You know, I wasn’t going to say anything about the role of Realtors here, but now that the California Association of Realtors (“C.A.R.”) has actually sent out a RED ALERT opposing… and more than that… now that they’re actively trying to kill the package of bills in California known as the “Homeowners Bill of Rights,” I feel compelled to speak out loud and clear, as it were.
First let’s look at what C.A.R. is saying in its RED ALERT email, which is calling its members to take action against the interests of homeowners. The message starts as follows…
“C.A.R. is OPPOSING a conference report, AB 278, containing anti-foreclosure legislation sponsored by the state Attorney General. C.A.R. opposes provisions in this measure which will allow anyone to stop the foreclosure process by filing a lawsuit, merited or not.”
What they’re talking about is the inclusion of a “private right of action,” perhaps the single most important component of the entire series of bills. It means that homeowners can sue if servicers don’t follow the rules set forth in the various bills being proposed.
Let me be very clear about this… without the private right of action the new laws have no teeth. They’re like HAMP guidelines. I was around for the HAMP guidelines debacle and trust me on this… we don’t need another set of guidelines that no one follows. Without a private right of action, homeowners are powerless to do anything when a servicer fails to do what they’re supposed to do.
Without a private right of action, you might as well just flush the whole thing.
And, let’s just get something straight right off the bat… people file lawsuits all the time for all sorts of reasons. The people that file them think they have good reason to do so. The people being sued undoubtedly often believe otherwise. As to whether the claims in a given lawsuit are “merited or not?” Well, I’ve always been under the impression that judges get to decide that issue… no one else.
It seems that C.A.R. needs a lesson from an 8th grade civics class.
Americans have a right to access their legal system. And judges have the authority to sanction, or in other words, punish those who file frivolous lawsuits.
Attorneys can also be sanctioned for filing frivolous litigation. The person filing the suit and their lawyer can end up paying the other side’s legal bills and if found to be particularly egregious, other fines as well. In addition, the filer of such a lawsuit and their attorney may be sued for malicious prosecution or abuse of process. (You’ll find links to the law on this topic at the bottom of this article, marked A & B.)
The right to sue doesn’t mean people will file frivolous lawsuits, and the potential for filing frivolous lawsuits is not a reason to deny someone the right to sue.
“C.A.R. agrees that careful and balanced reforms to the foreclosure process are necessary. However, C.A.R. opposes this conference report because it will further delay the housing recovery by inviting bad-faith lawsuits and defaults, and making it difficult for even well qualified borrowers to obtain financing. Financing is already very difficult to get. This conference report will only make a difficult situation worse.”
Okay, so the foreclosure process needs “careful and balanced reforms,” yada, yada, yada. The point is that C.A.R. is saying that their opposition is based on the belief that, by allowing homeowners the right to sue their servicer for not following the laws, that will lead to “bad faith lawsuits,” is preposterous. That it will somehow encourage “defaults,” is just idle blathering.
Like, I’m current on my mortgage now, but because I have the right to sue should my servicer screw me around, I think I’ll go ahead and default on my loan?
The next part of their claim, however, comes straight from the Mortgage Bankers Association (“MBA”), or the FHFA’s General Counsel and chief goon, Alfred M. Pollard.
Here’s the scary bedtime story that always comes along with anything the MBA doesn’t want to see changed. Homeowners being able to sue their servicers to assert their rights under the law will make it “even more difficult for homeowners to obtain financing.” Ooooh, very scary stuff.
And we all know how difficult financing is to get, right? Well, this is going to make it that much harder, don’t you know.
Oh, really? If that were true, then why is it so hard to get financing now? Borrowers have no private right of action now. It should be easy to get financing now, since borrowers can’t sue servicers regardless of the rules they choose to ignore, shouldn’t it? But it’s not. How come?
I know how come. It’s because borrowers having the right to sue a servicer for breaking the law doesn’t have anything to do with why credit is so tight today.
One reason credit is tight because banks are afraid they’ll be forced to buy loans back if anything is found to be wrong with their origination. You see, we haven’t had a private securitization of mortgage debt since 2007. Today, the only true lenders are Fannie Mae, Freddie Mac, FHA, VA, and some kind of loans offered by the US Department of Agriculture, believe it or not.
In other words… the federal government is the only lender out there and ever since the meltdown of 2008, the government agencies have been kind of persnickety about how loans are made, since last time it was quite the problem you might recall. So, since banks today only make loans that they can sell off to one government agency or another, they’re only making loans that they’re sure won’t come back to haunt them, no pun intended.
There are other factors that impact credit markets, like the recent downgrade of the world’s 15 largest banks doesn’t help anything. Neither does Dodd-Frank compliance. And then there’s the tenuous financial positions in which our banks find themselves, and the waiting for that other European loafer to fall.
There’s lot’s of reasons for credit to be tight today, but borrowers being able to sue servicers for breaking laws doesn’t make the list.
Next C.A.R.’s RED ALERT bulletin to Realtors® says the following…
Initially the Attorney General had sponsored a package of bills; the so-called the “Homeowners Bill of Rights.” For procedural reasons, the majority of these bills have been under consideration by a Conference Committee made up of six legislators.
REALTORS® had the opportunity to educate these legislators about C.A.R.’s concerns as part of Legislative Day and since then C.A.R. lobbyists have been working directly with the conferees and legislative staff to make them aware of the unintended consequences of some of these proposals.
The Conference Committee has now issued its final report and it must be passed by both Houses of the legislature. These votes may occur as early as Monday, July 2nd.
Oh, goodie… C.A.R.’s lobbyists have been working directly with the legislators involved to explain the unintended consequences of the private right of action allowing homeowners to sue when servicers break the new laws. Isn’t that special?
This is a Realtors® association doing this… Realtors®… the very same folks that want to be our friends and sell us another house someday. And dare I mention, the same Realtors® that sold us the homes that were always going to go up… that then brought in the loan officers to rape and pillage. Yeah, those Realtors®.
Now, don’t freak out, I’m not blaming Realtors® for the housing crisis, but to think that they would now be carrying water for the Mortgage Bankers Association… well, not cool… not at all cool, Realtors®. You want to be on the banker team, you go right ahead, but homeowners like me are going to remember on which side your bread got buttered when it mattered, capisce?
Here’s how C.A.R. explained the “background.”
The Attorney General has sponsored a package of bills to place into California law an expanded version of the national settlement between major banks and state attorneys general.
The contents of some of these bills have been under consideration by a Conference Committee comprised of six members who have just approved a conference report on a party-line vote. Some provisions will have the unintended effect of drying up mortgage loans for anyone but the most well-qualified borrowers, and increasing the costs of all mortgages.
See there’s that scary bedtime story again. It’s like a broken record. Borrowers being allowed to sue servicers for failing to follow new laws isn’t going to do a darn thing to “dry up mortgages for anyone but the most well-qualified borrowers.” It’s also not going to increase the costs of all mortgages… that’s just silly.
Remember, there is one way to make the private right of action absolutely irrelevant. Do you know what that “one way” might be? Well, it’s simple really. Servicers could follow the new laws. Presto! The private right of action means nothing.
What? It could happen, right? It’s possible.
But, wait… there’s more in the way of background…
One provision allows any borrower, no matter what the circumstances, to file a lawsuit. This will encourage opportunistic lawyers to pursue frivolous lawsuits, bringing unnecessary and unjustifiable delays to an already difficult and time-consuming process.
The language is so vaguely written that the borrower doesn’t even have to show that they have been harmed to file suit and be awarded damages. One-sided attorneys’ fees may still be awarded only to plaintiffs based on the very broad definition of a “prevailing party” in the report.
And, of course, if lenders don’t have the remedy of foreclosure to ensure they can recover their security in appropriate situations, they will be less likely to lend, credit will be less available and the housing market recovery will limp along even more slowly.
Once again, the two opening sentences are ridiculous. Lawyers who file frivolous lawsuits will ultimately find themselves sanctioned, sued for malicious prosecution, and ultimately disbarred. The second paragraph is similarly goofy.
“The borrower doesn’t even have to show that they’ve been harmed to file suit and be awarded damages?” On which planet are these people living? It must be the judges-handing-out-damages-with-out-plaintiff-being-harmed planet, I suppose.
And finally, C.A.R. wraps it up with a lie based on a lie based on another lie. Nothing in the Homeowners Bill of Rights prevents a servicer from foreclosing and recovering their security in appropriate situations. All the bills do is makes some of the new servicer standards into actual laws, and in some cases they allow a borrower to sue if the new laws aren’t followed by their servicer.
Look, banks aren’t lending now. And it wouldn’t matter if they were because we don’t really want to borrow all that much anyway. So, go jump in a lake okay? And if the banks don’t want to lend in the future because if the new laws, that’s okay too, because I’m pretty sure that someone will show up to fill that void. And you guys at the MBA can just run your hedge funds and lend money to each other, how would that be?
C.A.R. then explains that there are three reasons that they’re opposed to the Homeowners Bill of Rights legislation…
Here’s reason #1:
The housing market recovery is still fragile. About half of all sales are of distressed properties. By restricting a lender’s ability to foreclose and exposing them to unnecessary liability, this report will dry up inventory, and it will further discourage lending other than to the most highly qualified borrowers. Additionally, these bills will artificially slow down the foreclosure process, keeping properties off the market that are legitimately in foreclosure. Finally, by removing the threat of foreclosure, the bill erodes the incentive for short sales as well.
No, no, no. First of all, did you ever consider that maybe the reason that “half the sales are distressed properties” is because there is no private right of action. Maybe if there were, we’d a have a few less of those distressed properties and a few more modified loans… ya’ think? And C.A.R. has got it all wrong… lawsuits don’t expose anyone to unnecessary liability… they expose people and institutions to necessary liability.’’
These bills won’t “artificially slow down the foreclosure process,” if anything slows down the foreclosure process, it’ll be darn real… nothing artificial about it. And there’s nothing about these bills that will keep properties off the market that are legitimately in foreclosure, nor is there a single thing in these bills that removes the threat of foreclosure or erodes the incentive to do short sales either. What is C.A.R. lying about… oh, wait… I mean talking about. (Sorry, it’s hard to distinguish between the two.)
Do I need to review the bills we’re talking about here? Maybe I do…
There’s SB 1470 – The Anti-Dual Tracking Bill
Is C.A.R. pro-dual tracking? Yeah, well screw them. And more importantly, is MY Realtor® pro-dual tracking, because if so, she’s not my Realtor® anymore as of today, and I have lots of friends that she’s not going to be listing any homes for ever again either. In fact, I’ve been living in my home town for over twenty years, and if I were her… I’d just move. Her career here is over.
There’s SB 1471 – Single Point of Contact & Fines for Document Fraud
Is C.A.R. opposed to the Single Point of Contact, because I think that was the OCC’s idea following the investigation in 2010 into mortgage servicers that found them employing “unsafe and unsound practices,” remember that? I do. I never met a single homeowner who said, “I know what we need, a single point of contact.”
Or, is it document fraud that C.A.R. is in favor of keeping around free of charge? Because I think if Mickey Mouse is going to assign my Deed of Trust and Donald Duck is going to notarize it, then someone should have to pay extra, and it sure as heck shouldn’t be me.
There’s SB 1472 – Fight Neighborhood Blight
I can’t imagine that C.A.R. is in favor of increasing neighborhood blight, but at this point I’m not sure what the Realtors® at C.A.R. are thinking.
There’s SB 1473 – Renter Protection
Yeah, now there’s something that’s going to make lending turn tail and head for the hills… a little renter protection. And if that’s the case, then lending is a tad fragile to my way of thinking, and they need some toughening up anyway.
There’s the AB 1950 – File an NOD, Pay $25
Is someone really whining about this one? Seriously? Oh, shut-up, shut-up, shut-up… this trivial cost is going to get passed along seven times over and everyone knows it.
There’s SB 1464 – Special Financial Crimes
This bill would allow the state Attorney General to create a special grand jury to look into special financial crimes that involve multiple victims and I simply cannot believe this bill isn’t already a law.
Now, which one of these was going to destroy the future of lending, remove the threat of foreclosure, and have homeowners all filing frivolous lawsuits left and right? And which one was going to remove the incentive to a short sale?
What’s the word I’m looking for here? Oh, yeah…
POPPYCOCK! NONSENSE! CODSSWALLOP! TWADDLE? BULLSHIT!
What else you got, C.A.R?
Here’s reason #2:
The bill invites bad-faith defaults and lawsuits. By broadly defining under what circumstances a lawsuit can be filed, even those legitimately in foreclosure can “game” the system. Additionally, the bill creates an incentive for plaintiffs’ attorneys to file frivolous lawsuits even if no harm has been done to the borrower. The courts are already overwhelmed. This bill, by inviting frivolous lawsuits puts an additional strain on the already underfunded courts.
What part does that? Which one of those things convinces lawyers to file frivolous lawsuits that overwhelm the courts? Which one allows homeowners to “game” anything? Is C.A.R. smoking something that doesn’t come with a label on it? What are these Realtors® looking at, besides some mortgage banker’s butt?
And here’s reason #3:
Lending is already tight. Even the best qualified borrowers are finding it difficult to obtain financing. By stopping legitimate foreclosures, banks will be forced to further tighten lending standards at the expense of homebuyers.
And this, my dear Watson, as I’ve pointed out earlier… is the most ridiculous item of the day. The California Homeowner Bill of Rights has nothing to do with how difficult it will be to obtain financing. Nothing. Nada. Zippo. Naught. Nil. Zilch.
I remember years ago in California, when there was a law going through the legislature that the car insurance companies didn’t like one bit. And they all said that if the law passed there would be no car insurance available in California. Well, guess what? The bill passed. And I never had any problem at all buying car insurance. It was like Y2K all over again. Midnight came, and planes didn’t fall from the sky.
Lending will adjust, servicers will adjust… everyone will adjust. At the end of the proverbial day, the real impact of this legislation will be that it will make homeowners feel a little better protected, while it prevents the servicing industry from destroying itself.
Ooooh, scary, huh?
Here’s C.A.R.’s RED ALERT call-to-action… they’re asking Realtors® to…
Call Senator Christine Kehoe… TODAY
Urge them to vote NO on the so-called “Homeowners Bill of Rights”
Call (800) 969-3310
PIN # 196502687 to be connected.
So, here’s what I think we should do instead. In fact, I have several ideas here…
First of all, why don’t we all call Senator Christine Kehoe… TODAY…
… just like C.A.R. suggested.
ONLY INSTEAD WE CAN URGE THEM TO
On the so-called “Homeowners Bill of Rights”
Call (800) 969-3310
PIN # 196502687 to be connected.
The other thing we can do is to contact our elected representatives. Click the link below to enter your zip code and find your elected representatives, and how you contact them.
Contact him or her TODAY and tell them that you feel very strongly that you want the Homeowner Bill of Rights to pass and become law. Then do it again tomorrow. And the next day. And the day after that. And tell your friends to do it too.
You can call them on the phone…
Call them when you’re all alone…
You can call them once or twice…
Calling three times is quite nice.
You can call them from your bed…
Tell them that you’re seeing RED.
Call and ask, Who is John Galt?
Call them when you’re in default.
Tell them the foreclosure faction,
Wants a private right of action.
Say VOTE YES on bills proposed,
Protect those that are being foreclosed.
Call them and be nice, but firm…
Make them nervous, make them squirm.
Call them so they’ll fight the fights,
For homeowners and their Bill of Rights.
I also think it would be nice to contact Attorney General Kamala Harris. She has done an incredible job backing the Homeowner Bill of Rights against very formidable opposition. I admit, I didn’t think it was possible, and she has proven me wrong no matter what happens from here. The only thing is, I have no idea how to contact her, so if you can figure it out, it would be nice to let her know that you appreciate her dedication and hard work.
OH, AND ONE MORE THING…
IF YOU WANT TO HAVE SOME REAL FUN…
C.A.R.’s RED ALERT has a contact by email, for more information. The address is: [email protected].
It also says that to contact C.A.R., click on this link: http://www.car.org/?view=ContactUs
SO, LET’S DO PRECISELY AS THEY SUGGEST…
C.A.R. says that it’s a trade association representing 160,000 members, presumably Realtors®. So, I think we should let them know that we’re going to contact every Realtor® we know, and let them know that if they support this C.A.R. initiative, they are dead to us.
Let’s let C.A.R. know that even though many of us may be losing homes today, that doesn’t make us deadbeats… it makes us strong… it makes us focused… and it makes us remember who was and who wasn’t on our side when the chips were down.
Let’s let C.A.R. know that this was a mistake.
Realtors® either work on the side of homeowners or they don’t work at all.
Let’s let C.A.R. hear loud and clear that we know these truths to be self-evident. Then contact the Realtors® where you live. I don’t care if it’s your mom… I don’t care if it’s your husband or your wife. Make it clear that Realtors® that don’t denounce this effort by C.A.R. will be branded… for life.
Send them this via email… tell them they’ll be wearing it from now on…
A scarlet letter…
COME ON DOERS, LET’S DO THIS!
LET’S FORCE C.A.R. INTO CHANGING THEIR MINDS AND DOING THE RIGHT THING. LET’S MAKE THEM UNDERSTAND, THAT WE’RE NOT GOING TO FORGET THIS… EVER.
I think that calls for a song… Sing it with me…
Foreclosed Again, Actually.
With apologies to Gilbert O’Sullivan…
A) 3.1:101, Model Rule Comparison…
MR 3.1 sets forth fundamentals with respect to a lawyer’s taking a legal position on behalf of any client. At a minimum, the lawyer needs (1) a non-frivolous basis and (2) a good faith argument for any proposed change in the law. (One exception to these fundamentals applies, as discussed below). This rule describes the boundary between zealous representation and abuse of legal procedure. The MR 3.1 Official Comment recognizes that the boundary cannot be a “bright-line,” due to the murky and ever-changing requirements of the law.
A California lawyer may maintain only such actions as are “legal or just,” except when defending criminal actions, see B&PC � 6068(c), and “must not encourage either the commencement or continuance of an action or proceeding for any corrupt motive of passion or interest.” CRPC 3-200 precludes a lawyer from accepting or continuing employment if he “knows or should know” that the object of employment is either (1) to bring an action, conduct a defense, assert a position, or take an appeal “without probable cause and for the purpose of harassing or maliciously injuring any person,” or (2) to present a claim or defense “not warranted by existing law, unless it can be supported by a good faith argument for an extension, modification or reversal of existing law.”
B) And in the case of Bertero v. National General Corp., 13 Cal.3d 43 [L.A. No. 30156. Supreme Court of California. December 10, 1974.], the opinion written by Wright, C. J., expressing the unanimous view of the court said…
Defendants National General Corporation (National), NGC Theatre Corporation (NGC) and Eugene V. Klein appeal from a judgment upon a jury verdict totaling $1,178,952.77 in a malicious prosecution action in favor of plaintiff John B. Bertero. The award consists of compensatory damages of $553,952.77 against the three defendants and punitive damages of $625,000 allocated as follows: $350,000 against National, $25,000 against NGC and $250,000 against Klein. We conclude that the evidence supports the jury findings on the issues of liability and damages except as to an award as part of compensatory damages for attorney fees in the sum of $25,000. The judgment is thus modified and, as modified, affirmed.