A Private Right of Action Based on Civil Code § 2923.5 is Limited to Postponement of Foreclosure Proceedings to Allow the Lender Time To Comply
The California Legislature enacted the Perata Mortgage Relief Act in 2008 to address the increase in residential foreclosures. As part of the Act, California Civil Code section 2923.5 requires that lenders contact residential mortgage borrowers in person or by telephone to assess a borrower’s financial situation and explore options for the borrower to avoid foreclosure before the lender initiates foreclosure proceedings.
On June 2, 2010 the Fourth District of the California Court of Appeal, in Mabry v. Superior Court, held that section 2923.5 provides borrowers a private right of action, meaning section 2923.5 allows individual borrowers to sue lenders for failure to comply with its requirements. The sole legal remedy available to a borrower for a lender’s failure to comply with section 2923.5, however, is postponement of the foreclosure until the lender satisfies the requirements of section 2923.5. Further, the Mabry court determined section 2923.5 does not apply where a foreclosure sale already has occurred.
The Mabry court specifically acknowledged that relief under section 2923.5 is limited only to postponement of the foreclosure and that section 2923.5 creates no right to a loan modification. In addition, a borrower does not have to tender the full amount of indebtedness prior to any section 2923.5 enforcement. Finally, the court expressly stated that a lender’s failure to comply with section 2923.5 has no impact on the integrity of a debt.
In short, the Mabry decision provides helpful guidance to lenders seeking to enforce foreclosure rights by narrowly limiting the scope of section 2923.5 and describing in detail how to successfully comply with its requirements.
For help understanding the Perata Mortgage Relief Act and its many components, please contact one of our experienced real estate or business litigators. Click here to access the opinion.
For more information, please contact:
 |
 |
| Alison Buchanan |
Sean Cottle |
******************************************
This Legal Update is provided as an educational service by Hoge Fenton for clients and friends of the firm. This communiqué is an overview only, and should not be construed as legal advice or advice to take any specific action.