Facts: A homeowner obtains a purchase-assist mortgage and later defaults. The mortgage holder begins foreclosure and eventually records a notice of trustee’s sale (NOTS), after which a new servicer takes over the mortgage. The new servicer informs the owner in writing it will not foreclose if the owner applies for a mortgage modification no less than seven business days prior to the sale, yet the owner receives the letter seven days from the sale date. The owner immediately submits a mortgage modification application to the servicer and receives verbal confirmation of their pending application two days before the sale. On the sale date, the servicer forecloses.
Claim: The owner seeks money losses from the servicer, claiming the servicer improperly foreclosed and violated the Homeowner’s Bill of Rights, which prohibits “dual tracking” since the owner timely submitted the necessary application documents as instructed and received verbal confirmation of the pending application, thus barring a foreclosure sale.
Counterclaim: The servicer claims the owner is not entitled to money losses since they did not submit their completed application at least seven business days before the sale and failed to pay off the balance of the mortgage prior to filing a court action.
Holding: A California court of appeals holds the owner is entitled to money losses since they timely submitted their application as instructed, thus their mortgage modification was pending at the time of the foreclosure sale, and they are not required to pay off the balance of the mortgage before filing a court action for a violation under the Homeowner’s Bill of Rights. [Valbuena v. Ocwen Loan Servicing, LLC (May 21, 2015) ___ CA4th ___]