Cal App Holds No Private Right of Action Under loan modification statute

By Charles Cox, Esq.

Cal App Holds No Private Right of Action Under
loan modification statute

The Court of Appeal for the State of California, Fourth District,
recently held that there is no private right of action for violation
of Cal. Civ. Code §§ 2923.52 and 2923.53.

A copy of the opinion is available at:
http://www.courtinfo.ca.gov/opinions/documents/G043544.PDF

This matter involves a California foreclosure, where the lender
purchased the collateral at sale.  The borrowers filed a writ
proceeding with the appellate court to stay the eviction pending
further order.

The borrowers attempted among other things to invalidate the
foreclosure sale, alleging violations of Cal. Civ. Code §§ 2923.52 and
2923.53.  As you may recall, California Civil Code section 2923.52
imposes a 90-day delay in the normal foreclosure process, and
California Civil Code section 2923.53 allows for an exemption to that
delay if lenders have loan modification programs that meet certain
criteria.

Enforcement of sections 2923.52 and 2923.53 is committed to regulatory
agencies, which have implicit power to terminate the license of any
company whose program is not in compliance. Section 2923.53,
subdivision (h), makes enforcement a matter of losing a license.

The Court held that, “[u]nlike section 2923.5 as construed by this
court in Mabry v. Superior Court (2010) 185 Cal.App.4th 208 (Mabry),
neither section 2923.52 or section 2923.53 provides any private right
of action, even a very limited one as this court found in Mabry.”  In
the words of the Court, “[n]ot only is there no express unmistakable
private right to sue, there is a virtually unmistakable intent not to
allow a private right to sue.”

The borrowers also sought to invalidate the foreclosure sale under
Cal. Civ. Code  § 2923.54.  However, the Court noted that “Subdivision
(b) of that statute is clear that: ‘Failure to comply with Section
2923.52 or 2923.53 shall not invalidate any sale that would otherwise
be valid under Section 2924f.’”  The Court rejected the borrowers’
argument that the statute does not apply to lenders who themselves buy
the property at foreclosure, i.e., to lenders who cannot claim the
status of bona fide purchasers, because any claim which the borrowers
might have to invalidate the foreclosure sale based on sections
2923.52 and 2923.53 necessarily entails a private right of action
which the statutes do not give them.

Because the borrowers’ claim for relief against the impending eviction
rested entirely on alleged violations of statutes which the Court held
do not afford them any private right of action, the stay of the
eviction was discharged, and the borrowers’ petition for the requested
writ was denied.

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