UNLESS YOUR BANK SIGNS YOUR LOAN MODIFICATION - YOU DON'T HAVE ONE

Check out this case:

It basically states that unless your lender actually signs your loan modification agreement then YOU DON'T HAVE A LOAN MODIFICATION.

Has anyone actually gotten a signed loan modification?

Watch OUT!


167 Cal.App.4th 544, 84 Cal.Rptr.3d 275, 08 Cal. Daily Op. Serv. 13,141, 2008 Daily Journal D.A.R. 15,648
Briefs and Other Related Documents
Court of Appeal, Fourth District, Division 3, California.
Luther E. SECREST et al., Plaintiffs and Appellants,
v.
SECURITY NATIONAL MORTGAGE LOAN TRUST 2002-2 et al., Defendants and Respondents.
No. G039065.
Oct. 9, 2008.
As Modified on Denial of Rehearing Nov. 3, 2008.
Review Denied Dec. 17, 2008.
Background: Borrowers brought action against creditors for declaratory judgment and injunction against foreclosure. The Superior Court, Orange County, No. 05CC04248, Andrew P. Banks, J., found that purported foreclosure forbearance agreement was unenforceable. Borrowers appealed.

Holdings: The Court of Appeal, Fybel, J., held that:
(1) statute of frauds objection was not waived;
(2) forbearance agreement was subject to the statute of frauds;
(3) borrowers did not sufficiently change position in reliance on forbearance agreement to estop assertion of statute of frauds; and
(4) borrowers' performance by making downpayment did not estop assertion of statute of frauds.

Affirmed.

West Headnotes

[1] KeyCite Citing References for this Headnote

185 Frauds, Statute Of
185IX Operation and Effect of Statute
185k129 Part Performance in General
185k129(5) k. Payment of Price in General. Most Cited Cases
Performance of an agreement by payment of money alone is not enough, as a matter of law, to take the agreement out of the statute of frauds. West's Ann.Cal.Civ.Code § 1624.

[2] KeyCite Citing References for this Headnote

185 Frauds, Statute Of
185X Pleading
185k151 Pleading Statute as Defense
185k152 Necessity
185k152(2) k. Waiver by Failure to Plead. Most Cited Cases
The statute of frauds is treated as a rule of evidence which, if not properly raised, may be forfeited. West's Ann.Cal.Civ.Code § 1624.

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185 Frauds, Statute Of
185X Pleading
185k151 Pleading Statute as Defense
185k153 k. Sufficiency of Denials and Allegations. Most Cited Cases
A general denial in an answer is sufficient to preserve a statute of frauds objection.

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185 Frauds, Statute Of
185X Pleading
185k150 Demurrer Raising Defense
185k150(1) k. Sufficiency of Demurrer to Raise Defense in General. Most Cited Cases
A general demurrer in an answer is sufficient to preserve a statute of frauds objection.

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118A Declaratory Judgment
118AIII Proceedings
118AIII(H) Appeal and Error
118Ak392 Appeal and Error
118Ak393 k. Scope and Extent of Review in General. Most Cited Cases

185 Frauds, Statute Of KeyCite Citing References for this Headnote
185X Pleading
185k151 Pleading Statute as Defense
185k152 Necessity
185k152(1) k. In General. Most Cited Cases
Creditors' statute of frauds objections to purported foreclosure forbearance agreement were presented to the trial court and not waived, in borrowers' action for declaratory judgment and injunction against foreclosure, even though creditors did not pose statute of frauds objections to declarations relating to the agreement, where borrowers first produced the agreement with their reply brief in support of their motion for preliminary injunction, the parties stipulated the only issue to be tried was whether the agreement was enforceable in lieu of an earlier forbearance agreement, and creditors argued in opposition to borrowers' special motion on the submitted issue that the later forbearance agreement was unenforceable under the statute of frauds.

[6] KeyCite Citing References for this Headnote

185 Frauds, Statute Of
185VIII Requisites and Sufficiency of Writing
185k114 Signature of Memorandum
185k115.3 Sufficiency of Signature by One Party Only
185k115.3(1) k. In General. Most Cited Cases
The “party to be charged,” within meaning of rule that a contract coming within the statute of frauds is invalid unless it is memorialized by a writing subscribed by the party to be charged or by the party's agent, means the party to be charged in court with the performance to the obligation, i.e., the defendant in the action brought to enforce the contract. West's Ann.Cal.Civ.Code § 1624.

[7] KeyCite Citing References for this Headnote

185 Frauds, Statute Of
185VIII Requisites and Sufficiency of Writing
185k114 Signature of Memorandum
185k115.3 Sufficiency of Signature by One Party Only
185k115.3(2) k. Agreements Relating to Land. Most Cited Cases
The “parties to be charged” with performance of purported foreclosure forbearance agreement coming within the statute of frauds were the creditor at the time the agreement was signed and the later buyers the note and deed of trust, and thus their failure to sign the agreement made the agreement unenforceable. West's Ann.Cal.Civ.Code § 1624.

[8] KeyCite Citing References for this Headnote

185 Frauds, Statute Of
185VI Real Property and Estates and Interests Therein
185k62 Assignment, Grant, or Surrender of Existing Estates, Interests, or Terms
185k63 In General
185k63(5) k. Interests Created by Mortgages, Liens, or Trusts. Most Cited Cases
A mortgage or deed of trust comes within the statute of frauds. West's Ann.Cal.Civ.Code §§ 1624(a)(3), 2922.

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266 Mortgages
266I Requisites and Validity
266I(A) Nature and Essentials of Conveyances as Security
266k1 k. Nature of Mortgage in General. Most Cited Cases

266 Mortgages KeyCite Citing References for this Headnote
266IV Rights and Liabilities of Parties
266k211 k. Dealings and Transactions Between Parties. Most Cited Cases

266 Mortgages KeyCite Citing References for this Headnote
266VII Payment or Performance of Condition, Release, and Satisfaction
266k306 k. Change in Time or Mode of Payment. Most Cited Cases
A forbearance agreement does not create, renew, or extend a deed of trust.

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185 Frauds, Statute Of
185IX Operation and Effect of Statute
185k131 Modification of Contract
185k131(1) k. In General. Most Cited Cases
Purported foreclosure forbearance agreement was subject to the statute of frauds, since the agreement attempted to modify the note and deed of trust; it substituted a new monthly payment for the monthly payment required under the note, and it altered the lender's ability to exercise a right to foreclose under the note and deed of trust due to the borrower's default. West's Ann.Cal.Civ.Code §§ 1624, 1698.

Greenwald & Asimov, Cal. Practice Guide: Real Property Transactions (The Rutter Group 2008) ¶ 4:263 (CAPROP Ch. 4-D); Annot., Modification of sealed instrument by subsequent parol agreement (1928) 55 A.L.R. 685; Cal. Jur. 3d, Frauds, Statute of, §§ 6, 81; Cal. Civil Practice (Thomson/West 2008) Business Litigation, § 27:28; 1 Miller & Starr, Cal. Real Estate (3d ed. 2001) §§ 1:60, 1:100; 2 Witkin, Cal. Evidence (4th ed. 2000) Documentary Evidence, § 107.

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185 Frauds, Statute Of
185IX Operation and Effect of Statute
185k131 Modification of Contract
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A modification of a contract, for purposes of the rule that an agreement to modify a contract that is subject to the statute of frauds is also subject to the statute of frauds, is a change in the obligations of a party by a subsequent mutual agreement of the parties. West's Ann.Cal.Civ.Code § 1698(a).

[12] KeyCite Citing References for this Headnote

266 Mortgages
266III Construction and Operation
266III(C) Property Mortgaged, and Estates of Parties Therein
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266 Mortgages KeyCite Citing References for this Headnote
266III Construction and Operation
266III(C) Property Mortgaged, and Estates of Parties Therein
266k136 Estates and Interests of Parties
266k138 k. Under Trust Deeds. Most Cited Cases
Under California law, a mortgage or deed of trust is a lien on property rather than a conveyance of legal title.

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30 Appeal and Error
30XVI Review
30XVI(K) Error Waived in Appellate Court
30k1079 k. Insufficient Discussion of Objections. Most Cited Cases
Borrowers did not waive their argument that creditors were estopped to foreclose on deed of trust by failing to cite to the record in the legal argument section of their opening brief, even though the legal argument section was primarily law with a paucity of record references, since the Court of Appeal was able to locate relevant portions of the record expeditiously and without thumbing through and rereading earlier portions of the brief. Cal.Rules of Court, Rule 8.204.

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185 Frauds, Statute Of
185IX Operation and Effect of Statute
185k129 Part Performance in General
185k129(1) k. In General. Most Cited Cases
Part performance allows enforcement of a contract lacking a requisite writing in situations in which invoking the statute of frauds would cause unconscionable injury. West's Ann.Cal.Civ.Code § 1624.

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185 Frauds, Statute Of
185IX Operation and Effect of Statute
185k129 Part Performance in General
185k129(12) k. Necessity That Part Performance Relied on Be Referable to Contract. Most Cited Cases
To constitute part performance of a purported contract estopping assertion of the statute of frauds, the relevant acts either must unequivocally refer to the contract, or clearly relate to its terms. West's Ann.Cal.Civ.Code § 1624.

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185 Frauds, Statute Of
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Before a party can be estopped to assert the statute of frauds due to the other's part performance, it must appear that a sufficient change of position has occurred so that the application of the statutory bar would result in an unjust and unconscionable loss, amounting in effect to a fraud. West's Ann.Cal.Civ.Code § 1624.

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185 Frauds, Statute Of
185IX Operation and Effect of Statute
185k129 Part Performance in General
185k129(5) k. Payment of Price in General. Most Cited Cases
The payment of money is not sufficient part performance to take an oral agreement out of the statute of frauds, for the party paying money under an invalid contract has an adequate remedy at law. West's Ann.Cal.Civ.Code § 1624.

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185 Frauds, Statute Of
185IX Operation and Effect of Statute
185k144 k. Waiver of Bar of Statute; Estoppel. Most Cited Cases
Borrowers did not sufficiently change their position in reliance on purported foreclosure forbearance agreement to estop creditors from asserting that the agreement was invalid under the statute of frauds, since they had an adequate remedy at law for the $13,422.51 downpayment they made under the agreement, absent evidence that they relied on the agreement in any way other than by making the downpayment. West's Ann.Cal.Civ.Code § 1624.

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185 Frauds, Statute Of
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185k139 Contracts Completely Performed
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Where a contract is unilateral, or, though originally bilateral, has been fully performed by one party, the remaining promise is taken out of the statute of frauds, and the party who performed may enforce it against the other. West's Ann.Cal.Civ.Code § 1624.

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185 Frauds, Statute Of
185IX Operation and Effect of Statute
185k144 k. Waiver of Bar of Statute; Estoppel. Most Cited Cases
Even if borrowers fully performed their obligations under purported foreclosure forbearance agreement by wire-transferring downpayment to creditor, such performance did not estop transferees of note and deed of trust from asserting the statute of frauds as a defense to enforcement of the agreement, since the borrowers' performance consisted only of payment of money. West's Ann.Cal.Civ.Code § 1624.

**277 Law Offices of Steven R. Young and Jim P. Mahacek for Plaintiffs and Appellants.

The Ryan Firm, Timothy M. Ryan and Barry G. Coleman for Defendants and Respondents.
*547 OPINION
FYBEL, J.
I.
INTRODUCTION
We hold an agreement by which a lender agreed to forbear from exercising the right of foreclosure under a deed of trust securing an interest in real property comes within the statute of frauds. We also conclude the borrowers in this case failed as a matter of law to establish estoppel to assert**278 the statute of frauds. As a result, we affirm a judgment declaring valid a notice of default and election to sell under a deed of trust.

Appellants Luther E. Secrest and Charmella C. Secrest (the Secrests) are the borrowers on a note secured by a deed of trust on their home. Respondents Security National Mortgage Loan Trust 2002-2, JP Morgan Chase Bank, and SN Servicing Corporation (collectively, Respondents) are the current holders of the note and deed of trust. After Respondents recorded a notice of default and election to sell under the deed of trust, the Secrests filed this lawsuit seeking a declaration the notice of default was invalid and an injunction to stop foreclosure proceedings.

In support of their motion for a preliminary injunction, the Secrests produced a purported written forbearance agreement made in January 2002 (the January 2002 Forbearance Agreement) between the Secrests and Ocwen Federal Bank, FSB (Ocwen), the holder of the note and deed of trust at the time. After the trial court issued a preliminary injunction, the parties agreed the trial would be conducted as a law and motion matter and would be limited to the issue whether the January 2002 Forbearance Agreement was enforceable “in lieu of its predecessor,” a written forbearance agreement made in April 2001. On essentially uncontroverted facts, the trial court concluded the January 2002 Forbearance Agreement was unenforceable. Based on that conclusion, a referee determined the amount of arrearages the Secrests owed on the note secured by the deed of trust, and a judgment was entered declaring valid the notice of default against the Secrests.

The Secrests challenge the judgment by asserting the January 2002 Forbearance Agreement was enforceable for a variety of reasons. We conclude the January 2002 Forbearance Agreement is unenforceable under the statute of frauds, Civil Code section 1624. The January 2002 Forbearance Agreement constitutes a modification of the note and deed of trust. Because the note and deed of trust come within the statute of frauds, the January 2002 Forbearance *548 Agreement also comes within the statute of frauds pursuant to Civil Code section 1698. Neither Ocwen, the party to be charged, nor its agent signed the January 2002 Forbearance Agreement.

[1] The Secrests argue their making the downpayment on the January 2002 Forbearance Agreement is sufficient part performance to estop Respondents from asserting the statute of frauds. But under well-established principles of California law, payment of money alone is not enough as a matter of law to take an agreement out of the statute of frauds, and the Secrests have legal means to recover the downpayment if they are entitled to its return.

II.
FACTS
In 1996, the Secrests borrowed $552,700 from GE Capital Mortgage Services, Inc., to purchase their home. The loan was evidenced by a promissory note and secured by a deed of trust on the home. In 1999, the note and deed of trust were sold to Ocwen.

In April 2001, the Secrests and Ocwen entered into a forbearance agreement (the April 2001 Forbearance Agreement) stating: “So long as the Borrower(s) comply with all of the conditions set forth in the Forbearance Agreement, Ocwen Federal will undertake no affirmative steps to advance the foreclosure action.” The April 2001 Forbearance Agreement had a reinstatement**279 amount of $76,559.03 and required a downpayment of $15,000 with monthly payments of $7,570.52 commencing June 1, 2001. The April 2001 Forbearance Agreement would terminate if the Secrests “fail[ed] to meet any of the terms of this Forbearance Agreement or the original Note and Mortgage.”

There was evidence that by January 2002, the Secrests were in default. Joseph Neamon, a loan resolution consultant representing Ocwen, sent a letter to the Secrests regarding alternatives to foreclosure. In response, Luther Secrest telephoned Neamon to discuss loan status and the Secrests' financial situation. During the telephone conversation, Neamon offered the Secrests another forbearance agreement if they made a $15,000 downpayment. Luther Secrest said he could not pay $15,000 but would agree to pay $13,422.51. Neamon accepted that proposal and stated he would have a written forbearance agreement prepared and faxed to Luther Secrest.

On January 18, 2002, Luther Secrest received by facsimile a proposed written forbearance agreement. This proposed forbearance agreement was *549 unsigned and contained provisions nearly identical to those of the April 2001 Forbearance Agreement. Luther Secrest noticed, however, the proposed forbearance agreement had a reinstatement amount of $552,700-an amount he knew could not be correct because it was the original amount of the loan. Luther Secrest also believed the monthly payment amount of $6,700 in the proposed forbearance agreement could not be correct because it appeared to be based on the inaccurate reinstatement amount.

Luther Secrest telephoned Neamon and reported those inaccuracies to him. Neamon agreed the reinstatement amount and the monthly payment amount in the proposed forbearance agreement were incorrect and agreed to correct them.

During the same telephone conversation, Luther Secrest said he and his wife were “not in arrears” on the loan, or if they were, they were “only in arrears by a few monthly payments and certainly no more than nine monthly payments.” Neamon responded by saying he was authorized by Ocwen to negotiate and enter into forbearance agreements on its behalf.

Neamon told Luther Secrest to modify the proposed forbearance agreement by crossing out the $552,700 reinstatement amount, sign the agreement as modified, fax the signed agreement back to him, and wire-transfer $13,422.51 to Ocwen. Neamon agreed that if Luther Secrest did those things, then “he would immediately stop any collection efforts, perform a complete audit of our residential loan agreement from the date of the inception of the loan to the present to determine the correct amount of arrearage, if any, and subsequently negotiate the correct amount of any reinstatement amount, if any.” Neamon also told Luther Secrest that if the audit showed the Secrests owed anything more on the loan, then he, on behalf of Ocwen, “would have a corrected forbearance agreement prepared and sent to me in which the reinstatement amount, if any, would be accurately stated based on the results of the complete audit of the residential loan from its inception.”

Luther Secrest crossed out the $552,700 reinstatement amount on the proposed forbearance agreement and signed it. After Charmella Secrest signed the agreement, he faxed it to Neamon and wire-transferred $13,422.51 to Ocwen.

Ocwen sold the Secrest note and deed of trust to Respondents. A loan audit was never conducted and a corrected forbearance agreement was never delivered to the Secrests.

*550 **280 III.
PROCEDURAL HISTORY
In September 2004, Respondents filed a notice of default and election to sell under the deed of trust securing the note. The notice of default stated the past due amount was $75,577.69.

In March 2005, the Secrests filed a lawsuit against Respondents, GE Capital Mortgage Services, Inc., Ocwen, and others, for declaratory relief and injunctive relief to enjoin the foreclosure. The first amended complaint alleged the notice of default was void because it overstated the amount of the default. The complaint did not allege the January 2002 Forbearance Agreement. In October 2005, the Secrests sought, and were granted, a preliminary injunction to halt foreclosure proceedings.

In the reply memorandum in support of the motion for a preliminary injunction, the Secrests produced the January 2002 Forbearance Agreement. Respondents contended they had not seen that agreement before and the Secrests had never informed them of it.

At a review hearing on November 17, 2005, the trial court renewed the injunction and ordered that it remain in effect until resolution of the case or further court order. The parties then entered into a stipulation identifying the sole contested issue, submitting the contested issue to the trial court for resolution in a law and motion proceeding, and, based on that resolution, having a court-appointed referee determine the correct amount due and owing at the time the notice of default was filed.

The stipulation identified the contested issue as: “Plaintiffs and Defendants agree and stipulate that the only contested legal issue in this case is whether the last forbearance agreement dated in January of 2002 is enforceable between the parties to this action in lieu of its predecessor dated in April of 2001; and if the April 2001 agreement is effective, the amount due and owing as of the date of the forbearance agreement.” The parties stipulated too, “the issue of which forbearance agreement effective date is controlling (and the amount of the note due and owing at that time if the April, 2001 agreement is effective)” would be decided by the trial court “as a law and motion matter.”

The parties agreed that once the trial court decided which forbearance agreement was controlling, a court-appointed accounting referee would determine the amount of arrearages, if any, owed by the Secrests. The parties agreed the referee would use April 1998 as the starting date for the accounting if the trial court decided the January 2002 Forbearance Agreement *551 was controlling, and would use April 25, 2001 as the starting date for the accounting if the trial court decided the January 2002 Forbearance Agreement was not controlling.

The trial court approved the stipulation, and, in June 2006, the Secrests filed a special motion on the submitted issue. In support of the motion, the Secrests submitted declarations from Luther Secrest and Neamon. Respondents did not controvert those declarations. In their opposition to the Secrests' special motion on the submitted issue, Respondents asserted the January 2002 Forbearance Agreement was unenforceable under the statute of frauds.

The trial court found, “the operative forbearance agreement is the April 2001, agreement executed by the plaintiffs, that the total sum due and owing as of April 25, 2001, before application of the $15,000.00 payment is the sum of $605,750.44 which is comprised of $531,184.36 principal plus **281 $76,559.03, less $1,992.95 in the suspense account.”

An amended judgment declared: “the forbearance agreement dated April 25, 2001, is the enforceable forbearance agreement”; the amount due and owing by the Secrests on the note was $605,750.44; the notice of default recorded on September 13, 2004 was valid and enforceable; the amount of arrearages on September 13, 2004 was $87,045.16; and Respondents were entitled to foreclose the deed of trust.

IV.
THE JANUARY 2002 FORBEARANCE AGREEMENT IS UNENFORCEABLE UNDER THE STATUTE OF FRAUDS

A. Respondents Raised the Statute of Frauds in the Trial Court.

The Secrests argue Respondents waived the statute of frauds by failing to object to the declarations of Luther Secrest and Neamon specifically on that ground. We find no waiver because Respondents presented the statute of frauds issue to the trial court.

[2] [3] [4] The statute of frauds is treated as a rule of evidence which, if not properly raised, may be forfeited. ( In re Marriage of Benson (2005) 36 Cal.4th 1096, 1104, fn. 3, 32 Cal.Rptr.3d 471, 116 P.3d 1152; Howard v. Adams (1940) 16 Cal.2d 253, 257-258, 105 P.2d 971; see 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 347, p. 394 [“The statute of frauds must ordinarily be asserted in the lower court, and cannot be raised for the first time on appeal”].) The California Supreme Court explained, “it is settled *552 that ... a defendant waives his right to rely upon any provisions of the statute of frauds [citation] by failing to (a) demur to the complaint, (b) object to the introduction of testimony to prove the oral agreement at the time of trial, or (c) make a motion to strike such testimony.” ( Pao Ch'en Lee v. Gregoriou (1958) 50 Cal.2d 502, 506, 326 P.2d 135.) A general denial in an answer is sufficient to preserve a statute of frauds objection ( Howard v. Adams, supra, 16 Cal.2d at p. 257, 105 P.2d 971), as is a general demurrer (5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 930, p. 389).

[5] Respondents could not have challenged the January 2002 Forbearance Agreement by answer or demurrer because the Secrests did not allege that agreement in their complaint. Rather, they first produced it with their reply brief in support of their motion for a preliminary injunction. As the Secrests argue, Respondents did not pose statute of frauds objections to the Luther Secrest and Neamon declarations. However, once the Secrests produced the January 2002 Forbearance Agreement, the parties stipulated the only issue to be tried was whether it was enforceable in lieu of the April 2001 Forbearance Agreement. In effect, Respondents posed statute of frauds objections by arguing in their opposition to the Secrests' special motion on the submitted issue that the January 2002 Forbearance Agreement was unenforceable under the statute of frauds. The issue of the statute of frauds was thus squarely presented to the trial court and was not waived.

B. The January 2002 Forbearance Agreement Modifies the Note and Deed of Trust.
[6] [7] A contract coming within the statute of frauds is invalid unless it is memorialized by a writing subscribed by the party to be charged or by the party's agent. (Civ.Code, § 1624.) Under Civil Code section 1624, the party to be charged means “ ‘the party to be charged in court with the performance to the obligation, i.e., **282 the defendant in the action brought to enforce the contract.’ ” ( Ulloa v. McMillin Real Estate & Mortgage, Inc. (2007) 149 Cal.App.4th 333, 339, 57 Cal.Rptr.3d 1.) Here, the parties to be charged with performance of the January 2002 Forbearance Agreement are Ocwen and Respondents. Neither Ocwen nor its agent signed the January 2002 Forbearance Agreement.

[8] An agreement for the sale of real property or an interest in real property comes within the statute of frauds. (Civ.Code, § 1624, subd. (a)(3).) A mortgage or deed of trust also comes within the statute of frauds. Civil Code section 2922 states: “A mortgage can be created, renewed, or extended, only by writing, executed with the formalities required in the case of a grant of real property.”

[9] *553 A forbearance agreement does not create, renew, or extend a deed of trust. The January 2002 Forbearance Agreement states: “Borrower(s) understand all the rights and obligations of the Note and Mortgage, except as expressly changed by this Forbearance Agreement, shall remain in full force. Nothing contained herein shall be construed to impair the Mortgage or effect or impair rights or powers under the Note and Mortgage to recover ... any sum due under the Note, together with interest and costs.”

[10] [11] The January 2002 Forbearance Agreement, though not creating, renewing, or extending the note and deed of trust, did modify them. An agreement to modify a contract that is subject to the statute of frauds is also subject to the statute of frauds. (Civ.Code, § 1698, subd. (a) [“A contract in writing may be modified by a contract in writing”]; Collins v. Marvel Land Co. (1970) 13 Cal.App.3d 34, 43, 91 Cal.Rptr. 291.) A modification of a contract is a change in the obligations of a party by a subsequent mutual agreement of the parties. (1 Witkin, Summary of Cal. Law, supra, Contracts, § 964, p. 1055.)

The January 2002 Forbearance Agreement attempted to modify the note and deed of trust in several ways. First, the January 2002 Forbearance Agreement substituted a new monthly payment for the monthly payment required under the note. Second, the January 2002 Forbearance Agreement altered the lender's ability to exercise a right to foreclose under the note and deed of trust due to the borrower's default. The deed of trust states it secures a debt “evidenced by Borrower's note dated the same date as this Security Instrument” including “all renewals, extensions and modifications of the Note.” The January 2002 Forbearance Agreement attempted to modify the note and therefore serves as additional evidence of the debt secured by the deed of trust. The January 2002 Forbearance Agreement was therefore subject to the statute of frauds.

[12] A few courts in other jurisdictions have expressly concluded a forbearance agreement is subject to the statute of frauds. A Pennsylvania appellate court, in Atlantic Financial Federal v. Orianna Historic Associates (1991) 406 Pa.Super. 316, 319, 594 A.2d 356, held a forbearance agreement was subject to the statute of frauds, explaining: “In the present case, the alleged oral agreement not to foreclose was between the mortgagor and mortgagee. As between these parties, the mortgage represented an interest in land. The agreement not to foreclose was therefore an agreement to surrender an interest in land. As such, the agreement was within the Statute of Frauds.” In Glastonbury Bank & Trust Co. v. Corbett Construction Co., Inc. (Conn.Super.Ct.1992) 1992 WL 316472, *3-*4, 1992 Conn.Super. Lexis 3016, *8-*9, a Connecticut trial court used the same reasoning to conclude “an agreement**283 to forbear from foreclosing a mortgage involves an interest in real property; therefore, such an agreement is within the purview of the Statute of Frauds and must be in writing.” These cases provide limited guidance, *554 however, because, in Pennsylvania and Connecticut, mortgages are considered conveyances of legal title. ( State v. Hahn (1988) 207 Conn. 555, 562, 541 A.2d 499.) In contrast, under California law, a mortgage or deed of trust is a lien on property. ( Monterey S.P. Partnership v. W.L. Bangham, Inc. (1989) 49 Cal.3d 454, 460, 261 Cal.Rptr. 587, 777 P.2d 623; 4 Witkin, Summary of Cal. Law, supra, Security Transactions in Real Property, §§ 3, 6.)

Other courts have implicitly concluded a forbearance agreement is subject to the statute of frauds. In Henrikson v. First Union National Bank (4th Cir.2005) 120 Fed.Appx. 949, the borrower alleged a writing memorialized an oral forbearance agreement made three months before the writing. Without directly addressing whether a forbearance agreement comes within the statute of frauds, the Fourth Circuit Court of Appeals concluded the writing satisfied Nevada's statute of frauds because it set forth the property location, the payment terms and dates, and possible recourse on default, and was signed by the lender's agent. ( Id. at p. 952.) In Consolidation Services, Inc. v. KeyBank National Assn. (7th Cir.1999) 185 F.3d 817, 820, the Seventh Circuit concluded a 45-day forbearance agreement was unenforceable under Indiana's statute of frauds. In Emigrant Mortgage Co., Inc. v. Berger (N.Y.Sup.Ct.2006) 14 Misc.3d 1202(A), 831 N.Y.S.2d 359, a New York trial court concluded, without explanation, a forbearance agreement was unenforceable because it did not comply with New York's statute of frauds.

The Miller and Starr treatise on California real property law suggests a forbearance agreement is enforceable without a writing. The treatise states: “A beneficiary can agree not to exercise the right of foreclosure or to delay the commencement of foreclosure. An oral agreement not to foreclose the lien of a mortgage or deed of trust, if given for consideration, is enforceable without any written confirmation by the beneficiary or trustee.” (4 Miller & Starr, Cal. Real Estate (3d ed.2003) § 10:123, p. 379.) In support of that proposition, Miller and Starr cite only Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 596-597, 125 Cal.Rptr. 557, 542 P.2d 981, which does not address that issue. Instead, at the cited pages, Cornelison v. Kornbluth states: “Upon the transfer of real property covered by a mortgage or deed of trust as security for an indebtedness, the property remains subject to the secured indebtedness but the grantee is not personally liable for the indebtedness or to perform any of the obligations of the mortgage or trust deed unless his agreement to pay the indebtedness, or some note or memorandum thereof, is in writing and subscribed by him or his agent or his assumption of the indebtedness is specifically provided for in the conveyance.” ( Ibid.)

*555 C. Respondents Are Not Estopped from Asserting the Statute of Frauds.
[13] The Secrests argue their making the downpayment on the January 2002 Forbearance Agreement constituted part performance sufficient to estop Respondents from asserting the statute of frauds. This argument fails under well-established law.FN1

FN1. Respondents assert the Secrests waived their estoppel argument by failing to cite to the record in the legal argument section of their opening brief. (See Cal. Rules of Court, rule 8.204.) We find no waiver. The procedural history section and uncontroverted facts section of the Secrests' opening brief comply with California Rules of Court, rule 8.204. The legal argument section is primarily law, and the references to matters in the appellate record are generally to the Luther Secrest declaration or Neamon declaration. Despite the paucity of record references in the argument section, we were able to locate relevant portions of the record “expeditiously” and “without thumbing through and rereading earlier portions of a brief.” (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2007) ¶ 9:36, p. 9-11 (rev.# 1, 2006).)

**284 [14] [15] [16] Part performance allows enforcement of a contract lacking a requisite writing in situations in which invoking the statute of frauds would cause unconscionable injury. ( In re Marriage of Benson, supra, 36 Cal.4th at p. 1108, 32 Cal.Rptr.3d 471, 116 P.3d 1152.) “[T]o constitute part performance, the relevant acts either must ‘unequivocally refer[ ]’ to the contract [citation], or ‘clearly relate’ to its terms. [Citation.] Such conduct satisfies the evidentiary function of the statute of frauds by confirming that a bargain was in fact reached. [Citation.]” ( Id. at p. 1109, 32 Cal.Rptr.3d 471, 116 P.3d 1152.) In addition to part performance, the party seeking to enforce the contract must have changed position in reliance on the oral contract to such an extent that application of the statute of frauds would result in an unjust or unconscionable loss, amounting in effect to a fraud. ( Anderson v. Stansbury (1952) 38 Cal.2d 707, 715, 242 P.2d 305; Oren Realty & Development Co. v. Superior Court (1979) 91 Cal.App.3d 229, 235, 154 Cal.Rptr. 97.)

[17] [18] The Secrests argue their payment of $13,422.51 to Ocwen constituted part performance and a change of position sufficient to prevent Respondents from asserting the statute of frauds. “Before a party can be estopped to assert the statute [of frauds] due to the other's part performance, it must appear that a sufficient change of position has occurred so that the application of the statutory bar would result in an unjust and unconscionable loss, amounting in effect to a fraud. [Citations.] ... The payment of money is not ‘sufficient part performance to take an oral agreement out of the statute of frauds' [citation], for the party paying money ‘under an invalid contract ... has an adequate remedy at law.’ ” ( Anderson v. Stansbury, supra, 38 Cal.2d at pp. 715-716, 242 P.2d 305; see also Oren Realty & Development Co. v. Superior Court, supra, 91 Cal.App.3d at p. 235, 154 Cal.Rptr. 97; Shive v. Barrow (1948) 88 Cal.App.2d 838, 848, 199 P.2d 693; *556 Loper v. Flynn (1946) 72 Cal.App.2d 619, 622-623, 165 P.2d 256.) The Secrests do not assert they changed their position in reliance on the January 2002 Forbearance Agreement in any way other than by making the downpayment.

[19] [20] It is arguable the Secrests fully performed their obligations under the January 2002 Forbearance Agreement by wire-transferring $13,422.51 to Ocwen. “Where the contract is unilateral, or, though originally bilateral, has been fully performed by one party, the remaining promise is taken out of the statute [of frauds], and the party who performed may enforce it against the other.” (1 Witkin, Summary of Cal. Law, supra, Contracts, § 370, p. 414, and authorities cited.) In Dougherty v. California Kettleman, etc. (1937) 9 Cal.2d 58, 81, 69 P.2d 155, the California Supreme Court explained: “The fact that the agreement between Dougherty and Ochsner rested in parol is of no legal significance in this case. This agreement was fully executed by Dougherty. Assuming the contract could not be performed within a year and therefore fell within the statute of frauds, the circumstances of this case, showing as they do complete performance by Dougherty, **285 clearly create an estoppel to plead the statute. Dougherty's performance was clearly induced by Ochsner's representations that he would sign the contract. This creates an estoppel.” (See also Dutton v. Interstate Investment Corp. (1941) 19 Cal.2d 65, 70, 119 P.2d 138 [“the finding of the trial court that Dutton had fully performed all of his obligations under the contract operates to remove the bar of the statute [of frauds]”]; Dean v. Davis (1946) 73 Cal.App.2d 166, 168, 166 P.2d 15 [“The statute of frauds has no application to an executed agreement”]; Marr v. Postal Union Life Ins. Co. (1940) 40 Cal.App.2d 673, 679, 105 P.2d 649 [“Where ... there has been full performance upon the part of the party seeking to enforce the contract, the doctrine of estoppel arises”].)

The principle that full performance takes a contract out of the statute of frauds has been limited to the situation where performance consisted of conveying property, rendering personal services, or doing something other than payment of money. This limitation is consistent with Anderson v. Stansbury, supra, 38 Cal.2d 707, 242 P.2d 305 and other authority supporting the proposition the payment of money is insufficient part performance to take a contract out of the statute of frauds. In Dougherty v. California Kettleman, etc., supra, 9 Cal.2d 58, 69 P.2d 155, the plaintiff performed his obligations to find oil-bearing land and obtain prospecting permits. In Dutton v. Interstate Investment Corp., supra, 19 Cal.2d 65, 119 P.2d 138, the plaintiff performed his obligation to negotiate oil leases and sought his share of royalties promised by the defendants. In Dean v. Davis, supra, 73 Cal.App.2d 166, 166 P.2d 15, the plaintiff performed his part of the bargain by securing employment for the defendant, and in Marr v. Postal Union Life Ins. Co., supra, 40 Cal.App.2d 673, 105 P.2d 649, the plaintiffs fully performed their obligations by conveying real property to the defendants.

*557 In conclusion, the Secrests failed as a matter of law to establish estoppel to assert the statute of frauds. We emphasize the only action undertaken by the Secrests in reliance on the January 2002 Forbearance Agreement was making the downpayment. The Secrests have legal means to recover that money if they are entitled to its return or have not received credit for it. We do not address what other actions in reliance on the January 2002 Forbearance Agreement might have been sufficient to raise an estoppel to assert the statute of frauds because the Secrests asserted only the payment of money as the basis for estoppel.

Our conclusion renders moot Respondents' motion to take judicial notice, and we deny it for that reason.

V.
DISPOSITION
The judgment is affirmed. Respondents to recover their costs incurred on appeal.

WE CONCUR: SILLS, P.J., and ARONSON, J.


Cal.App. 4 Dist.,2008.
Secrest v. Security Nat. Mortg. Loan Trust 2002-2
167 Cal.App.4th 544, 84 Cal.Rptr.3d 275, 08 Cal. Daily Op. Serv. 13,141, 2008 Daily Journal D.A.R. 15,648


Briefs and Other Related Documents (Back to top)

• 2008 WL 5167675 (Appellate Petition, Motion and Filing) Respondents' Answer to Appellants' Petition for Rehearing (Oct. 31, 2008) Original Image of this Document (PDF)
• 2008 WL 5167664 (Appellate Petition, Motion and Filing) Petition For Rehearing Opinion Filed October 9, 2008 (Oct. 24, 2008) Original Image of this Document (PDF)
• 2008 WL 1924817 (Appellate Brief) Appellants' Reply Brief (Mar. 26, 2008) Original Image of this Document (PDF)
• 2008 WL 1862525 (Appellate Brief) Respondents' Brief (Feb. 14, 2008)
• 2007 WL 4588326 (Appellate Brief) Appellants' Opening Brief (Nov. 12, 2007)
• G039065 (Docket) (Aug. 3, 2007)
END OF DOCUMENT


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Senator Ron Calderon Feeding His Constituents to the Banking and Real Estate Wolves

Hi Everyone: I have had to sit back and regroup a bit as I am overwhelmed how this mortgage banking and real estate fraud is playing out. This month's "Adding Insult to Injury" Award goes to Senator Ron Calderon. Along with the California Escrow Association, United Trustees Association, and Escrow Agents' Fidelity Corporation he authored Senate Bill 306 - the Omnibus Mortgage Legislation.

His web-site states, “My legislation is aimed at protecting struggling borrowers who desperately want to keep their homes, aiding consumers who wish to purchase homes, and jump-starting our housing recovery.”

The truth is that the legislation will do little if anything to help homeowners stay in their home. In fact, it resolves any ambiguities in last year's legislation in favor of the bank. What many attorneys don't understand or know is that Civil Code Section 2923.5, 2923.6 had become anchors in which we have had some success arguing in court meant that the legislature INTENDED banks to provide loan modifications when it makes sense. These code sections make reference to "net present value." What it means is that if your loan modification was going to offer a greater profit for the bank than if they foreclosed on the property and reinvested, then it was the duty of the loan servicer to offer a loan modification to you.

Senator Calderon's bill wipes out our legal argument that under Civil Code Section 2923.6, the duty owed by the loan servicers to maximize profits by using loan modifications extended to the borrower/homeowner. Instead it facilitates a short sale. I will talk about short-sales in my next blog entry. So let's add this all up. Now homeowners have less leverage to get a loan modification what will keep them in their home.

Adding insult to injury, the bill intends to facilitate a "short-sale" of your home. Makes sense that the Escrow industry wants more short-sales. BECAUSE IT GENERATES ESCROW FEES. THE BROKERS BACK IT BECAUSE IT GENERATES MORE FEES FOR REAL ESTATE BROKERS AND FOR MORTGAGE BROKERS. To make things worse. . typically the HOMEOWNERS GET NOTHING!!!!!!! It is absolutely infuriating to see our own politicians selling us out to the real estate industry by this sort of legislation!

Thank you Senator Calderon. Your Bill now kicks the legs out from under that argument to obtain loan modifications which would keep homeowners in their home. Now why would you go and do that? Did you get promises of future campaign contributions from the Escrow Industry. With term limits, are you negotiating with the banking and real estate industry early for your future employment by this bill that does very little if anything to help a homeowner stay in their home, but instead encourages homeowners to short sale their homes?

I'm so disgusted one more time. I hope people wake up soon and realize what you and the rest of the politicians out there appear to be doing.

Below is Senator Calderon's spin on things:


Senator Calderon's Omnibus Mortage Legislation
Thursday, August 06, 2009 at 5:15 PM

SACRAMENTO – The Governor today signed into law Senator Ron Calderon’s omnibus mortgage legislation, which makes changes to the escrow process that will make it easier to conduct short sales, and, in doing so, avoid foreclosures.

“California’s slumping economic climate and housing market have combined to create a fertile climate for the exploitation of consumers,” said Senator Calderon (D-Montebello), chairman of the Senate Banking, Finance and Insurance Committee. “My legislation is aimed at protecting struggling borrowers who desperately want to keep their homes, aiding consumers who wish to purchase homes, and jump-starting our housing recovery.”

A short sale is a sale in which a homeowner sells his or her house for less than what is owed on the mortgage, with the knowledge and approval of the lender. Short sales help homeowners avoid the financial and emotional toll of a foreclosure; help neighborhoods avoid the decay, vandalism, and negative pressure on property values that have come to characterize vacant, foreclosed property; and help lenders avoid the money-losing foreclosure process.

SB 306 facilitates short sales, by ensuring that escrow agents receive up-to-date, accurate information they need to cleanly transfer title to a property that is sold via a short sale. Prior to enactment of SB 306, escrow agents frequently lacked the information they needed to cleanly transfer title on short sale properties, which led to delays, and sometimes cancellations of these sales.

SB 306 also clarifies last year's SB 1137, a bill that required lenders to contact borrowers to discuss options for avoiding foreclosure; gave renters of homes that fall into foreclosure more rights; and gave local governments greater ability to crack down against foreclosure-induced blight. The clarifying changes in SB 306 will help borrowers and renters, by resolving unintended ambiguity in the prior legislation.

The bill was co-sponsored by the California Escrow Association, United Trustees Association, and Escrow Agents' Fidelity Corporation. It will become operative on January 1, 2010.

“Our housing market can be the engine that starts us on our return to economic prosperity,” said Senator Calderon.
Contact: Rocky Rushing
(916) 651-4030

Senator Calderon Selling Out to the Banking Interests

Senate Bill No. 306
CHAPTER 43
An act to amend Sections 2923.5, 2923.6, 2924.8, and 2924f of, and to
amend, repeal, and add Section 2943 of, the Civil Code, and to amend
Section 17312 of the Financial Code, relating to real property transactions.
[Approved by Governor August 5, 2009. Filed with
Secretary of State August 6, 2009.]
legislative counsel’s digest
SB 306, Calderon. Real property transactions.
(1) Existing law requires that, upon a breach of the obligation of a
mortgage or transfer of an interest in property, the trustee, mortgagee, or
beneficiary record a notice of default in the office of the county recorder
where the mortgaged or trust property is situated and mail the notice of
default to the mortgagor or trustor. Existing law, until January 1, 2013,
prohibits a mortgagee, trustee, beneficiary, or authorized agent from filing
a notice of default for an additional 30 days on loans made between January
1, 2003, to December 31, 2007, that secure residential real property, under
certain circumstances.
This bill would, until January 1, 2013, provide that these provisions apply
to mortgages and deeds of trust recorded between January 1, 2003, to
December 31, 2007, secured by owner-occupied residential real property
containing no more than 4 dwelling units. The bill would also, among other
things, revise the declaration that is required to be filed in this connection
with the notice of default.
(2) Existing law states legislative findings and declarations with regard
to the duty loan servicers have to maximize net present value under their
pooling and servicing agreements, stating that their duty is owed to all parties
in a loan pool, not to any particular parties, and that a servicer acts in the
best interests of all parties if it agrees to or implements a loan modification
or workout plan, as specified.
This bill would specify the application of these findings and declarations
to certain investors.
(3) Existing law requires a trustee or authorized agent, upon posting a
notice of sale, to post and mail a specified notice addressed to residents of
property subject to foreclosure upon posting a notice of sale. Existing law
requires a notice of sale to be recorded in the county in which the property,
or some part of it, is situated at least 14 days prior to the date of sale.
This bill would specify how and when this notice is to be mailed. This
bill would extend the time during which the notice of sale must be recorded
from 14 to 20 days.
95
(4) Existing law requires a beneficiary on a deed of trust or a mortgagee
on a mortgage to prepare and deliver a beneficiary statement or a pay-off
demand statement within 21 days of receipt of a written demand from
specified entitled parties. Existing law requires the written statement to
include information reasonably necessary to calculate the payoff amount
on a per diem basis for the period of time, not to exceed 30 days, during
which the per diem amount is not changed by the terms of the note.
The bill would, until January 1, 2014, require a beneficiary, within 21
days of the receipt of a short-pay request, as defined, to prepare and deliver
a short-pay demand statement, which would be a written statement,
conditioned on the existence of a short-pay agreement, that is prepared in
response to a request from an entitled person or authorized agent, setting
forth an amount less than the outstanding debt, together with any terms and
conditions, under which the beneficiary would execute and deliver a
reconveyance of the deed of trust securing the note that is the subject of the
short-pay demand statement. The bill would provide that the short-pay
agreement is an agreement in writing in which the beneficiary agrees to
release its lien on a property in return for payment of an amount less than
the secured obligation. The bill would permit a beneficiary that elects not
to proceed with the transaction that is the subject of the short-pay request
to refuse to provide a short-pay demand statement, but would require that
he or she provide a written statement, indicating that the beneficiary has
elected not to proceed. The bill would provide that if the terms and conditions
of the short-pay agreement require approval by the beneficiary of a closing
statement prepared by an escrowholder, approval or disapproval shall be
provided not more than 4 days after receipt by the beneficiary of the closing
statement, or the closing statement shall be deemed approved, except as
specified.
(5) The Escrow Law provides for licensing and regulation of escrow
agents, other than certain exempt persons, by the Commissioner of
Corporations. The law requires licensees to apply for membership in the
Escrow Agents’ Fidelity Corporation, a nonprofit mutual benefit corporation,
which is established to indemnify its members against loss of trust
obligations. The law limits required membership in the Escrow Agents’
Fidelity Corporation who engage in certain kinds of business. Existing law
defines and regulates the activities of exchange facilitators and excepts from
the definition of exchange facilitator escrow companies, under specified
circumstances.
This bill would provide escrow transactions that involve money or
property held or deposited pursuant to specified actions of an exchange
facilitator regarding deposit of funds are not transactions that require a
licensee to have membership in the Escrow Agents’ Fidelity Corporation.
The people of the State of California do enact as follows:
SECTION 1. Section 2923.5 of the Civil Code is amended to read:
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Ch. 43 — 2 —
2923.5. (a) (1) A mortgagee, trustee, beneficiary, or authorized agent
may not file a notice of default pursuant to Section 2924 until 30 days after
initial contact is made as required by paragraph (2) or 30 days after satisfying
the due diligence requirements as described in subdivision (g).
(2) A mortgagee, beneficiary, or authorized agent shall contact the
borrower in person or by telephone in order to assess the borrower’s financial
situation and explore options for the borrower to avoid foreclosure. During
the initial contact, the mortgagee, beneficiary, or authorized agent shall
advise the borrower that he or she has the right to request a subsequent
meeting and, if requested, the mortgagee, beneficiary, or authorized agent
shall schedule the meeting to occur within 14 days. The assessment of the
borrower’s financial situation and discussion of options may occur during
the first contact, or at the subsequent meeting scheduled for that purpose.
In either case, the borrower shall be provided the toll-free telephone number
made available by the United States Department of Housing and Urban
Development (HUD) to find a HUD-certified housing counseling agency.
Any meeting may occur telephonically.
(b) A notice of default filed pursuant to Section 2924 shall include a
declaration that the mortgagee, beneficiary, or authorized agent has contacted
the borrower, has tried with due diligence to contact the borrower as required
by this section, or that no contact was required pursuant to subdivision (h).
(c) If a mortgagee, trustee, beneficiary, or authorized agent had already
filed the notice of default prior to the enactment of this section and did not
subsequently file a notice of rescission, then the mortgagee, trustee,
beneficiary, or authorized agent shall, as part of the notice of sale filed
pursuant to Section 2924f, include a declaration that either:
(1) States that the borrower was contacted to assess the borrower’s
financial situation and to explore options for the borrower to avoid
foreclosure.
(2) Lists the efforts made, if any, to contact the borrower in the event no
contact was made.
(d) A mortgagee’s, beneficiary’s, or authorized agent’s loss mitigation
personnel may participate by telephone during any contact required by this
section.
(e) For purposes of this section, a “borrower” shall include a mortgagor
or trustor.
(f) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other advisor to
discuss with the mortgagee, beneficiary, or authorized agent, on the
borrower’s behalf, the borrowers financial situation and options for the
borrower to avoid foreclosure. That contact made at the direction of the
borrower shall satisfy the contact requirements of paragraph (2) of
subdivision (a). Any loan modification or workout plan offered at the
meeting by the mortgagee, beneficiary, or authorized agent is subject to
approval by the borrower.
(g) A notice of default may be filed pursuant to Section 2924 when a
mortgagee, beneficiary, or authorized agent has not contacted a borrower
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— 3 — Ch. 43
as required by paragraph (2) of subdivision (a) provided that the failure to
contact the borrower occurred despite the due diligence of the mortgagee,
beneficiary, or authorized agent. For purposes of this section, “due diligence”
shall require and mean all of the following:
(1) A mortgagee, beneficiary, or authorized agent shall first attempt to
contact a borrower by sending a first-class letter that includes the toll-free
telephone number made available by HUD to find a HUD-certified housing
counseling agency.
(2) (A) After the letter has been sent, the mortgagee, beneficiary, or
authorized agent shall attempt to contact the borrower by telephone at least
three times at different hours and on different days. Telephone calls shall
be made to the primary telephone number on file.
(B) A mortgagee, beneficiary, or authorized agent may attempt to contact
a borrower using an automated system to dial borrowers, provided that, if
the telephone call is answered, the call is connected to a live representative
of the mortgagee, beneficiary, or authorized agent.
(C) A mortgagee, beneficiary, or authorized agent satisfies the telephone
contact requirements of this paragraph if it determines, after attempting
contact pursuant to this paragraph, that the borrower’s primary telephone
number and secondary telephone number or numbers on file, if any, have
been disconnected.
(3) If the borrower does not respond within two weeks after the telephone
call requirements of paragraph (2) have been satisfied, the mortgagee,
beneficiary, or authorized agent shall then send a certified letter, with return
receipt requested.
(4) The mortgagee, beneficiary, or authorized agent shall provide a means
for the borrower to contact it in a timely manner, including a toll-free
telephone number that will provide access to a live representative during
business hours.
(5) The mortgagee, beneficiary, or authorized agent has posted a
prominent link on the homepage of its Internet Web site, if any, to the
following information:
(A) Options that may be available to borrowers who are unable to afford
their mortgage payments and who wish to avoid foreclosure, and instructions
to borrowers advising them on steps to take to explore those options.
(B) A list of financial documents borrowers should collect and be
prepared to present to the mortgagee, beneficiary, or authorized agent when
discussing options for avoiding foreclosure.
(C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgagee, beneficiary, or
authorized agent.
(D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
(h) Subdivisions (a), (c), and (g) shall not apply if any of the following
occurs:
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Ch. 43 — 4 —
(1) The borrower has surrendered the property as evidenced by either a
letter confirming the surrender or delivery of the keys to the property to the
mortgagee, trustee, beneficiary, or authorized agent.
(2) The borrower has contracted with an organization, person, or entity
whose primary business is advising people who have decided to leave their
homes on how to extend the foreclosure process and avoid their contractual
obligations to mortgagees or beneficiaries.
(3) A case has been filed by the borrower under Chapter 7, 11, 12, or 13
of Title 11 of the United States Code and the bankruptcy court has not
entered an order closing or dismissing the bankruptcy case, or granting relief
from a stay of foreclosure.
(i) This section shall apply only to mortgages or deeds of trust recorded
from January 1, 2003, to December 31, 2007, inclusive, that are secured by
owner-occupied residential real property containing no more than four
dwelling units. For purposes of this subdivision, “owner-occupied” means
that the residence is the principal residence of the borrower as indicated to
the lender in loan documents.
(j) This section shall remain in effect only until January 1, 2013, and as
of that date is repealed, unless a later enacted statute, that is enacted before
January 1, 2013, deletes or extends that date.
SEC. 2. Section 2923.6 of the Civil Code is amended to read:
2923.6. (a) The Legislature finds and declares that any duty servicers
may have to maximize net present value under their pooling and servicing
agreements is owed to all parties in a loan pool, or to all investors under a
pooling and servicing agreement, not to any particular party in the loan pool
or investor under a polling and servicing agreement, and that a servicer acts
in the best interests of all parties to the loan pool or investors in the pooling
and servicing agreement if it agrees to or implements a loan modification
or workout plan for which both of the following apply:
(1) The loan is in payment default, or payment default is reasonably
foreseeable.
(2) Anticipated recovery under the loan modification or workout plan
exceeds the anticipated recovery through foreclosure on a net present value
basis.
(b) It is the intent of the Legislature that the mortgagee, beneficiary, or
authorized agent offer the borrower a loan modification or workout plan if
such a modification or plan is consistent with its contractual or other
authority.
(c) This section shall remain in effect only until January 1, 2013, and as
of that date is repealed, unless a later enacted statute, that is enacted before
January 1, 2013, deletes or extends that date.
SEC. 3. Section 2924.8 of the Civil Code is amended to read:
2924.8. (a) Upon posting a notice of sale pursuant to Section 2924f, a
trustee or authorized agent shall also post the following notice, in the manner
required for posting the notice of sale on the property to be sold, and a
mortgagee, trustee, beneficiary, or authorized agent, concurrently with the
mailing of the notice of sale pursuant to Section 2924b, shall send by
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— 5 — Ch. 43
first-class mail in an envelope addressed to the “Resident of property subject
to foreclosure sale” the following notice in English and the languages
described in Section 1632: “Foreclosure process has begun on this property,
which may affect your right to continue to live in this property. Twenty
days or more after the date of this notice, this property may be sold at
foreclosure. If you are renting this property, the new property owner may
either give you a new lease or rental agreement or provide you with a 60-day
eviction notice. However, other laws may prohibit an eviction in this
circumstance or provide you with a longer notice before eviction. You may
wish to contact a lawyer or your local legal aid or housing counseling agency
to discuss any rights you may have.”
(b) It shall be an infraction to tear down the notice described in
subdivision (a) within 72 hours of posting. Violators shall be subject to a
fine of one hundred dollars ($100).
(c) A state government entity shall make available translations of the
notice described in subdivision (a) which may be used by a mortgagee,
trustee, beneficiary, or authorized agent to satisfy the requirements of this
section.
(d) This section shall only apply to loans secured by residential real
property, and if the billing address for the mortgage note is different than
the property address.
(e) This section shall remain in effect only until January 1, 2013, and as
of that date is repealed, unless a later enacted statute, that is enacted before
January 1, 2013, deletes or extends that date.
SEC. 4. Section 2924f of the Civil Code is amended to read:
2924f. (a) As used in this section and Sections 2924g and 2924h,
“property” means real property or a leasehold estate therein, and “calendar
week” means Monday through Saturday, inclusive.
(b) (1) Except as provided in subdivision (c), before any sale of property
can be made under the power of sale contained in any deed of trust or
mortgage, or any resale resulting from a rescission for a failure of
consideration pursuant to subdivision (c) of Section 2924h, notice of the
sale thereof shall be given by posting a written notice of the time of sale
and of the street address and the specific place at the street address where
the sale will be held, and describing the property to be sold, at least 20 days
before the date of sale in one public place in the city where the property is
to be sold, if the property is to be sold in a city, or, if not, then in one public
place in the judicial district in which the property is to be sold, and publishing
a copy once a week for three consecutive calendar weeks, the first publication
to be at least 20 days before the date of sale, in a newspaper of general
circulation published in the city in which the property or some part thereof
is situated, if any part thereof is situated in a city, if not, then in a newspaper
of general circulation published in the judicial district in which the property
or some part thereof is situated, or in case no newspaper of general
circulation is published in the city or judicial district, as the case may be,
in a newspaper of general circulation published in the county in which the
property or some part thereof is situated, or in case no newspaper of general
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Ch. 43 — 6 —
circulation is published in the city or judicial district or county, as the case
may be, in a newspaper of general circulation published in the county in
this state that (A) is contiguous to the county in which the property or some
part thereof is situated and (B) has, by comparison with all similarly
contiguous counties, the highest population based upon total county
population as determined by the most recent federal decennial census
published by the Bureau of the Census. A copy of the notice of sale shall
also be posted in a conspicuous place on the property to be sold at least 20
days before the date of sale, where possible and where not restricted for any
reason. If the property is a single-family residence the posting shall be on
a door of the residence, but, if not possible or restricted, then the notice shall
be posted in a conspicuous place on the property; however, if access is
denied because a common entrance to the property is restricted by a guard
gate or similar impediment, the property may be posted at that guard gate
or similar impediment to any development community. Additionally, the
notice of sale shall conform to the minimum requirements of Section 6043
of the Government Code and be recorded with the county recorder of the
county in which the property or some part thereof is situated at least 20 days
prior to the date of sale. The notice of sale shall contain the name, street
address in this state, which may reflect an agent of the trustee, and either a
toll-free telephone number or telephone number in this state of the trustee,
and the name of the original trustor, and also shall contain the statement
required by paragraph (3) of subdivision (c). In addition to any other
description of the property, the notice shall describe the property by giving
its street address, if any, or other common designation, if any, and a county
assessor’s parcel number; but if the property has no street address or other
common designation, the notice shall contain a legal description of the
property, the name and address of the beneficiary at whose request the sale
is to be conducted, and a statement that directions may be obtained pursuant
to a written request submitted to the beneficiary within 10 days from the
first publication of the notice. Directions shall be deemed reasonably
sufficient to locate the property if information as to the location of the
property is given by reference to the direction and approximate distance
from the nearest crossroads, frontage road, or access road. If a legal
description or a county assessor’s parcel number and either a street address
or another common designation of the property is given, the validity of the
notice and the validity of the sale shall not be affected by the fact that the
street address, other common designation, name and address of the
beneficiary, or the directions obtained therefrom are erroneous or that the
street address, other common designation, name and address of the
beneficiary, or directions obtained therefrom are omitted. The term
“newspaper of general circulation,” as used in this section, has the same
meaning as defined in Article 1 (commencing with Section 6000) of Chapter
1 of Division 7 of Title 1 of the Government Code.
The notice of sale shall contain a statement of the total amount of the
unpaid balance of the obligation secured by the property to be sold and
reasonably estimated costs, expenses, advances at the time of the initial
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publication of the notice of sale, and, if republished pursuant to a cancellation
of a cash equivalent pursuant to subdivision (d) of Section 2924h, a reference
of that fact; provided, that the trustee shall incur no liability for any good
faith error in stating the proper amount, including any amount provided in
good faith by or on behalf of the beneficiary. An inaccurate statement of
this amount shall not affect the validity of any sale to a bona fide purchaser
for value, nor shall the failure to post the notice of sale on a door as provided
by this subdivision affect the validity of any sale to a bona fide purchaser
for value.
(2) If the sale of the property is to be a unified sale as provided in
subparagraph (B) of paragraph (1) of subdivision (a) of Section 9604 of the
Commercial Code, the notice of sale shall also contain a description of the
personal property or fixtures to be sold. In the case where it is contemplated
that all of the personal property or fixtures are to be sold, the description in
the notice of the personal property or fixtures shall be sufficient if it is the
same as the description of the personal property or fixtures contained in the
agreement creating the security interest in or encumbrance on the personal
property or fixtures or the filed financing statement relating to the personal
property or fixtures. In all other cases, the description in the notice shall be
sufficient if it would be a sufficient description of the personal property or
fixtures under Section 9108 of the Commercial Code. Inclusion of a reference
to or a description of personal property or fixtures in a notice of sale
hereunder shall not constitute an election by the secured party to conduct a
unified sale pursuant to subparagraph (B) of paragraph (1) of subdivision
(a) of Section 9604 of the Commercial Code, shall not obligate the secured
party to conduct a unified sale pursuant to subparagraph (B) of paragraph
(1) of subdivision (a) of Section 9604 of the Commercial Code, and in no
way shall render defective or noncomplying either that notice or a sale
pursuant to that notice by reason of the fact that the sale includes none or
less than all of the personal property or fixtures referred to or described in
the notice. This paragraph shall not otherwise affect the obligations or duties
of a secured party under the Commercial Code.
(c) (1) This subdivision applies only to deeds of trust or mortgages which
contain a power of sale and which are secured by real property containing
a single-family, owner-occupied residence, where the obligation secured
by the deed of trust or mortgage is contained in a contract for goods or
services subject to the provisions of the Unruh Act (Chapter 1 (commencing
with Section 1801) of Title 2 of Part 4 of Division 3).
(2) Except as otherwise expressly set forth in this subdivision, all other
provisions of law relating to the exercise of a power of sale shall govern
the exercise of a power of sale contained in a deed of trust or mortgage
described in paragraph (1).
(3) If any default of the obligation secured by a deed of trust or mortgage
described in paragraph (1) has not been cured within 30 days after the
recordation of the notice of default, the trustee or mortgagee shall mail to
the trustor or mortgagor, at his or her last known address, a copy of the
following statement:
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YOU ARE IN DEFAULT UNDER A
____________________________________________________________,
(Deed of trust or mortgage)
DATED ____. UNLESS YOU TAKE ACTION TO PROTECT
YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE. IF
YOU NEED AN EXPLANATION OF THE NATURE OF THE
PROCEEDING AGAINST YOU, YOU SHOULD CONTACT A
LAWYER.
(4) All sales of real property pursuant to a power of sale contained in
any deed of trust or mortgage described in paragraph (1) shall be held in
the county where the residence is located and shall be made to the person
making the highest offer. The trustee may receive offers during the 10-day
period immediately prior to the date of sale and if any offer is accepted in
writing by both the trustor or mortgagor and the beneficiary or mortgagee
prior to the time set for sale, the sale shall be postponed to a date certain
and prior to which the property may be conveyed by the trustor to the person
making the offer according to its terms. The offer is revocable until accepted.
The performance of the offer, following acceptance, according to its terms,
by a conveyance of the property to the offeror, shall operate to terminate
any further proceeding under the notice of sale and it shall be deemed
revoked.
(5) In addition to the trustee fee pursuant to Section 2924c, the trustee
or mortgagee pursuant to a deed of trust or mortgage subject to this
subdivision shall be entitled to charge an additional fee of fifty dollars ($50).
(6) This subdivision applies only to property on which notices of default
were filed on or after the effective date of this subdivision.
SEC. 5. Section 2943 of the Civil Code is amended to read:
2943. (a) As used in this section:
(1) “Beneficiary” means a mortgagee or beneficiary of a mortgage or
deed of trust, or his or her assignees.
(2) “Beneficiary statement” means a written statement showing:
(A) The amount of the unpaid balance of the obligation secured by the
mortgage or deed of trust and the interest rate, together with the total
amounts, if any, of all overdue installments of either principal or interest,
or both.
(B) The amounts of periodic payments, if any.
(C) The date on which the obligation is due in whole or in part.
(D) The date to which real estate taxes and special assessments have
been paid to the extent the information is known to the beneficiary.
(E) The amount of hazard insurance in effect and the term and premium
of that insurance to the extent the information is known to the beneficiary.
(F) The amount in an account, if any, maintained for the accumulation
of funds with which to pay taxes and insurance premiums.
(G) The nature and, if known, the amount of any additional charges,
costs, or expenses paid or incurred by the beneficiary which have become
a lien on the real property involved.
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(H) Whether the obligation secured by the mortgage or deed of trust can
or may be transferred to a new borrower.
(3) “Delivery” means depositing or causing to be deposited in the United
States mail an envelope with postage prepaid, containing a copy of the
document to be delivered, addressed to the person whose name and address
is set forth in the demand therefor. The document may also be transmitted
by facsimile machine to the person whose name and address is set forth in
the demand therefor.
(4) “Entitled person” means the trustor or mortgagor of, or his or her
successor in interest in, the mortgaged or trust property or any part thereof,
any beneficiary under a deed of trust, any person having a subordinate lien
or encumbrance of record thereon, the escrowholder licensed as an agent
pursuant to Division 6 (commencing with Section 17000) of the Financial
Code, or the party exempt by virtue of Section 17006 of the Financial Code
who is acting as the escrowholder.
(5) “Payoff demand statement” means a written statement, prepared in
response to a written demand made by an entitled person or authorized
agent, setting forth the amounts required as of the date of preparation by
the beneficiary, to fully satisfy all obligations secured by the loan that is
the subject of the payoff demand statement. The written statement shall
include information reasonably necessary to calculate the payoff amount
on a per diem basis for the period of time, not to exceed 30 days, during
which the per diem amount is not changed by the terms of the note.
(6) “Short-pay agreement” means an agreement in writing in which the
beneficiary agrees to release its lien on a property in return for payment of
an amount less than the secured obligation.
(7) “Short-pay demand statement” means a written statement, issued
subsequent to and conditioned on the existence of a short-pay agreement
that is in possession of the entitled person, that is prepared in response to a
written demand made by an entitled person or authorized agent, setting forth
an amount less than the outstanding debt, together with any terms and
conditions, under which the beneficiary will execute and deliver a
reconveyance of the deed of trust securing the note that is the subject of the
short-pay demand statement. The period shall not be greater than 30 days
from the date of preparation by the beneficiary.
(8) “Short-pay request” means a written request made by an entitled
person or authorized agent requesting the beneficiary to provide a short-pay
demand statement that includes all of the following:
(A) A copy of an existing contract to purchase the property for an amount
certain.
(B) A copy of the short-pay agreement in the possession of the entitled
person.
(C) Information related to the release of any other liens on the property,
if any.
(b) (1) A beneficiary, or his or her authorized agent, shall, within 21
days of the receipt of a written demand by an entitled person or his or her
authorized agent, prepare and deliver to the person demanding it a true,
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Ch. 43 — 10 —
correct, and complete copy of the note or other evidence of indebtedness
with any modification thereto, and a beneficiary statement.
(2) A request pursuant to this subdivision may be made by an entitled
person or his or her authorized agent at any time before, or within two
months after, the recording of a notice of default under a mortgage or deed
of trust, or may otherwise be made more than 30 days prior to the entry of
the decree of foreclosure.
(c) (1) A beneficiary, or his or her authorized agent, shall, on the written
demand of an entitled person, or his or her authorized agent, prepare and
deliver a payoff demand statement to the person demanding it within 21
days of the receipt of the demand. However, if the loan is subject to a
recorded notice of default or a filed complaint commencing a judicial
foreclosure, the beneficiary shall have no obligation to prepare and deliver
this statement as prescribed unless the written demand is received prior to
the first publication of a notice of sale or the notice of the first date of sale
established by a court.
(2) Except as provided in this subdivision, a beneficiary, or his or her
authorized agent, shall, upon receipt of a short-pay request, prepare and
deliver a short-pay demand statement to the person requesting it within 21
days of the receipt of the short-pay request. A beneficiary, or his or her
authorized agent that elects not to proceed with the transaction that is the
subject of the short-pay request may refuse to provide a short-pay demand
statement for that transaction, but shall provide a written statement to the
person requesting it, indicating that the beneficiary elects not to proceed
with the proposed transaction, within 21 days of the receipt of the short-pay
request. If the terms and conditions of the short-pay agreement require
approval by the beneficiary of a closing statement or similar document
prepared by an escrowholder, approval or disapproval shall be provided not
more than four days after receipt by the beneficiary of the closing statement,
or the closing statement shall be deemed approved, provided that the
statement is not clearly contrary to the terms of the short-pay agreement or
the short-pay demand statement provided to the escrowholder.
(d) (1) A beneficiary statement, payoff demand statement, or short-pay
demand statement may be relied upon by the entitled person or his or her
authorized agent in accordance with its terms, including with respect to the
payoff demand statement or short-pay demand statement reliance for the
purpose of establishing the amount necessary to pay the obligation in full.
If the beneficiary notifies the entitled person or his or her authorized agent
of any amendment to the statement, then the amended statement may be
relied upon by the entitled person or his or her authorized agent as provided
in this subdivision.
(2) If notification of any amendment to the statement is not given in
writing, then a written amendment to the statement shall be delivered to the
entitled person or his or her authorized agent no later than the next business
day after notification.
(3) Upon the dates specified in subparagraphs (A) and (B), any sums that
were due and for any reason not included in the statement or amended
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statement shall continue to be recoverable by the beneficiary as an unsecured
obligation of the obligor pursuant to the terms of the note and existing
provisions of law.
(A) If the transaction is voluntary, the entitled party or his or her
authorized agent may rely upon the statement or amended statement upon
the earlier of (i) the close of escrow, (ii) transfer of title, or (iii) recordation
of a lien.
(B) If the loan is subject to a recorded notice of default or a filed
complaint commencing a judicial foreclosure, the entitled party or his or
her authorized agent may rely upon the statement or amended statement
upon the acceptance of the last and highest bid at a trustee’s sale or a court
supervised sale.
(e) The following provisions apply to a demand for either a beneficiary
statement, a payoff demand statement, or a short-pay demand statement:
(1) If an entitled person or his or her authorized agent requests a statement
pursuant to this section and does not specify a beneficiary statement, a
payoff demand statement, or short-pay demand statement the beneficiary
shall treat the request as a request for a payoff demand statement.
(2) If the entitled person or the entitled person’s authorized agent includes
in the written demand a specific request for a copy of the deed of trust or
mortgage, it shall be furnished with the written statement at no additional
charge.
(3) The beneficiary may, before delivering a statement, require reasonable
proof that the person making the demand is, in fact, an entitled person or
an authorized agent of an entitled person, in which event the beneficiary
shall not be subject to the penalties of this section until 21 days after receipt
of the proof herein provided for. A statement in writing signed by the entitled
person appointing an authorized agent when delivered personally to the
beneficiary or delivered by registered return receipt mail shall constitute
reasonable proof as to the identity of an agent. Similar delivery of a policy
of title insurance, preliminary report issued by a title company, original or
photographic copy of a grant deed or certified copy of letters testamentary,
guardianship, or conservatorship shall constitute reasonable proof as to the
identity of a successor in interest, provided the person demanding a statement
is named as successor in interest in the document.
(4) If a beneficiary for a period of 21 days after receipt of the written
demand willfully fails to prepare and deliver the statement, he or she is
liable to the entitled person for all damages which he or she may sustain by
reason of the refusal and, whether or not actual damages are sustained, he
or she shall forfeit to the entitled person the sum of three hundred dollars
($300). Each failure to prepare and deliver the statement, occurring at a time
when, pursuant to this section, the beneficiary is required to prepare and
deliver the statement, creates a separate cause of action, but a judgment
awarding an entitled person a forfeiture, or damages and forfeiture, for any
failure to prepare and deliver a statement bars recovery of damages and
forfeiture for any other failure to prepare and deliver a statement, with
respect to the same obligation, in compliance with a demand therefor made
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Ch. 43 — 12 —
within six months before or after the demand as to which the award was
made. For the purposes of this subdivision, “willfully” means an intentional
failure to comply with the requirements of this section without just cause
or excuse.
(5) If the beneficiary has more than one branch, office, or other place of
business, then the demand shall be made to the branch or office address set
forth in the payment billing notice or payment book, and the statement,
unless it specifies otherwise, shall be deemed to apply only to the unpaid
balance of the single obligation named in the request and secured by the
mortgage or deed of trust which is payable at the branch or office whose
address appears on the aforesaid billing notice or payment book.
(6) The beneficiary may make a charge not to exceed thirty dollars ($30)
for furnishing each required statement. The provisions of this paragraph
shall not apply to mortgages or deeds of trust insured by the Federal Housing
Administrator or guaranteed by the Administrator of Veterans Affairs.
(f) The preparation and delivery of a beneficiary statement, a payoff
demand statement, or short-pay demand statement pursuant to this section
shall not change a date of sale established pursuant to Section 2924g.
(g) This section shall remain in effect only until January 1, 2014, and as
of that date is repealed, unless a later enacted statute, that is enacted before
January 1, 2014, deletes or extends that date.
SEC. 6. Section 2943 is added to the Civil Code, to read:
2943. (a) As used in this section:
(1) “Beneficiary” means a mortgagee or beneficiary of a mortgage or
deed of trust, or his or her assignees.
(2) “Beneficiary statement” means a written statement showing:
(A) The amount of the unpaid balance of the obligation secured by the
mortgage or deed of trust and the interest rate, together with the total
amounts, if any, of all overdue installments of either principal or interest,
or both.
(B) The amounts of periodic payments, if any.
(C) The date on which the obligation is due in whole or in part.
(D) The date to which real estate taxes and special assessments have
been paid to the extent the information is known to the beneficiary.
(E) The amount of hazard insurance in effect and the term and premium
of that insurance to the extent the information is known to the beneficiary.
(F) The amount in an account, if any, maintained for the accumulation
of funds with which to pay taxes and insurance premiums.
(G) The nature and, if known, the amount of any additional charges,
costs, or expenses paid or incurred by the beneficiary which have become
a lien on the real property involved.
(H) Whether the obligation secured by the mortgage or deed of trust can
or may be transferred to a new borrower.
(3) “Delivery” means depositing or causing to be deposited in the United
States mail an envelope with postage prepaid, containing a copy of the
document to be delivered, addressed to the person whose name and address
is set forth in the demand therefor. The document may also be transmitted
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by facsimile machine to the person whose name and address is set forth in
the demand therefor.
(4) “Entitled person” means the trustor or mortgagor of, or his or her
successor in interest in, the mortgaged or trust property or any part thereof,
any beneficiary under a deed of trust, any person having a subordinate lien
or encumbrance of record thereon, the escrowholder licensed as an agent
pursuant to Division 6 (commencing with Section 17000) of the Financial
Code, or the party exempt by virtue of Section 17006 of the Financial Code
who is acting as the escrowholder.
(5) “Payoff demand statement” means a written statement, prepared in
response to a written demand made by an entitled person or authorized
agent, setting forth the amounts required as of the date of preparation by
the beneficiary, to fully satisfy all obligations secured by the loan that is
the subject of the payoff demand statement. The written statement shall
include information reasonably necessary to calculate the payoff amount
on a per diem basis for the period of time, not to exceed 30 days, during
which the per diem amount is not changed by the terms of the note.
(b) (1) A beneficiary, or his or her authorized agent, shall, within 21
days of the receipt of a written demand by an entitled person or his or her
authorized agent, prepare and deliver to the person demanding it a true,
correct, and complete copy of the note or other evidence of indebtedness
with any modification thereto, and a beneficiary statement.
(2) A request pursuant to this subdivision may be made by an entitled
person or his or her authorized agent at any time before, or within two
months after, the recording of a notice of default under a mortgage or deed
of trust, or may otherwise be made more than 30 days prior to the entry of
the decree of foreclosure.
(c) A beneficiary, or his or her authorized agent, shall, on the written
demand of an entitled person, or his or her authorized agent, prepare and
deliver a payoff demand statement to the person demanding it within 21
days of the receipt of the demand. However, if the loan is subject to a
recorded notice of default or a filed complaint commencing a judicial
foreclosure, the beneficiary shall have no obligation to prepare and deliver
this statement as prescribed unless the written demand is received prior to
the first publication of a notice of sale or the notice of the first date of sale
established by a court.
(d) (1) A beneficiary statement or payoff demand statement may be
relied upon by the entitled person or his or her authorized agent in accordance
with its terms, including with respect to the payoff demand statement reliance
for the purpose of establishing the amount necessary to pay the obligation
in full. If the beneficiary notifies the entitled person or his or her authorized
agent of any amendment to the statement, then the amended statement may
be relied upon by the entitled person or his or her authorized agent as
provided in this subdivision.
(2) If notification of any amendment to the statement is not given in
writing, then a written amendment to the statement shall be delivered to the
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Ch. 43 — 14 —
entitled person or his or her authorized agent no later than the next business
day after notification.
(3) Upon the dates specified in subparagraphs (A) and (B) any sums that
were due and for any reason not included in the statement or amended
statement shall continue to be recoverable by the beneficiary as an unsecured
obligation of the obligor pursuant to the terms of the note and existing
provisions of law.
(A) If the transaction is voluntary, the entitled party or his or her
authorized agent may rely upon the statement or amended statement upon
the earlier of (i) the close of escrow, (ii) transfer of title, or (iii) recordation
of a lien.
(B) If the loan is subject to a recorded notice of default or a filed
complaint commencing a judicial foreclosure, the entitled party or his or
her authorized agent may rely upon the statement or amended statement
upon the acceptance of the last and highest bid at a trustee’s sale or a court
supervised sale.
(e) The following provisions apply to a demand for either a beneficiary
statement or a payoff demand statement:
(1) If an entitled person or his or her authorized agent requests a statement
pursuant to this section and does not specify a beneficiary statement or a
payoff demand statement the beneficiary shall treat the request as a request
for a payoff demand statement.
(2) If the entitled person or the entitled person’s authorized agent includes
in the written demand a specific request for a copy of the deed of trust or
mortgage, it shall be furnished with the written statement at no additional
charge.
(3) The beneficiary may, before delivering a statement, require reasonable
proof that the person making the demand is, in fact, an entitled person or
an authorized agent of an entitled person, in which event the beneficiary
shall not be subject to the penalties of this section until 21 days after receipt
of the proof herein provided for. A statement in writing signed by the entitled
person appointing an authorized agent when delivered personally to the
beneficiary or delivered by registered return receipt mail shall constitute
reasonable proof as to the identity of an agent. Similar delivery of a policy
of title insurance, preliminary report issued by a title company, original or
photographic copy of a grant deed or certified copy of letters testamentary,
guardianship, or conservatorship shall constitute reasonable proof as to the
identity of a successor in interest, provided the person demanding a statement
is named as successor in interest in the document.
(4) If a beneficiary for a period of 21 days after receipt of the written
demand willfully fails to prepare and deliver the statement, he or she is
liable to the entitled person for all damages which he or she may sustain by
reason of the refusal and, whether or not actual damages are sustained, he
or she shall forfeit to the entitled person the sum of three hundred dollars
($300). Each failure to prepare and deliver the statement, occurring at a time
when, pursuant to this section, the beneficiary is required to prepare and
deliver the statement, creates a separate cause of action, but a judgment
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awarding an entitled person a forfeiture, or damages and forfeiture, for any
failure to prepare and deliver a statement bars recovery of damages and
forfeiture for any other failure to prepare and deliver a statement, with
respect to the same obligation, in compliance with a demand therefor made
within six months before or after the demand as to which the award was
made. For the purposes of this subdivision, “willfully” means an intentional
failure to comply with the requirements of this section without just cause
or excuse.
(5) If the beneficiary has more than one branch, office, or other place of
business, then the demand shall be made to the branch or office address set
forth in the payment billing notice or payment book, and the statement,
unless it specifies otherwise, shall be deemed to apply only to the unpaid
balance of the single obligation named in the request and secured by the
mortgage or deed of trust which is payable at the branch or office whose
address appears on the aforesaid billing notice or payment book.
(6) The beneficiary may make a charge not to exceed thirty dollars ($30)
for furnishing each required statement. The provisions of this paragraph
shall not apply to mortgages or deeds of trust insured by the Federal Housing
Administrator or guaranteed by the Administrator of Veterans Affairs.
(f) The preparation and delivery of a beneficiary statement or a payoff
demand statement pursuant to this section shall not change a date of sale
established pursuant to Section 2924g.
(g) This section shall become operative on January 1, 2014.
SEC. 7. Section 17312 of the Financial Code is amended to read:
17312. (a) Each person licensed pursuant to this division who is engaged
in the business of receiving escrows specified in subdivision (c) and whose
escrow business location is located within the State of California shall
participate as a member in Fidelity Corporation in accordance with this
chapter and rules established by the Board of Directors of Fidelity
Corporation. Fidelity Corporation shall not deny membership to any escrow
agent holding a valid unrevoked license under the Escrow Law who is
required to be a member under this subdivision.
(b) Upon filing a new application for licensure as required by Section
17201, persons required to be a member of Fidelity Corporation shall file
a copy thereof concurrently with Fidelity Corporation. If an application for
licensure submitted to Fidelity Corporation contains personal or confidential
information, Fidelity Corporation and its board shall maintain this
information in confidence to protect the privacy of the information. The
copy of the application shall include the three-thousand-dollar ($3,000) fee
specified in subdivision (a) of Section 17320 and all required Fidelity
Corporation Certificates set forth in Sections 17331 and 17331.1. Fidelity
Corporation shall promptly furnish to the commissioner a compliance letter
confirming that the applicant has satisfied the requirements to be a member
of Fidelity Corporation.
(c) The required membership in Fidelity Corporation shall be limited to
those licensees whose escrow business location is located within the State
of California and who engage, in whole or in part, in the business of
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Ch. 43 — 16 —
receiving escrows for deposit or delivery in the following types of
transactions:
(1) Real property escrows, including, but not limited to, the sale,
encumbrance, lease, transfer of title, loans or other obligations to be secured
by a lien upon real property, and exchanges, excluding money or property
held or deposited pursuant to paragraph (3) of subdivision (a) of Section
51003.
(2) Bulk sale escrows, including, but not limited to, the sale or transfer
of title to a business entity and the transfer of liquor licenses or other types
of business licenses or permits.
(3) Fund or joint control escrows, including, but not limited to,
transactions specified in Section 17005.1, and contracts specified in Section
10263 of the Public Contract Code.
(4) The sale, transfer of title, or refinance escrows for manufactured
homes or mobilehomes.
(5) Reservation deposits required under Article 2 (commencing with
Section 11010) of Chapter 1 of Part 2 of Division 4 of the Business and
Professions Code or by regulation of the Department of Real Estate to be
held in an escrow account.
(6) Escrows for sale, transfer, modification, assignment, or hypothecation
of promissory notes secured by deeds of trust.
(d) Coverage required to be provided by Fidelity Corporation under this
chapter shall be provided to members only for loss of trust obligations with
respect to those types of transactions specified in subdivision (c). If a loss
covered by Fidelity Corporation is also covered by a member’s general
liability, dishonesty, or indemnity policy, or other private insurance policy,
then the member’s private policy shall first be applied as the primary
indemnity to cover the loss. However, the failure of the member’s private
primary policy to indemnify the member’s loss within the time specified
for Fidelity Corporation indemnity in subdivision (a) of Section 17314 shall
not limit the indemnity obligations of Fidelity Corporation as defined in
this chapter. Indemnity coverage for those types of transactions not specified
in subdivision (c) shall be provided by escrow agents in accordance with
Section 17203.1.
O
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