February 29, 2016.
To All SLG Clients and Affiliates.
From: Spencer Scheer
Subject: Client Alert: From the Scheer Law Group: Foreclosure Appellate Decisions Heating up. The Orcilla v. Big Sur, Inc., Case is of Extreme Concern.
In Orcilla v. Big Sur, Inc., No. H040021, 2016 WL 542922 (Cal. Ct. App. Feb. 11, 2016), The Court allowed the borrower/appellants to assert an action to equitably rescind a foreclosure sale and held that: If the facts and circumstances surrounding the origination of the loan are unconscionable it can lead to a challenge to the enforcement of the loan including rescinding a foreclosure sale to a BFP. The greater the degree of unconscionability the greater the scrutiny into the right to enforce the loan. This case has far-ranging implications on the finality of foreclosure sales and BFP rights.
Consider what this means: The particular facts of this case drove the result (non-English speaking borrowers with little education, signing loan documents in English with relatively bad terms). However, the rationale for the case “tramples” other areas of law and imposes quasi-fiduciary duties on a lender to ensure that the borrower is not misled or taken advantage of. In essence, under the ruling of this case, If a judge finds your loan terms are not fair, he or she can allow a borrower to challenge any default/collection actions you take, including challenging a completed foreclosure sale.
To make sure that you really can’t’ sleep at night, the court went even further and found that the rights to challenge a loan that is unfair extends to “trump” a foreclosure sale where there is a BFP who purchases at the sale. While the Court in this case allowed the BFP to evict the borrower because it had obtained a UD judgment, it found that the rights allowed to a BFP do not supersede the borrower’s rights to challenge the foreclosure. This will add further uncertainty to foreclosure sale and the willingness of title companies to insure, if the case is not overturned or ignored in jurisdictions outside of the one issuing the opinion.
This case has ramifications that are just as far-ranging and disruptive as the recent California Supreme Court holding in the Yvanova v. New Century Mortgage Corp, et al., Docket No. S218973 (CA Supreme Court February 18, 2016.
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