2017-00211956-CU-OR

Paul Fraga vs. Bank Of America, National Association

Nature of Proceeding: Hearing on Demurrer to Verified Second Amended Complaint (New

Filed By: Miner, Katharine M.

The demurrer of Defendant New Penn Financial, LLC dba Shellpoint Mortgage Servicing (Shellpoint), sued as Shellpoint Mortgage, LLC is SUSTAINED without leave amend.

Overview

This is a nonjudicial foreclosure case. The plaintiffs are Paul and Luis Fraga (the “Fragas”). In the second amended complaint (SAC), the Fragas allege that Shellpoint is their current loan servicer and the trustee under their deed of trust. The Fragas concede that they defaulted on the loan in 2008 and again in 2009. They allege that they began seeking loan modifications in 2012, but former servicers named as co-defendants in this case thwarted the modification process. Former servicer and co-defendant Ocwen Loan Servicing LLC (Ocwen) allegedly recorded notices of default and sale in 2015. Shellpoint took over as servicer after that.

The Fragas allege they submitted a fresh HAMP loan modification application to Shellpoint. Shellpoint allegedly offered them a HAMP Trial Period Plan (TPP) in February 2017, but the offer was based on a miscalculation of income. As a result, the offer allegedly required monthly payments greater than they otherwise would have been. The Fragas appealed the determination and pointed out the miscalculations, but Shellpoint refused to modify the offer.

There is no allegation the property was sold at auction.

The SAC contains causes of action against Shellpoint for Violation of CC § 2923.6, Violation of CC § 2923.7, Negligence, and Violation of B&P Code §§ 17200 et seq. Shellpoint demurs to the causes of action other than negligence on grounds the allegations fail to state facts sufficient to state a valid cause of action. The Fragas oppose.

The court sustained in part and overruled in part Shellpoint’s demurrer to the first

amended complaint (FAC). The court granted leave to amend.

Discussion

The First Cause of Action for Violation of CC § 2923.6 [Dual Tracking]

The demurrer is SUSTAINED without leave to amend.

The right of action under § 2923.6 was repealed as of 1/01/18. But assuming the Fragas’ preexisting cause of action survives the repeal, the allegations do not state a valid cause of action.

A servicer’s liability under § 2923.6 is predicated on steps taken to foreclosure while a loan modification application is pending. The Fragas do not allege that any such application is or was pending when the notice of default or notice of sale was recorded. Instead, they allege that the determinations of their applications were infirm for various reasons. Because the Fragas have not alleged essential elements of their § 2923.6 claim, and because they have not established a reasonable likelihood they can cure the defects through amendment, the demurrer is sustained without leave to amend.

The court notes the Fragas’ argument in opposition that Shellpoint is liable because it failed to rescind a notice of default. The Fragas do not cite any legal authority to support this notion of liability, and the court rejects it.

The Second Cause of Action for Violation of CC § 2923.7 [Single Point of Contact]

The demurrer is SUSTAINED without leave to amend.

The court sustained Shellpoint’s prior demurrer to the second cause of action because there were no allegations tethering Shellpoint’s miscalculation of income and offer of the wrong modification to any failure to assign a single point of contact. Absent such a nexus, Shellpoint’s failure to assign a single point of contact was not a material violation of § 2923.7, and that failure is not actionable. (See CC § 2924.12(a)(1) [only “material” violations of § 2923.7 warrant a remedy].) The allegations in the SAC still do not establish a material violation. Given this, and given the Fragas’ failure to demonstrate a reasonable likelihood they can cure their allegations through further amendment, the demurrer is sustained without leave to amend.

The Fourth Cause of Action for Violation of B&P Code §§ 17200 et Seq.

The demurrer is SUSTAINED without leave to amend.

The court sustained Shellpoint’s prior demurrer to the fourth cause of action on grounds the Fragas had failed to establish standing, i.e., their loss of money or property. The Fragas now allege that their credit was damaged and that they incurred late fees and charges. (See SAC, ¶¶ 123-124.) However, the new allegations are directed at all the defendants collectively, and there are no allegations establishing that Shellpoint’s alleged misconduct caused any monetary losses. Instead, the alleged losses appear to be the result of other defendants’ misconduct. As a result, the Fragas have still failed to establish standing under B&P Code § 17204, and the demurrer is sustained. Furthermore, the Fragas have failed to demonstrate a

reasonable likelihood they can cure the fourth cause of action through amendment.

Consequently, leave to amend is denied.

Disposition

The demurrer is sustained without leave to amend.

No later than 4/23/18, Shellpoint shall file and serve its answer to the third cause of action for negligence.