Hello,Effective Jan 1, 2013, Cal. Civil Code 2923.55(b)(1)(B)(i) now requires that the mortgagee, servicer, trustee, beneficiary or authorized agent, may not record a notice of default against a borrower's property, until it has sent notice to the borrower of the right to request a copy of the promissory note or other indebtedness, which is secured by the borrower's deed of trust. Civil Code 2924.12(b) further provides a penalty of the greater of $50,000 or treble damages for a violation of this requirement. Prior to the enactment of this law, both federal and state case law concerning deed of trust foreclosures in California have uniformly held that no borrower can enjoin/stop the foreclosure of a property based upon a deed of trust, merely because the lender/beneficiary cannot produce a copy of the original promissory note or other evidence of indebtedness. The cases further hold that it is up to the state legislature to modify the foreclosure laws to provide the requirement of "proving the note." This "proving the note" theory has been successfully used to stop foreclosure actions in other jurisdictions. However, the case law of other jurisdictions has been uniformly rejected by the California state and federal district courts. Thus, reliance on other jurisdictional law re foreclosure is of no value in a California court -- be it bankruptcy or otherwise. The new law seems to suggest that if the lender/beneficiary/servicer/trustee cannot "prove the note," that the borrower could seek injunctive relief and stop a foreclosure sale -- and obtain a large damage award of at least $50,000. However, that's not what the law actually states. All the law states is that the lender/beneficiary must provide notice of the borrower's right to request a copy of the note or other indebtedness. It doesn't say anything at all about what happens if the lender/beneficiary cannot produce the note. Since there is, as of this time, no case law interpreting this result, no one knows the answer to the question. Were I the judge considering the question, I would probably find that the borrower has the right to obtain a copy of the note -- but, whether or not the borrower receives the note, and whether or not the lender can prove the note, none of authorizes a court to stop a foreclosure sale, based upon current case law precedent. What all of this boils down to is that while it may be possible to convince a court that leverage exists to create fertile ground for a "cramdown" of a first deed of trust as part of a bankruptcy case -- or without filing for bankruptcy at all -- the legal fact is that no one has actually done so, yet -- and until someone does, the theory that you are current watching evolve around you is pure speculation. In sum, if your associates can make this all work to their advantage, then I congratulate them. However, I believe that if a court actually sinks its teeth into the issue, that the ruling will be exactly what it currently is, which can be summarized as: "The recognition of the right to bring a lawsuit to determine a nominee's authorization to proceed with foreclosure on behalf of the note holder would fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures." Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1155.One final note: There actually is a very old California case which absolutely requires that the note or other evidence of indebtedness must exist for a deed of trust to be enforceable. However, as the California federal and state courts have each and every one managed to skillfully avoid any reference to this case -- so I shall make no reference to it, either. For your purposes, I suggest that if your associates can actually manipulate lenders to act in your interests, then you not expend any money until such time as those associates actually perform this act of legerdemain. Because, at least from a strictly legal viewpoint, at this time, it is not possible to accomplish what you are suggesting in any court sitting in California.Hope this helps.
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