Case of the Month
Adams v. Bank of America, N.A. et al.

Plaintiff Connie Adams obtained a $422,750 loan secured by a deed of trust on a residential property located in Vallejo California in August 2006. The deed of trust lists Adams as a “borrower” and the lender was Countrywide Home Loans doing business as America’s Wholesale Lender which was later acquired by Bank of America. ReconTrust Company, an affiliate of Countrywide, was the trustee under the deed of trust. 

Later in 2006, Adams obtained a junior loan in the amount of $28,000 from an individual names Peter Gallegos, secured by a separate deed of trust, against the same property. Adams then defaulted on the junior loan, resulting in foreclosure and a trustee’s sale of the property in 2008. Gallegos purchased the property at the trustee sale, with the property still being subject to the senior loan. No action was taken to revise the senior loan to remove Adams as the borrower.

Almost 10 years later, in December 2017, Adams filed a complaint against Bank of America and ReconTrust Company alleging a cause of action for “violations of the Homeowners Bill of Rights (HBOR)”. The HBOR was enacted to give borrowers the opportunity for apply for available loss mitigation options prior to a non-judicial foreclosure.  Among other things, the HBOR prohibits dual tracking, whereby a financial institution continues to pursue foreclosure while evaluating a borrower’s loan modification application. The HBOR also requires that a mortgage servicer establish a single point of contact and provide a borrower who requests a foreclosure prevention alternative with one or more direct means of communication with the single point of contact.

Adams complaint alleged that in 2016 and 2017 she was engaging in “ongoing good faith negotiations with Bank of America toward the modification of a home loan”. Allegedly the bank was actively moving forward with foreclosure of the home. The complaint also claimed that during the loan modification process Bank of America did not provide a single point of contact. Adams sought injunctive relief, declaratory relief, damages, prejudgment interest, attorney’s fees, and costs of suit.

Of note, the dual tracking and single point of contact provisions of the HBOR do not apply to all mortgages and deeds of trust. Instead, they only apply to first lien mortgages or deeds of trust that are secured by “owner-occupied” residential real property containing no more than four dwelling units.  After all, it is the “homeowners” bill of rights.

On December 19, 2018, the trial court granted Bank of America and ReconTrust Company’s motions for judgement on the pleadings with no leave to amend, based upon their argument that Adams was no longer the owner of the property and thus not entitled to the protections of the HBOR.  Adams appealed.

On appeal, the court looked to the statutory language of the HBOR which specifically defines “owner-occupied” as a property that is “the principal residence of the borrower and is secured for a loan made for personal, family, or household purposes.” Holding that this definition was controlling and that it did not require ownership, the court determined that Adams’ lack of ownership did not bar her claim under the HBOR.

Adams complaint did not state whether the property was currently her principal residence, so the case was revered and remanded to allow Adams the opportunity to amend her pleadings.