Foreclosures and Changes in the Orange County Courts

Foreclosures and Changes in the Orange County Courts

Active Non-judicial Foreclosure Cases in Orange County 700 566 600 500 400 327 340 Jul Aug 367 406 435 616 478 264 200 100 0 Jun Sep Oct Nov Foreclosure Training 3/11/11 Dec Jan Feb 2

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) 3

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 2923. 5 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 4

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 2923. 5 being satisfied • And… Foreclosure Training 3/11/11 5

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 3/11/11 6

By Stipulation/Mabry & CC 29323. 5 • 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 2923. 5 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 3/11/11 7

Readiness Conference • Ensure plaintiff has given to the bank/servicer the information it needs • Only bank can take off calendar Foreclosure Training 3/11/11 8

Settlement Conference • Temporary Judges Conducting – Judge Nakamura oversees a cadre of pro tems – Housing Counselors present – Temporary Judge Worksheet Foreclosure Training 3/11/11 9

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Results Obtained at MSC • Loan Modifications • Exit Strategy – Cash for Keys – Clean, undamaged house • Rescinding Sale of Residence • Rent Back to Homeowner • Mabry, CC 2923. 5 satisfied Foreclosure Training 3/11/11 11

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 3/11/11 12

Town Hall Meetings • Brown bag in Department at lunch with: – Bank’s Attorneys – Homeowner’s Attorneys • Essential to success of Stipulation Foreclosure Training 3/11/11 13

Things to consider • Training pro tems • Introducing pro tems to HUD Counselors • Ongoing training of pro tems Foreclosure Training 3/11/11 14

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 2006. 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 certificateholders – 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 2923. 52.

Questions? Foreclosure Training 3/11/11 24