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Litigation Litigation Servicing

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					Litigation
        g
Servicing Issues

   Standing & State Law
   Leah Getlan
   Assistant General Counsel
   Capital One




                               1
Litigation – Servicing Issues
What Are We Seeing?
   Standing                             p
                                     Misrepresentation / Fraud

   Violation of foreclosure        Negligence
    statute

   Wrongful foreclosure
                                    Products Liability

   UDAP                            Conspiracy

   Breach of Contract              Predatory Lending

          ebt Co ect o a s
    State Debt Collection Laws

                                                             2
Litigation Servicing Issues
Standing
 J.P.                  v.
  J P Morgan Chase v Pocopanni
(Fl. Cir. Ct. January 19, 2010)
       Held that servicer committed fraud on the court by
        knowingly misrepresenting that it owned the note
       Decision is being appealed




                                                         3
Litigation Servicing Issues
Foreclosure
         v.               (Cal. App.    2,
    Mabry v Superior Court (Cal App June 2
    2010)
                 g                                     §
        Private right of action under Cal. Civil Code §2923.5
       No obligation to tender amounts owed
       No post-sale remedy
       No bli ti to          dif loan or collect additional
        N obligation t modify l             ll t dditi     l
        information from borrower
              g           p     y
        No obligation to specify how assessed borrowers’ financial
        information or discussion of foreclosure options
       No HOLA preemption of statute


                                                                     4
Litigation Servicing Issues
Foreclosure
             v
    Zendejas v. GMAC Wholesale Mortgage
    Corp. (E.D. Cal. June 15, 2010)
       No private right of action under Cal. Civil Code
        Section 2923.5




                                                           5
Litigation Servicing Issues
Wrongful Foreclosure
   Davidson v. Countrywide Home Loans (SD Cal.
    July 23, 2010)
   Tender is required to maintain wrongful foreclosure,
    and quiet title, causes of action under CA law, which
    provide for rescission or cancellation of the loan.
   Thi rule applies even if b
    This l         li                      ll      h
                               borrower alleges she was
    fraudulently induced into entering into the loan
    agreement.
   Plaintiff’s tender of a short sale offer was insufficient
    to show tender. Tender must be the full loan value.

                                                            6
Litigation Servicing Issues
Wrongful Foreclosure
          v            Mortgage Inc.
    Roque v. SunTrust Mortgage, Inc (ND
    Cal. February 9, 2010)
              v.
    Lawrence v Aurora Loan Services LLC
    (ED Cal. Jan. 25, 2010)
       No wrongful foreclosure if borrower
       cannot demonstrate ability to tender debt
       owed



                                                   7
Litigation Servicing Issues
Wrongful Foreclosure
       v                  (EDNY,      28,
    Liu v. Bank of America (EDNY April 28
    2010)
                       NY s
        Court held that NY’s right of redemption allows
        borrowers to redeem property anytime before
        property sold at foreclosure sale, but not after.
       No requirement to postpone a sale to allow a
        borrower to tender.
       No l i for             i ll            bl
        N claim f commercially unreasonable sale      l
        where borrower only asserts conclusory allegation
        that the property was sold for 20% less than FMV.

                                                        8
Litigation Servicing Issues
Breach of Contract
            v.    Savings,    (Cal. App.
    Garcia v World Savings FSB (Cal App
    April 9, 2010)
       Oral promise to postpone foreclosure sale does
        not give rise to breach of contract claim because
        no consideration given by borrower
       Borrowers could meet the elements of promissory
        estoppel claim notwithstanding that the promise
        may have been conditional and that the
        arrangement was not confirmed.


                                                            9
Litigation Servicing Issues
Breach of Contract
           v
    Vissuet v. IndyMac Mortgage Services (SD
    Cal. March 19, 2010)
       Although the loan contract must be in writing,
        contract to postpone foreclosure sale in exchange
        for loan mod not subject to statute of frauds.




                                                        10
Litigation Servicing Issues
Breach of Contract
            v.
    Williams v JP Morgan Mortgage
    Acquisition Corp. (ED Mich. March 19,
    2010))
       Holding Michigan statute of frauds requires that
        an agreement to modify a mortgage loan and
        delay foreclosure be in writing.




                                                           11
Litigation Servicing Issues
UDAP
   Gomez v. Wells Fargo Bank, N.A.(N.D.
    Tex. July 21, 2010)
       Alleged misrepresentations made in loan
        modification process not a deceptive trade
        practice under the Texas Deceptive Trade
        Practices Act because borrowing money is not a
                                         g       y
        good or service.
       State debt collection statute applied to Wells
        Fargo because statute applies to those collecting
        debt on behalf of others as well as entities
        attempting to collect their own debts.

                                                            12
Litigation Servicing Issues
UDAP
               v.
    Henderson v Chase Home Finance LLC
    (D. Ariz. May 14, 2010)
       Borrowers alleged viable UDAP claim under
        Arizona’s Consumer Fraud Act that lender
        concealed that forebearance agreement would
            l in late f
        result i l           d      i      di        i
                      fees and negative credit reporting.
       Loan transactions constitute a sale within the
                         ACFA.
        meaning of the ACFA



                                                            13
Litigation Servicing Issues
Negligence
   Garcia v. Ocwen Loan Servicing LLC (N.D. Cal.
    May 6, 2010)
       Plaintiff brought action for misrepresentation and
            li         d injunctive relief f alleged mishandling of
        negligence and i j      ti    li f for ll  d i h dli      f
        his mortgage loan modification documents, which were
        sent to the wrong department.
       Court denied motion to dismiss the negligence claim stating
        that borrower sufficiently pled negligence and that a duty of
        care may be owed to a borrower by a servicer processing a
                  y                           y         p         g
        loan modification.




                                                                   14
Litigation Servicing Issues
Fraud / Misrepresentation
          v.                  (Cal. App.
    Perlas v GMAC Mortgage LLC (Cal App
    August 11, 2010)
       A lender is under no duty to determine a
        borrower’s ability to repay.
       Borrowers cannot rely on loan qualification to
        determine if the loan payments are affordable.




                                                         15
Litigation Servicing Issues
Waste
                       v         (Bankr.
    First Republic Bank v. Mirner (Bankr ND
    Cal. July 1, 2010)
       Damage to property done recklessly, intentionally
        or maliciously is bad faith waste that is not barred
        by California’s anti-deficiency legislation.
       Court held intentionally taking fixtures from
        property is bad faith waste.
       Bad faith     t       b       di h
        B d f ith waste may be nondischargeable i bl in
        bankruptcy.


                                                               16

				
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posted:3/26/2011
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