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Court Offers Some Relief for Homeowners under HBOR


Julia Wei

by Julia Wei on October 22, 2015

in Foreclosure, Lending/Lender Issues, Mortgage Issues

The case of Monterossa v. Superior Court of Sacramento County (real party in interest, PNC Bank) is the first case to definitively answer a question many litigators have had ever since the Homeowner’s Bill of Rights went into effect.

California’s Homeowner Bill of Rights (the “HBOR”) went into effect on January 1, 2013.  The HBOR was a legislative package and contained two bills, S.B. 900 and A.B. 278, which amended and added to California’s Civil Code sections governing nonjudicial foreclosure sales.

According to California’s Office of the Attorney General, the HBOR was intended to accomplish these stated objectives:

(1) bar dual tracking of foreclosure sales;

(2) mandate a single point of contact;

(3) give borrowers legal relief; and

(4) mandate verification of documents.

The law, formally titled the California Foreclosure Reduction Act, originally sought to overhaul the non-judicial foreclosure process. HBOR also provided stronger legal remedies to borrowers, giving them a private right of action to seek an injunction for lender violations of HBOR and entitling them to attorney’s fees.

Like all new laws, there were some ambiguities in HBOR, and one of the unknown questions was whether a borrower could recover their attorney’s fees early in the case, such as after obtaining the preliminary injunction. We wrote about that previously, stating: “Accordingly, the HBOR’s broad wording is unclear whether litigants would be entitled to seek attorneys’ fees immediately after being awarded a TRO and before issuance of the preliminary injunction. This creates a powerful leverage for borrower’s counsel, who can seek to bring the lender to the table to settle a case early.”

Two years later, the appellate court has provided an answer, finding that a borrower who successfully obtains a preliminary injunction is a “prevailing party…in an action” since the statute clearly intends to provide injunctive relief as its remedy.

Mr. Monterossa and co-petitioner Cheranne Nobis were borrowers under a loan of $359,650 from PNC Mortgage, a division of PNC Bank, N.A. (PNC), and purchased their home in 2005. As succinctly explained in the decision, “In June 2013, petitioners were unable to make their mortgage payments. PNC twice wrote to petitioners in August, asking them to call PNC for help with foreclosure prevention alternatives, and telling them that PNC wanted to help them retain their home. Petitioners repeatedly called PNC to request a “hardship assistance package,” but PNC failed to send them one. Despite PNC’s failure to send petitioners a hardship assistance package, PNC notified petitioners that their request for hardship was denied because PNC did not receive a completed hardship assistance package from petitioners. Thereafter, PNC recorded a notice of default with Quality Loan Service Corporation. In November 2013, petitioners submitted a loan modification agreement to PNC, and PNC “appointed a single point of contact” named Hazel, who informed petitioners they needed to submit missing documents. On December 5, 2013, petitioners submitted the missing documents, and Hazel confirmed PNC had received a complete package. On January 24, 2014, PNC recorded a notice of trustee’s sale on the property. Petitioners immediately called PNC, and were told that their loan modification was denied due to missing documents.”

Monterossa and Nobis filed an ex parte application for a temporary restraining order (TRO) to halt the foreclosure sale, which the court granted.  Then after the hearing on the Order to Show Cause why a preliminary injunction should not issue, the Court granted the preliminary injunction as well.  Then, borrowers sought their attorney’s fees as prevailing party under the new statute section 2924.12, subdivision (i).  The trial court denied borrowers’ motion, concluding a preliminary injunction was an “interim award” for provisional relief and therefore not eligible yet for attorneys’ fees.  Borrower’s filed a Writ of Mandate, and this opinion followed.

THE DECISION

The Appellate Court reversed, analyzing the relevant HBOR provisions, legislative history and concluding that HBOR was a unique statutory scheme.  The most the borrower could “win” under HBOR was the injunction, which is what happened here.  The Monterossa Court clearly explained that HBOR enforced the prohibition against lender dual tracking by providing one of two remedies: 1) either an injunction to halt the non-judicial foreclosure sale, or 2) if the trustee’s sale had already occurred, the borrower would be entitled to actual economic damages.

WHY THIS CASE IS IMPORTANT

In a situation where the borrower is facing the loss of their residence, courts will very reasonably conclude that irreparable harm would result from a foreclosure sale.  That means that if the borrower can show a de facto violation of HOBR (failure to comply with any number of technical requirements), that may be enough to obtain a preliminary injunction.  Accordingly, lenders will be facing the prospect of an attorney fee award very early in the dispute.

This decision acknowledges that this statute is unique, presents a unique remedy and is contrary to the general litigation principle that a party is only eligible for their attorney fee award after they win the entire litigation as opposed to the interim award allowed here.

COMMENT

This case still does not expressly address whether the TRO is injunctive relief sufficient to request attorney’s fees.  Therefore, in a situation where the borrower obtains the TRO, but is denied a preliminary injunction, could they obtain attorney’s fees for the TRO? This decision speaks only of preliminary injunctions and so a lender’s counsel may conclude that since the statute does not expressly authorize it and the sole case in point does not address it that indeed, a TRO is not injunctive relief sufficient to trigger the attorney’s fee provision of 2924.12 (i).

Monterossa v. Superior Court, 237 Cal. App. 4th 747 (June 12, 2015)

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