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72 Borrowers regularly sue their loan servicers over alleged violations of the California's complex Homeowner Bill of Rights 1 (HBOR). Generally, the allegations have little merit. However, in the rare case that an actual violation exists, the Court of Appeal for the Second Appellate District recently confirmed that a loan servicer can remedy HOBR violations prior to the actual foreclosure sale, avoiding having to restart the entire foreclosure. While the industry has been making this argument for some time, we now have a published appellate decision to rely on. More specifically, the court in Billesbach v. Specialized Loan Servicing LLC 2 , found that (1) a mortgage servicer has no liability under California Civil Code sections 2923.55, 2923.7, and 2924.17 where it postpones the foreclosure sale after pre-sale violations and allows the borrower to pursue foreclosure alternatives; and (2) a mortgage servicer does not violate Civil Code section 2923.6 for dual tracking where a foreclosure sale takes place after the borrower fails to accept an offer by a specified deadline for a trial-period modification plan. Under Civil Code section 2923.55, before recording a notice of default, mortgage servicers must contact (or diligently attempt to contact) the borrower to assess the borrower's financial position and explore foreclosure prevention alternatives (FPA). 3 Section 2924.17 requires that a declaration attached to the notice of default attesting to compliance with section 2923.55 "be accurate and complete." 4 If a borrower requests an FPA, then under section 2923.7, the servicer must promptly provide a means of communication with a single point of contact (SPOC). Further, under section 2923.6, a mortgage servicer cannot proceed with the next phase of foreclosure proceedings while a complete application for a loan modification is pending, known as "dual tracking." In Billesbach, following a payment default by the deceased borrower's husband, Mr. Billesbach, the loan servicer, Specialized Loan Servicing LLC (SLS), recorded a Notice of Default which included a declaration that SLS had tried diligently to communicate about FPAs pursuant to Civil Code section 2923.55. SLS scheduled a foreclosure sale, and Billesbach filed this action to enjoin the sale, claiming violations of Civil Code section 2923.7 for failing to assign him a SPOC, violation of section 2923.55 for failing to communicate about FPAs, and violation of section 2924.17 for recording a false declaration of compliance. e sale was postponed to review Billesbach's loan modification application. After review, SLS offered Billesbach a trial period modification plan. Billesbach rejected the offer, seeking more favorable terms. With the offer rejected, SLS went to sale and the property was sold to a third party. Billesbach amended the complaint to add a cause of action for violation of section 2923.6, alleging a dual tracking violation for going to sale while his application was pending a response. 5 Although Billesbach argued, among other things, that SLS should have recorded a new Notice of Default, and that there was a dual- tracking violation because the parties were still "in negotiations" for a modification, the Court of Appeal disagreed. e Court instead found that Billesbach's HOBR claims failed, and specifically that: "where a mortgage servicer's violations stem from its failure to communicate with 1. California Civil Code section 2923.4 et seq. 2. Billesbach v. Specialized Loan Servicing LLC (April 29, 2021) 63 Cal.App.5th 830. 3. Civil Code §2923.55 (a), (b)(2), (f ). 4. Civil Code §2924.17(a). 5. Billesbach v. Specialized Loan Servicing LLC, supra, 63 Cal. App. 5th at 839-842. 6. Id. at 837. Quick Take By: Joan C. Spaeder- Younkin and T. Robert Finlay CALIFORNIA COURT REVISITS HOMEOWNER'S BILL OF RIGHTS A recent California Court of Appeals finding could give loan servicers the ability to "clean up" any violations before going to sale.

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