California Civil Code 2924What Do You Owe and to Whom Do You Owe It?

Posted by Foreclosure Fraud on June 8, 2010 · 6 Comments By George W. Mantor

RISMEDIA, June 8, 2010—“Produce the Note” foreclosure defense strategies have given some people hope, albeit
false in many cases, in defending their homes against unlawful foreclosures.

Note that in 30 states there is no judicial review of the foreclosure documentation and no opportunity to raise the
issue of standing unless the homeowner sues the foreclosing entity. Few people have the resources to wage a lengthy
battle against the best attorneys tax payer’s money can buy.

And, in that handful of cases in California, one of the nonjudicial states, where the homeowners have fought back,
courts have been dismissing those lawsuits ruling that the nonjudicial foreclosure statutes, the infamous 2924,
occupy the field and are exclusive as long as they are complied with.

But, because there is no review, foreclosing entities routinely violate those requirements without any fear of being
challenged. Time and time again, we find that the foreclosing entities do not even bother to notify the homeowner
until the foreclosure has already taken place.

And then, it is almost too late. As a last-ditch effort, the homeowner litigates to stop the issuance of an unlawful
detainer and ultimate eviction.

At this point, the court will not entertain any objections as to standing or predatory lending or other issues. Judges
simply cite 2924 and order the eviction.

These courts view the statutes that regulate nonjudicial foreclosures as all inclusive of all the requirements and
remedies in foreclosure proceedings.

Indeed, California Civil Code sections 2924 through 2924k provide a comprehensive framework for the regulation of
a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust.

Thus, in the case where a notice of default is recorded and a lawsuit then filed in response to stop the foreclosure,
based upon the objection that the foreclosing party does not possess the underlying note, all too often the Court will
simply dismiss the case and claim “2924 has no requirement to produce the note.”

The lynchpin of that legal theory is that the borrower agreed to an obligation, defaulted, the remedy is foreclosure,
and that is the law. The note isn’t needed.

That is a dead end. The note is not the end game. They may even have the note with all the proper endorsements and
a clear and demonstrable chain of title, they may not. If they have it, they may not produce it, even under penalty of
sanctions.

Even if they produce it, they still have to deal with your predatory lending claims, and for that, a full accounting of
all moneys paid in connection with the loan, including any insurance or TARP funds should be produced in
discovery. The full accounting would reveal evidence of predatory lending or servicing for which penalties can be
substantial.

We aren’t looking for the note; we are looking for the creditor. The person to whom the obligation, if there is one, is
actually owed and the only party who would have standing to bring the foreclosure or to appear in court to answer
questions regarding TILA, RESPA, HOEPA, and or a host of other provable allegations that show either origination
fraud, servicing fraud, or both.
Your suit needs to lead off with something more substantial than a confusing paper trail attempting to show that they
don’t have the right to foreclose. It’s true, but right now, at least, that isn’t working in many courts. That will all
come out in the discovery process if the suit survives 2924 and there is no settlement between the parties.

The meat and the muscle of your case are predatory lending or predatory loan servicing, an increasingly prevalent
form of unlawful foreclosure.

Why? Because your loan, by its very terms, may have been designed to fail and you were either steered into the loan,
given no other options, promised a refinance, or just blindsided at the signing table. If you had a 750 FICO, for
example, and you didn’t get a great thirty year fixed rate loan, you may have been the victim of predatory lending. If
you got a 2-28 adjustable or a 3-36 or a pick a pay, or an option arm, you may have been the victim of predatory
lending.

If you got your loan in the last few years, there is a strong possibility that it was pledged as part of a pool of loans
with a large percentage of loan instruments with terms that the underwriters knew would contribute to a high
probability of default.

This would make it a virtual certainty that the entire pool would surpass the default threshold established in the
Pooling and Servicing Agreement, and the Credit Default Swaps would reap big rewards for the banks.

But, it would also mean that losses were covered and that these were the very pools that would be eligible for TARP
funds to also offset the loss.

You may have been the victim of high-tech identity theft if your Social Security Number and credit report were used
to legitimize and to showcase the quality of the pool…which was probably loaded with loans designed to fail.

You may be the victim of servicing fraud wherein the servicer falsely states that you haven’t insurance, didn’t pay
your property taxes, or missed your payment, and then uses this to extract fees and penalties, and default the loan.

You may be the victim of servicing fraud if you were told that to be eligible for a modification you had to be behind
in your payments and your credit was damaged as a result. Or, your home was foreclosed with no notice while you
were supposedly awaiting approval of your modification.

It is these matters that you wish to address and the pretender lender will quickly tell you that it isn’t them.
Particularly, if it is MERS. MERS abets predatory lending and is thus one of the main pillars of loan securitization. It
removes the transparency as to the identities of those who would have liability for these claims.

MERS was created so that more predatory loans could be placed in pools without increasing the liability of predatory
lending claims for its members.

So, if the foreclosing entity isn’t the creditor, who is? Possibly, no one. But, if anyone knows, it should be MERS.
That is what they do. They should not be able to object to this discovery as being vague, overly burdensome, beyond
the scope of the matter, etc.

Lawyers are pulling a fast one on the court, and with a wink and a nod, the judges play along with the 2924 and its
supposed total exclusivity.

But, just because the lawyers say so, doesn’t make it so. Lawyers are kind of like magicians, they want you to look in
one direction so you won’t see the deception. They pound the laws and facts that help them to distract the opposition
from the laws and facts that would hurt them.

As the courts are currently allowing the application of the law, the consequences are a complete denial of due
process. Surely, no one can argue that 2924 was intended to sanction fraud or to abet a crime in progress.

Just the opposite. The law’s very purposes include protection for both the debtor and the creditor.
The three stated purposes of 2924 are: “(1) to provide the creditor/beneficiary with a quick, inexpensive and efficient
remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and
(3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.”

Let’s break it down: purpose one relates to the creditor/beneficiary. If that isn’t the foreclosing entity, then purpose
two and three would be frustrated.

Isn’t it fair enough to require the foreclosing entity to properly identify itself to the court and prove that they are, in
fact, the legal creditor for an obligation they can prove exists?

Without a review of the legitimacy of the foreclosing entity, what is there to stop anyone from foreclosing on anyone
without ever proving standing or an obligation? One way to cure this would be if an organization like the Tea Party,
for example, undertook filing notices of default in the thirty nonjudicial states against all politicians, judges, news
media, etc.

Then there would be a focus on purpose two, protect the homeowner against a wrongful foreclosure. Isn’t it wrongful
if the person foreclosing has no stake whatsoever in the property? And, without a complete accounting, how does
one establish that there is an obligation due, rising to a default? How can there be a default if the obligation were
already satisfied?

In order to fulfill purposes two and three, the identity of the creditor/beneficiary must be firmly established.

Contained within 2924 is adequate protection for both the borrower and the true creditor if the courts will simply
demand the fundamental evidence to prove the status of the foreclosing entity, and to determine that an obligation
even exists.

But, I am unprepared to concede the underlying notion that 2924 is the only applicable law. If other crimes are
committed that ultimately prove to be the proximate cause of any default, they cannot be excluded. Simply, 2924
doesn’t supersede all other law. And now, I’m not alone. We have an appeal right on point.

Recently, in the case of California Golf, L.L.C. v. Cooper, the Appellate Court held that the remedies of 2924h were
not exclusive. They reversed the lower court and specifically held that provisions of the Uniform Commercial Code,
UCC, Article 3 were allowed in the foreclosure context.

And, that is huge. Under California Commercial Code 3301, a note may only be enforced if one has actual
possession of the note as a holder, or has possession of the note, not as a non-holder, but with holder rights.

From a defensive standpoint, this opens the door to showing that the note and mortgage were split and the
foreclosing entity has nothing.

From an offensive standpoint, having identified who you may owe an obligation to, may also reveal that the
obligation no longer exists and that the trust holding your note was dissolved. Once you get a foot in the door, who
knows what wonders you may find?

For more on predatory servicing, see my blog: http://www.realtown.com/gwmantor/blog.

George W. Mantor is known as “The Real Estate Professor” for his consumer education efforts including a long-
running radio program, monthly workshop series, public appearances, and frequent articles.

During a career dating back to 1978, he has amassed experience in new home and resale residential real estate, resort
marketing and commercial and investment property.

Prior to starting his own real estate and mortgage brokerage in 1992, he had been Director of Training and Customer
Service for Great Western Real Estate. In addition, he has served on virtually every real estate committee, including
a term as a Director of the California Association of REALTORS.
George is a nationally respected authority on all areas of real estate and is frequently quoted in a wide range of
publications. He is an oft invited guest of Fox Business Network and for many years, he was the host of “Keepin’ It
Real…Real talk about the real thing, real estate” on KCEO radio.