Minutes of Legal Strategy Meeting to Halt Foreclosures

Legal Strategy Meeting to Halt Foreclosures and Related Auctions and Evictions

May 16, 2012, at MEDA office in San Francisco

Link: PDF for printing

Duration: 2 hours, 11am – 1pm

Attending:

  • C.J. Holmes
  • Colin Davis
  • Dave Crow
  • Deepa Varma
  • Jose Luis Rodriguez
  • Selwyn Whitehead
  • Sheila
  • Stardust (facilitator)

Minutes:

  1. Introductions (5 minutes)
  2. Overview of Current Housing Crisis (5 minutes)
    Comments from CJ Holmes and Jose Luis Rodriguez
    California is a non-judicial (for almost all foreclosures currently) and judicial state
    Idea of affidavit of authority
    Deed of trust with power of sales clauses: consumers give away rights to judicial process
    Lenders don’t currently offer loans without power of sale clause
  3. Overview of Current Foreclosure and Related Law (20 minutes)
    • U.S. Law
      Protecting Tenants in Foreclosure Act
      Real Estate Settlement Procedures Act
      Truth in Lending Act (applies when new buyer)
      U.S. Bankruptcy Code (stops all foreclosure and other actions once in bankruptcy, lenders misappropriating trustee funds, trustee represents unsecured creditors, trustee works for Department of Justice)
      (Attorney General settlement)
    • California Law
      California Civil Code 2924: foreclosure
      2932, 2936: substitution of trustees, assignments
      (Nevada changed law for filing false documents with person signing getting felony penalty)
      California Code of Civil Procedure 1161 for tenants
      California Code of Civil Procedure 1161A for homeowners
      California gives very few rights on unlawful detainers
      California 1812.601-609: auctioneers
      California 827: 60-day notice law for tenants if in possession over a year
      California 2936: right to the security
      Discussion of loan modifications and bankruptcies
      Constitution 4th amendment: protection from seizure without oath or affidavit (people may sign away rights to real property)
    • San Francisco Law
      Article 12 and 12-C
      San Francisco Rent Ordinance
  4. Pending Legislation (10 minutes)
    • U.S. Congress
      Boxer Bill: Homeowner Refinance Act
      Feinstein Bill
    • California
      Homeowner Bill of Rights:
      AB 1602 / SB 1470: affidavit law
      AB 2425 / SB 1471: due process
      AB 2314 / SB 1472: blight prevention
      AB 2610 / SB 1473: tenant protection
      AB 1950
      AB 1763 / SB 1474: AG grand jury
    • San Francisco
      Avalos proposal to treat foreclosed homeowners as renters
      Avalos ballot measure to close foreclosure tax loophole
  5. Litigation Theories (20 minutes)
    If homeowner wants to sue, burden of proof is on them. Judges have for years imposed burden of a bond to get into court, for example monthly amount similar to mortgage payment into escrow.

    Cause of auction in federal court may not require bond.

    Breach of civil code or assignment is fraudulent or didn’t give notice of default or dispute of default or dispute over modification or noticing procedures all require bond.

    California Appellate court (email Colin for info) might not have to post bond.

    Those who can post a bond and get competent counsel.

    Foreclosing banks are almost always assignees, like trustees for a securitized trust

    Tactic 1: Break apart the assignment

    If assignment of deed of trust is fraudulent, judge will ask for a cause of action for quiet title (clearing all issues with title) or declaratory relief. People have been litigating on fraudulent assignments for several years, but Appellate court now says that requirement for assignment only applies to mortgage not to deeds of trust. The assignment could be filed and be fraudulent, but since it is no longer required for a trustee sale, it is not a legal cause for action. MERS challenges are not easy in this situation.

    Tactic 2: Break apart substitution of trustee

    If substitution is false, then could not foreclose. Have to prove everything alleged without being a party of MERS, so discovery process is difficult. Some appellate case law on segregating the note from the deed of trust in non-MERS cases.

    Tactic 3: Predatory lending

    Examples: cheated on application, stated income, said could refinance, elderly and/or on fixed pensions, didn’t disclose balloon payment, variable interest rates, etc. Broker breach of fiduciary duty. Signing of documents in a non-native language. Generally fails, except in some cases with language issues. Remedies: damages, foreclosed loan modification, RESPA (if within 3 days to 3 years after origination if breach of code). Possibility of down payment refund as a remedy? HERA has had some success on “statute of repose” argument, “equitable tolling”. Bankruptcy courts can tear up contracts. Bankruptcy judges have a 14-year appointment, so conscious about pushing the law.

    Tactic 4: Bankruptcies

    Gateway to litigation while keeping homeowner in house. Incentive for banks to do modifications and shows judges that homeowners can dependably make payments at 31% of gross income. Building up a war chest of funds for litigation. Violations of rules during bankruptcies: paying property taxes, etc. Even if litigation fails, they pay “rent” to stay in home and discharge other debts.

    Tactic 5: MERS Challenges

    All failed. No disclosures about who sponsors, etc. are, so they are off record and invented MERS system. Original lender is MERS agent and everyone in banking is a MERS agent. When note passes from one MERS agent to the next, it is an in-house transfer. “Milestones” are supposed to show chain of transfer, but records are incomplete since there is no enforcement to enter “milestones”. Several years ago, some successes in other states since MERS was doing foreclosures in their own name. MERS stopped doing foreclosures in their own name in California or elsewhere. Now a fictitious assignee does it, so tried to challenge it, but no law to produce the note. In some states, MERS can no longer assign either.

    Tactic 6: Class Actions?

    Beals v B of A

    Depends on stage at which case is being fought: pre-foreclosure or during foreclosure or eviction. Also requires deep pockets, so discriminates against low-income folks. Bankruptcies helpful in getting a reasonable loan modification to make it possible to have cash to litigate.

  6. Strategy Brainstorming (30 minutes)

    Need multiple strategies on many levels.

    Law students can do research.

    Make banks spend lots of money whenever possible.

    a. Notices of Sale Must be Unconditional Notices to Pay? Not negotiable instruments under law. Loophole may or may not work in litigation.

    b. Get homes back at auction? Gag order.

    c. Go after trustee companies and robo-signers.

    d. Go after attorneys filing fraudulent documents: Bar Association complaints.

    e. Lawsuits for malicious prosecutions.

    f. California auction bond requirement

    g. Civil Code: cancellation of instruments. Any interested party can go to court to cancel an instrument (and possibly subsequent instruments based on it) if it’s fraudulent. Have to show that language is untrue, since has to be “duly acknowledged”. Simple, cheap complaint.

  7. Legal Support for Foreclosure/Auction/Eviction Activists (10 minutes)
    Didn’t make it to this agenda item.
  8. Followup Tasks (20 minutes)

San Francisco Board of Supervisors Unanimously Passes Foreclosure Moratorium Resolution

The San Francisco Board of Supervisors on April 10 voted unanimously to pass a resolution calling for “support for state and federal measures to protect homeowners and suspension of foreclosure activities in San Francisco”. The resolution supports the Homeowner Bill of Rights legislation before the state legislature and urges city and county officials and departments to protect homeowners from unlawful foreclosures. The resolution also urges all mortgage and banking institutions to suspend foreclosure activities and related auctions and evictions until state and federal measures to protect homeowners from unfair and unlawful practices, as well as provisions for principal reductions, are in place.

Link: More info and photos

Foreclosure Fighter Forum

Please join us for this presentation and training for renters and homeowners facing eviction, foreclosure, or foreclosure auction. Anyone in support of the Occupy movement is welcome to attend.

When: March 31, 2012 1:00 pm – 3:00 pm

Where: Sports Basement, Grotto Room 1590 Bryant St San Francisco CA, 94103 USA

Contact: Becca Gourevitch becca@sftu.org