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» VISIT US ONLINE @ DSNEWS.COM 71 whether it has language that varies from the language in the Chase and Nationstar DOTs. Move for fees under paragraph 22 of the note: Although rejected as not timely raised, Nationstar raised an excellent argument on appeal, i.e., that the language in the acceleration paragraph 22 provided for attorney's fees but did not restrict the recovery of those fees to adding the fees to the amounts owed under the note and DOT. Likewise, many notes contain language providing for attorney's fees to the prevailing lender. If the note involved in your litigation contains favorable attorney fee language, use that as the basis or your fee motion. Postforeclosure fees: While not directly ad- dressed in either of the court's rulings, without another ground for a fee judgment, lenders are presumably barred from recovering fees post- foreclosure. If the lender's only recourse is to add the fees to the amount owed under the note and DOT and the foreclosure sale has already occurred, there is no loan to add the fees to! Recovering fees posttransfer: As Chase found out the hard way, while you may be entitled to add fees to the note and DOT, that process is complicated if the loan has been sold or service transferred prior to resolving the litigation. Logistically, how can the prior lender add fees to a note they no longer own or service and, even if they could, how would one collect them? It can be done but it will require lots of calls to the new lender or servicer. Can a servicer recover fees under the DOT? California law is mixed on whether a servicer can recover fees under the DOT. Fortunately, most decisions and courts side with the servicer. While the Hart and Chacker decisions focused on the successor to the lender's right to recover fees, the rulings will apply similarly to a servicer. Indeed, implicit under Chacker was its ac- ceptance that Chase, even as a nonparty, was entitled, as an agent of the owner, to be paid its fees—it just was limited to doing so by adding them to the loan balance. Likewise, the servicer will have the same challenges collecting fees if the servicing of the loan has already transferred to a new servicer. Can the foreclosure trustee recover its litiga- tion defense fees? Whether a foreclosing trustee named in borrower litigation can recover its litigation defense's fees and costs is a complicat- ed question. Regardless of the recent decisions discussed above, most standard form DOTs do not contain language specifically allowing the trustee to obtain a fee award or add them directly to the loan. It will generally require nonstandard language specifically providing that the trustee can recover fees. (Note: the court did confirm fees for the trustee in the Chacker case; however, it appears to have done so without much thought and perhaps was an oversight.) Can the borrower still recover fees? Unfortu- nately, yes. While it might seem inequitable, the reciprocal language of Civil Code Section 1717 still gives the prevailing borrower the ability to recover a fee award, even if the prevailing lender or servicer is limited to adding the fees to the loan. Do you need to move for fees or can you add them directly to your DOT? Even before these decisions, servicers and lenders often asked our firm if they could simply add the attorney's fees and costs directly to the loan like they do with advances for taxes, inspection fees, bankruptcy fees, nonjudicial foreclosure fees, etc. e answer was almost uniformly—no. Although the DOT language cited above appears to provide that the attorney's fees in defensive litigation with the borrower can be added directly to the loan, Civil Code Section 1717 provides that only the prevailing party is entitled to fees (and the fees must be reasonable). erefore, until the lender wins and is awarded "reasonable" fees, the lender cannot simply add them directly to the loan. However, the Hart and Chacker decisions appear to bring into question the traditional approach. Both decisions repeatedly point to the language in the DOT that the fees can be added directly to the loan. In fact, the court in Hart vacated the fee award completely, holding that Nationstar was essentially free to apply the fees directly to the loan. "[Paragraph 9] is, instead, a provision that attorney's fees, like any other expenses the lender may incur to protect its interest, will be added to the secured debt." However, there are other issues at play, and we strongly recommend consulting with our office or an- other attorney before adding any litigation-related fees directly to your DOT. Updating the attorney fee language in your DOT: While it might be difficult for institu- tional lenders, private and conventional lenders can revise the language in their DOTs to clearly state that the lender is entitled to add the fees to the loan or, at its sole discretion, obtain an attorney fee award. Again, please consult your attorney before revising the provisions in your DOT. Why do I even care if the borrower is already in default? In most instances where the bor- rower sues its lender, the loan is in default. If the borrower cannot afford to make his or her mort- gage payments, he or she often cannot reimburse a lender for its litigation fees and costs. For the last decade or so, it did not make much sense for a lender to incur the expense of moving for fees. Now, however, with property values in Califor- nia at or above all-time peaks, many litigious borrowers have equity in their homes. If they chose to sue and are unsuccessful, the prevailing lender may want to consider trying to recover its defense costs from the equity in the property. In addition, with borrowers who are serial litigants, the threat of having to pay fees when they lose might help dissuade them. As you can see, while the court's recent decisions seem clear cut, they raise a plethora of issues for a lender, servicer, and trustee to consider when moving for fees. We recommend analyzing your DOT at the outset of any litiga- tion to determine whether you can ultimately recover your attorney's fees should you ulti- mately prevail. Even if you never end up filing the fee motion, knowing your options is useful when negotiating with the other side or during a mediation.