Billeci v. Finance

Background

Plaintiff John Billeci became the owner of residential property located at 299 Duperu Ct, Crockett, California 94525 by quitclaim deed after his parents, who purchased the property around 1981, passed away. The property is Billeci's residence and is encumbered by a $165,000 loan that his parents obtained in March 2010 from Freedom Mortgage Corporation.

In mid-2024, Billeci fell behind on monthly payments. In June 2025, a Notice of Default was recorded. In October 2025, mortgage servicing was transferred to Defendant Selene Finance, LP. On April 15, 2026, a Notice of Trustee's Sale was recorded, setting a sale date of May 20, 2026. Shortly after, in April 2026, Billeci submitted a loan modification application to Selene.

On April 23, 2026, Selene sent a letter identifying a single point of contact ("SPOC") for Billeci — an individual identified only as Brittney M. On May 18, 2026, Selene sent a denial letter stating the application was denied because the post-modification front-end debt-to-income ratio was outside the acceptable range. Critically, the denial letter did not inform Billeci that he had the right to appeal or provide instructions for doing so. Billeci then called Selene and spoke with his SPOC. The parties dispute whether the SPOC told Billeci not to appeal because doing so would accelerate the foreclosure.

Procedural History

Billeci filed an ex parte application (a request made without the other side present) for a Temporary Restraining Order ("TRO") on June 22, 2026, seeking to halt a foreclosure sale then set for June 24, 2026. Selene did not appear at the June 23, 2026 hearing; the court treated its nonappearance as no opposition and granted the TRO. The court issued an Order to Show Cause and scheduled an evidentiary hearing, which was ultimately continued to August 4, 2026 on the parties' joint request. Selene filed an opposition brief on July 13, 2026; Billeci filed a reply on July 17, 2026. On August 13, 2026, Selene submitted loan documents. An evidentiary hearing was held, and the court issued this order on August 19, 2026.

Legal Standard

The court applied the four-factor Winter test for a preliminary injunction — an extraordinary court order that preserves the status quo while litigation proceeds. The plaintiff must show: (1) likelihood of success on the merits, (2) likelihood of irreparable harm absent relief, (3) that the balance of equities tips in the plaintiff's favor, and (4) that an injunction is in the public interest. Under Ninth Circuit precedent, a plaintiff who cannot show full likelihood of success but shows "serious questions going to the merits" may still obtain an injunction if the balance of hardships tips sharply in their favor and the other factors are satisfied. Likelihood of success on the merits is the most important factor.

Analysis

Factor 1: Likelihood of Success on the Merits

The court analyzed several provisions of California's Homeowner Bill of Rights:

- California Civil Code § 2923.7 requires mortgage servicers to establish a single point of contact when a borrower requests a foreclosure prevention alternative. - California Civil Code § 2923.6(d) gives borrowers at least 30 days from a written denial to appeal a loan modification denial. - California Civil Code § 2923.6(f)(1) requires the denial letter to identify the time the borrower has to appeal and provide instructions on how to appeal. - California Civil Code § 2924.12(a)(1) authorizes a borrower to seek a court order (injunctive relief) to stop a material violation of §§ 2923.6 or 2923.7 before a trustee's deed upon sale is recorded.

The court found Billeci unlikely to prevail on his § 2923.7 SPOC claim because, as both sides confirmed, he did in fact contact a SPOC by phone after receiving the denial letter. However, the court found Billeci likely to succeed on a § 2923.6(f)(1) claim because Selene's denial letter did not include the time allowed to appeal or instructions on how to appeal, despite identifying the reason for denial.

As to the disputed phone call, Selene submitted an audio recording of the May 18, 2026 call via supplemental exhibits, but Selene's counsel acknowledged the recording was reviewed by the client and disclosed to counsel — without submitting a declaration from the SPOC herself. The court noted that under the Federal Rules of Evidence (Rule 602), witnesses must establish personal knowledge, and courts must still apply rules of evidence even while construing declarations liberally. However, the court found it unnecessary to resolve that evidentiary issue because, regardless of what was said on the call, the written denial letter was itself likely deficient under § 2923.6(f)(1).

The court also found that this likely statutory violation served as a predicate "unlawful" act supporting a claim under the California Unfair Competition Law (UCL), which prohibits unlawful, unfair, or fraudulent business practices.

Factors 2–4: Irreparable Harm, Balance of Equities, Public Interest

The court found that losing one's home constitutes irreparable harm. On the balance of equities, Selene argued a preliminary injunction would impose "significant operational, financial, and regulatory burdens," but the court found these assertions too vague and unspecified to tip the balance in Selene's favor. On public interest, the court found that enforcing California's statutory protections against wrongful foreclosure serves the public interest.

Order

The court granted the preliminary injunction and issued the following specific directives:

1. Foreclosure halted: Selene is enjoined (legally barred by court order) from conducting a Trustee's Sale on the property until Billeci is given a genuine opportunity to appeal the denial, and Selene has complied with § 2923.6(f)(1) with respect to that appeal.

2. No fee or penalty accrual: During the appeal period and any pending appeal, Selene may not charge or accrue any interest, late charges, fees, costs, penalties, escrow charges, advances, attorney's fees, foreclosure-related charges, or any other amount. The unpaid principal balance and other amounts due are fixed as of the date Billeci received the written denial notice.

3. Foreclosure may proceed if no timely appeal or if appeal fails: If Billeci does not timely appeal, or if the appeal properly concludes showing him ineligible for a loan modification due to his financial circumstances, Selene is not barred from proceeding with a Trustee's Sale, provided it complies with all applicable statutory requirements, including California Civil Code § 2924. The court must be notified immediately in writing if no timely appeal is sought or if Billeci is found ineligible.

4. Duration: The order remains in effect until the earliest of: (1) final resolution of Billeci's appeal; (2) a further court order; or (3) a determination that Billeci is ineligible for loan modification following compliance with § 2923.6(f)(1).

5. Status report: The parties must jointly report the status of the action no later than September 1, 2026, or face a show-cause hearing.

6. Case Management Conference: Set for November 12, 2026 via videoconference, with a joint statement due November 5, 2026.

7. Attorneys' fees: Each party bears its own attorneys' fees and costs related to this motion.

Note on Judge's Name

The opinion is signed "United States District Judge" without a full printed name visible in the text. The case number suffix "TLT" and the docket metadata indicate the assigned judge, but the opinion itself does not spell out the judge's full name.