February 15, 2013
To: SLG Clients and Affiliates:
From : Spencer Scheer
Re: First known SB 900 Published Case
Most Lenders/Servicers are “holding their collective breath”, waiting to see the legislative and litigation climate that will result from the passage of SB 900 (California Homeowners Bill of Rights). SLG has already received a SB 900 lawsuit filed by a firm that looks like it has set up an “assembly line” to file complaints under the statute.
Four days ago, the first known published case giving an advisory interpretation of Lender duties under SB 900 was issued in the case of: Jolley v. Chase Home Finance, LLC, 2013 Cal. App. LEXIS 107, 62-63 (Cal. App. 1st Dist. Feb. 11, 2013). The Jolley case decides rights under pre SB 900 law. However, this is a California Court of Appeal and it could not resist the urge to give its opinion on how it might rule under SB 900, and to cite the enhanced duties that Lenders will owe under the statute. The following language by the Court is instructive and enlightening on how courts in California are likely to view the obligations of Lenders when handling loan modification requests made by borrowers on covered loans:
“We also understand there is no express duty on a lender’s part to grant a modification under state or federal loan modification statutes. And until the new legislation takes effect, no private right of action for damages is granted under the statutes (citations omitted)… We do not cite any of these legislative measures in reliance upon their provisions, nor do we suggest their provisions were violated in the present case. Rather, we refer to the existence—and recent strengthening—of these legislative measures because they demonstrate a rising trend to require [*63] lenders to deal reasonably with borrowers in default to try to effectuate a workable loan modification. In short, these measures indicate that HN16courts should not rely mechanically on the “general rule” that lenders owe no duty of care to their borrowers.
…Existing state statutes relating to loan modifications will soon be supplemented by stiffer restrictions on the conduct of lenders and loan servicers during the loan modification process. Even as this case has been pending before us, on July 2, 2012, the California Legislature passed Assembly Bill No. 278 and Senate Bill No. 900, which have since been signed into law by the Governor. These provisions address more pointedly the foreclosure crisis in our state through even greater encouragement to lenders and loan servicers to engage in good faith loan modification efforts”.
SLG urges its Clients, and all lender/servicers to understand the requirements of the statute and to develop and implement effective policies and procedures to comply with statutory requirements mandated under SB 900. Doing so will reduce law suits and will aid in defense of both real and meritless claims that will inevitably be brought by borrowers counsel. If this Court of Appeal in the Jolley case is any indication of how CA courts will interpret SB 900, it is clear that, the “shoe may now be on the other foot” in demonstrating whether a borrower is entitled to a loan modification.
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