Securitization for Lawyers: How it was Written by Wall Street Banks

Posted on September 3, 2014 by Neil Garfield

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Continuing with my article THE CONCEPT OF SECURITIZATION from yesterday, we have been looking at the CONCEPT of Securitization and determined there is nothing theoretically wrong with it. That alone accounts for tens of thousands of defenses” raised in foreclosure actions across the country where borrowers raised the “defense” securitization. No such thing exists. Foreclosure defense is contract defense — i.e., you need to prove that in your case the elements of contract are absent and THAT is why the note or the mortgage cannot be enforced. Keep in mind that it is entirely possible to prove that the mortgage is unenforceable even if the note remains enforceable. But as we have said in a hundred different ways, it does not appear to me that in most cases, the loan contract ever existed, or that the acquisition contract in which the loan was being “purchased” ever occurred. But much of THAT argument is left for tomorrow’s article on Securitization as it was practiced by Wall Street banks.

So we know that the concept of securitization is almost as old as commerce itself. The idea of reducing risk and increasing the opportunity for profits is an essential element of commerce and capitalism. Selling off pieces of a venture to accomplish a reduction of risk on one ship or one oil well or one loan has existed legally and properly for a long time without much problem except when a criminal used the system against us — like Ponzi, Madoff or Drier or others. And broadening the venture to include many ships, oil wells or loans makes sense to further reduce risk and increase the likelihood of a healthy profit through volume.

Syndication of loans has been around as long as banking has existed. Thus agreements to share risk and profit or actually selling “shares” of loans have been around, enabling banks to offer loans to governments, big corporations or even little ones. In the case of residential loans, few syndications are known to have been used. In 1983, syndications called securitizations appeared in residential loans, credit cards, student loans, auto loans and all types of other consumer loans where the issuance of IPO securities representing shares of bundles of debt.

For logistical and legal reasons these securitizations had to be structured to enable the flow of loans into “special purpose vehicles” (SPV) which were simply corporations, partnerships or Trusts that were formed for the sole purpose of taking ownership of loans that were originated or acquired with the money the SPV acquired from an offering of “bonds” or other “shares” representing an undivided fractional share of the entire portfolio of that particular SPV.

The structural documents presented to investors included the Prospectus, Subscription Agreement, and Pooling and Servicing Agreement (PSA). The prospectus is supposed to disclose the use of proceeds and the terms of the payback. Since the offering is in the form of a bond, it is actually a loan from the investor to the Trust, coupled with a fractional ownership interest in the alleged “pool of assets” that is going into the Trust by virtue of the Trustee’s acceptance of the assets. That acceptance executed by the Trustee is in the Pooling and Servicing Agreement, which is an exhibit to the Prospectus. In theory that is proper. The problem is that the assets don’t exist, can’t be put in the trust and the proceeds of sale of the Trust mortgage-backed bonds doesn’t go into the Trust or any account that is under the authority of the Trustee.

The writing of the securitization documents was done by a handful of law firms under the direction of a few individual lawyers, most of whom I have not been able to identify. One of them is located in Chicago. There are some reports that 9 lawyers from a New Jersey law firm resigned rather than participate in the drafting of the documents. The reports include emails from the 9 lawyers saying that they refused to be involved in the writing of a “criminal enterprise.”

I believe the report is true, after reading so many documents that purport to create a securitization scheme. The documents themselves start off with what one would and should expect in the terms and provisions of a Prospectus, Pooling and Servicing Agreement etc. But as you read through them, you see the initial terms and provisions eroded to the point of extinction. What is left is an amalgam of options for the broker dealers selling the mortgage backed bonds.

The options all lead down roads that are absolutely opposite to what any real party in interest would allow or give their consent or agreement. The lenders (investors) would never have agreed to what was allowed in the documents. The rating agencies and insurers and guarantors would never have gone along with the scheme if they had truly understood what was intended. And of course the “borrowers” (homeowners) had no idea that claims of securitization existed as to the origination or intended acquisition their loans. Allan Greenspan, former Federal Reserve Chairman, said he read the documents and couldn’t understand them. He also said that he had more than 100 PhD’s and lawyers who read them and couldn’t understand them either.

Greenspan believed that “market forces” would correct the ambiguities. That means he believed that people who were actually dealing with these securities as buyers, sellers, rating agencies, insurers and guarantors would reject them if the appropriate safety measures were not adopted. After he left the Federal Reserve he admitted he was wrong. Market forces did not and could not correct the deficiencies and defects in the entire process.

The REAL document is the Assignment and Assumption Agreement that is NOT usually disclosed or attached as an exhibit to the Prospectus. THAT is the agreement that controls everything that happens with the borrower at the time of the alleged “closing.” See me on YouTube to explain the Assignment and Assumption Agreement. Suffice it to say that contrary to the representations made in the sale of the bonds by the broker to the investor, the money from the investor goes into the control of the broker dealer and NOT the REMIC Trust. The Broker Dealer filters some of the money down to closings in the name of “originators” ranging from large (Wells Fargo, Countrywide) to small (First Magnus et al). I’ll tell you why tomorrow or the next day. The originators are essentially renting their names the same as the Trustees of the REMIC Trusts. It looks right but isn’t what it appears. Done properly, the lender on the note and mortgage would be the REMIC Trust or a common aggregator. But if the Banks did it properly they wouldn’t have had such a joyful time in the moral hazard zone.

The PSA turned out to be the primary document creating the Trusts that were creating primarily under the laws of the State of New York because New York and a few other states had a statute that said that any variance from the express terms of the Trust was VOID, not voidable. This gave an added measure of protection to the investors that the SPV would not be used for any purpose other than what was described, and eliminated the need for them to sue the Trustee or the Trust for misuse of their funds. What the investors did not understand was that there were provisions in the enabling documents that allowed the brokers and other intermediaries to ignore the Trust altogether, assert ownership in the name of a broker or broker-controlled entity and trade on both the loans and the bonds.

The Prospectus SHOULD have contained the full list of all loans that were being aggregated into the SPV or Trust. And the Trust instrument (PSA) should have shown that the investors were receiving not only a promise to repay them but also a share ownership in the pool of loans. One of the first signals that Wall Street was running an illegal scheme was that most prospectuses stated that the pool assets were disclosed in an attached spreadsheet, which contained the description of loans that were already in existence and were then accepted by the Trustee of the SPV (REMIC Trust) in the Pooling and Servicing Agreement. The problem was that the vast majority of Prospectuses and Pooling and Servicing agreements either omitted the exhibit showing the list of loans or stated outright that the attached list was not the real list and that the loans on the spreadsheet were by example only and not the real loans.

Most of the investors were “stable managed funds.” This is a term of art that applied to retirement, pension and similar type of managed funds that were under strict restrictions about the risk they could take, which is to say, the risk had to be as close to zero as possible. So in order to present a pool that the fund manager of a stable managed fund could invest fund assets the investment had to qualify under the rules and regulations restricting the activities of stable managed funds. The presence of stable managed funds buying the bonds or shares of the Trust also encouraged other types of investors to buy the bonds or shares.

But the number of loans (which were in the thousands) in each bundle made it impractical for the fund managers of stable managed funds to examine the portfolio. For the most part, if they done so they would not found one loan that was actually in existence and obviously would not have done the deal. But they didn’t do it. They left it on trust for the broker dealers to prove the quality of the investment in bonds or shares of the SPV or Trust.

So the broker dealers who were creating the SPVs (Trusts) and selling the bonds or shares, went to the rating agencies which are quasi governmental units that give a score not unlike the credit score given to individuals. Under pressure from the broker dealers, the rating agencies went from quality culture to a profit culture. The broker dealers were offering fees and even premium on fees for evaluation and rating of the bonds or shares they were offering. They HAD to have a rating that the bonds or shares were “investment grade,” which would enable the stable managed funds to buy the bonds or shares. The rating agencies were used because they had been independent sources of evaluation of risk and viability of an investment, especially bonds — even if the bonds were not treated as securities under a 1998 law signed into law by President Clinton at the behest of both republicans and Democrats.

Dozens of people in the rating agencies set off warning bells and red flags stating that these were not investment grade securities and that the entire SPV or Trust would fail because it had to fail.  The broker dealers who were the underwriters on nearly all the business done by the rating agencies used threats, intimidation and the carrot of greater profits to get the ratings they wanted. and responded to threats that the broker would get the rating they wanted from another rating agency and that they would not ever do business with the reluctant rating agency ever again — threatening to effectively put the rating agency out of business. At the rating agencies, the “objectors” were either terminated or reassigned. Reports in the Wal Street Journal show that it was custom and practice for the rating officers to be taken on fishing trips or other perks in order to get the required the ratings that made Wall Street scheme of “securitization” possible.

This threat was also used against real estate appraisers prompting them in 2005 to send a petition to Congress signed by 8,000 appraisers, in which they said that the instructions for appraisal had been changed from a fair market value appraisal to an appraisal that would make each deal work. the appraisers were told that if they didn’t “play ball” they would never be hired again to do another appraisal. Many left the industry, but the remaining ones, succumbed to the pressure and, like the rating agencies, they gave the broker dealers what they wanted. And insurers of the bonds or shares freely issued policies based upon the same premise — the rating from the respected rating agencies. And ultimate this also effected both guarantors of the loans and “guarantors” of the bonds or shares in the Trusts.

So the investors were now presented with an insured investment grade rating from a respected and trusted source. The interest rate return was attractive — i.e., the expected return was higher than any of the current alternatives that were available. Some fund managers still refused to participate and they are the only ones that didn’t lose money in the crisis caused by Wall Street — except for a period of time through the negative impact on the stock market and bond market when all securities became suspect.

In order for there to be a “bundle” of loans that would go into a pool owned by the Trust there had to be an aggregator. The aggregator was typically the CDO Manager (CDO= Collateralized Debt Obligation) or some entity controlled by the broker dealer who was selling the bonds or shares of the SPV or Trust. So regardless of whether the loan was originated with funds from the SPV or was originated by an actual lender who sold the loan to the trust, the debts had to be processed by the aggregator to decide who would own them.

In order to protect the Trust and the investors who became Trust beneficiaries, there was a structure created that made it look like everything was under control for their benefit. The Trust was purchasing the pool within the time period prescribed by the Internal Revenue Code. The IRC allowed the creation of entities that were essentially conduits in real estate mortgages — called Real Estate Mortgage Investment Conduits (REMICs). It allows for the conduit to be set up and to “do business” for 90 days during which it must acquire whatever assets are being acquired. The REMIC Trust then distributes the profits to the investors. In reality, the investors were getting worthless bonds issued by unfunded trusts for the acquisition of assets that were never purchased (because the trusts didn’t have the money to buy them).

The TRUSTEE of the REMIC Trust would be called a Trustee and should have had the powers and duties of a Trustee. But instead the written provisions not only narrowed the duties and obligations of the Trustee but actual prevented both the Trustee and the beneficiaries from even inquiring about the actual portfolio or the status of any loan or group of loans. The way it was written, the Trustee of the REMIC Trust was in actuality renting its name to appear as Trustee in order to give credence to the offering to investors.

There was also a Depositor whose purpose was to receive, process and store documents from the loan closings — except for the provisions that said, no, the custodian, would store the records. In either case it doesn’t appear that either the Depositor nor the “custodian” ever received the documents. In fact, it appears as though the documents were mostly purposely lost and destroyed, as per the Iowa University study conducted by Katherine Ann Porter in 2007. Like the others, the Depositor was renting its name as though ti was doing something when it was doing nothing.

And there was a servicer described as a Master Servicer who could delegate certain functions to subservicers. And buried in the maze of documents containing hundreds of pages of mind-numbing descriptions and representations, there was a provision that stated the servicer would pay the monthly payment to the investor regardless of whether the borrower made any payment or not. The servicer could stop making those payments if it determined, in its sole discretion, that it was not “recoverable.”

This was the hidden part of the scheme that might be a simple PONZI scheme. The servicers obviously could have no interest in making payments they were not receiving from borrowers. But they did have an interest in continuing payments as long as investors were buying bonds. THAT is because the Master Servicers were the broker dealers, who were selling the bonds or shares. Those same broker dealers designated their own departments as the “underwriter.” So the underwriters wrote into the prospectus the presence of a “reserve” account, the source of funding for which was never made clear. That was intentionally vague because while some of the “servicer advance” money might have come from the investors themselves, most of it came from external “profits” claimed by the broker dealers.

The presence of  servicer advances is problematic for those who are pursuing foreclosures. Besides the fact that they could not possibly own the loan, and that they couldn’t possibly be a proper representative of an owner of the loan or Holder in Due Course, the actual creditor (the group of investors or theoretically the REMIC Trust) never shows a default of any kind even when the servicers or sub-servicers declare a default, send a notice of default, send a notice of acceleration etc. What they are doing is escalating their volunteer payments to the creditor — made for their own reasons — to the status of a holder or even a holder in due course — despite the fact that they never acquired the loan, the debt, the note or the mortgage.

The essential fact here is that the only paperwork that shows actual transfer of money is that which contains a check or wire transfer from investor to the broker dealer — and then from the broker dealer to various entities including the CLOSING AGENT (not the originator) who applied the funds to a closing in which the originator was named as the Lender when they had never advanced any funds, were being paid as a vendor, and would sign anything, just to get another fee. The money received by the borrower or paid on behalf of the borrower was money from the investors, not the Trust.

So the note should have named the investors, not the Trust nor the originator. And the mortgage should have made the investors the mortgagee, not the Trust nor the originator. The actual note and mortgage signed in favor of the originator were both void documents because they failed to identify the parties to the loan contract. Another way of looking at the same thing is to say there was no loan contract because neither the investors nor the borrowers knew or understood what was happening at the closing, neither had an opportunity to accept or reject the loan, and neither got title to the loan nor clear title after the loan. The investors were left with a debt that could be recovered probably as a demand loan, but which was unsecured by any mortgage or security agreement.

To counter that argument these intermediaries are claiming possession of the note and mortgage (a dubious proposal considering the Porter study) and therefore successfully claiming, incorrectly, that the facts don’t matter, and they have the absolute right to prevail in a foreclosure on a home secured by a mortgage that names a non-creditor as mortgagee without disclosure of the true source of funds. By claiming legal presumptions, the foreclosers are in actuality claiming that form should prevail over substance.

Thus the broker-dealers created written instruments that are the opposite of the Concept of Securitization, turning complete transparency into a brick wall. Investor should have been receiving verifiable reports and access into the portfolio of assets, none of which in actuality were ever purchased by the Trust, because the pooling and servicing agreement is devoid of any representation that the loans have been purchased by the Trust or that the Trust paid for the pool of loans. Most of the actual transfers occurred after the cutoff date for REMIC status under the IRC, violating the provisions of the PSA/Trust document that states the transfer must be complete within the 90 day cutoff period. And it appears as though the only documents even attempted to be transferred into the pool are those that are in default or in foreclosure. The vast majority of the other loans are floating in cyberspace where anyone can grab them if they know where to look.

Filed under: AMGAR, bubble, CDO, CORRUPTION, discovery, escrow agent, evidence, expert witness, foreclosure, foreclosure defenses, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, Motions, Neil Garfield Show, originator, Pleading, securities fraud, Servicer, taxes, Title, TRUST BENEFICIARIES, trustee | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , | 6 Comments »

Why Is the PSA Relevant?

Posted on June 18, 2014 by Neil Garfield

Many judges in foreclosure actions continue to rule that the securitization documents are irrelevant. This would be a correct ruling in the event that there were no securitization documents. Otherwise, the securitization documents are nothing but relevant.

There are three scenarios in which the securitization documents are relevant:

  1.  The party claiming to be a trustee of a trust is claiming to have the rights of collection and foreclosure.
  2.  The party claiming to be the servicer  for a trust is claiming to have the rights of collection and foreclosure.
  3.  The party claiming to be the holder with rights to enforce is claiming to have rights of collection and foreclosure. If the party claims to be a holder in due course, the inquiry ends there and the borrower is stuck with bringing claims against the intermediaries, being stripped of his right to raise defenses he/she could otherwise have made against the originator, aggregator or other parties.

The securitization scheme can be summarized as follows:

  1.  Assignment and Assumption agreement:  This governs procedures for the closing. This is an agreement between the apparent originator of the loan and an undisclosed third-party aggregator. This agreement exists before the first application for loan is received by the originator, and before the alleged “closing.” It governs the behavior of the originator as well as the rights and obligations of the originator. Specifically it states that the originator has no rights to the whatsoever. The aggregator is used as a conduit for the delivery of funds to the closing table at which the borrower is deceived into thinking that he received a loan from the originator when in fact the funds were wired by the aggregator on behalf of an unknown fourth party. The unknown fourth party is a broker-dealer acting as a conduit for the actual lenders. The actual lenders are investors who believe that they were buying mortgage bonds issued by a REMIC trust, which in turn would be using the money raised from the offering of the bonds for the purpose of originating or acquiring residential loans. Hence the assignment and assumption agreement is highly relevant because it dictates the manner in which the closing takes place. And it demonstrates that the loan was a table funded loan in a pattern of conduct that is indisputably “predatory per se.” It also demonstrates the fact that there was no consideration between originator and the borrower. And it demonstrates that there was no privity between the aggregator and the borrower. As the closing agent procured the signature of the borrower on false pretenses. Interviews with document processors for both originators closing agents now show that they would not participate in such a closing where the identity of the actual lender was intentionally withheld.
  2.  The pooling and servicing agreement: This governs the procedures for collection, disbursement and enforcement. This is the document that specifies the authority of the trustee, the servicer, the sub servicers, the documents that should be held by the servicer, the servicer advance payments, and the formulas under which the lenders would be paid. Without this document, none of the parties currently bring foreclosure actions would have any right to be in court. Without this document trustee cannot show its authority to represent the trust or the trust beneficiaries. Without this document servicer cannot show that it performed in accordance with the requirements of a contract, or that it was in privity with the actual lenders,  or that it had any right of enforcement, or that it computed correctly the amount of payment required from the borrower and the amount of payment required to be made to the lenders. It also specifies the types of third party payments that are made from insurance, swaps and other guarantors or co-obligors.
  3. Of specific importance is the common provision for servicer advances, in which the creditors are receiving payments in full despite the declaration of default by the servicer.  In fact, the declaration of default by the servicer is actually an attempt to recover money that was voluntarily paid to the creditor. It is not correctly seen as a declaration of default nor any right to demand reinstatement nor any right to accelerate because the creditor is not showing any default. It is a disguised attempt to assert a claim for unjust enrichment because the servicer made payments on behalf of the borrower, voluntarily, to the creditor that are not recoverable from the creditor. Usually they make this payment by the 25th of each month. Hence any prior delinquency is cured each month and eliminates the possibility of a default with respect to the creditor on the residential loan.

It is argued by the banks and accepted by many judges that mere possession of the note sufficient to enforce it in the amount demanded by the servicer. This is wrong. The amount demanded by the servicer and does not take into account the actual payments received by the actual creditor. Accordingly the computation of interest and principal is incorrect. This can only be shown by reference to the securitization documents, including the assignment and assumption agreement, the pooling and servicing agreement, the prospectus and supplements to the PSA and Prospectus.

For more information please call 520-405-1688 or 954-495-9867.

Filed under: AMGAR, CDO, CORRUPTION, escrow agent, evidence, foreclosure, foreclosure defenses, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, Neil Garfield Show, originator, Pleading, Servicer, Title, TRUST BENEFICIARIES, trustee | Tagged: , , , , , , | 57 Comments »

US Bank Gets Banged for Forcing Homeowner Into Foreclosure

Posted on September 12, 2012 by Neil Garfield

Hat tip to Attorney Dan Hanacek in Northern California for spotting this.

Editor’s Note: U.S. Bank has been called everything from a slumlord in L.A. to a co-conspirator in the Merendon Mining Scandal a few years back. We have already seen them scam the system by foreclosing on property without relief from stay in BKR, and was a pioneer in the phrase “U.S. Bank as trustee relating to…” which of course means nothing other than that they have arrogated to themselves the role of trustee even though the securitization documents (that were ignored anyway) say otherwise.

While a lot of people have been complaining about “dual tracking” (luring homeowners into stopping payments while their modification proposal is “considered” and then foreclosing) this time it was a court ruling that nailed them.

“Applying basic contract and tort law, we reverse the judgment in favor of U.S. Bank on the causes of action for negligent misrepresentation, fraud, violation of section 2924g(d), and intentional infliction of emotional distress.” The use of emotional distress damages in both a boon to lawyers who take on clients after foreclosure is complete and a real threat to the millions of wrongful foreclosures that have been processed.

When lawyers ask me my opinion on advice to give a client who has been told to withhold payments on an otherwise current loan, my response is always the same. Don’t do anything that puts you into a worse position than you were in before you take any action. Now the delinquency appears real and the default becomes real and the homeowner looks like a deadbeat just like everyone else. In this case the Plaintiff was able to prove that the negligent representation had been made and that she had reasonably relied upon it with full intention of making the payments.

Obviously this was a case where the lawyer both wrote good pleadings, made a good record on appeal and wrote a good brief and argued it effectively. But there is an additional element creeping into these decisions. It is becoming less likely that Judges are ruling on a speculative presumption that the property would have ended up in foreclosure anyway. That presumption lies at the root of a lot of negative decisions where the argument by the homeowner was legally correct but denied and affirmed. The tide is changing.

The other interesting aspect is that this one invovled Downey Savings, about which that have been many complaints and maybe some regulator will take a closer look at them. But the point is that the misrepresentation by Downey was all the more believable because it was a bank that not mentioned prominently in the news as opposed to the banks and servicers who are well-known to have engaged in this behavior. So be careful with whom you speak, and be ready to record all conversations — especially if they tell you that the call may be recorded for quality control purposes — that I believe and so do other attorneys, is consent for the recording even in a state requiring two party consent.

D.J. cite:   2012 DJDAR 12769
California Courts of Appeal – 4th District
DAILY JOURNAL SUMMARY
In 2002, Pam Ragland refinanced her home mortgage through Downey Savings and Loan Association. In April 2008, she asked Downey Savings to modify her loan to decrease her monthly payments. While attempting to do so, a Downey Savings employee told her not to make her April payment. Although Ragland planned on making the payment, she cancelled it based on what the employee told her. Later that month, Downey Savings notified Ragland that her loan was delinquent. By June, Ragland received a letter informing her the Downey Saving was beginning foreclosure proceedings on her home. After she lost her home, she sued Downey Savings, alleging negligent misrepresentation, and other claims. She claimed that Downey Savings induced her to miss the April 2008 loan payment, which wrongfully put her loan in foreclosure. The trial court found in favor of Downey Savings. Reversed in part. To prove negligent misrepresentation, a plaintiff has to show that the defendant misrepresented a fact without having a reasonable ground to think it is true, and with the intent to make the plaintiff rely on the fact. Also, the plaintiff must prove that she justifiably relied on the defendant’s statements. Here, Ragland’s evidence showed that Downey Savings told her that her loan was not “behind,” and that she should not make the April 2008 payment. Further, she showed that she did not make that payment because she relied on Downey Savings’ statements not to do so. As a result, Ragland presented evidence that would allow her to prove negligent misrepresentation, and the trial court should not have found in favor of Downey Savings on the claim. Thus, this court reversed the case for further proceedings. Opinion by Justice Fybel. 
OPINION

PAM RAGLAND,

Plaintiff and Appellant,

v.

U.S. BANK NATIONAL

ASSOCIATION et al.,

Defendants and Respondents.

No. G045580

(Super. Ct. No. 30-2008-00114411)

California Courts of Appeal

Fourth Appellate District

Division Three

Filed September 11, 2012

Appeal from a judgment of the Superior Court of Orange County, Gregory H. Lewis, Judge.  Affirmed in part, reversed in part, and remanded.  Request for judicial notice.  Denied.  Motion to strike.  Granted in part and denied in part.

Travis R. Jack for Plaintiff and Appellant.

Sheppard, Mullin, Richter & Hampton, Karin Dougan Vogel, J. Barrett Marum and Mark G. Rackers for Defendants and Respondents.

*                *                *

INTRODUCTION

After Pam Ragland lost her home through foreclosure, she sued defendants U.S. Bank National Association (U.S. Bank), the successor in interest to the Federal Deposit Insurance Corporation (FDIC) as the receiver for Downey Savings and Loan Association (Downey Savings); DSL Service Company (DSL), the trustee under the deed of trust; and DSL’s agent, FCI Lender Services, Inc. (FCI).  (We refer to U.S. Bank, DSL, and FCI collectively as Defendants.)  She asserted causes of action for negligent misrepresentation, fraud, breach of oral contract, violation of Civil Code section 2924g, subdivision (d) (section 2924g(d)), intentional and negligent infliction of emotional distress, and rescission of the foreclosure sale.  Ragland appeals from the judgment entered after the trial court granted Defendants’ motion for summary judgment and summary adjudication.

Applying basic contract and tort law, we reverse the judgment in favor of U.S. Bank on the causes of action for negligent misrepresentation, fraud, violation of section 2924g(d), and intentional infliction of emotional distress.  Ragland produced evidence creating triable issues of fact as to whether Downey Savings induced her to miss a loan payment, thereby wrongfully placing her loan in foreclosure, and whether she suffered damages as a result.  We affirm summary adjudication of the causes of action for breach of oral contract, negligent infliction of emotional distress, and rescission, and affirm the judgment in favor of DSL and FCI because Ragland is no longer pursuing claims against them.

The FDIC took control of Downey Savings in November 2008 and later assigned its assets, including Ragland’s loan, to U.S. Bank.  For the sake of clarity, we continue to use the name “Downey Savings” up through December 17, 2008, the date of the foreclosure sale.

FACTS

I.

Ragland Refinances Her Loan.  Her Signature Is Forged on Some Loan Documents.

In June 2002, Ragland refinanced her home mortgage through Downey Savings.  She obtained the refinance loan through a mortgage broker.  The loan was an adjustable rate mortgage with an initial yearly interest rate of 2.95 percent, and the initial monthly payment was $1,241.03.

Ragland thought that Downey Savings had offered her a fixed rate loan and claimed her mortgage broker forged her name on certain loan documents.  In July 2002, she sent a letter to the escrow company, asserting her signature had been forged on the buyer’s estimated closing statement and on the lender’s escrow instructions, and, in September 2002, she notified Downey Savings of the claimed forgery.  A handwriting expert opined that Ragland’s signature had been forged on those two documents, and on a statement of assets and liabilities, an addendum to the loan application, a provider of service schedule, and an itemization of charges.  By August 2002, Ragland had consulted two attorneys about the forged documents, one of whom wanted to file a class action lawsuit on her behalf, and the other of whom advised her of her right to rescind the loan. Ragland signed, and did not dispute signing, the adjustable rate mortgage note, the deed of trust, and riders to both instruments.

II.

Ragland Seeks a Loan Modification.  She Is Told to Miss a Loan Payment to Qualify.

By April 2008, the yearly interest rate on Ragland’s loan had increased to 7.022 percent and her monthly payment had increased to over $2,600.  On April 13, Ragland spoke with a Downey Savings representative named John about modifying her loan.  John told Ragland her loan was not “behind” but he would work with her to modify it.  He told Ragland not to make the April 2008 loan payment because “the worst thing that’s going to happen is you are going to have a late fee, we will get this done for you.”  When Ragland asked if there was a chance the loan modification would not “go through,” John replied, “usually not, you are pre‑qualified.”

John told Ragland a $1,000 fee would be charged to modify the loan, and Downey Savings would not waive that fee.  She replied that Downey Savings should waive the fee because her “loan was forged and nothing was done about it.”  John said he would check with his supervisor about waiving the fee.

John did not call back, and on April 16, 2008, the last day to make a timely loan payment for April, Ragland, who was nervous about a late payment, called him.  John told her nothing could be done about the loan, so she asked to speak to his supervisor. The supervisor told Ragland, “[i]f you have one document in your packet that’s forged, you may not be responsible for anything in your loan, at all, you may not have to even pay your loan.”  When Ragland said she had 13 to 15 forged documents, the supervisor checked her record and told her, “I can see that you reported . . . this to us.  We are going to have to put it in legal.”  The supervisor told Ragland that Downey Savings could not collect from her while its legal department investigated the forgery.   Ragland had planned to make her April 2008 loan payment but, based on what John and the supervisor told her, manually cancelled the automatic payment from her checking account.

In late April 2008, Downey Savings sent Ragland a notice that her loan payment was delinquent.  On April 29, 2008, Ragland spoke with Downey Savings representatives named Joseph and Claudia and made notes on the delinquency notice of her conversations with them.  Ragland noted that Claudia or Joseph told her:  “Can’t do modi[fication] while investigat[e] [¶] . . . Collection activity ‘frozen.’”  Claudia told Ragland that Downey Savings was initiating an investigation into her claim of forgery and could not accept further loan payments from her during the investigation.  Ragland noted that Joseph also told her, “collection activity frozen.”

No one from Downey Savings further discussed a loan modification with Ragland or requested financial information from her.  Ragland testified in her deposition, “once it went into legal, that was it.  It was like the legal black hole.”

In May 2008, a withdrawal was made from Ragland’s checking account and transmitted to Downey Savings as the May 2008 loan payment.  Downey Savings refused to accept the payment.

On May 5, 2008, Downey Savings sent Ragland a letter entitled “Notice of Intent to Foreclose” (some capitalization omitted).  According to the letter, the amount required to reinstate the loan was $5,487.80.  On May 9, Ragland called Downey Savings in response to this letter.  Her notes for this conversation indicate she spoke with “Reb,” who transferred her to “Jasmine,” who transferred her to “Lilia,” who said the loan was in Downey Savings’s legal department and “they[‘]ll C/B.”

III.

Downey Savings Institutes Foreclosure Proceedings; Ragland Gets the Runaround.

Nobody from Downey Savings called Ragland back.  In early July 2008, Ragland received a letter from Downey Savings’s collection department, informing her that foreclosure proceedings on her home had begun.  On July 15, Ragland had a telephone conversation with each of three Downey Savings representatives, identified in her notes of the conversations as Eric, Gail, and Leanna.  Ragland spoke first with Eric, who told her the account was in foreclosure and transferred her to the foreclosure department.  Ragland next spoke with Gail, who said she could not speak to her because the account was in foreclosure.  Gail transferred Ragland to Leanna.  Leanna told Ragland that the legal department failed to put a red flag in the computer to indicate the loan was being investigated and that the loan should never have been placed in foreclosure.  Leanna told Ragland that Downey Savings was “waiting for legal,” and Ragland’s attorney needed to “write the letter to legal and ask them . . . for a status update on the investigation, and that we had time, because it had just been referred in June and the sale wasn’t set for quite a while.”  Ragland’s notes from the conversation include, “[f]oreclosure on hold.”

IV.

Downey Savings Institutes Foreclosure Proceedings; Ragland Attempts to Make Loan Payments.

On July 18, 2008, Downey Savings instructed DSL, the trustee under the deed of trust, to initiate foreclosure proceedings on Ragland’s home.  DSL assigned its agent, FCI, to take the actions necessary to foreclose the deed of trust on Ragland’s home.

Ragland attempted to make payments on her loan in September, October, and November 2008 through transfers from her checking account.  Downey Savings rejected the payments.

On October 30, 2008, FCI recorded a notice of trustee’s sale, stating the foreclosure sale of Ragland’s home would be held on November 20.  Ragland filed this lawsuit against Downey Savings on November 7, 2008.  Several days later, Ragland’s attorney, Dean R. Kitano, spoke with general counsel for Downey Savings, Richard Swinney, about Ragland’s allegations of fraud and forgery in connection with the origination of her loan.  Swinney agreed to postpone the foreclosure sale until December 9, 2008.

By letter dated November 12, 2008, Swinney informed Kitano that until Downey Savings received certain documentation from Ragland, it would not consider modifying her loan.  The letter stated that any loan modification would require that she bring the loan current and described as “not credible” Ragland’s contention that a Downey Savings representative told her to skip a monthly payment.  The forgery issue, according to the letter, “has no impact on this loan” because Ragland did not claim her signatures on the disclosure statement, note, or deed of trust were forged.

Later in November 2008, the Office of Thrift Supervision closed Downey Savings, and the FDIC was appointed as its receiver.  U.S. Bank acquired the assets of Downey Savings from the FDIC.  Ragland’s loan was among those assets acquired by U.S. Bank.

V.

Ragland’s Home Is Sold at Foreclosure Sale on the Day After the Trial Court Denied Ragland’s Motion for
a Preliminary Injunction.

On November 12, 2008, Ragland filed an ex parte application for a temporary restraining order to enjoin the foreclosure sale scheduled for December 9.  The ex parte application was heard on November 26, on which date the trial court issued an order stating:  “Plaintiff shall be entitled to a temporary restraining order enjoining the foreclosure sale on December 9, 2008; upon bringing the loan current by Dec[ember] 16.  Current is as of Nov[ember] 26, 2008.”  A hearing on Ragland’s motion for a preliminary injunction was scheduled for December 16, 2008.

Following the ex parte hearing, Downey Savings provided Ragland a statement showing the amount necessary to reinstate her loan was $24,804.57, of which about $4,074 was for late charges, interest on arrears, property inspection and foreclosure costs.  Kitano sent Downey Savings a letter, dated December 2, 2008, stating that “[c]urrently, my client is unable to pay the arrearage to make the loan current” and proposing that (1) $12,000 of the reinstatement amount be “tacked onto the back end of the loan” and (2) Downey Savings forgive the remaining amount.

In advance of the hearing on Ragland’s motion for a preliminary injunction, the trial court issued a tentative decision that stated, in part:  “The court’s order of November 26, 2008, conditions the TRO [(temporary restraining order)] on plaintiff’s bringing her payments current as of November 26, 20[08] by no later than December 16, 2008.  According to defendant, t[he] amount necessary to bring the loan current is $24,804.57.  Plaintiff does not dispute that she owes regular monthly mortgag[e] payments on the loan, and therefore whether or not she is likely to prevail on the merits is not at issue insofar as her responsibilit[ies] to bring the loan payments current [are] concerned.  If plaintiff fails to bring her payments current by the hearing date, there is no reason to issue a preliminary injunction, since the injunction would serve no purpose but to prolong the inevitable to no good purpose. . . .  [¶]  If plaintiff does bring her payments current by the hearing date, then there is no basis for a foreclosure sale because the arrears would have been cured.  Hence there would seem to be no need for the issuance of a preliminary injunction under such circumstances.”

Ragland did not pay the amount demanded by Downey Savings to reinstate the loan by December 16, 2008.  She had sufficient funds to make the back payments due under the note, but not to pay the additional fees.

On December 16, 2008, the trial court denied Ragland’s motion for a preliminary injunction, and the foreclosure sale was conducted the next day.  Ragland’s home was sold at the sale for $375,000.

MOTION FOR SUMMARY JUDGMENT

Ragland’s third amended complaint asserted causes of action against U.S. Bank for negligent misrepresentation, breach of oral contract, and fraud, and against Defendants for violations of section 2924g(d), intentional infliction of emotional distress, negligent infliction of emotional distress, and rescission of foreclosure sale.

In December 2010, Defendants moved for summary judgment and, in the alternative, for summary adjudication of each cause of action.  In May 2011, the trial court granted the motion for summary judgment on the ground Ragland could not pay the full amount demanded by Downey Savings to reinstate her loan.  The trial court ruled:  “A valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust . . . .  [Citation.] [¶]  This rule . . . is based upon the equitable maxim that a court of equity will not order a useless act performed . . . if plaintiffs could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the plaintiffs.  [¶]  [Citation.]  [¶]  The defendants have shown that all of plaintiff’s damages under each cause of action were suffered as a result of the foreclosure sale of her property. . . . Plaintiff alleges that the foreclosure sale occurred six days too early in violation of Civil Code §2924g.  Even if this were true, plaintiff’s damages are not recoverable because plaintiff was incapable of reinstating her loan. . . . This was made clear by plaintiff’s counsel in his letter to Downey Savings’ counsel two weeks before the foreclosure sale (December 2, 2008).  Plaintiff’s counsel stated that ‘. . . my client is unable to pay the arrearage to make the loan current[.’] . . . Plaintiff’s failure to reinstate the loan by the December 16, 2008 preliminary injunction hearing confirmed as much, and plaintiff also admitted this in her deposition.”

As to the contention that Ragland could have made the past due loan payments but not the added fees, the trial court ruled:  “Plaintiff claims that she indicated in her deposition that she had the money to make up the back payments, but not enough money to also make up the fees.  Plaintiff’s Separate Statement, page 6, lines 16‑18.  The referenced deposition testimony amounts to a claim that plaintiff had only part of the money necessary to reinstate the loan.”  The court also rejected the contention that Ragland was prepared to file bankruptcy to delay the foreclosure sale, stating, “[t]his is a further admission that plaintiff was incapable of reinstating her loan even if the foreclosure sale had been delayed an additional six days.”

Ragland timely filed a notice of appeal from the judgment entered in Defendants’ favor.

REQUEST FOR JUDICIAL NOTICE AND MOTION TO STRIKE

I.

Ragland’s Request for Judicial Notice

Ragland requests that we take judicial notice of 18 discrete facts concerning the financial condition of Downey Savings from 2005 to the time of its acquisition by U.S. Bank, the nature of Downey Savings’s assets in that timeframe, the resale of Ragland’s home, and the condition of the Orange County housing market.  She argues those 18 facts are relevant to show “when Downey Savings’ disastrous financial condition beg[a]n showing in late 2007, and bec[ame] clear by April, 2008, Downey’s desperate need for cash explains its unusual behavior.”  She concedes, “[t]he matters concerning which judicial notice is requested were not presented to the trial court.”  We deny the request for judicial notice.

Ragland requests we take judicial notice pursuant to Evidence Code section 452, subdivision (h), which provides the court “may” take judicial notice of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.”  The Court of Appeal has the same power as the trial court to take judicial notice of matters properly subject to judicial notice.  (Evid. Code, § 459.)  “‘Matters that cannot be brought before the appellate court through the record on appeal (initially or by augmentation) may still be considered on appeal by judicial notice.’”  (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 719, fn. 4.)

As evidentiary support for the request for judicial notice, Ragland offers 12 exhibits, consisting of an audit report of Downey Savings, prepared by the Office of the Inspector General of the United States Department of the Treasury (exhibit 1), printed pages from various Web sites and blogs (exhibits 2‑6 and 8‑12), and a recorded grant deed (exhibit 7). Ragland’s request for judicial notice requires us (with one exception) to take judicial notice of, and accept as true, the contents of those exhibits.  While we may take judicial notice of the existence of the audit report, Web sites, and blogs, we may not accept their contents as true.  (Unruh‑Haxton v. Regents of University of California (2008) 162 Cal.App.4th 343, 364.) “When judicial notice is taken of a document, however, the truthfulness and proper interpretation of the document are disputable.  [Citation.]”  (StorMedia Inc. v. Superior Court (1999) 20 Cal.4th 449, 457, fn. 9.)

Although the audit report is a government document, we may not judicially notice the truth of its contents.  In Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on another ground in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276, the plaintiff sought judicial notice of a report of the United States Surgeon General and a report to the California Department of Health Services.  The California Supreme Court denied the request:  “While courts may notice official acts and public records, ‘we do not take judicial notice of the truth of all matters stated therein.’  [Citations.]  ‘[T]he taking of judicial notice of the official acts of a governmental entity does not in and of itself require acceptance of the truth of factual matters which might be deduced therefrom, since in many instances what is being noticed, and thereby established, is no more than the existence of such acts and not, without supporting evidence, what might factually be associated with or flow therefrom.’”  (Mangini v. R. J. Reynolds Tobacco Co., supra, at pp. 1063‑1064.)

Nor may we take judicial notice of the truth of the contents of the Web sites and blogs, including those of the Los Angeles Times and Orange County Register.  (See Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1141, fn. 6 [“The truth of the content of the articles is not a proper matter for judicial notice”]; Unlimited Adjusting Group, Inc. v. Wells Fargo Bank, N.A. (2009) 174 Cal.App.4th 883, 888, fn. 4 [statements of facts contained in press release not subject to judicial notice].) The contents of the Web sites and blogs are “plainly subject to interpretation and for that reason not subject to judicial notice.”  (L.B. Research & Education Foundation v. UCLA Foundation (2005) 130 Cal.App.4th 171, 180, fn. 2.)

The exception is the grant deed.  A recorded deed is an official act of the executive branch, of which this court may take judicial notice.  (Evid. Code, §§ 452, subd. (c), 459, subd. (a); Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549; Cal‑American Income Property Fund II v. County of Los Angeles (1989) 208 Cal.App.3d 109, 112, fn. 2.)  The grant deed purports to show that Ragland’s home was conveyed by the purchaser at the foreclosure sale to another party. While we may take judicial notice of the grant deed, we decline to do so because we conclude it is not relevant to any issue raised on appeal.

In addition, Ragland has not shown exceptional circumstances justifying judicial notice of facts that were not part of the record when the judgment was entered.  (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3;Duronslet v. Kamps (2012) 203 Cal.App.4th 717, 737.)

II.

Defendants’ Motion to Strike Portions of Ragland’s Opening Brief

Defendants move to strike (1) six passages from Ragland’s opening brief that are supported by citations to the exhibits attached to the request for judicial notice or by citations to Web sites outside the record on appeal, and (2) three passages accusing Downey Savings of trying to swindle Ragland to generate cash.

California Rules of Court, rule 8.204(a)(1)(C) states an appellate brief must “[s]upport any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears.”  We may decline to consider passages of a brief that do not comply with this rule.  (Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 990.)  As a reviewing court, we usually consider only matters that were part of the record when the judgment was entered.  (Vons Companies, Inc. v. Seabest Foods, Inc., supra, 14 Cal.4th at p. 444, fn. 3.)

We have denied Ragland’s request for judicial notice; we therefore decline to consider those passages of the appellant’s opening brief, noted in the margin, which are supported solely by citations to exhibits attached to that request or to Web sites outside the appellate record.1  The three passages from the appellant’s opening brief accusing Downey Savings of trying to swindle Ragland also are not supported by record references,2 but we consider those three passages to be argument rather than factual assertions.

STANDARD OF REVIEW

“A trial court properly grants summary judgment where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law.  [Citation.]  We review the trial court’s decision de novo, considering all of the evidence the parties offered in connection with the motion (except that which the court properly excluded) and the uncontradicted inferences the evidence reasonably supports.  [Citation.]”  (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.)  We liberally construe the evidence in support of the party opposing summary judgment and resolve all doubts about the evidence in that party’s favor.  (Hughes v. Pair (2009) 46 Cal.4th 1035, 1039.)

DISCUSSION

I.

Negligent Misrepresentation Cause of Action

In the first cause of action, for negligent misrepresentation, Ragland alleged:  “On or about April 29, 2008, Downey [Savings] represented to Plaintiff that Downey [Savings] could modify Plaintiff’s current loan during the time that the legal department was investigating the fraud allegation on Plaintiff’s loan.  However, in order to do a modification of Plaintiff’s loan, Plaintiff would have to be in arrears on her current loan.  Downey[ Savings]’s representative then told Plaintiff not to pay April’s mortgage payment.  Upon . . . Downey[ Savings]’s representations Plaintiff did not pay April’s mortgage payment.  Thereafter, Downey [Savings] informed Plaintiff that Downey [Savings] could not accept any further mortgage payments from Plaintiff until the legal department investigated the alleged fraud on the initial mortgage.”

The elements of negligent misrepresentation are (1) a misrepresentation of a past or existing material fact, (2) made without reasonable ground for believing it to be true, (3) made with the intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.  (Wells Fargo Bank, N.A. v. FSI, Financial Solutions, Inc. (2011) 196 Cal.App.4th 1559, 1573; National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50.)

In opposition to Defendants’ motion for summary judgment, Ragland presented evidence that John or his supervisor represented (1) her loan was not “behind” but he would work with her to modify the loan; (2) she should not make the April 2008 loan payment because “the worst thing that’s going to happen is you are going to have a late fee, we will get this done for you”; and (3) her loan modification request likely would be approved because she was prequalified.  Ragland also presented evidence that several days later, on the last day for her to make a timely loan payment for April, John’s supervisor told her the loan would be turned over to the legal department because Ragland had reported some of the loan documents were forged. The supervisor told Ragland that Downey Savings would not attempt to collect from her until the matter had been investigated by the legal department.

Ragland presented evidence that in reliance on the representations made by John or his supervisor, she did not make her April 2008 loan payment.  Defendants assert Ragland was already in default when she first spoke with John on April 13, 2008, because she failed to make her payment due April 1, 2008.  The note stated Ragland’s monthly payment was due on the first day of each month, but that the monthly payment would be deemed timely if paid by the end of the 15th day after the due date.  In addition, Ragland presented evidence that John told her on April 13, 2008, she was not “behind” but he would work with her to modify the loan.  The payments made by Ragland for September and October 2008, which were rejected by Downey Savings, were dated the 16th of the month, and the rejected payment for November 2008 was dated the 14th.  At the very least, there is a triable issue of fact whether Ragland was in default when she spoke with John on April 13.

Defendants argue Ragland did not rely on the misrepresentations because she tried to make her loan payments in May, September, October, and November 2008.  Ragland made her loan payment by automatic transfer from her checking account. She manually prevented or undid the automatic payments for April, June, July, and August 2008.  As Ragland argues in her reply brief, an inference could be drawn that she inadvertently did not stop the May 2008 payment.  We draw all reasonable inference in favor of the party against whom the summary judgment motion was made.  (Crouse v. Brobeck, Phleger & Harrison (1998) 67 Cal.App.4th 1509, 1520.)

Defendants argue Ragland’s reliance was not justified because she was told her loan was in the foreclosure department and nobody at Downey Savings ever told her she could stop making loan payments.  The evidence presented by Ragland created a triable issue of fact whether her reliance was justified.  On April 29, 2008, Ragland spoke with Joseph and Claudia at Downey Savings, and they told her Downey Savings was initiating an investigation of her forgery claim; during the investigation, Downey Savings would not accept loan payments; and collection activity was frozen.  In May 2008, on receiving a letter stating her loan was in foreclosure, Ragland called Downey Savings.  Her call was transferred several times, until a person named Lilia told her the loan was in Downey Savings’s legal department, which would call her back.  Nobody from the legal department called Ragland back.  In July 2008, Ragland received a letter from Downey Savings, telling her foreclosure proceedings had begun.  After receiving the letter, she called Downey Savings and spoke with three different representatives. The third, Leanna, told Ragland the legal department had failed to place a red flag on the loan and it should never have been placed in foreclosure.  Ragland’s notes from the conversation include the statement, “[f]oreclosure on hold.”

The trial court granted summary judgment against Ragland on the ground she suffered no damages because, on the date of the foreclosure sale, she could not reinstate the loan by tendering $24,804.57—the amount Downey Savings claimed was due and owing.  The evidence created at the very least a triable issue of fact on damages.  Ragland testified in her deposition that as of the date of the foreclosure sale, “I could have covered the back payments but not the fees, not all the fees.”  Those fees were tacked on because Ragland’s failure to make the April 2008 loan payment placed the loan in foreclosure.  However, Ragland presented evidence that she did not make the April 2008 payment because she relied on misrepresentations made by Downey Savings.  In July 2008, Downey Savings told Ragland her loan should not have been placed in foreclosure and the foreclosure was “on hold.”  If Downey Savings wrongfully placed Ragland’s loan in foreclosure, as Ragland alleges, then it had no right to demand payment of additional fees and interest to reinstate the loan.  Downey Savings could not take advantage of its own wrong.  (Civ. Code, § 3517.)

Defendants point to the December 2, 2008 letter from Ragland’s attorney as undermining her claim she could make the past due monthly loan payments.  In that letter, the attorney stated that Ragland could not pay the full amount required to bring the loan current and proposed $12,000 of the reinstatement amount be “tacked onto the back end of the loan.” Defendants ask, if Ragland could have made all of the past due monthly loan payments, why did she not offer to pay them? The question is rhetorical:  If she had offered to pay the past due monthly loan payments, Downey Savings certainly would have rejected the offer, just as now Defendants vigorously argue a tender must be unconditional and offer payment of additional fees.

Defendants argue Ragland’s declaration is inconsistent with her deposition testimony because, in her deposition, Ragland could not identify precisely the people from whom she asked to borrow money to make the past due monthly loan payments. Her declaration is consistent with her deposition testimony.  Ragland testified, under oath, in her deposition that as of the date of the foreclosure sale, she “could have covered the back payments but not the fees.”  The evidence established she was not behind on her monthly payments when she spoke with John at Downey Savings on April 13, 2008, and Downey Savings rejected her payments for May, September, October, and November 2008.  A reasonable inference from this evidence, which we liberally construe in Ragland’s favor, is that Ragland would have been able to make the past due monthly payments by the time of the foreclosure sale.  (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 470 [“We stress that, because this is an appeal from a grant of summary judgment in favor of defendants, a reviewing court must examine the evidence de novo and should draw reasonable inferences in favor of the nonmoving party”].)

II.

Breach of Oral Contract Cause of Action

In her second cause of action, for breach of oral contract, Ragland alleged Downey Savings breached its promise to investigate her allegations of forgery.  On appeal, she does not attempt to support a claim of breach of oral contract and argues instead, “[t]he second cause of action for breach of oral promise to investigate should have been labeled as a cause of action for promissory estoppel.”  While conceding the second cause of action does not include the required allegation of detrimental reliance (Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305, 310), she argues a detrimental reliance allegation may be extrapolated from the fraud cause of action.

The second cause of action did not incorporate by reference the allegations of the fraud cause of action.  Ragland argues we must ignore labels, but however labeled, the second cause of action does not allege promissory estoppel.  On remand, Ragland may seek leave to amend her complaint to allege a promissory estoppel cause of action.

III.

Fraud Cause of Action

In the third cause of action, for fraud, Ragland alleged Downey Savings “falsely and fraudulently” made the representations alleged in the negligent misrepresentation cause of action.

The elements of fraud are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably and reasonably relied on the representation; and (5) the plaintiff suffered resulting damages.  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

Defendants argue U.S. Bank was entitled to summary adjudication of the fraud cause of action because no evidence was presented of “a misrepresentation, reliance or damages.”  As explained in part I. of the Discussion on negligent misrepresentation, Ragland presented evidence in opposition to the motion for summary judgment that was sufficient to create triable issues as to misrepresentation, reliance, and damages.

Defendants do not argue lack of evidence of elements two (knowledge of falsity) and three (intent to deceive) and did not seek summary adjudication of the fraud cause of action on the ground of lack of evidence of either of those elements.3  Since Ragland submitted evidence creating triable issues of misrepresentation, reliance, and damages, summary adjudication of the fraud cause of action is reversed.

IV.

Violation of Section 2924g(d) Cause of Action

In the fourth cause of action, Ragland alleged Defendants violated section 2924g(d) by selling her home one day after the expiration of the temporary restraining order.

Section 2924g(d) reads, in relevant part:  “The notice of each postponement and the reason therefor shall be given by public declaration by the trustee at the time and place last appointed for sale.  A public declaration of postponement shall also set forth the new date, time, and place of sale and the place of sale shall be the same place as originally fixed by the trustee for the sale.  No other notice of postponement need be given.  However, the sale shall be conducted no sooner than on the seventh day after the earlier of (1) dismissal of the action or (2) expiration or termination of the injunction, restraining order, or stay that required postponement of the sale, whether by entry of an order by a court of competent jurisdiction, operation of law, or otherwise, unless the injunction, restraining order, or subsequent order expressly directs the conduct of the sale within that seven-day period.”  (Italics added.)

On November 26, 2008, the trial court issued an order stating:  “Plaintiff shall be entitled to a temporary restraining order enjoining the foreclosure sale on December 9, 2008; upon bringing the loan current by Dec[ember] 16.  Current is as of Nov[ember] 26, 2008.”  The foreclosure sale was conducted on December 17, 2008.

A.  Section 2924g(d) Creates a Private Right of Action and Is Not Preempted by Federal Law.

In their summary judgment motion, Defendants argued section 2924g(d) does not create a private right of action and is preempted by federal law.  Although Defendants do not make those arguments on appeal, we address, due to their significance, the issues whether section 2924g(d) creates a private right of action and whether it is preempted by federal law.  Following the reasoning of Mabry v. Superior Court (2010) 185 Cal.App.4th 208 (Mabry), we conclude section 2924g(d) creates a private right of action and is not preempted.

In Mabry, supra, 185 Cal.App.4th at page 214, our colleagues concluded Civil Code section 2923.5 may be enforced by private right of action.  Section 2923.5 requires a lender to contact the borrower in person or by telephone before a notice of default may be filed to “‘assess’” the borrower’s financial situation and “‘explore’” options to prevent foreclosure.  (Mabry,supra, at pp. 213‑214.)  Section 2923.5, though not expressly creating a private right of action, impliedly created one because there was no administrative mechanism to enforce the statute, a private remedy furthered the purpose of the statute and was necessary for it to be effective, and California courts do not favor constructions of statutes that render them advisory only.  (Mabry, supra, at p. 218.)

There is no administrative mechanism to enforce section 2924g(d), and a private remedy is necessary to make it effective.  While the Attorney General might be responsible for collective enforcement of section 2924g(d), “the Attorney General’s office can hardly be expected to take up the cause of every individual borrower whose diverse circumstances show noncompliance with section [2924g(d)].”  (Mabry, supra, 185 Cal.App.4th at p. 224.)

The Mabry court also concluded Civil Code section 2923.5 was not preempted by federal law because the statute was part of the foreclosure process, traditionally a matter of state law.  Regulations promulgated by the Office of Thrift Supervision pursuant to the Home Owners’ Loan Act of 1933 (12 U.S.C. § 1461 et seq.) preempted state law but dealt with loan servicing only.  (Mabry, supra, 185 Cal.App.4th at pp. 228‑231.)  “Given the traditional state control over mortgage foreclosure laws, it is logical to conclude that if the Office of Thrift Supervision wanted to include foreclosure as within the preempted category of loan servicing, it would have been explicit.”  (Id. at p. 231.)  Section 2924g(d), as section 2923.5, is part of the process of foreclosure and therefore is not subject to federal preemption.

B.  The Foreclosure Sale Violated Section 2924g(d).

Defendants argue the foreclosure sale did not violate section 2924g(d) on the ground the trial court’s November 26, 2008 order was not a temporary restraining order because it conditioned injunctive relief on Ragland bringing her loan current by December 16, 2008.  That condition was not met, and, therefore, Defendants argue, a temporary restraining order was never issued.

We disagree with Defendants’ interpretation of the November 26 order.  The foreclosure sale had been scheduled for December 9, 2008.  The November 26 order was for all intents and purposes a temporary restraining order subject to section 2924g(d) because the effect of that order was to require postponement of the sale at least to December 16, 2008.  The requirement that Ragland bring the loan current by that date was not a condition precedent to a temporary restraining order, which in effect had been issued, but a condition subsequent, the failure of which to satisfy would terminate injunctive relief.4

Defendants argue they were entitled nonetheless to summary adjudication of the fourth cause of action because Ragland could not have brought her loan current within seven days of December 16, 2008.  Although Ragland submitted evidence that she could pay back amounts due, she did not present evidence she could bring the loan current, including payment of additional fees, as required by the trial court’s November 26 order.

The purpose of the seven‑day waiting period under section 2924g(d) was not, however, to permit reinstatement of the loan, “but to ‘provide sufficient time for a trustor to find out when a foreclosure sale is going to occur following the expiration of a court order which required the sale’s postponement’ and ‘provide the trustor with the opportunity to attend the sale and to ensure that his or her interests are protected.’  [Citation].”  (Hicks v. E.T. Legg & Associates (2001) 89 Cal.App.4th 496, 505.)  “The bill [amending section 2924g(d) to add the waiting period] was sponsored by the Western Center on Law and Poverty in response to an incident in which a foreclosure sale was held one day after a TRO was dissolved. The property was sold substantially below fair market value.  The trustor, who had obtained a purchaser for the property, did not learn of the new sale date and was unable to protect his interests at the sale.”  (Ibid.)

Thus, in obtaining relief under section 2924g(d), the issue is not whether Ragland could have reinstated her loan within the seven‑day waiting period but whether the failure of Downey Savings to comply with the statute impaired her ability to protect her interests at a foreclosure sale.  Defendants did not raise that issue as ground for summary adjudication of the fourth cause of action.

V.

Intentional Infliction of Emotional Distress Cause of Action

In the fifth cause of action, Ragland alleged that in December 2008, Defendants intentionally caused her severe emotional distress by selling her home in a foreclosure sale.

Defendants argue Ragland cannot recover emotional distress damages—either intentionally or negligently inflicted—because she suffered property damage at most as result of their actions.  (See Erlich v. Menezes (1999) 21 Cal.4th 543, 554 [“‘No California case has allowed recovery for emotional distress arising solely out of property damage’”].)  Erlich v. Menezesand other cases disallowing emotional distress damages in cases of property damage involved negligent infliction of emotional distress.  (Ibid. [negligent construction of home does not support emotional distress damages]; Butler‑Rupp v. Lourdeaux(2005) 134 Cal.App.4th 1220, 1228‑1229 [negligent breach of lease of storage space]; Camenisch v. Superior Court (1996) 44 Cal.App.4th 1689, 1693 [negligent infliction of emotional distress based on legal malpractice]; Smith v. Superior Court(1992) 10 Cal.App.4th 1033, 1040 [“mere negligence will not support a recovery for mental suffering where the defendant’s tortious conduct has resulted in only economic injury to the plaintiff”].)  The rule does not apply to intentional infliction of emotional distress:  “[R]ecovery for emotional distress caused by injury to property is permitted only where there is a preexisting relationship between the parties or an intentional tort.”  (Lubner v. City of Los Angeles (1996) 45 Cal.App.4th 525, 532; see also Cooper v. Superior Court (1984) 153 Cal.App.3d 1008, 1012 [no recovery for emotional distress arising solely out of property damage “absent a threshold showing of some preexisting relationship or intentional tort”].)

The elements of a cause of action for intentional infliction of emotional distress are (1) the defendant engages in extreme and outrageous conduct with the intent to cause, or with reckless disregard for the probability of causing, emotional distress; (2) the plaintiff suffers extreme or severe emotional distress; and (3) the defendant’s extreme and outrageous conduct was the actual and proximate cause of the plaintiff’s extreme or severe emotional distress.  (Potter v. Firestone Tire & Rubber Co.(1993) 6 Cal.4th 965, 1001.)  “Outrageous conduct” is conduct that is intentional or reckless and so extreme as to exceed all bounds of decency in a civilized community.  (Ibid.)  The defendant’s conduct must be directed to the plaintiff, but malicious or evil purpose is not essential to liability.  (Ibid.)  Whether conduct is outrageous is usually a question of fact.  (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1045 (Spinks).)

Ragland argues Downey Savings engaged in outrageous conduct by inducing her to skip the April loan payment, refusing later to accept loan payments, and selling her home at foreclosure.  She likens this case to Spinks, supra, 171 Cal.App.4th 1004, in which the appellate court reversed summary adjudication in the defendants’ favor of a cause of action for intentional infliction of emotional distress.  The defendants in Spinks were landlords of an apartment complex in which the plaintiff resided under a lease entered into by her employer.  (Id. at p. 1015.)  When the plaintiff’s employment was terminated following an industrial injury, the defendants, at the employer’s direction, changed the locks on the plaintiff’s apartment, causing her to leave her residence.  (Ibid.)  The Court of Appeal rejected the contention the defendants’ conduct was not outrageous as a matter of law:  “First, as a general principle, changing the locks on someone’s dwelling without consent to force that person to leave is prohibited by statute.  [Citation.]  Though defendants’ agents were polite and sympathetic towards plaintiff, they nevertheless caused her to leave her home without benefit of judicial process. . . . ‘While in the present case no threats or abusive language were employed, and no violence existed, that is not essential to the cause of action.  An eviction may, nevertheless, be unlawful even though not accompanied with threats, violence or abusive language.  Here the eviction was deliberate and intentional.  The conduct of defendants was outrageous.’”  (Id. at pp. 1045‑1046.)  In addition, the defendants’ onsite property manager had expressed concern over the legality of changing the locks, and the plaintiff was particularly vulnerable at the time because she was recovering from surgery.  (Id. at p. 1046.)

Defendants argue Spinks is inapposite because changing locks on an apartment to force the tenant to leave is unlawful, while, in contrast, Downey Savings proceeded with a lawful foreclosure after Ragland defaulted and had a legal right to protect its economic interests.  (See Sierra‑Bay Fed. Land Bank Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 334 [“It is simply not tortious for a commercial lender to lend money, take collateral, or to foreclose on collateral when a debt is not paid”]; Quinteros v. Aurora Loan Services (E.D.Cal. 2010) 740 F.Supp.2d 1163, 1172 [“The act of foreclosing on a home (absent other circumstances) is not the kind of extreme conduct that supports an intentional infliction of emotional distress claim”].)

This argument assumes Downey Savings had the right to foreclose, an issue at the heart of the case.  Ragland created triable issues of fact on her causes of action for negligent misrepresentation, fraud, and violation of section 2924g(d). Defendants do not argue Downey Savings would have had the right to foreclose if any of those causes of action were meritorious.  Ragland’s treatment by Downey Savings, if proven, was at least as bad as the conduct of the defendants in Spinksand was so extreme as to exceed all bounds of decency in our society.

VI.

Negligent Infliction of Emotional Distress Cause of Action

In the sixth cause of action, Ragland alleged that in December 2008, Defendants negligently caused her severe emotional distress by selling her home in a foreclosure sale.  As explained above, Ragland cannot recover under her cause of action for negligent infliction because Defendants’ conduct resulted only in injury to property.  In addition, she cannot recover for negligent infliction of emotional distress because she cannot prove a relationship giving rise to a duty of care.

There is no independent tort of negligent infliction of emotional distress; rather, “[t]he tort is negligence, a cause of action in which a duty to the plaintiff is an essential element.”  (Potter v. Firestone Tire & Rubber Co., supra, 6 Cal.4th at p. 984.)  “That duty may be imposed by law, be assumed by the defendant, or exist by virtue of a special relationship.”  (Id. at p. 985.)

Ragland asserted a “direct victim” claim for negligent infliction of emotional distress rather than a “bystander” claim. “‘Direct victim’ cases are cases in which the plaintiff’s claim of emotional distress is not based upon witnessing an injury to someone else, but rather is based upon the violation of a duty owed directly to the plaintiff.  ‘[T]he label “direct victim” arose to distinguish cases in which damages for serious emotional distress are sought as a result of a breach of duty owed the plaintiff that is “assumed by the defendant or imposed on the defendant as a matter of law, or that arises out of a relationship between the two.”  [Citation.]  In these cases, the limits [on bystander cases . . . ] have no direct application.  [Citations.]  Rather, well‑settled principles of negligence are invoked to determine whether all elements of a cause of action, including duty, are present in a given case.’”  (Wooden v. Raveling (1998) 61 Cal.App.4th 1035, 1038.)

Ragland argues a relationship between her and Defendants, sufficient to create a duty of care, arose by virtue of (1) the implied covenant of good faith and fair dealing in the loan documents and (2) financial advice rendered by John or Joseph during the telephone calls in April 2008.

The implied covenant of good faith and fair dealing is a contractual relationship and does not give rise to an independent duty of care.  Rather, “‘[t]he implied covenant of good faith and fair dealing is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated by the contract.’”  (Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1094.)  Outside of the insured‑insurer relationship and others with similar qualities, breach of the implied covenant of good faith and fair dealing does not give rise to tort damages.  (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 692‑693; see also Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 61 [no tort recovery for breach of implied covenant arising out of performance bond]; Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 516 [“In the absence of an independent tort, punitive damages may not be awarded for breach of contract” even when the breach was willful, fraudulent, or malicious]; Mitsui Manufacturers Bank v. Superior Court(1989) 212 Cal.App.3d 726, 730‑732 [commercial borrower may not recover tort damages for lender’s breach of implied covenant in loan documents].)

No fiduciary duty exists between a borrower and lender in an arm’s length transaction.  (Oaks Management Corporation v. Superior Court (2006) 145 Cal.App.4th 453, 466; Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 579; Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 476.)  “[A]s a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.”  (Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1096.)

Relying on Barrett v. Bank of America (1986) 183 Cal.App.3d 1362 (Barrett), Ragland argues Downey Savings exceeded the scope of its role as a lender of money because John and Joseph gave her what amounted to investment advice by telling her not to make her April 2008 loan payment.  In Barrett, the plaintiffs executed personal guarantees to the defendant bank of two loans made to a corporation of which the plaintiffs were the principal shareholders.  (Id. at p. 1365.)  Soon after the loans funded, the plaintiffs were informed the corporation was in technical default because the corporation’s liability to asset ratios no longer met the bank’s requirements.  (Ibid.)  The bank’s loan officer assigned to the matter suggested three different ways to improve the corporation’s financial situation.  As to the third suggestion, merger or acquisition, the loan officer told the plaintiffs a merging company would be responsible for the loans and the plaintiffs would be released from the guarantees. (Ibid.)

The plaintiffs followed the third suggestion, and their corporation merged with another one.  The merging corporation soon could not make the payments on the loans.  (Barrett, supra, 183 Cal.App.3d at pp. 1365‑1366.)  The assignee of the loans enforced them against the plaintiffs and instituted foreclosure proceedings against their home.  (Id. at p. 1366.)  The plaintiffs sued the bank for various causes of action, including constructive fraud and intentional infliction of emotional distress.  (Ibid.)  The jury returned a verdict in favor of the bank.  (Id. at pp. 1366‑1367.)

The issue on appeal was whether the trial court erred by refusing to instruct the jury on constructive fraud.  (Barrett, supra, 183 Cal.App.3d at p. 1368.)  The Court of Appeal, reversing, concluded substantial evidence supported a constructive fraud theory of recovery.  (Id. at p. 1369.)  Constructive fraud usually arises from a breach of duty in which a fiduciary relationship exists.  (Ibid.)  The court reasoned the bank acted as the plaintiffs’ fiduciary because one plaintiff perceived his relationship with the loan officer as “very close,” relied on the loan officer’s financial advice, shared confidential financial information with the loan officer, and relied on the loan officer’s advice about mergers.  (Ibid.)  In addition, a consultant for the merging corporation testified the loan officer assured him the plaintiffs would not be released from their guarantees.  (Ibid.)

The evidence presented in opposition to the motion for summary judgment did not create a triable issue of Ragland’s relationship with Downey Savings.  In contrast with the extensive financial and legal advice given by the loan officer inBarrett, John or his supervisor at Downey Savings told Ragland not to make her April 2008 loan payment in order to be considered for a loan modification.  This advice was directly related to the issue of loan modification and therefore fell within the scope of Downey Savings’s conventional role as a lender of money.

The undisputed facts established there was no relationship between Ragland and Downey Savings giving rise to a duty the breach of which would permit Ragland to recover emotional distress damages based on negligence.  The trial court did not err by granting summary adjudication of the cause of action for negligent infliction of emotional distress.

VII.

Rescission Cause of Action

Ragland concedes her seventh cause of action, for rescission, is no longer viable (“a dead letter”) because her home was resold after the foreclosure sale to a bona fide purchaser for value.  For that reason too, she states she is no longer asserting claims against DSL and FCI.

VIII.

Temporary Restraining Order

Ragland argues the trial court’s November 26, 2008 order violated her due process rights because it, in effect, required her to pay nearly $25,000 to bring her loan current or face foreclosure of her home.  There are two fundamental problems with Ragland’s challenge to the November 26 order.  First, an order granting or dissolving an injunction, or refusing to grant or dissolve an injunction, is directly appealable.  (Code Civ. Proc., § 904.1, subd. (a)(6).)  Ragland did not file a notice of appeal from the November 26 order or from the later order denying her motion for a preliminary injunction.  Second, even if Ragland properly had appealed, the sale of her home at foreclosure would have rendered the appeal moot.  An appeal from an order denying a temporary restraining order or preliminary injunction will not be entertained after the act sought to be enjoined has been performed.  (Finnie v. Town of Tiburon (1988) 199 Cal.App.3d 1, 10.)  “An appeal should be dismissed as moot when the occurrence of events renders it impossible for the appellate court to grant appellant any effective relief. [Citation.]”  (Cucamongans United for Reasonable Expansion v. City of Rancho Cucamonga (2000) 82 Cal.App.4th 473, 479.)

Ragland concedes her attempt to halt the foreclosure sale, like her rescission cause of action, is a “dead letter” and she is not seeking to set aside the November 26 order or the order denying a preliminary injunction.  She argues, “the denial of due process at the application for temporary restraining order was a substantial factor in [the] trial court’s decision to grant summary judgment in favor of U.S. Bank.”  We fail to see the connection.  In any event, we are reversing the judgment as to U.S. Bank, and affirming summary adjudication only of the causes of action for breach of oral contract, negligent infliction of emotional distress, and rescission.

DISPOSITION

The judgment in favor of DSL and FCI, and summary adjudication of the causes of action for breach of oral contract, negligent infliction of emotional distress, and rescission are affirmed.  Ragland may seek leave to amend in the trial court, as explained in this opinion.  In all other respects, the judgment is reversed and the matter remanded for further proceedings. Ragland shall recover costs incurred on appeal.

FYBEL, J.

WE CONCUR:

ARONSON, ACTING P. J.

IKOLA, J.

1  1.  From page 4, the third full paragraph beginning “In October, 2007, Downeys’ publicly traded common stock,” through page 6, the citation following the first full paragraph and ending “http://www.ocregister.com/articles/bank-16076-fremont-fdic.html).”

2  On page 7, footnote 3 that continues from page 6, the second sentence beginning “Between April 2008” and ending “[$543,000 + 14% = $619,020].”

3.  From page 7, in the third paragraph, the second sentence beginning “By that time, Downey’s” to page 8, the first line ending “(http:/www.bankaholic.com/ downey‑savings/).”

4.  On page 8, the second full paragraph beginning “In late July, 2008.”

5.  From page 9, the third full paragraph beginning “On November 21, 2008” through the first full paragraph on page 10.

6.  From page 31, the first full paragraph beginning “Going through a foreclosure can be so stressful” through page 32, the first full paragraph ending “(http://abcnews.go.com/Health/DepressionNews/story?id=5444573&page=1).”

2  The three passages are:

1.  On page 16, the first full paragraph beginning “In the present case.”

2.  On page 16, footnote 4.

3.  On page 30, in the first full paragraph, the fourth sentence beginning “Downey Savings took Ms. Ragland’s home.”

3  In its notice of motion and separate statement of undisputed material facts, U.S. Bank moved for summary adjudication of two issues (issues 9 and 10) related to the fraud cause of action:  “9. U.S. Bank is entitled to summary adjudication against Plaintiff on the third cause of action for Fraud because U.S. Bank did not make an actionable misrepresentation.  [¶]  10. U.S. Bank is entitled to summary adjudication against Plaintiff on the third cause of action for Fraud because all of Plaintiff’s alleged damages arise from the foreclosure of her property and Plaintiff was incapable of reinstating the loan at the time of the foreclosure.”

4  The requirement that Ragland bring her loan current might also be viewed as a condition precedent to a preliminary injunction.  But, as the trial court noted: “If plaintiff does bring her payments current by the hearing date, then there is no basis for a foreclosure sale because the arrears would have been cured.  Hence there would seem to be no need for the issuance of a preliminary injunction under such circumstances.”

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , | 14 Comments »

Another Strategy to Own Your Loan: Allocation of Third Party Payments to Your Loan Account

Posted on May 24, 2010 by Neil Garfield

I’m told by some industry insiders that you can buy a piece of our loan for pennies on the dollar, much the same as NPR did when they wanted to track the money and documents through the securitization structure. That’s a good goal because it will give you “inside information” on what the pretender lenders SAY happened to your loan.

But it doesn’t give you the real facts and events because the paperwork was prepared, executed and delivered long before the loans were originated. If a Judge thinks that you are nit-picking and that the issues you raise are issues between creditors, it is because he mistakenly presumes that the transaction started with the origination of the loan. In fact, the transaction commenced BEFORE the origination of the loan with the execution of the securitization documents, without which nobody would have any loans and nobody would have made any money.

By re-orienting the Judge to the point that the documentation for the origination of the loan was WITHIN THE CONTEXT, CONDITIONS AND PROVISIONS OF THE SECURITIZATION DOCUMENTS, you will (a) be telling the truth and (b) bringing the case closer to a result that are seeking — that without the pretender lender PROVING its case in a judicial proceeding, the election of non-judicial sale is unavailable.

One way to have the goods before your opposition has them is to buy, through a broker, a mortgage backed security that is based on a pool of assets and tranches, one of which is your own loan.

As an MBS owner you have every right to demand information about the rest of the owners and the status of the pool. One of the dirty little secrets is that a lot of pools have been closed out and dissolved which means that the party claiming to be the “trustee” for the SPV pool is claiming powers to represent an entity that no longer exists with investors who no longer are holders of MBS.

You can even ask whether any of the parties in the securitization chain or their agents, servants, employees, underwriters, affiliates ever received third party payments on “toxic” mortgages or mortgage backed securities or pools of assets in which a high percentage consists of loans that are non-performing, or on the representation that the receiver (usually the investment banking house or some subsidiary or affiliate).

As a holder of the mortgage backed securities you ask why the distribution reports did not include an allocation third party insurance, counterpart y or Federal money to your pool of assets and why the there was no allocation to individual loans in that pool. You can ask why they did not allocate those third party payments to the loans that were non-performing, which might include yours.

You can also ask whether such allocation to the pool and then to the individual loans in the pool and then to the nonperforming loans, has been applied to the obligation owed to the you as an investor. You should ask whether these third party payments are applied to the balance owed to you as an MBS owner, or whether it should be applied to payments that have been reduced or missed. And finally you should ask whether the third party payments would, if properly applied, make your payments, as an MBS owner, current or if they would still be behind. If behind, then how much behind and where did the rest of the money go? If ahead, then there is no longer any default to you as MBS owner.

Remember that the answer you are going to get (after stone-walling) is going to be a total of all such payments, since they never made any allocation. So your central question is how much did they get in third party payments and when. It is then up to you to decide on the proper with the help of an accountant familiar with generally accepted accounting principles.

You the  take the report of your accountant, your expert, and your forensic analyst and attach it to a pleading in which you “intervene” as the “real creditor” and state that the loan (a) was never in default because the MBS holders got their money that was due including a profit and/or (b) that the default was not in the amount as represented and that you, as creditor, would like to work out an arrangements with the debtor (you) in which you will (a) disclose the identity of the other creditors (b) disclose the true balance of the obligation after the above allocation (c) remove the predatory aspects of the loan, including the loss from appraisal fraud and (d) arrive at a thirty year fixed payment starting thirty days after the second closing at market rates for top tier debtors on the newly disclosed principal balance reduced by all relevant factors.

It’s all about transparency, truth ,justice and the American way.

Filed under: bubble, CASES, CDO, CORRUPTION, expert witness, Fannie MAe, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop | Tagged: , , , , , , , , , , , | 37 Comments »

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