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.
Continue Reading...Court of Appeal Addresses Issues in Foreclosure Litigation
In what may be the leading edge of a wave of litigation related to foreclosures, in FDIC v. Dintino, the California Court of Appeal last week issued an opinion addressing statutes of limitations and attorney's fees related to an IndyMac (FDIC) foreclosure.
In Dintino, IndyMac sued borrower to foreclose on a mortgage, alleging breach of contract, money lent, and unjust enrichment. Borrower raised affirmative defenses based on the statute of limitations, the antideficiency statutes (Code of Civil Procedure §580 et seq.) and the doctrine of unclean hands. Both parties moved for summary judgment. The trial court denied IndyMac's motion for summary judgment and granted, in part, borrower's motion for summary adjudication, holding IndyMac's breach of contract cause of action was barred by the One Action Rule (Code of Civil Procedure §726 et seq.). The trial court rejected borrower's statute of limitations argument, holding IndyMac's unjust enrichment cause of action was not barred by the applicable statute of limitations (Code of Civil Procedure § 337).
The parties stipulated to a bench trial, after which the trial court entered judgment for IndyMac. Borrower moved to recover attorney's fees incurred in the defense of the breach of contract cause of action. The trial court denied the motion. Borrower appealed the partial denial of his motion for summary judgment and the denial of his motion for attorney's fees.
Continue Reading...New Mortgage Laws in California
After California's budget standoff backed up nearly 850 bills on his desk, Governor Schwarzenegger is furiously signing significant legislation that will affect the California mortgage market. Last week, the Governor signed 10 bills into law related to mortgage and housing finance regulation:
SB1461 requires real estate agents to disclose their license number on all first point of contact marketing materials and property purchases beginning July 1, 2009;
SB1737 authorizes the Department of Real Estate to suspend or bar a person who has committed a violation of the Real Estate Law if the suspension or bar is in the best interest of the public;
AB69 mandates that all mortgage loan servicers report specific, detailed data to their licensing agency concerning loan modifications;
AB180 provides a registration and bonding process for foreclosure consultants and prohibits a foreclosure consultant from entering into an agreement to assist an owner in arranging the release of surplus funds after the trustee's sale is conducted;
SB870 allows the California Housing Finance Agency to more quickly establish a mortgage refinance program;
SB1065 includes the refinancing of home mortgages in the criteria for a city or county-administered home financing program;
SB1055 allows taxpayers to exclude the forgiven mortgage debt from their incomes for state income tax purposes which brings the state in compliance with federal law;
SB1604 requires that any private insurance policy maintained by an escrow agent be applied as primary coverage in the event of a loss covered by both the private insurance and the Escrow Agents Fidelity Corporation;
SB1675 provides the California Department of Veterans Affairs with the discretion to structure the terms and conditions of any authorized debt issuance; and
AB2454 would increase potential recovery for harmed consumers applying for Recovery Account payments filed on or after January 1, 2009, to $50,000 for any one transaction and $250,000 for any one licensee.
Details on the "Emergency Economic Stabilization Act"
Congressional leaders and the administration announced agreement this evening on the Troubled Asset Relief Program, reborn as the expanded "Emergency Economic Stabilization Act of 2008." House Speaker Nancy Pelosi issued a statement detailing the agreement. Congressional leadership also released a section-by-section analysis of the proposed legislation and the full text of the bill. The American Bankers Association has posted its reactions and resources, including detailed analysis of versions of the proposed legislation.
A vote on the bill could come as early as Monday.
(No) Agreement on "Troubled Asset Relief Program"?
The administration and the Congress reached preliminary agreement on the "Troubled Asset Relief Program," a massive program that would provide up to $700 billion in increments for the U.S. government to purchase and manage portfolios of troubled asset-backed securities from financial institutions. After several days of testimony in the House and the Senate followed by a presidential address, the administration's proposed program changed substantially in negotiations and emerged as an "Agreement on Principles" today. Late in the day talks stalled and the agreement was called into question.
Continue Reading...Treasury Details its Fannie/Freddie Conservatorship
Less than two months after receiving congressional authority for increased control over Fannie Mae and Freddie Mac, the Treasury Department today released details about its plan to place Fannie and Freddie under federal government conservatorship.
The Treasury Department's fact sheet includes information related to the appointment of James Lockhart, Director of the newly-created Federal Housing Finance Agency ("FHFA"), as conservator for Fannie and Freddie for an indefinite duration. FHFA also issued a statement about the plan.
In addition to the appointment of a conservator, the Treasury plan has four parts: (1) Fannie and Freddie will "modestly increase" their mortgage-backed securities portfolios through the end of 2009; (2) Treasury and FHFA have entered Preferred Stock Purchase Agreements for Fannie and Freddie stock; (3) Treasury will establish a new secured lending credit facility, which will be available to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; and (4) Treasury is initiating a temporary program to purchase Fannie and Freddie mortgage-backed securities.
A Closer Look at the Housing Bill's "HOPE"
The new insured mortgages cannot exceed 90% of the home's value (determined by a new independent appraisal), which means participating lenders must absorb any deficiency for mortgage borrowers who are underwater on current loans. Lenders also must waive all "penalties for prepayment or refinancing of the eligible mortgage, and all fees and penalties related to default or delinquency on the eligible mortgage." The new loan would extinguish any subordinate liens.
Continue Reading...
Sweeping Housing Bill Expected to Become Law
President Bush recently signaled that he will sign the Housing and Economic Recovery Act of 2008, H.R. 3221, which passed the Senate on July 26, 2008 after passing the House last week. Among other things, the massive aid package, aimed at shoring up the troubled housing market, includes $300 billion for homeowners to refinance their mortgages into government-backed loans through the Federal Housing Administration. An estimated 2.5 million households are facing possible foreclosures this year.
The bill also provides emergency financing capacity for mortgage titans Fannie Mae and Freddie Mac, two government-sponsored enterprises which own or guarantee nearly half the nation’s $12 trillion in outstanding home mortgage debt. The bill also creates a new regulator with expanded authority to oversee the two mortgage giants.
The final version of the bill also includes hotly contested provisions for a new low income housing tax credit, new tax exempt bonds for housing, and a new housing trust fund.
Your Scorecard For New Laws and Regulations
California law
• Mortgages: new foreclosure procedures are now law in Civil Code §§2923.5, 2923.6 and 2929.3 and Code of Civil Procedure §1161b.
Federal law
• Credit Cards: the 2008 Credit and Debit Card Receipt Clarification Act, now law, clairifies the Fair and Accurate Credit Transactions Act of 2003;
• Credit Cards and Deposit Accounts: "unfair or deceptive acts or practices" are refined and redefined in revisions to Regulation AA, revisions to Regulation DD, and revisions to Regulation Z;
• Mortgages: Regulation X would get a makeover in HUD's proposed rule amending the Real Estate Settlement Procedures Act;
• Arbitration: the proposed "Arbitration Fairness Act of 2007" would slice and dice the Federal Arbitration Act; the "Automobile Arbitration Fairness Act of 2008," would eviscerate pre-dispute arbitration provisions in auto sales or lease contracts.
Fed Issues Final Version of New Mortgage Rule
The new rule, most provisions of which will be effective October 1, 2009, creates a new category of mortgage loans called "higher-priced loans" (determined by reference to an index published by the Fed) to target subprime mortgages. The rule also contains additional regulations applicable to all mortgages.
Continue Reading...
Comment Period Closes on HUD's RESPA Reform Rule
The new rule would significantly amend Regulation X provisions regarding required mortgage disclosures and related mortgage loan settlement procedures:
- requiring a new standardized Good Faith Estimate form intended to make loan comparisons easier, to simplify the summary of loan terms and charges, and to provide more accurate estimates of costs for settlement services;
- requiring additional detailed disclosures of yield spread premiums;
- requiring a revised HUD-1 Settlement Statement form;
- requiring a particular "closing script" to be read to and provided to borrowers at closing, which would vary depending on the terms of the mortgage (see, e.g., a fixed interest rate closing script).
New Law Changes California Mortgage Foreclosure Rules
Among other significant changes, the new law amends the Civil Code procedures that must be followed before a lender can issue a notice of default or notice of trustee sale in connection with residential mortgage loans made from January 1, 2003 to December 31, 2007 for owner-occupied residences. The new law also imposes civil penalties up to $1,000 per day for lenders who fail to maintain foreclosed properties and gives tenants 60 days to vacate property sold in foreclosure.
New Mortgage Foreclosure Rules Expected to Become Law
The final version of the California Senate Bill SB 1137 passed the Senate on July 2 after passing the California assembly in late June.
