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Valentino v. Select Portfolio Servicing, Inc.

United States District Court, N.D. California

February 10, 2015

ABRAHAM VALENTINO, Plaintiff,
v.
SELECT PORTFOLIO SERVICING, INC., et al., Defendants.

ORDER GRANTING MOTION TO DISMISS FIRST AMENDED COMPLAINT AND GRANTING LEAVE TO AMEND Re: Dkt. No. 22

JOSEPH C. SPERO, Chief Magistrate Judge.

I. INTRODUCTION

This case arises from a non-judicial foreclosure of residential property. Plaintiff Abraham Valentino sued in state court, pursuant to the California Homeowner Bill of Rights, to block the sale of his home in Tiburon, California. Defendants Select Portfolio Servicing, Inc. ("SPS") and U.S. Bank National Association, N.A. ("U.S. Bank") removed the case to this Court based on diversity jurisdiction, and now move to dismiss Valentino's First Amended Complaint ("FAC, " dkt. 18). The Court finds the motion suitable for resolution without oral argument pursuant to Civil Local Rule 7-1(b), and vacates the hearing schedule for February 13, 2015. For the reasons stated below, Defendants' Motion is GRANTED IN PART, and the FAC is DISMISSED WITH LEAVE TO AMEND. If Valentino chooses to file a second amended complaint, he must do so no later than March 12, 2015.[1]

II. BACKGROUND

A. The Homeowner Bill of Rights

This case is based on a purported violation of the protections afforded by the California Homeowner Bill of Rights, specifically California Civil Code section 2923.6. That statute attempts to eliminate the practice whereby financial institutions continue to pursue foreclosure even while evaluating a borrower's loan modification application, commonly known as dual tracking. See Jolley v. Chase Home Fin., LLC, 213 Cal.App.4th 872, 904 (2013). The following subparts of section 2923.6 are relevant to this action:

(c) If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower's mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee's sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee's sale until any of the following occurs:
(1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired.
(2) The borrower does not accept an offered first lien loan modification within 14 days of the offer.
(3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower's obligations under, the first lien loan modification.
...
(g) In order to minimize the risk of borrowers submitting multiple applications for first lien loan modifications for the purpose of delay, the mortgage servicer shall not be obligated to evaluate applications from borrowers who have already been evaluated or afforded a fair opportunity to be evaluated for a first lien loan modification prior to January 1, 2013, or who have been evaluated or afforded a fair opportunity to be evaluated consistent with the requirements of this section, unless there has been a material change in the borrower's financial circumstances since the date of the borrower's previous application and that change is documented by the borrower and submitted to the mortgage servicer.
(h) For purposes of this section, an application shall be deemed "complete" when a borrower has supplied the mortgage servicer with all documents required by the mortgage servicer within the reasonable timeframes specified by the mortgage servicer.

Cal. Civ. Code § 2923.6 (emphasis added). The Homeowner Bill of Rights provides a private right of action of action for injunctive relief "[i]f a trustee's deed upon sale has not been recorded, " and for damages if the deed upon sale has been recorded. Id. § 2924.12(a), (b).

B. Valentino's Allegations[2]

Valentino obtained a loan from CMG Mortgage Services, Inc. ("CMG") in April of 2006, and executed a promissory note and a deed of trust secured by the property at issue. FAC ¶ 6. At some point thereafter, the note was transferred to U.S. Bank. Id. Valentino later sought to obtain a loan modification to lower his interest rate. Id. ¶ 7. He "defaulted on his loan to satisfy the lender's precondition for modification" and submitted an application for modification. Id. The FAC alleges that the application was neither denied nor approved because "the lender or loan servicer went out of business, thereby ...


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