CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE

CLARENCE E. BOSCHMA et al.,
Plaintiffs and Appellants,

v.

HOME LOAN CENTER, INC.,
Defendant and Respondent.

The defining feature of an option adjustable rate mortgage loan (?Option ARM?) with a discounted initial interest rate (i.e., a ?teaser? rate) is, for a limited number of years, the borrower may (by paying the minimum amount required to avoid default on the loan) make a monthly payment that is insufficient to pay off the interest accruing on the loan principal. Rather than amortizing the loan with each minimum monthly payment (as occurs with a standard mortgage loan), ?negative amortization? occurs — a borrower who elects to make only the scheduled payment during the initial years of the Option ARM owes more to the lender than he or she did on the date the loan was made. After an initial period of several years in which negative amortization can occur, a borrower‘s payment schedule then recasts to require a minimum monthly payment that amortizes the loan.

In this case, plaintiffs1 sued defendant Home Loan Center, Inc., for: (1) fraudulent omissions; and (2) violations of Business and Professions Code section 17200 et seq. (section 17200). Plaintiffs, individual borrowers who entered into Option ARMs with defendant, allege defendant‘s loan documents failed to adequately and accurately disclose the essential terms of the loans, namely that plaintiffs would suffer negative amortization if they made monthly payments according to the only payment schedule provided to them prior to the closing of the loan. The court sustained defendant‘s demurrer to the second amended complaint without leave to amend, reasoning that the loan documentation adequately described the nature of Option ARMs. We reverse the ensuing judgment. Plaintiffs adequately alleged fraud and section 17200 causes of action.

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Brian Burnett has signed mortgage documents using the job titles listed below during the approximate same period of time. All of these were notarized in Travis County, Texas, where IndyMac Mortgage Services is located. IndyMac Mortgage Services is now a division of One West Bank.

A certified signer for Mortgage electronic Registration Systems, Inc. was authorized to sign on behalf of the affiliated mortgage entity that employed him. Burnett, for example, would have been authorized to sign as an officer of MERS, as nominee for IndyMac Bank.

MERS signers were never authorized to sign on behalf of all other lenders.

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