Case Number: VC063533    Hearing Date: July 22, 2014    Dept: SEC

FREDELUCES v. QUALITY LOAN SERVICE CORP.
CASE NO.: VC063533
HEARING: 07/22/14

#4
TENTATIVE ORDER

Defendants NATIONSTAR MORTGAGE LLC and AURORA LOAN SERVICES LLC’s demurrer to the Third Amended Complaint is OVERRULED. C.C.P. § 430.10(e), (f).

Defendants have 20 days to serve and file a responsive pleading.

Plaintiff MATHY FREDELUCES asserts causes of action for (1) violation of Civil Code section 2923.6, (2) promissory estoppel (C.C. § 2924g) and (3) unfair business practices. He seeks an injunction, and an order setting aside the foreclosure sale on the subject real property.

As alleged in the operative Second Amended Complaint, plaintiff obtained a mortgage loan backed by a Deed of Trust in January 2007. TAC, ¶11. Sometime thereafter, the loan was transferred to defendant Aurora Loan Services. ¶13. In June 2009, co-defendant Quality Loan Service recorded a Notice of Default. ¶17. Both prior to his default and after the NOD was recorded, plaintiff alleges that he contacted Aurora to inquire about a loan modification. ¶¶15, 19.

Plaintiff submitted a complete loan modification application which Aurora acknowledges receiving in August 2009. TAC, ¶23. Shortly thereafter, plaintiff received a Special Forbearance Agreement calling for modified payments which he made from September 2009 through February 2010. ¶¶24, 25. During that time, plaintiff’s request for a permanent modification was being reviewed.

In May 2010, defendant Quality recorded a Notice of Trustee’s Sale. TAC, ¶28, Exh. E. Plaintiff was notified by Aurora that his modification had been denied for failing to provide the requested documents and it requested he submit a new application to avoid the sale scheduled for June 2010. ¶¶29, 30. This advice was given despite plaintiff’s representation that he could either pay off the arrears or file for bankruptcy protection. Aurora never provided him an accounting. ¶32.

Later that month, Aurora provided plaintiff with a temporary, modified payment plan on which plaintiff made the required payments through February 2012. TAC, ¶¶33, 34, 36. In February 2012, his payments increased due to the negative amortization interest rate and plaintiff was unable to pay.

In March 2013, Aurora assigned its interest in the DOT to defendant Nationstar. TAC, ¶39. Plaintiff alleges that Nationstar knew of Aurora’s prior wrongdoings. ¶40. Around that time, plaintiff contacted Neighborhood Assistance Corporation of America (“NACA”) to negotiate a modification. ¶41. On March 14, 2013, Aurora acknowledged receipt of a complete application. ¶¶43, 45. In April, plaintiff learned that Nationstar was his new loan servicer. It requested additional information, which plaintiff provided. ¶¶48-52. Nationstar acknowledged receipt of the complete application on May 16, 2013. ¶53.

In August 2013, a Notice of Trustee’s Sale was recorded. TAC, ¶54, Exh. J. Nationstar thereafter claimed it needed additional documents to complete the application. ¶¶56-58. The foreclosure sale took place in September 2013 while plaintiff was still seeking an explanation of the status of his application. ¶¶59-62.

Defendants challenge each of the causes of action on the ground of failure to state sufficient facts and uncertainty. Essentially, defendants argue that they had no duty to evaluate multiple loan modification applications under section 2923.6(g). While the duty is limited to circumstances where there has been a material change, plaintiff alleges that his payments increased in February 2012. Moreover, once defendants undertook to evaluate the application, they are precluded from continuing their efforts to foreclose. The facts alleges support the claim that defendants did not comply with the statute. C.C. § 2923.6(e).

The facts also support the cause of action for promissory estoppel. The statute of frauds is not invoked insofar as plaintiff does not allege that defendants agreed to a permanent modification (which is required to be in writing). See Secrest v. Security Nat’l Mort. Loan Trust 2002-2 (2008) 167 Cal.App.4th 544. In any event, the equitable estoppel exception to the writing requirement may likely apply. Chavez v. Indymac Mortgage Services (2013) 219 Cal. App. 4th 1052, 1060-61.

The same facts that support plaintiff’s claims for violation of statute and promissory estoppel are supportive of the unfair business practices statute. He has sufficiently alleged injury in the form of not exercising his other options in reliance on defendants’ conduct. See, e.g. Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49.