Latest ruling on Civil Code 2923.5

26 Feb

B. Perata Mortgage Relief Act, Cal. Civ. Code § 2923.5

Plaintiffs’ second cause of action arises under the Perata Mortgage Relief Act, Cal. Civ. Code § 2923.5. Plaintiffs argue U.S. Bank is liable for monetary damages under this provision because it “failed and refused to explore” “alternatives to the drastic remedy of foreclosure, such as loan modifications” before initiating foreclosure proceedings. (FAC PP 17-18.) Furthermore, Plaintiffs allege U.S. Bank violated Cal. Civ. Code § 2923.5(c) by failing to include with the notice of sale a declaration that it contacted the borrower to explore such options. (Opp’n at 6.)

Section 2923.5(a)(2) requires a “mortgagee, beneficiary or authorized agent” to “contact the borrower in person or by telephone in order to assess the borrower’s [*1166] financial situation and explore options for the borrower to avoid foreclosure.” For a lender which had recorded a notice of default prior to the effective date of the statute, as is the case here, § 2923.5(c) imposes a duty to attempt to negotiate with a borrower before recording a notice of sale. These provisions cover loans initiated between January 1, 2003 and December 31, 2007. Cal. Civ. Code § 2923.5(h)(3), (i).

U.S. Bank’s primary argument is that Plaintiffs’ claim should be dismissed because neither § 2923.5 nor its legislative history clearly indicate an intent to create a private right of action. (Mot. at 8.) Plaintiffs counter that such a conclusion is unsupported by the legislative history; the California legislature would not have enacted this “urgency” legislation, intended to curb high foreclosure rates in the state, without any accompanying enforcement mechanism. (Opp’n at 5.) The court agrees with Plaintiffs. While the Ninth Circuit has yet to address this issue, the court found no decision from this circuit [**15] where a § 2923.5 claim had been dismissed on the basis advanced by U.S. Bank. See, e.g. Gentsch v. Ownit Mortgage Solutions Inc., 2009 U.S. Dist. LEXIS 45163, 2009 WL 1390843, at *6 (E.D. Cal., May 14, 2009)(addressing merits of claim); Lee v. First Franklin Fin. Corp., 2009 U.S. Dist. LEXIS 44461, 2009 WL 1371740, at *1 (E.D. Cal., May 15, 2009) (addressing evidentiary support for claim).

On the other hand, the statute does not require a lender to actually modify a defaulting borrower’s loan but rather requires only contacts or attempted contacts in a good faith effort to prevent foreclosure. Cal. Civ. Code § 2923.5(a)(2). Plaintiffs allege only that U.S. Bank “failed and refused to explore such alternatives” but do not allege whether they were contacted or not. (FAC P 18.) Plaintiffs’ use of the phrase “refused to explore,” combined with the “Declaration of Compliance” accompanying the Notice of Trustee’s Sale, imply Plaintiffs were contacted as required by the statute. (Doc. No. 7-2, Exh. 4 at 3.) Because Plaintiffs have failed to state a claim under Cal. Civ. Code § 2923.5, U.S. Bank’s motion to dismiss is granted. Plaintiffs’ claim is dismissed without prejudice.

10 Responses to “Latest ruling on Civil Code 2923.5”

  1. Gary at 12:49 pm #

    While we read in the news that homeowners in foreclosure are shooting people at their mortgage lenders offices. You would think filing a law suit would be better than going to jail for murder because a lender did fraud upon you.

  2. David W. Brown at 8:31 pm #

    To date (March 10, 2010), this is the only reported decision to be published in the Federal Supplement (the cite is Ortiz v. Accredited Home Lenders, Inc., 639 F.Supp.2d 1159 (S.D. Cal., 7/13/2009)), holding that California Civil Code section 2923.5 does create a private right of action under California law, where a lender fails to comply with its terms. There are no published state-court appellate case decisions on this point. However, in Keen v. American Home Mortgage Servicing, Inc., 664 F.Supp.2d 1086 (E.D. Cal., 10/21/2009), the court held that absent an allegation of a tender, by the borrower, of the security, a plaintiff failed to state a claim on which relief can be granted.

  3. brian davies at 5:27 am #


    Any update on this case or any others with 2923.5

    • Elyse Del Francia-Goodwin at 9:22 am #

      I have a suit filed in INdio, as you, and I copied as many pages as I could afford (50 cents a page!) on your case, as it is much like mine.

      In reading some of the cases, I am shocked that the Courts are not moving towards some other manner of hearing the hundreds of cases filed in the Indio Courts? I heard something about cases in Orange County being directed to some other venue because the case loads are overwhelming with foreclosre issues and homeowners fighting back, Pro Per….

      My question is:
      Are you preparing all the motions on your own or is there an Attorney here in the desert who is “getting it” and directing your motions and responses?

      If so, can you give me their name?
      Thank You,
      (760) 770-6611

      • timothymccandless at 5:26 pm #

        We are working in the desert from our San Bernardino office 909-890-9192

  4. Jim Jordan, Esq. at 7:00 pm #

    The judges in LA Superior Court are granting TRO’s and Prel. Injunctions based on violations of CC 2923.5, period! A closer question is still in the ozone, to wit, if a declaration is present….does it satisfy the requirements of the Evidence Code sec 701-702? We have been urging the courts and counsel to consider this as the next consumer based argument for TRO….since 1. The declarations proffered are usually a check box, boilerplate, junk recitation of facts by someone having absolutely NO personal knowledge of any of the necessary facts to support a non-judicial foreclosure. We think this approach will work as well since the courts are well aware of the need for competence of witnesses.
    Good luck all defenders of the homeowners. We can be reached at 818.453.3585.

  5. Rob at 9:13 pm #

    Tim your words have inspired me. I have not made a payment since 2007 on any of my properties and I still own them. There is hope. I intend to save my properties and pay the banks today’s value and interest rate just like if they took them from me and sold them to someone else. I have a sale date of May 19, 2010 on a Notice of Default recorded on April 9, 2008. The boiler plate 2923.5 Declaration attached to the Notice of Trustee’s Sale has 3 boxes checked Box #1that they contacted me prior to the Notice of Sale pursuant 2923.5(a)(2) on April 10 2008
    ( The day after recording) Box 2 conversely claims that they could not contact me prior to recording so sent me a letter after recording pursuant 2923.5(g)(3) Dated January 22, 2008 (two and a half months prior to recording) and finally box #5 is checked which claims that a Bankruptcy has not been finalized so they are excused pursuant 2923.5(h)(3) it contains handwritten notes indicating;” Filed Chapter 13 09-02-08 dismissed 10-03-08″ (seems pretty final to me) the above Civil Codes were added on July 8, 2008. The Declaration is Dated January 9, 2009 and Notice of Sale Dated April 19, 2010. Alameda County


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