discussed below).

HOLDER IN DUE COURSE OVERVIEW

Generally speaking, a holder in due course (in the mortgage loan context) is a subsequent purchaser of a loan (ex. Wells Fargo who buys a loan from Countrywide or Fannie / Freddie who buys a loan from a direct lender) and who buys in good faith, without knowledge of any claims, defenses, or defects in the underlying instrument.  This is merely a general statement of the law.

BENEFITS OF BEING A HOLDER IN DUE COURSE: In general terms, a holder in due course will only be liable for the “REAL” defenses of a potential plaintiff (ex. infancy, duress, lack of capacity, illegality of transaction, fraud in the inducement where no opportunity to discover essential contract terms was permitted).   A holder in due course is generally NOT liable for any “PERSONAL” defenses (such as undue influence, less than total competence, fraud and misrepresentation that does not prevent discovery of material contract terms, etc.).

Obviously, this creates a powerful incentive to obtain holder in due course status under the holder in due course doctrine (HDC) as there are less legal claims that can be made against you.

GENERAL REQUIREMENTS TO OBTAIN HOLDER IN DUE COURSE STATUS FOR MORTGAGE LOANS:

Generally speaking, under U.C.C. 3-302 a holder in due course is a:

(1) “Holder” of an “instrument;”

(2) Who has no apparent evidence of forgery or alteration of the instrument;

(3) Who otherwise has no notice of any other irregularity that may call into question the authenticity of the instrument;

(4) Which Holder took the instrument for value (paid consideration);

(5) And in good faith (honesty in fact and in observation of commercially reasonable standards of good faith and fair dealing);

(6)  Who took without notice that the instrument may be overdue or that it has been dishonored, or that there is an uncured default with respect to payment of another instrument in the same series;

(7)  And which holder took the instrument without notice of any claims under UCC 3-305(a) (“real defense”) or 3-306

(8)  And which holder took the instrument without notice that the instrument contains unauthorized signatures or has been altered.

Note: the “notice” requirement seems to be more of an “objective standard” in that the Courts may look to whether or not the holder of the instrument “should have realized” any of the above items which would preclude HDC status.

Also note: Article 3 of the UCC underwent a re-writing in 1990.  It should come as little surprise that the drafting process was largely dominated by the banks, clearinghouses, and federal reserve board.

So, this section indicates that if a subsequent purchaser of a loan pays value for the loan, and takes it in good faith with no notice of claims or defects listed above, generally speaking then they may be considered a holder in due course subject to the limited claims and defenses of the potential plaintiff (i.e. an aggrieved homeowner) as stated above.

NOTE:  The key then is to either defeat the subsequent parties claim of HDC status, and if that cannot be done, find some other type of claim that may make them liable even though they fancy themselves as holders in due course.

If the facts of a case allows you to claim that either: (1) there is no holder, (2) there is no instrument, (3) there was no good faith, (4) there was no value paid for the loan, and/or (5) there were other noticeable claims and/or defects that should have been detected, etc., then you may be able to argue the subsequent purchaser of the loan deserves no HDC status.  These are some things to look into.

NOTE: We will be updating this section with caselaw in this area as time permits.  I did not have time to add to this section.

WHAT LEGAL CLAIMS, IF ANY, CAN BE MADE AGAINST A “HOLDER IN DUE COURSE?”

Now, even where the loan is owned by a subsequent lender, and/or Wall Street investors – who invest in mortgage backed securities (and where these loans are being serviced by a designated loan servicer, who may or may not be a major lender themselves) and the holder in due course issue arises, there still MAY be some claims that you MAY be able to assert against these loan assignees.

Here are a few arguments that can be looked into when trying to see if there is any way to threaten a lawsuit against the loan assignee  / innocent investor / trustee under a trust / loan servicer, etc where a reasonable and meaningful loan modification is not provided to the borrower.

Please keep in mind, these can be TOUGH theories to prevail on, but homeowners should at least consider some of these theories if the lender is literally forcing foreclosure on the homeowner, and where a predatory loan is present - (typically, the option ARM loan which most people agree is predatory, including the lenders themselves who are entering into various settlement agreements with state Attorney Generals, all but conceding the predatory nature of these types of loans and the 2/28 and 3/27 Sub-prime ARMS which may also be predatory, but  possibly in more limited circumstances).

Here are the theories we will be looking at in very general terms: (1) Civil Conspiracy, (2) Joint Venture Liability, (3) Aiding and abetting tort violations, (4) TILA and HOEPA rescission rights.  These claims, where applicable, can be raised against loan assignees, and should be presented to the loan servicer when attempting to leverage a loan modification.

(1) Civil Conspiracy

The following highlight some general principles in the State of California that highlight the elements required to show a civil conspiracy.

In the context of securitized loans, the question would be whether or not a borrower of an alleged predatory loan (ex. an option arm loan that was not fully explained, disclosed, or that has harsh, oppressive, and confusing and conflicting terms) can sue more than just the original broker and lender, but rather, can he sue the broker, lender, loan servicer, trustee of the trust, etc., by arguing they are involved in a system or process designed to defraud California borrowers or in disregard of whether or not the borrower would wind up in foreclosure given the underwriting and other predatory practices involved in the loan origination process.

A general review of the California case law highlights what might be legally required to assert a civil conspiracy claim against the players in the “structured predatory financing” system created by the major financial institutions (my comments are set forth in italics), the requirements are taken from actual cases involving civil conspiracy claims in California.

(1) Civil Conspiracy is not cause of action, but legal doctrine that imposes liability on persons who, although not actually committing tort themselves, share with immediate tort-feasors common plan or design in its perpetration.  (One could argue that the common plan or design is to originate predatory loans that have high costs and fees, and which are likely to result in foreclosure, and to securitize these loans in a manner in which everyone would profit).

(2) Elements of action for civil conspiracy are formation and operation of conspiracy and damage resulting to plaintiff from act or acts done in furtherance of common design; the major significance of civil conspiracy lies in fact that it renders each participant in wrongful act responsible as joint tort (whether or not he was a direct actor and regardless of degree of activity).  Formation of a conspiracy normally requires some type of agreement as set forth below.  The damage would be the resulting foreclosure that is a foreseeable consequence of some types of option arm loans.

(3) Actual knowledge of planned tort, without more, is insufficient to serve as basis for conspiracy claim as the knowledge must be combined with intent to aid in tort’s commission.Again, this seems to require some type of intent to aid the other parties.  This may be a bit difficult to prove.  For example, does a loan servicer have the intent to aid the original lender in originating an option arm loan?

(4) To prove claim for civil conspiracy, plaintiff must show: (1) formation and operation of conspiracy; (2) wrongful conduct in furtherance of conspiracy; and (3) damages arising from wrongful conduct. This is a general recitation of the rule.

(5) A civil conspiracy to commit tortious acts can only be formed by parties who are already under a statutory or common law duty to plaintiff, the breach of which will support a cause of action against them individually, rather than as conspirators.  Stated another way, where plaintiff alleges existence of civil conspiracy he must allege allege the preexisting legal duty and its breach.

(7) Because civil conspiracy is so easy to allege, plaintiffs have a weighty burden to prove it.  To prove the claim, Plaintiff’s must show that each member of conspiracy acted in concert and came to a mutual understanding to accomplish a common and unlawful plan, and that one or more of them committed an overt act to further it. Again, the cases indicate that Plaintiff must PROVE the mutual understanding……this may not be so easy to do, and must prove that each acted in concert to put Plaintiff into a predatory loan that was designed to result in foreclosure.

(8) There is no separate tort of civil conspiracy, but rather, conspirators must agree to do some act which is classified as “civil wrong. In the context of setting up a system to securitize loans, the “wrongful act” may be argued as setting up the chain of financing whereby the original broker and lender gets cashed out for their participation in essentially creating the security, while the other parties (the investment banker, loan aggregator and trustee) get immediately cashed out by the wall street investors who invest in the loan pools, and the servicer collects its fees for any and all loans that it gets to service. Note: If proper underwriting guidelines were followed, it would seem there would be a WHOLE LOT LESS LOANS TO SERVICE (meaning, less profits to the servicers).  Again, proving the common plan and scheme may be the hurdle.

(9) Mere knowledge, acquiescence, or approval of an act, without cooperation or agreement to cooperate is insufficient to establish liability based on conspiracy.

NOTE: This is not an exhaustive analysis of the cases, and may be missing some recent cases involving securitized financing.  These are just some general ideas to think about when determining whether there are proper grounds to assert against the parties to a securitized loan.

(2) Joint Venture liability

A joint venture is basically an agreement between two or more persons (which includes corporations) who agree to work together toward a common plan in the pursuit of profits.  There must be an agreement to work together.  The joint venture agreement may be oral or informal.  Whether a joint venture agreement is created is a question of fact depending upon the intention of the parties.

The essential element of a joint venture is an undertaking by two or more persons to carry out a single business enterprise jointly for profit. The rights and liabilities of joint adventurers, as between themselves, are governed by the same rules which apply to partnerships. See Pellegrini v. Weiss, 165 Cal.App.4th 515, (2008).

In Smith v. Wells Fargo, 401 F.Supp.2d 549, (2005), a Plaintiff was challenging the actions of a loan originator.  Countrywide and Wells Fargo claimed they were “holders in due course” and thus, could not be liable for the actions of the  loan originator or its agents.  The Court disagreed, and denied Defendant’s motion for summary judgment (Defendant’s claimed Plaintiffs could not prove that there was a joint venture agreement).    In denying Defendants motion for Summary judgment on the joint venture issues, the Court held:

“As between the parties, a contract, written or verbal, is essential to create the relation of joint adventurers……..to constitute a joint adventure the parties must combine their property, money, efforts, skill, or knowledge, in some common undertaking of a special or particular nature, but the contributions of the respective parties need not be equal or of the same character. There must, however, be some contribution by each party of something promotive of the enterprise…….an agreement, express or implied, for the sharing of profits is generally considered essential to the creation of a joint adventure, and it has been held that, at common law, in order to constitute a joint adventure, there must be an agreement to share in both the profits and the losses. It has also been held, however, that the sharing of losses is not essential, or at least that there need not be a specific agreement to share the losses, and that, if the nature of the undertaking is such that no losses, other than those of time and labor in carrying out the enterprise, are likely to occur, an agreement to divide the profits may suffice to make it a joint adventure, even in the absence of a provision to share the losses.”

In applying this, the Court held:

“In the case sub judice, after reviewing the PSA, it appears that there was an agreement to pool and service (PSA) mortgages between Delta Funding Corporation, as seller; Countrywide, as servicer; and Norwest Bank Minnesota, National Association or Wells Fargo, as trustee. It also appears that Delta Funding provided the mortgage loans, Countrywide provided servicing the loans and Wells Fargo provided the financing or money. Finally, it appears from sections 2.04(b), 2.05, 3.08, 7.01 and 9.05 of the PSA that there was an agreement on the fees each party could collect as well as their liability for losses.

Moreover, in section 4 of the expert report by Kevin P. Byers, Mr. Byers notes that Delta Funding’s revenues result primarily from “the sale of mortgage loans (through securitization and on a whole loan basis and sale of its servicing right on newly originated or purchased pools of home-equity loans.”)…..(quoting Delta Funding’s 10-K annual report to the Security and Exchange Commission).) Therefore, taking the evidence in the light most favorable to the plaintiff, it would not be unreasonable for a jury to conclude that Delta Funding, Countrywide and Wells Fargo entered into a joint venture. As there is a genuine issue of material fact, the Court denies summary judgment.”

Potential Argument for Joint Venture Liability in the Securitization of Loans:

The pooling and servicing agreement(used when loans are securitized) is an express written agreement that basically sets the stage for the participants in loan securitization to realize a profit:

(1) The Servicer is appointed to collect loan payments and receive a profit from the collection of such from the borrower.  The Servicer therefore commits its time, talent, resources, and services in an attempt to profit from the securitized loan;

(2) The Trustee agrees to perform certain duties to manage and administer payment streams for the benefit of the investors of the securitized loan;

(3) MERS may be appointed to receive a fee to track ownership and servicing rights (which may be transferred at the Trustees discretion);

(4) The seller of the security and investment banker / underwriter cannot profit “but for” the pooling and servicing agreement.  In essence, it could be argued they are third party beneficiaries under this agreement;

(5) As part of the agreement, some originating lenders may agree to “buy-back” non-performing loans, keeping them on the hook under the terms of the contract (sharing in the profits and losses of the joint venture).

Obviously this is just one example, you would want to review the pooling and servicing agreement and SEC filings to see what the exact set-up is in your situation.

(3) Aiding and Abetting Liability – Creating the Marketplace for Predatory Option Arm loans.

Under the common law of many states, it is against the law to aid and abet another in the commission of a tort (ex. fraud / misrepresentation are two types of torts).  For example, where you have a broker that broker’s a loan through a “direct lender” and the direct lender is “pricing out” the loan and reviewing the guidelines of the “purchasing lender” (i.e. the loan assignee who will claim they are a holder in due course) the question arises who is liable, for example, for making false statements of fact to induce a borrower to enter into an option arm loan?

It would seem appropriate that the broker (who took the loan application and made false statements of fact – in breach of their fiduciary duty to the borrower – should be held liable.  But what about the “direct lender” who is funding the loan only to turn around and sell it to the “purchasing lender”?  Did the direct lender aid and abet the broker by not verifying certain disclosures are made?  Do they aid and abet by underwriting the predatory loan product (usually these option arm loans are underwritten to wind up in foreclosure – the borrower can afford the “teaser rate” but not the payment that would result after the loan hits is principal balance cap and recasts into a fully amortized loan at the note rate?

Did the direct lender “aid and abet” the broker?  It would seem an argument could be made since the direct lender knows, or should know the details of the loan, and was in a good position to ensure proper underwriting and to ensure proper disclosures (ex. a CHARMS adjustable rate disclosure and other truth in lending disclosures are clear, conspicuous and accurate).

Taking it to the next level, even assuming you can create a case for liability against a direct lender (using our scenario above) can you then extend liability to the entity that purchases the loan from the direct lender (i.e. a private investor, private bank, investment banker, fannie mae or freddie mac, etc.?).  Can you impart this level of knowledge and wrongdoing against these parties that are even more remote in the chain of things?

These are the tough questions.  Again, it seems even these “purchasing lenders” are complicit, and have knowledge about the types of loans they are purchasing (in this case the option arm loan) and know, or should know that these loans are predatory, toxic, and likely to wind up in foreclosure.

In a recent predatory lending lawsuit, in the case of Plascencia v. Lending 1st Mortgage, the Defendant, EMC, claimed it could not be held liable under California’s Unfair Competition Law, (2008 WL 4544357 (583 F.Supp.2d 1090, N.D. Cal. Sept. 30, 2008)), since it was not the party that originated the loan in question (EMC purchased, and securitized loans from Lending 1st Mortgage that often had truth in lending violations).

The Plaintiff sought to hold EMC liable since they were “engaged in the business of promoting, marketing, distributing, selling, servicing, owning, or are and were the assignees of the Option ARM loans that are the subject of this Complaint.”  They argued EMC was engaged in a “fraudulent scheme” with Lending 1st.

The court denied Defendant EMC’s motion to dismiss on this ground holding that essentially it was possible that Defendant could be held liable for aiding and abetting.  Specifically, the Court stated:

“By showing that EMC purchased Lending 1st’s Option ARM loans with knowledge of Lending 1st’s TILA violations, Plaintiffs may be able to establish that EMC gave Lending 1st a financial incentive to continue to commit those violations, and therefore may be subjected to liability for aiding and abetting violations of the UCL. Moreover,      EMC’s profiting from loans featuring oppressive terms that were not fully disclosed in compliance      with TILA could itself be an unfair business practice under the UCL. EMC may    therefore be liable for UCL violations in its own right. Accordingly, the UCL claim will not be dismissed.”

NOTE: This case may be limited to cases where the borrower was unaware they had a negative amortization option arm loan and/or where Plaintiff can prove that the Purchasing lender has knowledge of TILA defects in the loans they are purchasing.  This is a good case that talks about fraud and the Unfair Competition Law in regard to Mortgage Loans and creates some “hope” for lender liability.

NOTE 2: The Plascencia Case also discussed / cited another case, the In re First Alliance Mortgage Co. case which citation can be found at 471 F.3d, 977, 994-995 (9th Cir.2006).  In this case, a California Federal Court imposed aiding and abetting liability on Lehman Brothers for predatory loans made by First Alliance which targeted senior citizens with false and misleading loans representations.  Lehman purchased the predatory loans and securitized them – while First Alliance remained as the loan servicer earning additional profits off what were found to be predatory and fraudulent loans. Again, the case indicated that Lehman had knowledge of Alliance’s lending practices and even provided a warehouse line of credit so that First Alliance could continue to originate these types of loans.  Again, which indicates some level of knowledge of the predatory loan origination practices may have to be shown as a pre-requisite to filing suit.

This case is important because companies like Countrywide often originated predatory option arm loans (or “backed” brokers who pitched these loans) and often sold them off on the secondary market, and retained the servicing rights.  We have been saying that in these cases, Countywide (now BofA) should not be able to claim they are an innocent party, or that they have some type of “holder in due course status” when they are continuing to profit from their dirty laundry.

A separate question to consider is whether a Plaintiff can attack what may appear to be a truly innocent “loan servicer” (without proof of predatory knowledge), with aiding and abetting liability where a loan servicer refuses to modify a loan that was a product of fraud at the loan origination stage.  It seems that some level of knowledge of the predatory loan origination may be required (although some would argue all loan servicers are implicit as to the true nature and quality of loans securitized and pooled into trusts).  Where a loan servicer is appointed / hired to collect loan payments on behalf of a trustee of a trust, it is not clear whether or not a predatory knowledge can be established, but should be investigated in each case.

NOTE 3: Another case that may help in analyzing and aiding and abetting liability claim against a loan purchaser / loan assignee who may have securitized your loan or a loan servicer with knowledge of predatory loan origination is Schulz v. Neovi Data Corp., 152 Cal.App.4th 86 (2007).  This is the case where an online payment processing company allowed an illegal online lottery site accept payments for its business.  The Plaintiff made a claim under the California Business and Professions Code Section 17200 (California’s unfair competition law) and argued that the payment processing company had  “aided and abetted” the illegal lottery site.  The Court held:

Liability may be imposed on one who aids and abets the commission of an intentional tort if the person knows the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act……..this is consistent with Restatement Second of Torts Section 876, which recognizes a cause of action for aiding and abetting in a civil action when the wrongdoer knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself.

The rationale is that advice or encouragement to act operates as a moral support to a tortfeasor and if the act encouraged is known to be tortious it has the same effect upon the liability of the adviser as participation or physical assistance.

Under this theory, at least for California loans, it appears a borrower may be able to sue a purchasing lender of a predatory loan who securitizes and profits off the loan, and potentially a loan servicer who profits off a predatory loan (even though the Schulz case does not involve the holder in due course argument) where it appears the lender or servicer has knowledge that the originator of the loan was committing a tort by breaching a legal duty (ex. making fraudulent representations to induce a borrower into entering into an option arm loan) AND, where the lender or loan servicer gives substantial aid, assistance, and/or encouragement.

Under this theory, it would seem you would need to prove two tough things, (1) knowledge of the tortious breach of duty by the loan originator, and (2) active participation in encouraging the predatory practice.  This may be an easier case to make against a purchasing lender who is looking to securitize loans, than it is a loan servicer seeking to profit off its servicing of virtually any loan (the servicer does not care what the loan is, they will service any loan).

At any rate, the facts of the case should be looked at to determine which, if any, parties may be proper parties to file a lawsuit against.  Remember, filing false and frivolous claims can result in sanctions and other unfavorable responses by the Court.  There needs to be good faith grounds to file a lawsuit against any party.

(4) HOEPA (high cost loans) and TILA Extended Right of Rescission Claims apply to assignees of loans even those claiming Holder in Due Course Status.

Note: MATERIAL TRUTH IN LENDING VIOLATIONS THAT CREATE AN EXTENDED THREE YEAR RIGHT TO RESCIND APPLY TO ALL LOAN ASSIGNEES EVEN TO ANY PARTY DEEMED A HOLDER IN DUE COURSE.  THAT IS WHY A TILA LOAN AUDIT IS SO POWERFUL BECAUSE IF YOU HAVE AN ABILITY TO “TENDER” THIS CLAIM WILL SURVIVE EVEN TO A HOLDER IN DUE COURSE.

More about these types of rescission claims can be found at our website www.RescindMyLoan.net

CONCLUSION

Although the financial giants have created an elaborate system of securitizing loans – which arguably encouraged, facilitated, and assisted the originating lender to loosen up the underwriting standards and create as many loans as possible that were designed to be bought up, securitized,  and ultimately sold-off to wall street investors – they also helped draft the UCC Holder in Due Course rules which they seek to hide behind whenever they are sued.

Although it can be difficult to make credible claims against a loan assignee, trustee of a trust, loan servicer or other entity that was intended to profit off securitized loans, there are some claims and defenses that should be explored.

Foreclosure defense is a difficult line of business because often times loan payments are not being made by the borrower, and at times the loan servicer may even offer some type of a loan modification that can be used to show good faith in a Court of Law in the event a lawsuit is filed.  In addition, judges are literally inundated with foreclosure defense lawsuits, and where a judge is paying his or her mortgage, they may not look favorably on others who don’t pay their mortgage, and it is possible that only the worst of the worst predatory lending practices will ever see the light of a jury.  Of course, judges are bound to follow the law, and it is our job as foreclosure defense lawyers to try to make a persuasive case for predatory lending, injunctions, damages, assignee liability, and rescission rights.

Sure the deck is stacked against you, but why take foreclosure lying down?  If you are denied a loan modification, and believe you may be the victim of predatory lending, have your case reviewed to see if you have any proper grounds to challenge the assertion of HDC status, or to lay claim against the parties to loan securitization for aiding and abetting legal violations and engaging in civil conspiracy’s and joint ventures that seek profit at the expense of legal compliance and at the expense of the homeowner.

Where you have valid good-faith legal claims that you can assert material TILA violations raising extended rescission rights against ANY loan assignee (ex. civil conspiracy, joint venture liability, aiding and abetting, TILA rescission rights, HOEPA recsission rights, etc.), this might be the best time to raise the “produce the note” defense and make them prove that: (a) they have the legal right to foreclosure on you (i.e. that their is some entity/beneficiary holding the note that has a legal right to foreclosure on your property) and that (b) this beneficiary,     or their authorized agent, has complied with all required aspects of foreclosure law in California)?

If the “wrong lender” or “pretender lender” (as this term is used by Neil Garfield) forecloses on you, how can you be certain the “real lender” (i.e. the entity/beneficiary that may be holding your original promissory note and all properly recorded assignments) won’t come knocking on your door  – wherever that door may be – and calling its loan due.

Should a homeowner / mortgagor be required to risk “financial double jeopardy” where it is not clear who owns your loan given the nature of securitized loans and given the tendency of loan servicers to keep this fact a secret?

Again, no one is saying this is an easy battle.   These are just some things to think about and issues to explore when your house is on the line.  This article is not to imply success on any of the theories outlined above.  For specific legal questions, please contact a foreclosure defense attorney in your area.  We are only licensed to practice law in the states of California and Arizona, and only seek to solicit clients in these states.  This is an advertisement and communication pursuant to state  bar rules.

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To see some of other other websites dealing with the financial crisis please review the following websites:

(1) www.OptionArmLawyer.com (potential attacks against the predatory option arm loan – aka “Pick-a-Prey”)

(2) www.TrialPlanFraud.com (tackling issues involved with what we call trial-plan shennanigans)

(3) www.BKAttorneyS.net (BK Attorney Steve – Chapter 7 Bankruptcy information for Arizona and California Homeowners)

(4) www.RescindMyLoan.net (website that discusses Truth in Lending Rescission information)

(5) www.LoanModRadio.com (site which features foreclosure defense issues in streaming audio)

(6) www.ProduceTheNoteAttorney.com (general information on the “Produce the Note” foreclosure defense strategy that is running rampant on the Internet)

www.LoanModSolutions.net (Submit your Wachovia / World Savings Loans)

www.LoanModificationRipoff.net (Submit your Loan Mod Scam – we may be able to take your case on contingency).

Our profiles will also be listed on www.ContingencyCase.com an online legal directory for lawyers who will consider taking cases on a contingency fee basis in a variety of legal areas.  I will be listed for our World Savings and Wachovia Option Arm loans.

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Offices:

Arizona Office (Esplanade): 2415 E. Camelback Road, Suite 700, Phoenix, AZ, 85020.

California Office (Fashion Island): 620 Newport Center Drive, Suite 1100, Newport Beach, CA 92660

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Our Real Estate Law Services:

1. Loan Modifications / Loan Workouts (World Savings and Wachovia Loans)

2. Commercial Lease Modifications

3. DRE audits, hearings and investigations

4. Real Estate Broker admissions cases

5. Foreclosure Defense

6. Mortgage Law & Predatory Law

7. Phoenix Real Estate Zoning Attorney – Greater Phoenix (Scottsdale, Goodyear, Buckeye, Casa Grande etc.)

8. Phoenix Eminent Domain Attorney / Inverse Condemnation / Prop 207 (Greater Phoenix)

9. Real Estate Arbitration, Litigation and Mediation

10. Foreclosure Consultant Contracts / Loan Modification Contracts

11. Real Estate LLC’s & Incorporations

12. Real Estate Partnership Law

13. Quiet Title Actions

14. Forensic Loan Audits – Greater Phoenix (Truth in Lending (TILA), RESPA, HOEPA, Fraud, etc.)

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KEYWORDS: ARIZONA FORECLOSURE DEFENSE / CALIFORNIA FORECLOSURE DEFENSE / SUING ON A OPTION ARM LOAN / PREDATORY LENDING LAWSUIT / INJUNCTION AGAINST FORECLOSURE / STOPPING A FORECLOSURE SALE / FORENSIC LOAN AUDIT / PHOENIX FORECLOSURE LAWYER / PHOENIX FORECLOSURE ATTORNEY / ORANGE COUNTY FORECLOSURE ATTORNEY / ORANGE COUNTY FORECLOSURE LAWYER.

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Because most of our foreclosure defense work is done by phone fax and email between we are able to serve our California clients in the following California Counties and Cities

Alameda
Albany
Berkeley
Dublin
Emeryville
Fremont
Hayward
Livermore
Newark
Oakland
Piedmont
Pleasanton
San Leandro
Union City
Amador
Amador City
Ione
Jackson
Plymouth
Sutter Creek
Chico
Gridley
Oroville
Paradise
Angels Camp
Colusa
Colusa
Williams
Antioch
Brentwood
Clayton
Concord
Danville
El Cerrito
Hercules
Lafayette
Martinez
Moraga
Orinda
Pinole
Pittsburg
Pleasant Hill
Richmond
San Pablo
San Ramon
Walnut Creek
Crescent City
Placerville
South Lake Tahoe
Clovis
Coalinga
Firebaugh
Fowler
Fresno
Huron
Kerman
Kingsburg
Mendota
Orange Cove
Parlier
Reedley
San Joaquin
Sanger
Selma
Orland
Willows
Humboldt
Arcata
Blue Lake
Eureka
Ferndale
Fortuna
Rio Dell
Trinidad
Imperial
Brawley
Calexico
Calipatria
El Centro
Holtville
Westmorland
Inyo
Bishop
Kern
Arvin
Bakersfield
California City
Delano
Kern County
Maricopa
McFarland
Ridgecrest
Shafter
Taft
Tehachapi
Wasco
Avenal
Corcoran
Hanford
Lemoore
Lake
Clearlake
Lakeport
Susanville
Los Angeles
Agoura Hills
Alhambra
Arcadia
Artesia
Azusa
Baldwin Park
Bell
Bell Gardens
Bellflower
Beverly Hills
Bradbury
Burbank
CalabasCarson
Cerritos
Claremont
Commerce
Compton
Covina
Cudahy
Culver City
Diamond Bar
Downey
Duarte
El Monte
El Segundo
Gardena
Glendale
Glendora
Hawaiian Gardens
Hawthorne
Hermosa Beach
Hidden Hills
Huntington Park
Industry
Inglewood
Irwindale
La Canada-Flintridge
La Habra Heights
La Mirada
La Puente
La Verne
Lakewood
Lancaster
Lawndale
Lomita
Long Beach
Lynwood
Malibu
Manhattan Beach
Maywood
Monrovia
Montebello
Monterey Park
Norwalk
Palmdale
Palos Verdes Estates
Paramount
Pasadena
Pico Rivera
Pomona
Rancho Palos Verdes
Redondo Beach
Rolling Hills
Rolling Hills Estates
Rosemead
San Dimas
San Fernando
San Gabriel
San Marino
Santa Clarita
Santa Fe Springs
Santa Monica
Sierra Madre
Signal Hill
South El Monte
South Gate
South Pasadena
Temple City
Torrance
Vernon
Walnut
West Covina
West Hollywood
Westlake Village
Whittier
Chowchilla
Madera
Marin
Belvedere
Corte Madera
Fairfax
Larkspur
Mill Valley
Novato
Ross
San Anselmo
San Rafael
Sausalito
Tiburon
Mariposa
Mendocino
Fort Bragg
Point Arena
Ukiah
Willits
Merced
Atwater
Dos Palos
Gustine
Livingston
Los Banos
Merced
Modoc
Alturas
Mono
Mammoth Lakes
Monterey
Carmel
Del Rey Oaks
Gonzales
Greenfield
King City
Marina
Monterey
Pacific Grove
Salinas
Sand City
Seaside
Soledad
Napa
American Canyon
Calistoga
Napa
St. Helena
Yountville
Nevada
Grass Valley
Nevada City
Truckee
Orange
Anaheim
Brea
Buena Park
Costa Mesa
Cypress
Dana Point
Fountain Valley
Fullerton
Garden Grove
Huntington Beach
Irvine
La Habra
La Palma
Laguna Beach
Laguna Hills
Laguna Niguel
Lake Forest
Los Alamitos
Mission Viejo
Newport Beach
Orange
Placentia
San Clemente
San Juan Capistrano
Santa Ana
Seal Beach
Stanton
Tustin
Villa Park
Westminster
Yorba Linda
Placer
Auburn
Colfax
Lincoln
Loomis
Rocklin
Roseville
Plumas
Portola
Riverside
Banning
Beaumont
Blythe
Calimesa
Canyon Lake
Cathedral City
Coachella
Corona
Desert Hot Springs
Hemet
Indian Wells
Indio
La Quinta
Lake Elsinore
Moreno Valley
Murrieta
Norco
Palm Desert
Palm Springs
Perris
Rancho Mirage
Riversi
San Jacinto
Temecula
Folsom
Galt
Isleton
Sacramento
San Benito
Hollister
San Juan Bautista
San Bernardino
Adelanto
Apple Valley
Barstow
Big Bear Lake
Chino
Chino Hills
Colton
Fontana
Grand Terrace
Hesperia
Highland
Loma Linda
Montclair
Needles
Ontario
Rancho Cucamonga
Redlands
Rialto
Twentynine Palms
Upland
Victorville
Yucaipa
Yucca Valley
San Diego
Carlsbad
Chula Vista
Coronado
Del Mar
El Cajon
Encinitas
Escondido
Imperial Beach
La Mesa
Lemon Grove
National City
Oceanside
Poway
San Marcos
Santee
Solana Beach
Vista
San Francisco
San Joaquin
Escalon
Lathrop
Lodi
Manteca
Ripon
Stockton
Tracy
Arroyo Grande
Atascadero
Grover Beach
Morro Bay
Paso Robles
Pismo Beach
San Luis Obispo
San Mateo
Atherton
Belmont
Brisbane
Burlingame
Colma
Daly City
East Palo Alto
Foster City
Half Moon Bay
Hillsborough
Menlo Park
Millbrae
Pacifica
Portola Valley
Redwood City
San Bruno
San Carlos
San Mateo
South San Francisco
Woodside
Santa Barbara
Buellton
Carpinteria
Guadalupe
Lompoc
Santa Barbara
Santa Maria
Solvang
Santa Clara
Campbell
Cupertino
Gilroy
Los Altos
Los Altos Hills
Los Gatos
Milpitas
Monte Sereno
Morgan Hill
Mountain View
Palo Alto
San Jose
Santa Clara
Saratoga
Sunnyvale
Santa Cruz
Capitola
Santa Cruz
Scotts Valley
Watsonville
Shasta
Anderson
Redding
Shasta Lak
Sierra
Loyalton
Siskiyou
Dorris
Dunsmuir
Etna
Fort Jones
Montague
Mount Shasta
Tulelake
Weed
Yreka
Solano
Benicia
Dixon
Fairfield
Rio Vista
Suisun City
Vacaville
Vallejo
Sonoma
Cloverdale
Cotati
Healdsburg
Petaluma
Rohnert Park
Santa Rosa
Sebastopol
Sonoma
Windsor
Stanislaus
Ceres
Hughson
Modesto
Newman
Oakdale
Patterson
Riverbank
Turlock
Waterford
Sutter
Live Oak
Yuba City
Tehama
Corning
Red Bluff
Tehama
Trinity
Tulare
Dinuba
Exeter
Farmersville
Lindsay
Porterville
Tulare
Tulare
Visalia
Woodlake
Tuolumne
Sonora
Ventura
Camarillo
Fillmore
MoorpaOjai
Oxnard
Port Hueneme
Santa Paula
Simi Valley
Thousand Oaks
Ventura
Yolo
Davis
West Sacramento
Winters
Woodland
Yuba
Marysville
Wheatland

Note: Our Foreclosure Defense work is primarily driven by phone, fax and email with you and the lenders.

As a consequence we are able to serve Arizona loan modification clients in the following Arizona cities:

Mesa
Glendale
Chandler
Scottsdale
Gilbert
Tempe
Peoria
Yuma
Surprise
Avondale
Flagstaff
Lake Havasu City
Goodyear
Sierra Vista
Prescott
Oro Valley
Bullhead City
Apache Junction
Prescott Valley
Casa Grande
El Mirage
Marana
Kingman
Buckeye
Fountain Hills
San Luis
Nogales
Florence
Douglas
Queen Creek
Maricopa
Payson
Sahuarita
Paradise Valley
Chino Valley
Eloy
Sedona
Cottonwood
Camp Verde
Show Low
Winslow
Somerton
Safford
Coolidge
Globe
Page
Bisbee
Tolleson
Youngtown
Wickenburg
South Tucson
Guadalupe
Holbrook
Snowflake
Cave Creek
Benson
Thatcher
Litchfield Park
Eagar
Pinetop-Lakeside
Taylor
Colorado City
Dewey-Humboldt
Willcox
St. Johns
Carefree
Clarkdale
Quartzsite
Parker
Superior
Williams
Clifton
Kear
Pima
Springerville
Star Valley
Gila Bend
Wellton
Miami
Huachuca City
Mammoth
Tombstone
Fredonia
Patagoni
Hayden
Dunca
Winkelman
Jerome

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NOTICE:

The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice.  If you have specific legal questions about your foreclosure case, or loan modification case you should seek out the advice of a real estate attorney.  In addition, the information posted above may not be 100% complete, accurate or up-to-date.  The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.  He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules.  Please do not send us private or confidential information through any of our above-listed websites.   Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).

Steve Vondran, Esq. is an attorney practicing Real Estate, Bankruptcy and Foreclosure Defense in Phoenix, Arizona and California.  He can be reached at (877) 276-5084 or emailed at Steve@VondranLaw.com

POTENTIAL STRATEGIES TO SEEK AN INJUNCTION AGAINST FORECLOSURE IN PHOENIX, SCOTTSDALE, AND SURROUNDING AREAS IN ARIZONA.

(1) Tort of Wrongful Foreclosure: For example, one way to try to seek an injunction to stop a foreclosure sale would be to argue that you received a loan modification or loan workout, and performed the agreement and thus, cured the breach.  See the case of Herring v. Countrywide Home Loans, 2007 WL 2051394 (D. Ariz. 2007).   This is a foreclosure defense grounds that definitely needs to be explored with the explosion of loan modifications in Phoenix, Arizona and elsewhere.   Under the Obama Making Home Affordable program (HAMP), and under some FHA HAMP modification programs, the lenders and loan servicers are giving out “three month trial plan” offers.

These agreements typically state that the borrower does, or may, qualify for a loan modification.  The borrower, induced into believing they qualify for a loan modification, typically makes the three payments, and may also submit financial documentation to be reviewed.   In at least some of these trial plan modification agreements we have reviewed,  the lender promises that if the three trial plan payments are made on time, and if the borrower’s financial condition (and some other “material representations” made by the borrower) do not change by the time the third payment is made, then the lender, in some of these agreements, agrees to provide the final and permanent loan modification which is supposed to be in line with the the trial plan payment was.   What we are seeing is lenders and loan servicers not honoring what appears to be a valid agreement, and instead either denying the modification, and in some cases, selling the house from underneath the borrower.  If you feel duped by a trial plan offer that was not honored, check out our website at www.TrialPlanFraud.com

The court may reach the conclusion that the lender / beneficiary is not exercising the power of sale in good faith in violation of its statutory duty.

(2) Failure to Comply with Arizona Foreclosure Statutes:

There can be no valid foreclosure in the State of Arizona without complying with the rules and regulations set forth in the Arizona foreclosure statutes.

For example, if there is a failure to follow the Notice of Sale Procedures this could provide proper grounds to enjoin the foreclosure sale in Phoenix, Scottsdale, and other surrounding Arizona cities.  Here are the statutory requirements under Arizona Revised Statutes Section 33-808.

33-808. Notice of trustee’s sale

A. The trustee shall give written notice of the time and place of sale legally describing the trust property to be sold by each of the following methods:

1. Recording a notice in the office of the recorder of each county where the trust property is situated.

2. Giving notice as provided in section 33-809 to the extent applicable.

3. Posting a copy of the notice of sale, at least twenty days before the date of sale in some conspicuous place on the trust property to be sold, if posting can be accomplished without a breach of the peace. If access to the trust property is denied because a common entrance to the property is restricted by a limited access gate or similar impediment, the property shall be posted by posting notice at that gate or impediment. Notice shall also be posted at one of the places provided for posting public notices at any building that serves as a location of the superior court in the county where the trust property is to be sold. Posting is deemed completed on the date the trust property is posted. The posting of notice at the superior court location is deemed a ministerial act.

4. Publication of the notice of sale in a newspaper of general circulation in each county in which the trust property to be sold is situated. The notice of sale shall be published at least once a week for four consecutive weeks. The last date of publication shall not be less than ten days prior to the date of sale. Publication is deemed completed on the date of the first of the four publications of the notice of sale pursuant to this paragraph.

B. The sale shall be held at the time and place designated in the notice of sale on a day other than a Saturday or legal holiday between 9:00 a.m. and 5:00 p.m. mountain standard time at a specified place on the trust property, at a specified place at any building that serves as a location of the superior court or at a specified place at a place of business of the trustee, in any county in which part of the trust property to be sold is situated.

C. The notice of sale shall contain:

1. The date, time and place of the sale. The date, time and place shall be set pursuant to section 33-807, subsection D. The date shall be no sooner than the ninety-first day after the date that the notice of sale was recorded.

2. The street address, if any, or identifiable location as well as the legal description of the trust property.

3. The county assessor’s tax parcel number for the trust property or the tax parcel number of a larger parcel of which the trust property is a part.

4. The original principal balance as shown on the deed of trust. If the amount is not shown on the deed of trust, it shall be listed as “unspecified”.

5. The names and addresses, as of the date the notice of sale is recorded, of the beneficiary and the trustee, the name and address of the original trustor as stated in the deed of trust, the signature of the trustee and the basis for the trustee’s qualification pursuant to section 33-803, subsection A, including an express statement of the paragraph under subsection A on which the qualification is based. The address of the beneficiary shall not be in care of the trustee.

6. The telephone number of the trustee.

7. The name of the state or federal licensing or regulatory body or controlling agency of the trustee as prescribed by section 33-803, subsection A.

D. The notice of sale shall be sufficient if made in substantially the following form:

Notice of Trustee’s Sale

The following legally described trust property will be sold, pursuant to the power of sale under that certain trust deed recorded in docket or book _______________________ at page __________ records of ______________ county, Arizona, at public auction to the highest bidder at (specific place of sale as permitted by law) _______________, in _______________ county, in or near _______________, Arizona, on ________, ____, at ___________ o’clock ___m. of said day:

(street address, if any, or identifiable

location of trust property)

(legal description of trust property)

Tax parcel number _______________

Original principal balance $________________________

Name and address of beneficiary ______________________________

______________________________

______________________________

Name and address of original trustor _________________________

_________________________

_________________________

Name, address and telephone number of trustee ________________

__________________________________

__________________________________

Signature of trustee _____________________________

Manner of trustee qualification ___________________________

Name of trustee’s regulator _______________________________

Dated this _____________ day of ______________, ____.

(Acknowledgement)

E. Any error or omission in the information required by subsection C or D of this section, other than an error in the legal description of the trust property or an error in the date, time or place of sale, shall not invalidate a trustee’s sale. Any error in the legal description of the trust property shall not invalidate a trustee’s sale if considered as a whole the information provided is sufficient to identify the trust property being sold. If there is an error or omission in the legal description so that the trust property cannot be identified, or if there is an error in the date, time or place of sale, the trustee shall record a cancellation of notice of sale. The trustee or any person furnishing information to the trustee shall not be subject to liability for any error or omission in the information required by subsection C of this section except for the wilful and intentional failure to provide such information. This subsection does not apply to claims made by an insured under any policy of title insurance.

F. The notice of trustee sale may not be rerecorded for any reason. This subsection does not prohibit the recording of a new or subsequent notice of sale regarding the same property.

Also note, where the deed of trust or mortgage calls for a certain plan or procedure for foreclosure, that plan must be followed.  Therefore, you need to check the procedures set forth in the deed of trust or mortgage instrument and see if they complied with the procedures that may be called for therein.

There are other sections relating to foreclosure that must also be reviewed.  For example, substitution of Trustees is covered in this section:

33-804. Appointment of successor trustee by beneficiary

A. If a person appointed as trustee fails to qualify, is unwilling or unable to serve or resigns as trustee or if a trustee was not designated in the deed of trust, the beneficiary may appoint a successor trustee, and such appointment shall constitute a substitution of trustee.

B. The beneficiary may at any time remove a trustee for any reason or cause and appoint a successor trustee, and such appointment shall constitute a substitution of trustee.

C. A notice of substitution of trustee shall be recorded in the office of the county recorder of each county in which the trust property or some part of the trust property is situated at the time of the substitution. The beneficiary shall give written notice through registered or certified mail, with postage prepaid, to the trustor.

D. A notice of substitution of trustee shall contain a description of the basis for the successor trustee’s qualification pursuant to section 33-803, subsection A. A notice of substitution of trustee shall be sufficient if acknowledged by all beneficiaries under the trust deed or their agents as authorized in writing and if prepared in substantially the following form:
Notice of Substitution of Trustee

The undersigned beneficiary hereby appoints ___________ _______________________________________________________________ _______________________________________________________________ _______________________________________________________________ successor trustee under the trust deed executed by ____________________ as trustor, in which _____________ is named beneficiary and _____________ as trustee, and recorded ________________, _____, in _________________ county in book or docket _________________, page ______________, and legally describing the trust property as:

(legal description of trust property)

The successor trustee appointed herein qualifies as a trustee of the trust deed in the trustee’s capacity as a ______________________ as required by Arizona Revised Statutes section 33-803, subsection A.

Dated this _______________ day of ________________, ____.

____________________

Signature

(Acknowledgement)

E. A notice of substitution of trustee is effective immediately on execution as prescribed by subsection D of this section.
F. A person appointed as a trustee under a deed of trust may resign as trustee at any time. Any such resignation shall be without liability, provided the person has not agreed in writing or by the person’s conduct to act in such capacity. If the trustee has agreed in writing or by the person’s conduct to act in such capacity, the person may only resign in accordance with the terms of the trust deed and this chapter. If a trustee fails to qualify or is unwilling or unable to serve or resigns, it does not affect the validity of the deed of trust, except that no action required to be performed by the trustee under this chapter or under the deed of trust may be taken until a successor trustee is appointed by the beneficiary or the beneficiary’s agent as authorized in writing pursuant to this section. Resignation by a trustee is made by recordation of a notice of resignation in the office of the county recorder of each county in which the trust property or some part of the trust property is situated at the time of the resignation. Written notice shall be given through registered or certified mail, with postage prepaid, to the trustor and the beneficiary. A notice of resignation of trustee is sufficient if acknowledged by the trustee and prepared in substantially the following form:

Notice of Resignation of Trustee

The undersigned trustee hereby resigns as trustee under the deed of trust executed by ________________, as trustor, in which ________________ is named beneficiary, and recorded ________________, ____, in ________________ county, in book or docket __________, page __________, and legally describing the trust property as:

(legal description of trust property)

Dated this _______________ day of _______________, ____.

_________________

Signature

(Acknowledgement)

Other Sections to look at (that may allow an Arizona homeowner to enjoin and/or set aside a foreclosure sale in Arizona) might relate to irregularities in the foreclosure sale/bidding process.

33-810. Sale by public auction; postponement of sale

A. On the date and at the time and place designated in the notice of sale, the trustee shall offer to sell the trust property at public auction for cash to the highest bidder. The trustee may schedule more than one sale for the same date, time and place. The attorney or agent for the trustee may conduct the sale and act at such sale as the auctioneer for the trustee. Any person, including the trustee or beneficiary, may bid at the sale. Only the beneficiary may make a credit bid in lieu of cash at sale. The trustee shall require every bidder except the beneficiary to provide a ten thousand dollar deposit in any form that is satisfactory to the trustee as a condition of entering a bid. The trustee or auctioneer may control the means and manner of the auction. Every bid shall be deemed an irrevocable offer until the sale is completed, except that a subsequent bid by the same bidder for a higher amount shall cancel that bidder’s lower bid. To determine the highest price bid, the trustor or beneficiary present at the sale may recommend the manner in which the known lots, parcels or divisions of the trust property described in the notice of sale be sold. The trustee shall conditionally sell the trust property under each recommendation, and, in addition, shall conditionally sell the trust property as a whole. The trustee shall determine which conditional sale or sales result in the highest total price bid for all of the trust property. The trustee shall return deposits to all but the bidder or bidders whose bid or bids result in the highest bid price. The sale shall be completed on payment by the purchaser of the price bid in a form satisfactory to the trustee. The subsequent execution, delivery and recordation of the trustee’s deed as prescribed by section 33-811 are ministerial acts. If the trustee’s deed is recorded in the county in which the trust property is located within fifteen business days after the date of the sale, the trustee’s sale is deemed perfected at the appointed date and time of the trustee’s sale. If the highest price bid at a completed sale is less than the amount of that bidder’s deposit, the amount of the deposit in excess of the bid price shall be refunded by the trustee at the time of delivery of the trustee’s deed.

B. The person conducting the sale may postpone or continue the sale from time to time or change the place of the sale to any other location authorized pursuant to this chapter by giving notice of the new date, time and place by public declaration at the time and place last appointed for the sale. Any new sale date shall be a fixed date within ninety calendar days of the date of the declaration. After a sale has been postponed or continued, the trustee, on request, shall make available the date and time of the next scheduled sale and, if the location of the sale has been changed, the new location of the sale until the sale has been conducted or canceled and providing this information shall be without obligation or liability for the accuracy or completeness of the information. No other notice of the postponed, continued or relocated sale is required except as provided in subsection C of this section.

C. A sale shall not be complete if the sale as held is contrary to or in violation of any federal statute in effect because of an unknown or undisclosed bankruptcy. A sale so held shall be deemed to be continued to a date, time and place announced by the trustee at the sale and shall comply with subsection B of this section or, if not announced, shall be continued to the same place and at the same time twenty-eight days later, unless the twenty-eighth day falls on a Saturday or legal holiday, in which event it shall be continued to the first business day thereafter. In the event a sale is continued because of an unknown or undisclosed bankruptcy, the trustee shall notify by registered or certified mail, with postage prepaid, all bidders who provide their names, addresses and telephone numbers in writing to the party conducting the sale of the continuation of the sale.

D. A sale is postponed by operation of law to the next business day at the same scheduled time and place if an act of force majeure prevents access to the sale location for the conduct of the sale.

NOTE: See also In re Kahn, 203 Ariz. 205 (2002) where a Court held that gross inadequacy of sale price may be grounds to set aside a foreclosure sale.  In regard to the question of what constitutes “gross inadequacy” the court held:

Determining gross inadequacy

“Gross inadequacy” cannot be precisely defined in terms of a specific percentage of fair market value. Generally, however, a court is warranted in invalidating a sale where the price is less than 20 percent of fair market value and, absent other foreclosure defects, is usually not warranted in invalidating a sale that yields in excess of that amount.  The Court also cited to the RESTATEMENT § 8.3 (emphasis added) and stated: In Fenton, our court of appeals noted, “even assuming that the price was inadequate, that fact standing alone would not justify setting aside the trustee’s sale…………..there must be in addition proof of some element of fraud, unfairness, or oppression as accounts for and brings about the inadequacy of price.”

THESE ARE JUST A FEW OF THE FORECLOSURE LAW SECTIONS THAT NEED TO BE LOOKED AT IN DETERMINING WHETHER THE FORECLOSURE PROCESS IN ARIZONA IS VALID.  CONTACT AN ARIZONA FORECLOSURE DEFENSE LAWYER TO REVIEW YOUR CASE.

(3) Oppressive and unconscionable conduct of beneficiary/mortgagee or their agents (ex. loan servicers) in regard to loan acceleration and/or foreclosure tactics:

For example, pursuing the power of sale on trivial breaches, accepting late payments yet still foreclosing, etc.  Review the case of Vork v. Dunn, 161 Ariz. 24, 775 (1989) for more information on possible challenges in this regard.

(4) TILA (truth in lending) Violations that trigger an extended three year right to rescind.  Some general principles illuminating portions of TILA can be found in the case of Smith v. Wells Fargo Credit Corp., 713 F. Supp. 354, D.Ariz. 1989.  In this case the court outlined the following TILA principles:

“In the case of closed-end credit, the material disclosures required of the lender are as follows: annual percentage rate, the finance charge, the amount financed, total of payments, and the payment schedule. TILA Sec. 103(u), 15 U.S.C. Sec. 1602(u). “Payment schedule” is defined as the number, amounts, and timing of payments scheduled to repay the obligation. Reg. Z, 12 C.F.R. Sec. 226.18(g); TILA Sec. 128(a)(6). The payment amount (which was stated incorrectly) on the original disclosure form is considered a “material” disclosure.

The consumer may exercise the right to rescind until midnight of the third business day following the latest of the following events:

1) consummation of the transaction;

2) delivery of notice of the right to rescind, or

3) delivery of all material disclosures.

See TILA Sec. 125(a), 15 U.S.C. Sec. 1635(a)

The consumer has a continuing right to rescind until the creditor provides the rescission notice and also supplies a copy of the TIL disclosure statement with all material information correctly disclosed. National Consumer Law Center, Truth in Lending (1986), para. 6.3.2 at 137.

Technical or minor violations of TILA, or Regulation Z, as well as major violations impose liability on the creditor and entitle the borrower to rescind. Semar v. Platte Valley Fed. S & L Assoc., 791 F.2d 699, 704 (9th Cir.1986) (notice to rescind was in error because it did not list the actual day *356 of expiration, but said “three business days after July 16”).

Congress made it clear that rescission suits are allowed after disclosure suits, and explicitly provided a statutory damages penalty for rescission violations. Aquino v. Public Finance Consumer Discount Co. 606 F.Supp 504, 511 (E.D.Pa.1985), based on S.Rep. No. 96-368, reprinted in 1980 U.S.Code Cong. & Admin.News at 236, 267.

If a mathematical error occurs with regard to a material disclosure, the three day rescission period will not commence, and thus the right to rescind will not expire three days later. Indeed, it will not expire until three business days after the correct disclosure is finally provided or until the earlier of three years after consummation. Rohrer, The Law of Truth in Lending (1984) at 8-33.

The rescission form that Wells Fargo had the Smiths sign at closing was not sufficient because the correct date of rescission must be stated. Reg. Z Sec. 226.23(b); TILA Sec. 125(a, f). To comply with this regulation, Wells Fargo was required to provide new rescission forms with the correct expiration date when the corrected material disclosure was made. Rohrer at 8-43.

There is a continuing right to rescind the transaction when the creditor makes an error regarding a material disclosure on the disclosure statement. In re Underwood, 66 B.R. 656 (Bkrtcy.W.D.Va.1986). In the Underwood case, the plaintiffs never received rescission forms-not when they initially closed, nor when the new finance charge data arrived. The court said “they would have had a continuing right to rescind the transaction even if they had initially been given copies of the Notice of the Right to Cancel because the defendant failed to make what now appears an admittedly erroneous and material disclosure on the disclosure statement.” Id. at 662. The court further stated that the Underwoods were entitled to rescind the transaction at any time within three years of the consummation of the transaction unless provided a statement containing the correct finance charge along with rescission forms. Id.

It is apparent that the courts have interpreted the right to rescind as being a continuing one in situations such as this. Here, Wells Fargo stated an incorrect payment amount (a material disclosure), and when the corrected amount was disclosed, they should have provided new rescission forms in compliance with the Truth in Lending Act. Because the Smiths were not given the new forms, they have a continuing right to rescind, within the statute of limitations of three years. 15 U.S.C. Sec. 1635(f).

Several defenses against TILA actions are available to creditors. There are three types of defenses: the TILA itself, common law, and standard procedural and jurisdictional defenses. NCLC at 146. The interpretation of the TILA defenses lies exclusively with the courts; Regulation Z and the Commentary of the Federal Reserve Board do not interpret them. Id.

[2]  As to the right to rescind, Wells Fargo raises the defense of good faith conformity with the FRB rules, regulations, or interpretations. TILA Sec. 130(f), 15 U.S.C. Sec. 1640(f). Under the New Act, the creditor’s good-faith conformity is limited to the Regulations and the Commentary which supersede all previous formal and informal FRB staff interpretations, and the defense provides no protection for reliance on court decisions. Hamilton v. Southern Discount Co., 656 F.2d 150 (5th Cir.1981).

A creditor may not merely allege good faith conformity; it must point to the specific regulation, ruling, or interpretation with which it claims conformity. Valencia v. Anderson Bros. Ford, 617 F.2d 1278, 1287 (7th Cir.1980), rev’d on other grounds, 452 U.S. 205, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981). Wells Fargo relies on the lack of a requirement for a new rescission form in the regulations as its defense, but fails to cite any specific authority to support its position. In this situation, courts have concluded that if a creditor misreads or misconstrues the provision, it is not entitled to the defense, even if the mistake is a reasonable one. Id. at 1278 *357 (creditor’s mistaken interpretation of Regulation Z, even if honest and reasonable, is not a defense under Sec. 1640(f); see also Kessler v. Associates Fin. Services Co., 573 F.2d 577, 579 (9th Cir.1977).

However, where the provision is ambiguous and the creditor reasonably construes the provision as applying to its act or omission, it may be entitled to the conformity defense. Charles v. Krauss Co., 572 F.2d 544 (5th Cir.1978) (creditor’s good faith belief that its contract form complied with the literal language of Sec. 226.801 forms exception provided a good faith defense). A case by case interpretation is required. NCLC at 147.

TILA is not ambiguous with regard to the right to rescind in this instance, and courts have made clear the continuing right to rescind in situations such as these. A new rescission form should have been provided, and Wells Fargo’s mistaken interpretation of Regulation Z is not a defense.

This may give you a general idea of TILA law and how the Courts may look at these issues.  We have posted other Truth in Lending blogs that you can search for online.  There is a radio show we did which also discussed Truth in Lending, in general terms on one show.  You can visit that site at www.LoanModRadio.com

TILA extended rescission rights may prove a nice foreclosure defense strategy where the borrower can put together a “tender” plan.

(5) Certain second mortgages containing a “balloon” payment may not be foreclosed upon (generally junior mortgages less than $10,000).  Here is an Arizona statutory section that deals with that topic.

6-114. Balloon payments prohibited; applicability; exemptions

A. A person engaged in the business of lending money or negotiating a loan between parties shall not make or arrange a loan in violation of this section.

B. On a loan in an amount of ten thousand dollars or less for a term up to three years which is secured by a lien on real property comprising an owner-occupied dwelling, an installment payment, whether providing for payment of principal, interest or principal and interest, shall not be greater than twice the amount of the smallest installment.

C. This section applies only to mortgages, trust deeds or other evidences of indebtedness secured by a lien other than a primary or first lien on real property.

D. This section does not apply to transactions involving the purchase or sale or the proposed purchase or sale of real property or to a financial institution licensed or chartered by this state or the federal government.

E. Pursuant to the provisions of 12 United States Code section 3804, this section shall not be superseded by the provisions of 12 United States Code section 3803.

(6) Failure of Consideration (question of fact for the jury)

See the case of Sepo v. First National Bank of Arizona, 21 Ariz. App. 606, (1974) where the Court held:

“Failure of consideration consists in failure to perform, or carry out, or make good a promise given as consideration for an instrument……whether or not a failure of consideration has occurred may be a question of fact for a jury to determine…..where several promises are made by one party the question whether breach of one such promise results in a complete or a partial failure of consideration, or no failure at all, is determined under the doctrine of substantial performance…..the parties raising the defense of failure of consideration with reference to a note have the burden of proving it.”

It is not entirely clear how far this holding can stretch.  For example, in the case of securitized loans, where MERS or a Trustee of a Trust claims it is the owner of the loan / loan beneficiary, but yet they gave no consideration to the transaction, can this be a grounds to raise to prevent foreclosure?  For more general information about issues raised by securitized loans, and the so-called “produce the note” foreclosure defense strategy that has been successful in some states see our website at www.ProduceTheNoteAttorney.com where we discuss some of these issues and potential legal challenges.  Note, many of these produce-the-note strategies are in the “test-phase.”

(7)  Filing Bankruptcy (may temporarily stay a foreclosure, and in some cases may prevent a foreclosure). See our website at www.BKAttorneyS.net (BK Attorney Steve)

The preceding are some of the grounds that can be reviewed by a foreclosure defense attorney in Phoenix, Scottsdale, and surrounding cities in Arizona to see of you may have a right to seek an injunction against foreclosure.  There maybe other grounds to review given the facts and circumstances of your case.  For example where qualified written requests are not responded to and legitimate questions as to whether payments were properly paid and applied may raise a defense warranting at least a temporary restraining order stopping the foreclosure sale.  Reverse Redlining – Financial Discrimination may also be another ground worth pursuing.

In addition, if you have an option arm loan it may be possible to argue that the loan is unconscionable and therefore unenforceable (see more discussion on our website www.OptionArmLawyer.com.  Again, certain facts have to be ferreted out to see if you truly have a valid good faith defense to assert that might stop your foreclosure.  The Courts will not likely treat you favorably where frivolous claims are filed (especially where loan payments are seriously delinquent), which tenuous claims are also prohibited from being filed by attorney ethics.  Again, have your case reviewed by a real estate lawyer / foreclosure defense attorney.

ABOUT US:

The Law Offices of Steve Vondran in licensed to practice law in California and Arizona.  Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.

He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084

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NOTICE:

The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice.  If you have specific legal questions about your foreclosure case, or loan modification case you should seek the advice of a real estate attorney.  In addition, the information posted above may not be 100% complete, accurate or up-to-date.  The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona.  He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084. This is an advertisement and communication pursuant to State Bar Rules.  Please do not send us private or confidential information through any of our above-listed websites.   Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this).