Forbearance of Foreclosure is Within the Statute of Frauds
In Secrest v. Security National Mortgage Loan Trust 2002-2, the Fourth District California Court of Appeal held that an agreement to forbear foreclosure comes within the statute of frauds.
In Secrest, plaintiff borrowers filed suit to enjoin foreclosure proceedings initiated by defendant lenders. Borrowers alleged that lenders' predecessors in interest had entered into an agreement to forbear foreclosure based on certain conditions. Borrowers had in fact made two such agreements, one in 2001 and one in 2002, each of which included a lump sum payment and timely payments on the note securing the deed of trust. Lenders asserted that the forbearance agreement was unenforceable under California's statute of frauds (Civil Code §1624) because lenders did not sign it. The trial court held that the forbearance agreement was unenforceable, and borrowers appealed.
On appeal, borrowers argued that the forbearance agreement was enforceable and that lenders were estopped from asserting the statute of frauds because borrowers had partly performed on the forbearance agreement by making a lump sum payment.
The Court of Appeal disagreed, holding that an agreement to forbear foreclosure falls within the statute of frauds because it constitutes a modification of the note and deed of trust, which fall within the statute of frauds. (Civil Code §§1624, 1628.) Here, because lenders, the "party to be charged" under the statute of frauds, had not signed the forbearance agreement, it was unenforceable. Significantly, the Court noted that one widely cited California law treatise incorrectly suggests that an agreement to forbear foreclosure is enforceable without a writing signed by both parties.
The Court also rejected borrowers' estoppel argument, holding that "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..." because it is not sufficient to show a change of position in reliance on the agreement.
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Perhaps an interesting note, not disclosed in this well written piece, is the irony of the Court's decision that the 2002 agreement was unenforceable because it was unsigned. This decision mandated that the 2001 (also unsigned) agreement was enforceable. Arguably, this was in direct contradiction with their simultaneous decision that to be enforceable an agreement must be signed.
What stands in the shadows is the much larger issue, I only want an accounting of my loan payments and charges to my account. I have demanded an accounting of my home loan since 1999 when a $40,000.00 error was made one of the four times it was sold.
Unfortunately, California foreclosure laws are simple, file a Notice of Default, wait 90 days, post a Notice of Trustee Sale and sell the property in 21 days. If a mistake is made in your loan, as was in my case, your choices are, pay the $40,000.00, lose your home or sign a forbearance agreement(s). A forbearance agreement is nothing more than a "ransom note"; you do not have to agree with it, you only have to pay the the first installment of what will never end and wait for the promised release of your "loved one" or, in our situation "the accounting that will straighten out everything".
Don't even think about any "protection" under 12 USC Section 2605 or a Qualified Written Requests under RESPA Section 6, or the Cranston-Gonzolas Act in California, they do not have to produce anything. The maximum fine, if convicted, is $1,000.00.
When all of the above failed, I filed a lawsuit for the accounting and the loan servicer, under penalty of perjury stated, "All records prior to 2001 were lost". Interestingly, six months prior, they had sent me those "lost records" from the same company logo/phone number stamped, fax machine that they now send the declaration from the "Person Most Knowledgeable" the "lost" declaration.
I never wanted to challenge the veracity of a 1677 English law, I only wanted to correct a 10 year old accounting error. My loan with GE Capital was fine, when it was sold to Wilshire and then OCWEN and later to SN my troubles were endless. Run a Google search on law suits against Wilshire or OCWEN and see what comes up. I am only a small part of what is really happening and will increase dramatically in the next few years.
The facts are simple, both the Superior Court and the Appellate Court should have said, if the Statute of Frauds did apply, Neither Agreement was enforceable. Do a loan audit based upon the Note. Amazingly, when I first filed the action in 2005, I had hired Loantech from the Washington DC area to audit my loan, their findings were crystal clear, I was right. The judge over ruled all objections to the findings of Loantech and then the case turned down the long road of the Statute of Frauds. You may also ask yourself, "Why would a loan servicer spend hundreds of thousands of dollars trying to avoid the audit of one of their loans? Do you think they have something to hide?
This case is now if front of The California Supreme Court, hopefully they will set the record straight and put some teeth into the rights of the borrowers in demanding that mistakes in their loans be corrected or appropriate fines be levied. If not we will remain with the same, the loan servicer "may" get fined $1,000.00 or the borrower will lose their home. Where is the fairness in the law?