Many of you call me or write with complaints about loss mitigation departments and short sale negotiations. I've heard of more than a dozen cases in which the negotiator tells the real estate agent that short sale approval is under review and they should have an answer soon. A few days later, the borrower finds out their property has been sold on the courthouse steps! A recent (June 29, 2010) California case, Vissuet v. IndyMac Mortgage Services, holds that a borrower can sue the lender when this happens. The United States District Court for the Southern District of California said,
- "The Court has previously rejected OneWest's argument that the alleged oral contract is unenforceable because it violates the Statute of Frauds. As the Court previously explained, Section 1698 of the California Civil Code provides that a contract in writing may only be modified (1) in writing, (2) by an executed oral agreement, or (3) by an oral agreement supported by new consideration. CAL. CIV. CODE § 1698(a)-(c). The California Supreme Court has held that "if there exists sufficient consideration for an oral modification agreement, then full performance by the promisee alone would suffice to render the agreement 'executed' within the meaning of section 1698." Raedeke v. Gibraltar Sav. & Loan Ass'n, 10 Cal. 3d 665, 673, 111 Cal. Rptr. 693, 517 P.2d 1157 (1974) (concluding that the borrowers had a cognizable cause of action at law because they relied on the lender's promise to postpone the foreclosure sale if they obtained a solvent buyer). In this case, adequate consideration can be found in the form of Plaintiff's completion and submission of the loan modification application."
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