Illegal Zombie 2nd Liens, Debts and Mortgages
By 33 Year Veteran Attorney Rich Rydstrom, Esq.
Former Chairman of CMIS, 1-877-WIN-4-You |https://LitigationMonster.com
HAMP 2MP, West v. JP Morgan Chase, BP 17,200, 17082, Reg F, CCP 337
As Chairman of the Coalition for Mortgage Industry Solutions (“CMIS”; https://MortgageCoalition.org ), I led the debate for solutions to the Great Recession, including foreclosure and servicer standards and the forming of default solutions. In 2008 they said I was wrong. But in 2013, I won the landmark West v. JP Morgan case affirming that California Borrowers could sue the banks (lender/servicers/foreclosure trustees) in California states courts, for violations of federal rules, regulations, guidelines, standards, and public policy, including violations of HAMP, HAFA and 2MP. This is long settled now.
But shockingly, now in 2023, we face a barrage of debt collectors, threatening foreclosure of our homes for second or junior liens that were long ‘charged off’ or ‘extinguished’, without proper communications, required legal notices, bank statements, credit reporting, and legal process. It is illegal to threaten to foreclosure on a lien, if the ability to collect legally has expired. In part, this is the case in California when we apply Federal Reg F and the California statutes of limitations.
Reg F; and Time-Barred Debt:
The Consumer Financial Protection Bureau (CFPB) issued an advisory opinion to affirm that the Fair Debt Collection Practices Act (FDCPA) and its implementing Regulation F prohibit a debt collector from suing or threatening to sue to collect a time-barred debt. Accordingly, an FDCPA debt collector who brings or threatens to bring a State court foreclosure action to collect a time-barred mortgage debt may violate the FDCPA and Regulation F. (CONSUMER FINANCIAL PROTECTION BUREAU 12 CFR Part 1006 Fair Debt Collection Practices Act (Regulation F); Time-Barred Debt.) https://files.consumerfinance.gov/f/documents/cfpb_regulation-f-time-barred-debt_advisory-opinion_2023-04.pdf
In California, and in California Superior Court, we can use The Rosenthal Act incorporating the FDCPA, and other state causes of action, such as Unfair Trade Practices (“UCL”), Breach of Contract, Fraud and Misrepresentation, both negligent and intentional, among others, to find liability and hold the debt collectors liable for acting outside of the law.
In California, enforcement of a debt must be lawful, otherwise it is unlawful to threaten foreclosure or file a lawsuit to enforce same. The California Civil Code of Procedure, section 337, holds that a debt is time-barred from enforcement over 4 years from the date of the breach of contract, which is typically the date of non-payment, or date of the ‘charge-off’ or ‘extinguishment’ – whether by purchase/sale, insurance claims or assignment.
The Federal government supplies regulations, standards, and guidelines which the breach of same may satisfy the elements of California causes of action as mentioned above. For example, HAMP/2MP states that if a lender/servicer charges off the debt/lien it is an extinguishment. It also says that an extinguishment prohibits the creditor from collecting on that debt/lien, even if the defendants cleverly disguise the party transactions by inserting a non-SPA-signatory. Litigation to come. Stay tuned.