SB 900: There is Good News and Bad News: The Lawsuits Keep Coming, but Courts are Reluctant to Support Questionable Claims

SB 900: There is Good News and Bad News: The Lawsuits Keep Coming, but Courts are Reluctant to Support Questionable Claims.

By Spencer Scheer: May 7, 2013.

Clearly, SB 900/A.B. 278 (effective 1.1.13) spells trouble for lenders, and gives borrowers expanded tools to challenge lender/servicer/trustee conduct in loan modification and foreclosure disputes. However, initial response (as gauged by some of the first court decisions issued) does not reflect a complete “swing of the pendulum” to borrower rights.
It is still early in the process and there are no appellate decisions that govern. However, the following give some preliminary indication of what Courts looking at SB 900 claims are thinking. In essence, while borrowers have more tools, it appears that the Courts are going to be reluctant to further “open the floodgates” and use SB 900 to justify unsubstantiated claims, even in spite of the recent groundswell for borrower foreclosure protections:

• Post SB 900 CA case Denying an Injunction for Alleged SB 900 “Show me the Note” Violations: Nardico v. J P Morgan Chase & Co., 2013 U.S. Dist. LEXIS 63194 (N.D. Cal. May 2, 2013). Plaintiff generally alleged that the foreclosing lender never acquired an assignment of the loan from the originating lender and that Plaintiff’s loan was part of a securitized loan pool that was established before the purchase of the lender’s assets by the foreclosing lender. Plaintiff cited SB 900 provisions (Cal. Civ. Code §2924 (a)(6)), requiring that a foreclosing entity establish that it owns the note or is authorized by the current holder to foreclose, to support a request for issuance of an injunction to stop the foreclosure sale. The Court rejected “show me the note” claims (requirement that the lenders show possession of the original note) as a prerequisite to foreclose, cited cases that previously rejected such claims. The Court upheld the right to foreclose on loans that have been “securitized” and assigned to a loan pool, and denied the request for an injunction.

Note: While the lender also argued that SB 900 should not be applied retroactively to the facts of this case, the Court did not specifically rule on the argument.

• SB 900 Provisions not to be Applied Retroactively: See Guglielmelli v. Wells Fargo Bank, N.A., 2013 U.S. Dist. LEXIS 43063 (C.D. Cal. Mar. 26, 2013) denying a request for injunction because of this fact; See: McGough v. Wells Fargo Bank, N.A., 2012 U.S. Dist. LEXIS 151737 (N.D. Cal. Oct. 22, 2012) (dicta, in footnote 4).
• Post SB 900 Case Imposing an Injunction for Alleged Dual Tracking: Singh v. Bank of Am., N.A., 2013 U.S. Dist. LEXIS 63127 (E.D. Cal. May 1, 2013). Plaintiff alleged SB 900 violations pursuant to Cal. Civ. Code § 2923.6, asserting that the Lender recorded an NOTS while he had a complete loan modification application pending and did not respond to his loan modification request. The Court granted a TRO.

Please contact Spencer Scheer if you have any questions.