By Glen C. Hansen

In Vuki v. Superior Court (October 29, 2010) 189 Cal.App.4th 791, Lucy and Manatu Vuki filed an action against their mortgagee, HSBC Bank USA, initially seeking a temporary restraining order that would stay HSBC’s eviction of the Vukis after the Vukis lost their home to foreclosure. The Vukis alleged, among other things, that HSBC violated the requirements for a “comprehensive loan modification program” that are provided in Civil Code sections 2923.52 and 2923.53 (enacted in 2009). The trial court denied the application for a temporary restraining order and the Vukis filed a writ proceeding with the Court of Appeal for the Fourth Appellate District. The Court denied that writ petition on the grounds that neither section 2923.52 nor section 2923.53 provides any private right of action.

Before section 2923.52 was enacted, there was a minimum of three months from any notice of default until any foreclosure sale. After the enactment of section 2923.52, at least for certain loans, another 90 days must be included “in order to allow the parties to pursue a loan modification to prevent foreclosure.”  However, if lenders have in place a comprehensive loan modification programs that meet certain criteria provided in section 2923.53, they are exempted from the 90-day delay imposed by section 2923.52. Under subdivision (a) of section 2923.53, a “comprehensive loan modification program” shall include all of the following features:   

(1) The loan modification program is intended to keep borrowers whose principal residences are homes located in California in those homes.


(2) The loan modification program targets a ratio of the borrower’s housing-related debt to the borrower’s gross income of 38 percent or less, on an aggregate basis in the program.


(3) The loan modification program includes some combination of the following features: 

  • (A) An interest rate reduction, as needed, for a fixed term of at least five years. 
  • (B) An extension of the amortization period for the loan term, to no more than 40 years from the original date of the loan.
  • (C) Deferral of some portion of the principal amount of the unpaid principal balance until maturity of the loan.
  • (D) Reduction of principal.
  • (E) Compliance with a federally mandated loan modification program.
  • (F) Other factors that the commissioner determines are appropriate. In determining those factors, the commissioner may consider efforts implemented in other jurisdictions that have resulted in a reduction in foreclosures. 

(4) When determining a loan modification solution for a borrower under the loan modification program, the servicer seeks to achieve long-term sustainability for the borrower.


The Court of Appeal explained that these mandatory requirements for a comprehensive loan modification program are a “matter of a general program, evaluated by regulatory commissioners” and enforcement “is committed to regulatory agencies.”   Thus, the Court held that any noncompliance with sections 2923.52 and 2923.53 “is entirely a regulatory matter, and cannot be remedied in a private action.”  The Court distinguished a decision rendered by the same Fourth Appellate District only a few months earlier in Mabry v. Superior Court (June 2, 2010) 185 Cal.App.4th 208. In Mabry, the Court held that an individual cause of action did exist to enforce the requirement in Civil Code section 2923.5 that, before a notice of default may be filed, a lender must contact the borrower in person or by telephone to “assess” the borrower’s financial situation and to “explore” options for the borrower to prevent foreclosure. The key factors that resulted in the different outcome in Mabry, are that (unlike with section 2923.52 and 2923.53) the language in section 2923.5 contained an individual, case-by-case approach, and that nothing in the statute suggested that its enforcement was committed to a regulatory structure.   


The Court further recognized that section 2923.54 of the Civil Code makes clear that “whatever else is the case in regards to actual compliance or noncompliance with sections 2923.52 and 2923.53, it will not invalidate any otherwise valid foreclosure sale.”


While there is no private right of action to enforce the requirements for a comprehensive loan modification program provided in sections 2923.52 and 2923.53, those requirements are not toothless. Mortgagees should take careful heed that, as the Vuki Court noted, California state regulators have “implicit power to terminate the license of any company whose program is not in compliance.”


Glen C. Hansen is a senior associate at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.


The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.