Case Number: BC543589    Hearing Date: July 24, 2014    Dept: 82

Maria Perez
v.
Residential Credit Solutions; Bank of New York Mellon, f/k/a Bank of New York; First American Title Insurance Company; and Does 1 through 50, inclusive.

Tentative Decision on OSC re PI: Denied

Plaintiff Maria Perez (“Perez”) seeks to enjoin Defendants Residential Credit Solutions, Inc. (“RCS”) and First American Title Insurance Company (“First American”), and their employees and agents, or any persons acting on Defendants’ behalf, from auctioning, selling, or causing to be sold, Plaintiff’s residence located at 12733 Orizaba Avenue, Downey, California 90242 (the “subject property”) pending trial on the underlying action. The Court rules as follows:

Evidentiary Objections

The Court sustains Defendant RCS’s objections Nos. 2 through 7. The Court overrules Defendant’s remaining objections.

Requests for Judicial Notice

The Court grants Defendant RCS’s unopposed requests for judicial notice.

Statement of the Case

In September 2006, Plaintiff borrowed $468,000 from America’s Wholesale Lender (the “Loan”) to finance the purchase of the subject property. (Jones Decl., ¶ 2; Perez Decl., ¶ 2). As security for the Loan, Plaintiff executed a Deed of Trust granting a security interest in the subject property in favor of the Loan’s original trustee, ReconTrust Company. (Jones Decl., ¶ 2). The Deed of Trust was recorded on September 21, 2006. (See RJN Exhibit A).

On July 20, 2012, America’s Wholesale Lender assigned the Deed of Trust to Defendant Bank of New York Mellon (“Bank of NY”). (Application Exhibit D).

On December 16, 2012, Bank of America, who had serviced Plaintiff’s loan for a period of time up to that date, transferred its servicing rights under Plaintiff’s Loan, along with its records corresponding to Plaintiff’s Loan, to Defendant RCS. (Jones Decl., ¶ 4, Exhibit 2). According to Bank of America’s records, Plaintiff had sought to modify the Loan in 2011. (Id., ¶ 5(a), Exhibit 3). On March 13, 2012, Bank of America denied Plaintiff’s loan-modification request in writing, citing Plaintiff’s failure to provide Bank of America with the necessary documents to complete Plaintiff’s request. (Id., ¶ 5(b), Exhibit 4). Around August 30, 2012, Bank of America accepted Plaintiff’s second application for a loan modification after Plaintiff claimed that her financial information and circumstances had changed since the time she filed her first application. (Id., ¶ 5(c), Exhibit 5). On October 29, 2012, Bank of America denied Plaintiff’s second loan modification application. (Id., ¶ 5(d), Exhibit 1 [pp. 43-44]).

On December 21, 2012, Defendant RCS sent Plaintiff a letter informing her that she had failed to make timely mortgage payments. (Jones Decl., ¶ 6, Exhibit 6). The letter also included the contact information for the United States Department of Housing and Urban Development (“HUD”), as well as information concerning RCS’s payment counseling options. (Id., ¶ 6, Exhibit 6). On December 24, 2012, RCS sent Plaintiff another letter outlining foreclosure alternatives, including Plaintiff’s ability to apply for a loan modification as a possible method of avoiding foreclosure of the subject property. (Id., ¶ 7, Exhibit 7).

Through January 31, 2013, Defendant RCS repeatedly attempted to contact Plaintiff by telephone and continued sending her numerous letters concerning the Loan’s delinquent status and her options for avoiding foreclosure of the subject property. (Jones Decl., ¶¶ 1, 8-10, Exhibits 1 [pp. 48-52] and 8 through 10). Specifically, RCS sent Plaintiff two letters identifying her single point of contact in RCS’s Loss Mitigation Department. (Id., ¶¶ 8, 10, Exhibits 8 and 10).

On February 7, 2013, Plaintiff submitted a loan modification application to Defendant RCS. (Jones Decl., ¶ 15, Exhibit 1 [p. 53]). The next day, RCS sent Plaintiff a letter confirming its receipt of her loan modification application and informing her of the documents required to process her application. (Id., ¶ 16, Exhibit 14). On February 12, 2013, RCS sent Plaintiff a letter listing certain records and information that were missing from Plaintiff’s loan modification application. (Id., ¶ 17, Exhibit 15). The letter also informed Plaintiff that if RCS did not receive the listed documents by March 12, 2013, RCS would deem Plaintiff’s application withdrawn. (Id., ¶ 17, Exhibit 15).

On April 9, 2013, RCS denied Plaintiff’s February 7, 2013 loan modification application after Plaintiff had failed to provide RCS with all of the necessary information for processing Plaintiff’s application. (Jones Decl., ¶ 21, Exhibit 18). RCS’s April 9, 2013 denial letter informed Plaintiff that she had 30 days to provide RCS with information demonstrating that its denial of Plaintiff’s application was erroneous. (Id., ¶ 21, Exhibit 18).

On April 10, 2013, RCS sent Plaintiff a letter detailing the federal government’s Home Affordable Foreclosure Alternative Program (“HAFA”). (Jones Decl., ¶ 22, Exhibit 19).

On May 1, 2013, upon Plaintiff’s representative’s request, RCS reopened Plaintiff’s February 7, 2013 loan modification application. (Jones Decl., ¶ 24, Exhibit 20). Again, RCS provided Plaintiff with a list of documents necessary to process Plaintiff’s application. (Id., ¶ 24, Exhibit 20).

On July 11, 2013, Plaintiff provided RCS with all the necessary loan modification documents. (Jones Decl., ¶ 25). However, on July 15, 2013, RCS denied Plaintiff’s application on the basis that Plaintiff’s income was too low to meet the forbearance payment amount for a possible loan modification. (Id., ¶ 26, Exhibit 21). RCS’s July 15, 2013 letter informed Plaintiff that she had 30 days to appeal RCS’s denial. (Id., ¶ 26, Exhibit 21).

On September 9, 2013, Defendant First American recorded a Substitution of Trustee through which Defendant BONY substituted First American as the trustee under the Deed of Trust. (Verified Complaint ¶ 16, Exhibit C; see also Jones Decl., ¶ 29).

On October 7, 2013, Defendant First American recorded a Notice of Default, along with a due-diligence declaration executed by Defendant RCS, against the subject property. (Jones Decl., ¶ 30; see also Application Exhibit B).

On October 30, 2013, in response to Plaintiff’s representative’s request for reconsideration of Plaintiff’s previously denied loan modification application, Defendant RCS sent Plaintiff a letter requesting documents needed to reopen Plaintiff’s application. (Jones Decl., ¶ 32, Exhibit 22).

On January 22, 2014, Defendant First American recorded a Notice of Trustee’s Sale which stated that the subject property was to be sold at a public auction on February 19, 2014. (Jones Decl., ¶ 33; RJN Exhibit A).

On January 31, 2014, Defendant RCS sent Plaintiff a letter informing her that RCS had received all the necessary documents for Plaintiff’s renewed loan modification application. (Jones Decl., ¶ 34, Exhibit 23). On February 7, 2014, Defendant RCS denied Plaintiff’s application on the ground that Plaintiff’s income was insufficient to support a loan modification. (Id., ¶ 35, Exhibit 24). Defendant RCS’s February 7, 2014 denial letter informed Plaintiff that she had 30 days to appeal RCS’s decision. (Id., ¶ 35, Exhibit 24).

On February 12, 2014, Defendant RCS continued the scheduled February 19, 2014 auction of the subject property to March 21, 2014. (Jones Decl., ¶ 37, Exhibit 26).

On March 5, 2014, Plaintiff requested another opportunity to apply for a loan modification. (Jones Decl., ¶ 39). Defendant RCS informed Plaintiff that she could not be considered for another loan modification until she provided proof of a material change in her financial condition. (Id., ¶ 39).

In seeking reconsideration of Plaintiff’s loan modification application, Plaintiff’s counsel sent Defendant RCS three income statements for Plaintiff: the first covering all of 2013; the second covering November 2013 through January 2014; and the third covering January 2014. (Jones Decl., ¶ 42, Exhibit 30). The statements reflect different incomes for Plaintiff throughout 2013. (See Id., ¶ 42, Exhibit 30). For example, the first statement indicates that Plaintiff received a net income of $10,426 during 2013. (See Id., ¶ 42, Exhibit 30). However, the second and third statements indicate that Plaintiff received a net income of $12,565 during November 2013 alone. (See Id., ¶ 42, Exhibit 30). According to Defendant RCS, Plaintiff’s income statements did not adequately prove that Plaintiff’s financial condition had materially changed to justify reconsideration of Plaintiff’s loan modification application. (Id., ¶ 44).

On March 20, 2014, Plaintiff filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Central District of California (“Bankruptcy Court”). (See RJN Exhibit B).

On March 26, 2014, Defendant RCS sent Plaintiff a letter informing her that the trustee’s sale of the subject property had been continued to April 25, 2014. (Jones Decl., ¶ 48, Exhibit 32).

On April 18, 2014, the Bankruptcy Court dismissed Plaintiff’s petition due to Plaintiff’s failure to timely file documents necessary to pursue Chapter 7 bankruptcy. (See RJN Exhibit C).

On April 23, 2014, Plaintiff filed a complaint against Defendants for: (1) wrongful foreclosure; (2) negligence; (3) fraud; (4) unfair business practices; (5) violation of the Homeowner’s Bill of Rights Act; and (6) negligent misrepresentation.

On April 25, 2014, Plaintiff filed a first amended complaint (“FAC”). On April 24, 2014, Plaintiff also filed an ex parte application for a temporary restraining order (“TRO”) and an order to show cause regarding a preliminary injunction (“OSC re PI”). That same day, the matter came on for hearing and the Court denied Plaintiff’s application without prejudice due to improper notice. On April 25, 2014, Plaintiff filed a second ex parte application. The Court granted Plaintiff’s request for a TRO and set a hearing on the OSC re PI for May 15, 2014.

Per the parties’ stipulation, the OSC re PI hearing was ultimately continued to July 24, 2014. The matter was argued and submitted on July 24, 2014.

Summary of Applicable Law

The purpose of a preliminary injunction is to preserve the status quo pending a decision on the merits. Major v. Miraverde Homeowners Ass’n., (1992) 7 Cal.App.4th 618, 623. A plaintiff seeking injunctive relief must show the absence of an adequate damages remedy at law. Code Civ. Pro. §526(a)(4). In determining whether to issue a preliminary injunction, the trial court is to consider the likelihood that the plaintiff will prevail on the merits at trial and to weigh the interim harm to the plaintiff if the injunction is denied against the harm to the defendant if the injunction is granted. King v. Meese, (1987) 43 Cal. 3d 1217, 1226. A party seeking an injunction must demonstrate a reasonable probability of success on the merits. IT Corp. v. County of Imperial, (1983) 35 Cal.3d 63, 73-74.

Analysis

Plaintiff contends that she is entitled to a preliminary injunction enjoining Defendants from foreclosing on the subject property because Defendants failed to comply with the California Homeowner’s Bill or Rights Act (“HBRA”) in initiating the non-judicial foreclosure process. As discussed in greater detail below, Plaintiff has not demonstrated that she is likely to prevail on the merits of her claims against Defendants.

a. Plaintiff has failed to prove Defendants violated Civil Code section 2923.6

Plaintiff first contends that Defendant RCS violated Civil Code section 2923.6 because it never properly notified Plaintiff in writing that her February 2014 loan modification application had been denied prior to filing the Notice of Trustee’s Sale.

Civil Code section 2923.6 provides in relevant part:

(c) If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower’s mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee’s sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee’s sale until any of the following occurs:

(1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired.

(2) The borrower does not accept an offered first lien loan modification within 14 days of the offer.

(3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower’s obligations under, the first lien loan modification.

(d) If the borrower’s application for a first lien loan modification is denied, the borrower shall have at least 30 days from the date of the written denial to appeal the denial and to provide evidence that the mortgage servicer’s determination was in error.

The Court finds that Plaintiff is not likely to succeed on her claim that Defendant RCS violated Civil Code section 2923.6. As a preliminary matter, Plaintiff has presented no credible evidence that she submitted a loan modification application to RCS in February 2014. Although Plaintiff contends that she submitted a loan modification application “around” 2014, she has not attached a copy of the loan application to her declaration. See Lohman v. Lohman, (1946) 29 Cal.2d 144, 149 (“a trial judge is not required to accept as true the sworn testimony of a witness, even in the absence of evidence directly contradicting it, and this rule applies to an affidavit”). In any event, Defendant RCS properly denied Plaintiff’s first lien loan modification application submitted to RCS before Plaintiff allegedly submitted her subsequent loan modification application in February 2014. As discussed below, because Plaintiff has failed to demonstrate that her financial condition materially changed after her first loan modification application was denied, Plaintiff cannot demonstrate that Defendant RCS violated Section 2923.6 with respect to the loan modification application Plaintiff allegedly filed in February 2014.

On February 7, 2013, Plaintiff submitted a loan modification application to Defendant RCS. (Jones Decl., ¶ 15, Exhibit 1 [p. 53]). The next day, RCS sent Plaintiff a letter confirming its receipt of her loan modification application and informing her of the documents required to process her application. (Id., ¶ 16, Exhibit 14). On February 12, 2013, RCS sent Plaintiff a letter listing certain records and information that were missing from Plaintiff’s loan modification application. (Id., ¶ 17, Exhibit 15). The letter also informed Plaintiff that if RCS did not receive the listed documents by March 12, 2013, RCS would deem Plaintiff’s application withdrawn. (Id., ¶ 17, Exhibit 15). On April 9, 2013, RCS denied Plaintiff’s February 7, 2013 loan modification application after Plaintiff failed to provide RCS with all of the necessary information for processing Plaintiff’s application. (Jones Decl., ¶ 21, Exhibit 18). RCS’s April 9, 2013 denial letter informed Plaintiff that she had 30 days to provide RCS with information demonstrating that its denial of Plaintiff’s application was erroneous. (Id., ¶ 21, Exhibit 18).

As the language of Civil Code section 2923.6(g) makes clear, the statute’s protections apply only to first lien loan modification applications. The statute does not permit a defaulting borrower to repeatedly submit loan modification applications without demonstrating a material change in the borrower’s financial condition. See Civ. Code, § 2923.6. Here, Plaintiff claims that Defendant RCS violated Section 2923.6 because it failed to properly notify her in writing that her February 2014 loan modification application had been denied. However, Plaintiff has failed to provide the Court and Defendant RCS with any evidence that her financial condition had materially changed since RCS properly denied her February 7, 2013 loan modification application. Indeed, she makes no allegations to such effect in her declaration supporting the instant motion. Although Defendant RCS has attached to its opposition income statements Plaintiff allegedly submitted to RCS at some point in 2013 and in March 2014, those income statements are inconsistent and do not demonstrate that Plaintiff’s financial condition had materially changed since RCS properly denied her February 7, 2013 loan modification application. (See Jones Decl., ¶¶ 42, 44, Exhibit 30). As such, Plaintiff has failed to demonstrate that Defendant RCS failed to comply with Civil Code section 2923.6 with respect to any loan modification application Plaintiff may have filed in February 2014.

b. Plaintiff has failed to prove Defendants violated Civil Code section 2923.5

Plaintiff next contends that Defendant RCS violated Civil Code section 2923.5 because it did not properly contact her prior to recording the October 7, 2013 Notice of Default.

Civil Code section 2923.5(a)(1) provides:

A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent may not record a notice of default pursuant to Section 2924 until both of the following:

(A) Either 30 days after initial contact is made as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision (e).

(B) The mortgage servicer complies with paragraph (1) of subdivision (a) of Section 2924.18, if the borrower has provided a complete application as defined in subdivision (d) of Section 2924.18.

Civil Code section 2923.5(a)(2) goes on to provide that: “[a] mortgage servicer shall contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure.” In addition, “the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency. Any meeting may occur telephonically.” Id. Finally, Civil Code section 2923.5(b) provides that “[a] notice of default recorded pursuant to Section 2924 shall include a declaration that the mortgage servicer has contacted the borrower, has tried with due diligence to contact the borrower as required by this section, or that no contact was required because the individual did not meet the definition of “borrower” pursuant to subdivision (c) of Section 2920.5.”

Plaintiff has failed to establish that Defendants violated Civil Code section 2923.5. As the party seeking a preliminary injunction, Plaintiff bears the burden of producing evidence to demonstrate a likelihood of success on the merits. See Savage v. Trammell Crow Co., (1990) 223 Cal.App.3d 1562, 1571; Citizens for Better Streets v. Board of Sup’rs of City and County, (2004) 117 Cal.App.4th 1, 6. Plaintiff cannot meet this burden because she has presented no admissible evidence demonstrating that Defendants failed to comply with Civil Code section 2923.5’s contact requirements. Plaintiff’s own declaration, which is the only evidence Plaintiff submits in support of her claim, does not address Defendants’ filing of the Notice of Default or the steps, or lack thereof, that Defendants took prior to filing the Notice of Default. Thus, Plaintiff has directed the Court to no evidence demonstrating that Defendants failed to comply with Civil Code section 2923.5.

In fact, the evidence submitted in opposition to Plaintiff’s motion demonstrates that Defendant RCS complied with Civil Code section 2923.5 when it filed the Notice of Default. On October 7, 2013, Defendant RCS recorded a Notice of Default against Plaintiff. (Jones Decl., ¶ 30; see also Application Exhibit B). Attached to the Notice of Default is a due-diligence declaration in which RCS’s Default Operations Specialist declares that “[t]he mortgage servicer contacted the borrower to assess the borrower’s financial situation and to explore options for the borrower to avoid foreclosure as required by Civ. Code § 2923.55. Thirty days have passed since the initial contact was made.” (Id., ¶ 30; see also Application Exhibit B). It is well settled that a declaration in a notice of default that tracks the language of Civil Code section 2923.5(b) complies with the statute. Mabry v. Superior Court, (2010) 185 Cal.App.4th 208, 235. Indeed, Defendant RCS’s supporting evidence demonstrates that RCS’s representatives repeatedly contacted Plaintiff in the months leading up to the recording of the Notice of Default to discuss Plaintiff’s default status, her attempts to obtain a loan modification, and the alternatives available to Plaintiff to avoid foreclosure. (See Jones Decl., ¶¶ 1, 8-10, 15-17, 21, 22, 24, 26). Without credible evidence to counter Defendant RCS’s opposition evidence and rebut the validity of the due diligence declaration attached to the October 7, 2013 Notice of Default, Plaintiff has failed to establish that Defendants violated Civil Code section 2923.5.

c. Plaintiff has failed to prove Defendants violated Civil Code section 2923.7

Plaintiff next contends that Defendant RCS violated Civil Code section 2923.7 because it failed to provide Plaintiff with a single point of contact once it initiated the nonjudicial foreclosure process.

Civil Code section 2923.7(a) provides: “Upon request from a borrower who requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact and provide to the borrower one or more direct means of communication with the single point of contact.”

Again, Plaintiff has failed to present evidence demonstrating that Defendants violated Civil Code section 2923.7(a). In her application, Plaintiff asserts that Defendants clearly violated Section 2923.7(a) because Plaintiff was “forced to discuss her matter with a myriad of RCS employees . . .” after she submitted her loan modification application in February 2014. (April 25, 2014 Application, p. 11). However, this assertion is not supported by Plaintiff’s evidence. Plaintiff never alleges that she was contacted by multiple representatives at RCS; rather, she alleges that her counsel spoke with several representatives who provided her counsel with conflicting information concerning the status of Plaintiff’s loan modification application. Plaintiff’s counsel has not provided the Court with his own declaration verifying these contacts. Further, Defendant RCS has provided the Court with two letters sent to Plaintiff in January 2013 through which RCS established Alejandra Valadez as Plaintiff’s single point of contact at RCS. (Jones Decl., ¶¶ 8, 10, Exhibits 8 and 10). These letters were sent to Plaintiff after RCS made repeated attempts to contact her about her default status in December 2012 and January 2013. (See Jones Decl., ¶¶ 1, 8-10, Exhibits 1 and 8 through 10).

d. Plaintiff has failed to prove Defendants violated Civil Code section 2924.17

Plaintiff next contends that Defendants improperly recorded the October 7, 2013 Notice of Default because Defendant RCS, who executed the Notice of Default’s due-diligence declaration, has no interest in the underlying loan. This claim is not supported by the evidence.

Civil Code section 2924.17 provides in relevant part:

(a) A declaration recorded pursuant to Section 2923.5 or, until January 1, 2018, pursuant to Section 2923.55, a notice of default, notice of sale, assignment of a deed of trust, or substitution of trustee recorded by or on behalf of a mortgage servicer in connection with a foreclosure subject to the requirements of Section 2924, or a declaration or affidavit filed in any court relative to a foreclosure proceeding shall be accurate and complete and supported by competent and reliable evidence.

(b) Before recording or filing any of the documents described in subdivision (a), a mortgage servicer shall ensure that it has reviewed competent and reliable evidence to substantiate the borrower’s default and the right to foreclose, including the borrower’s loan status and loan information.

Civil Code section 2924 provides in relevant part: “The trustee, mortgagee, or beneficiary, or any of their authorized agents shall first file for record, in the office of the recorder of each county wherein the mortgaged or trust property or some part or parcel thereof is situated, a notice of default.”

Here, the evidence demonstrates that Defendant RCS was authorized to execute the due-diligence declaration attached to the Notice of Default. On December 16, 2012, Bank of America, who had originally serviced Plaintiff’s loan, transferred its servicing rights under Plaintiff’s loan, along with its records corresponding to Plaintiff’s loan, to Defendant RCS. (Jones Decl., ¶ 4, Exhibit 2). Bank of America and Defendant RCS notified Plaintiff of Defendant RCS’s substitution as the loan servicer in November and December 2012, respectively. (Id., ¶ 4, Exhibit 2). Plaintiff has presented no evidence that Defendant RCS no longer retained its status as Plaintiff’s loan servicer.

e. Plaintiff has failed to prove she is likely to succeed on her remaining claims.

Finally, Plaintiff argues that a preliminary injunction should issue because Defendants engaged in unfair business practices, acted negligently and fraudulently, and made negligent misrepresentations throughout the time Plaintiff has sought modification of her loan. Plaintiff premises all of these claims on the same alleged conduct that underlies her claims for violation of the HBRA. Because Plaintiff has failed to present any credible and admissible evidence supporting her claims under the HBRA, Plaintiff has not established that she is likely to succeed on her remaining claims.

Disposition

Plaintiff’s request for injunctive relief is DENIED because she has not shown a likelihood of success on the merits with competent, admissible, and persuasive evidence. The temporary restraining order is dissolved and the order to show cause is discharged.