Legal Update - Mabry Applellate Decision re California Civil Code 2923.5

The Court of Appeals decision in the Mabry case just came down today. It's a mixed bag for the servicing and trustee industries. On the positive side, the Court of Appeals adopted most of the arguments ALFN asserted in the Amicus Curiae brief we filed for the United Trustee Association and California Mortgage Association. Specifically, the Court of Appeals ruled, in a published decision, that: (1) the 2923.5 Declaration does not have to be signed under penalty of perjury; (2) that the compliance language in the 2923.5 Declaration can simply track the statute itself, i.e., the Dec does not have to identify the specific method by which the servicer complied with 2923.5; (3) the remedy for non-compliance with 2923.5 is postponement only; and (4) completed sales are not invalidated by alleged non-compliance with 2923.5.


As for the rest of the decision, the Court of Appeals held that: (1) there is a private right of action under 2923.5; (2) a tender is not required as a pre-requisite to stating a substantive 2923.5 claim; (3) 2923.5 is not preempted by HOLA; (4) the matter is remanded to the trial court to determine if Aurora complied with 2923.5; and (5) under the facts presented in the Mabry case, it is not appropriate for a class action.

Five potential implications of the decision on the industry?

1. 2923.5 causes of action on completed sales will be moot as the sale is final;

2. 2923.5 allegations in the eviction process will be moot, greatly helping eviction counsel;

3. Trustees should be able to file more Declarations of Non-Monetary Status on 2923.5 cases;

4. Borrowers will file more TROs alleging non-compliance of 2923.5 by the servicer; and

5. Without the private right of action, preemption or tender arguments, Demurrers and Motions to Dismiss will become more difficult to win, meaning more protracting litigation on those issues.