Case Number: SS025732 Hearing Date: January 17, 2018 Dept: O

SS025732

IN RE 13053 ROSE AVENUE

Hearing is continued one last time for First Franklin to establish its right to the surplus funds as the holder of a Second Lien against the property with supporting documentation tracing the loan’s transfer from Nationpoint to First Franklin and documentation regarding its relationship with Specialized Loan Servicing.

ANALYSIS: The funds were deposited on 11/4/15. The hearing date was set for 1/22/16. No claims were submitted for the Court’s consideration on 1/22/16. As a result, the Court issued a ruling on 1/22/16 acknowledging that there were no claims against the funds and that the funds would therefore escheat to the state. The funds have not been discharged to the state as unclaimed property yet and is currently still deposited with the Court.

On 8/7/17, Ewan Leslie, the original trustor/homeowner, filed a claim against the surplus funds from the foreclosure sale on his property. Leslie is in pro per. Leslie contends he never received notice of this proceeding or the 1/22/16 hearing date, because all notices were sent to the property that was foreclosed on. Leslie testifies that moved out of the property several years before the hearing date. See Motion, Decl. of E. Leslie, ¶7. Leslie claims no entity has a superior claim to the surplus funds. Id. at ¶6. Leslie provides no explanation or testimony regarding how he discovered that this proceeding was pending or that there were excess funds from the foreclosure sale.

On 8/21/17, First Franklin Mortgage Loan Trust filed its own claim against the surplus funds. First Franklin claims it held a second priority deed of trust as to the Property as the time of the 3/4/15 trustee’s sale. First Franklin claims it did not receive notice of this proceeding or the 1/22/16 hearing date because the notices were sent to the prior loan servicer, Carrington Mortgage Services, LLC and not the servicer of the loan as of 12/8/14, Specialized Loan Servicing LLC. See First Franklin Claim, ¶4. First Franklin only learned of this proceeding and the surplus funds on 8/16/17 when Specialized Loan Servicing LLC received a copy of Leslie’s claim. Id. at ¶5. According to First Franklin’s counsel, there is an outstanding amount of $265,422.67 on the Nationpoint loan and that First Franklin is the assignee or successor in interest of Nationpoint on the loan. Id. at ¶2.

Within 90 days after the trustee deposits the funds with the clerk, the court shall consider all claims filed at least 15 days before the date on which the hearing is scheduled by the court. See CC §2924j(d). The clerk must serve written notice of the hearing by first-class mail on all claimants identified in the trustees’ declaration. The court then distributes the deposited funds to any and all claimants entitled to them. Id.

No claims were submitted in time for the 1/22/16 hearing date. The trustee who originally deposited the funds was responsible for ensuring that any potential claimants be served written notice of its intent to deposit the funds. The notice must also inform these potential claimants of the requirement that they file a claim on the court within 30 days of that written notice for the claim to be considered. See CC §2924j(d).

The trustee served the notice required under CC §2924j(d) on: (1) Leslie at 13053 Rose Ave., the address of the property foreclosed upon; (2) MERS; (3) Nationpoint, the original lender on the loan occupying the second lien position on the property and First Star’s alleged predecessor-in-interest; and (4) Carrington Mortgage Servcies, LLC, the loan servicer on the 2nd priority loan and the predecessor of Specialized Loan Servicing LLC. Based on the declarations of both Leslie and First Franklin, service was ineffectual because either the address was wrong or the entity no longer had an interest in the funds or the property.

Given this defect in service, Leslie and First Franklin are entitled to have their claims heard even though the timetable under CC §2924j(d) no longer applies, nor do the entities originally served with the notice of the 1/22/16 hearing need be notified. Those entities received proper notice of the surplus funds and the 1/22/16 hearing date and did not file a claim.

First Franklin submits the declaration of its loan servicer Specialized Loan Servicing LLC, Nicholas Raab, as evidence of its right to the surplus funds. According to Raab, Leslie obtained a loan from Nationpoint, a Div. of FFFC, an Op. Sub. Of MLB&T Co., FSB on 3/13/07 in the amount of $168,750. See Decl. of N. Raab, ¶6. The promissory note was secured by a second priority deed of trust as to the subject property. Id. The Second DOT was recorded 3/16/17. Id. First Franklin obtained its current beneficial interest in the Loan by way of a mortgage loan pool acquisition that included the subject loan. Id. Based on Raab’s declaration, the outstanding balance on the First Franklin/Nationpoint loan is $227,390.93, which exceeds the surplus funds deposited with the Court.

First Franklin fails to provide any documentation tracing the loan’s transfer from Nationpoint to First Franklin. First Franklin also fails to provide any documentation of the relationship with Specialized Loan Servicing.

The only evidence of either is the declaration of Nicholas Raab of Specialized Loan Servicing. Raab’s statement that “First Franklin currently holds beneficial interest in the Loan by way of a mortgage loan pool acquisition encompassing the subject loan” is conclusory and lacks foundation. There is no testimony regarding when First Franklin acquired the loan and the acquisition agreement is not attached. Raab provides no facts indicating he would have personal knowledge of the acquisition either.

The hearing is continued again for additional evidence on an essential element of First Franklin’s claim. There must be admissible evidence of First Franklin’s status as the successor-in-interest of Nationpoint, a Div. of FFFC, an Op. Sub. Of MLB&T Co., FSB on this loan, as well as Specialized Loan Servicing’s relationship with it.