Foreclosures and Changes in the Orange County Courts

Foreclosure Training 3/11/112 Active Non-judicial Foreclosure Cases in Orange County

3 Foreclosure Cases were Assigned to C-15 TRO Hearing – 90-day Stay Ordered (CCP 187) 7 weeks after TRO Hearing - Settlement Readiness Conference 10 weeks after TRO - Settlement Conference (MSC is 23 days after Readiness Conference)

4 Consenting to a 90-day Stay Order is a win-win for both sides Benefits to Lender: A high-credibility non-litigated, inexpensive process Some successful loan modifications Early closure on the issue Monthly payments income stream A better exit strategy (no bankruptcy, no unlawful detainer, undamaged property) Demurrer set promptly after Settlement Conference Benefits to Homeowner: Opportunity for loan modification and keeping the home Several months longer in the property Avoid litigation process and costs A customized exit strategy if no loan modification –short sale –extension of time to move –cash for keys –an end to all litigation

Foreclosure Training 3/11/115 90–day Stay - Terms Mortgage/FMV monthly payment ordered Taxes, Insurance, HOA paid Defendant is served Defendant does not need to file a responsive pleading Plaintiff stipulates to Mabry and CC being satisfied And…

Foreclosure Training 3/11/116 Modification of 90-day Stay Order If any party deems that this Order or any provision thereof is inappropriate for this case, then counsel may be heard in this department at 1:30 p.m. for an ex parte hearing, with 24 hours’ notice to all parties, and the Court will, at that time, reconsider this Order, which may include striking any inappropriate clauses, setting aside this Order, and / or reconsidering the request for a TRO.

Foreclosure Training 3/11/117 By Stipulation/Mabry & CC Plaintiff/Plaintiff’s counsel hereby agrees to the terms of this 90 day stay order and specifically agree that Defendant(s) participation in this stay order and MSC process shall be deemed full compliance with the requirements of CC and the Mabry decision and that any claims relying or derived from said statute will be deemed moot and shall be stricken from the Complaint.

Foreclosure Training 3/11/118 Readiness Conference Ensure plaintiff has given to the bank/servicer the information it needs Only bank can take off calendar

Foreclosure Training 3/11/119 Settlement Conference Temporary Judges Conducting –Judge Nakamura oversees a cadre of pro tems –Housing Counselors present –Temporary Judge Worksheet

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Foreclosure Training 3/11/1111 Results Obtained at MSC Loan Modifications Exit Strategy –Cash for Keys –Clean, undamaged house Rescinding Sale of Residence Rent Back to Homeowner Mabry, CC satisfied

Foreclosure Training 3/11/1112 Problems with Settlement Conferences Continuances Person with Settlement Authority not Present Attorney may have no more than TWO cases at any conference date

Foreclosure Training 3/11/1113 Town Hall Meetings Brown bag in Department at lunch with: –Bank’s Attorneys –Homeowner’s Attorneys Essential to success of Stipulation

Foreclosure Training 3/11/1114 Things to consider Training pro tems Introducing pro tems to HUD Counselors Ongoing training of pro tems

Are Restrictions to Modification Real? Pooling and Servicing Agreements (PSAs) Servicers claim that the PSAs prevent loan modifications, but these contracts rarely pose a roadblock to refinancing. –Professor Hunt from UC Davis School of Law issued a report analyzing the contract trends from John Patrick Hunt, Loan Modification Restrictions in Subprime Securitization Pooling and Servicing Agreements from 2006: Final Results, University of California at Davis, School of Law.

Findings: Subprime securitization contracts may expressly bar, expressly authorize, or remain silent on material modification. –Express authorization (60%) –Silence on authorization (32%) –Express bar on authorization (8%)

Express Authorization If material modification is expressly authorized, it is subject to conditions: –Reasonably foreseeable/imminent default –“Normal and Usual” servicing practices must be followed –Act in best interest of certificate-holders

Implied Authorization Some contracts remain silent on the servicer’s authorization to make material modifications. –Most of these contracts will provide a general statement empowering the servicer to “do any and all things necessary or desirable in servicing the loan…”

Implied Authorization (Continue) In situations where the contract is silent, there are still contractual restraints on the power to modify arising from the PSA’s general provisions: –Using “normal and usual” servicing practices –Act in the best interest of the certificate- holders –Reasonably foreseeable/imminent default

Express Bar Only 8% of agreements expressly bar material modifications by servicers. If an agreement expressly bars modifications, the servicer must meet the requirements as outlined in California Civil Code

Foreclosure Training 3/11/1124 Questions?