Court Rules Private Right of Action Exists for Violations of CA Civil Code 2923.5 Homeowners Can Now File Suit Against Lenders

With the banks pretty much running the show over the last couple of years, tossing homeowners around like flotsam and jetsam, it’s rare to see anything come out of the courts that favors the rights of homeowners.

In fact, I can’t even count the times I’ve seen something in the law that I thought was clearly being violated by the banks, only to be told by any one of the lawyers I’ve been hanging around with lately, that I’m correct in my thinking, but unfortunately there’s no “private right of action”.

Want to know what that means?  It means that there are quite a few laws in this country that sound like they were passed to protect consumers from banks and other financial service companies, but when a company doesn’t follow them there’s nothing a consumer can do about it because our elected officials neglected to write a “private cause of action” into the law.  So, yes, it’s a law… and yes, the bank is breaking it… but no, you can’t do anything to the bank for breaking that law.  Sorry about that.

I don’t know how anyone else feels about this sort of thing, and Lord knows I’m no lawyer, but if you ask me… well, this is the sort of thing that makes me think that people should be allowed to hit politicians with sticks.  Not 2x4s or baseball bats, perhaps, but just regular size sticks.

Like a few years ago, when I turned on C-SPAN one evening and found our elected officials debating whether English should be our national language… and then some jackass stood up and made a big deal out of the word “national,” as compared with the word “official”.  If I remember correctly, “official” made him happier.  Don’t even tell me that I was the only person that thought… “Why, I’d like to take a stick and give that guy such a whack…”

Or, whenever the “take-In-God-We-Trust-off-the-money” argument comes up… WHACK!  A constitutional amendment banning flag burning?  WHACK!  Prayer in public schools?  Sorry, we’ve already done that one… WHACK!  WHACK!  Remember when G.W. Bush signed an entirely unfunded bill to build a 700-mile fence along our 2,000-mile border with Mexico?  WHACK!  And, anything having to do with the Ten Commandments appearing in a work of art that’s displayed in or near a courthouse.  WHACK!

Of course, as far as I’m concerned they can put a giant, lit-up nativity scene on top of the U.S. Supreme Court for Christmas.  If the Jews don’t like it, go ahead and put the Star of David atop the Treasury Building to balance things out.  (Hey, it’s a joke, and I’m Jewish, so don’t be writing me nasty letters.  Shalom.)

Okay, sorry… back to the topic at hand…

California Civil Code, Section 2923.5, requires that before a Notice of Default is filed, the lender has to contact the homeowner by mail or phone to assess his or her financial situation and explore options to avoid foreclosure.  There’s nothing in 2923.5 that requires the lender to rewrite or modify the loan, it just says they have to communicate in an effort to avoid foreclosure.

This section of the code is also known as the Perata Mortgage Relief Act and it applies only to loans made between January 1, 2003 and December 31, 2007.  Apparently, if you got your mortgage before or after those dates, all the lender has to do before foreclosing is hang up on you twice and then drive by and flip you off.  (Okay, so like I said, I’m not a lawyer and I do not have to be tolerant of my state legislature’s idiocy at this point in the foreclosure crisis, are we clear?)

What was really surprising to me, when I looked up this bill’s history, was that the summary sheet said: “as a result of negotiations, all opposition has been eliminated”.  Wow, that must have been some negotiation.  Who was in charge there?  I can’t believe the banking industry wasn’t presenting studies showing that having to call or send letters to borrowers prior to foreclosure would increase the cost of borrowing so as to eliminate the possibility of homeownership for all children born between 1989 and 2003, and as a result reduce the size of California’s economy to one on par with Ecuador.

Okay, I’m sorry again… this is serious stuff, I realize.  Actually, it’s a very BIG DEAL for homeowners, even if I am apparently not mature enough to treat it as such.

The thing about this court decision is that, even if I think the law itself is marginal at best in what it offers, there is now a “private cause of action” attached to it.  And that means that homeowners can file lawsuits against their lenders and servicers for noncompliance with the law.  And get this… I know at least one California law firm that’s done it several times already, and you’re going to love the results.

Attorney Timothy McFarlin, a senior partner in the law firm, McFarlin & Geurts, says his firm has recently settled several such suits that his firm had brought on behalf of California homeowners, as a result of this decision.  And the settlements his firm has negotiated have taken the form of modified loans for homeowners.  The details of the modifications were ordered closed by the court, but I’m smiling as a write this, so you can decide for yourself how good the modified terms were.

Tim McFarlin was the very first attorney I met when I started investigating the whole loan modification thing about 18 months ago.  When I mentioned that to Tim, he said: “Wow, has it been that long?  Time really does fly… it doesn’t feel like a day over three years.”  So, you can probably see why we get along.

Tim and I went to lunch the first time we met, and he ordered something like Chilled Tofu over Sprouts with a side of Tree Bark and Watercress, and some lightly steamed vegetables.  And water, no ice.  Me?  I had a double cheeseburger, extra cheese, fries, onion rings, and a strawberry shake.  Oh yeah… and a Diet Coke.  He picked up the check, which I thought was fair after ordering like Suzanne Somers.

We got along from day one, I think partially because he was an economics major… just like yours truly… and there aren’t that many lawyers who majored in something involving numbers, Barack Obama being the obvious example.  (It’s a joke, lawyers, just a joke.)

After lunch that day, we went back to the firm’s Irvine office, they also have a Los Angeles address, and Tim explained that he was a bankruptcy attorney.  Then he said a bunch of other stuff, but it was after lunch and I was pretty much napping.

The truth is, I didn’t understand how fascinating the subject of bankruptcy actually was back then.  I was deeply offended at how banks were treating homeowners in distress, and at how society as a whole was treating the lawyers who defended homeowners.  I had started writing to help people better understand that it was not their fault that the bankers of Wall Street had broken the back of the global financial system, but I didn’t see how bankruptcy was involved.

I mean… I knew homeowners didn’t want to file bankruptcy, and besides doing so wouldn’t save their homes anyway.  Obama’s promise to support bankruptcy reform that would allow judges to write down loans for homeowners filing bankruptcy had been forgotten.  Not by me, of course.  I remembered the president making the promise, perfectly.  But, Obama and quite a few other Democrats had apparently been drunk when they said it, because when it come up for a vote… oh wait… nope, they didn’t even allow it to come to a vote.

But, over time Tim got me interested in bankruptcy and now I’ve become friends with nationally famous and quite renowned bankruptcy attorney, O. Max Gardner, and between the two of them I’ve completely so absorbed by the topic that I’ve completely stopped making money in the hopes of qualifying for a filing of my own soon.  And that would be funnier, if I wasn’t only half kidding about that.

Actually, I’ve come to understand that bankruptcy is one of the areas of the law that makes our country great.  It fosters entrepreneurship and allows for risk-taking.  Without our bankruptcy protection laws, we would certainly not be the country we were before our bankers bankrupted us, of course.

There’s no question in my mind that filing bankruptcy is nothing to be ashamed of, in fact to the contrary, for many people, it’s not only the best thing for them and their families, but it’s better for our country as well, because once the bankruptcy is discharged they can being contributing to our country’s economic growth instead of just contributing to their creditor’s profits.

Tim’s partner is Phil Geurts, who is a litigator, and having been down to their offices on numerous occasions, I can tell you that the two must run a great firm at which to work, because the staff always seems to be pretty happy, considering they spend their days fighting banks on behalf of distressed homeowners.  I fight banks and talk with distressed homeowners all the time, albeit not in the courtroom, but I must admit to more than a few days spent daydreaming that I’m actually Shaolin monk, Kwai Chang Caine, and I’m wandering the West looking for justice.

So, at this point I think I’ve had a little too much fun for one article, and I’m concerned that my very serious point might have gotten lost along the way…

The California Courts have said that there is a “private cause of action,” related to violations to California Civil Code 2923.5, known as the Perata Mortgage Relief Act, which requires that before a Notice of Default is filed, the lender has to contact the homeowner by mail or phone to assess his or her financial situation and explore options to avoid foreclosure.

In other words, in California anyway, your bank MUST communicate with you and see if things can be worked out any other way, before they file a Notice of Default (“NOD”) and proceed with foreclosure.  If they don’t, now you can file a lawsuit and perhaps it will lead to the bank agreeing to modify your loan.  Hey, whatever works, if you ask me.

I forgot to ask Tim when we were talking on the phone earlier today, but I would think that McFarlin & Geurts would have to be one of the first firms to settle cases based on this recent ruling by the courts, because it only happened about a week ago.  But, I know his firm handles lots of other things for distressed homeowners, from bankruptcy to litigation, to… I don’t know… legal stuff.

Tim’s firm, it should go without saying, isn’t the only law firm around that takes on these sort of cases, another lawyer I know is expert in this area as well.  Nathan Fransen, partner in Fransen & Molinaro, also has experience representing homeowners in claims against lenders and servicers.  Nathan isn’t a bankruptcy lawyer, he’s a litigator who specializes in real estate and mortgage law, although his firm does do some bankruptcy work, as well.

Nathan is another one of the attorneys that I’ve become friends with over the last year, and he’s always in court arguing on behalf of a homeowner, and against a bank, for one reason or another.  It’s a difficult job, and not one that many people could do for very long, if at all.  But, I can tell that Nathan loves what he does, even though there have been a few days that he probably would have thrown something at me for saying that.

If you’re fighting to keep your home through a loan modification, and you think your lender might have violated California Civil Code 2923.5, or if you just want to talk to an attorney that knows what homeowners are up against nowadays related to the foreclosure crisis,  you can write to me:, and I’ll be more than happy to put you in touch with either Tim Mcfarlin or Nathan Fransen.

I think both are really smart guys, who I believe truly care about their clients and the situation in which our country finds itself today.  And that’s no joke.

Here’s a handy link to the CALIFORNIA CIVIL CODE.  Click it and then just scroll down to 2923.5.

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