A California appellate court has ruled that a lender’s agreement to forbear from a foreclosure or modify a mortgage loan must be in writing and that verbal agreements are unenforceable.
In Granadino v. Wells Fargo Bank, N.A., a married couple secured a mortgage loan from Wells Fargo with their Pasadena residence. In May 2010, the bank recorded a notice of default. In August, 2011, the bank issued a notice of trustee’s sale. The couple then hired counsel and attempted to negotiate a loan modification; the negotiations took place over a month’s period, from the end of September to October, 2011.
The date of the trustee’s sale was slated for October 17, 2011. According to the couple, the bank told a paralegal in their attorney’s office that their loan was under active review for a modification and that the trustee’s sale had been cancelled.
In November 2011, the couple receive a letter from the lender stating that their loan was no longer being actively reviewed for a modification, and that the foreclosure process would move forward. The trustee’s sale was later scheduled for December 16, 2011, and the couples’ home was sold on that date.
Subsequently, the couple sued the bank for promissory estoppel, asserting that the lender’s verbal agreement was enforceable and had they known about the actual date of the sale, they could have reinstated their original loan. A trial court granted summary judgment to the bank.
On appeal to the California Court of Appeal, Second District, the court upheld the trial court decision, relying on the statute of frauds that states any agreement relating to the sale of real property — including a mortgage or deed of trust — is invalid unless it is in writing.
In addition, the court noted that there were other options for its reaching the same conclusion: (1) the suit failed because the bank’s statement to the paralegal was a statement of fact, not a promise or assurance of action; (2) there was no evidence that the plaintiffs had the means to reinstate the loan even if they had known of the sale date; and (3) the mortgage loan was underwater and plaintiffs failed to establish damages since they had no equity in the home.
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