If the property was upside down, & it was in default, which ultimately lead to its foreclosure...that suggests to me that the previous owner never had clear title to be able to sell the property to 'this person' i.e. tenant, without 3rd party approval, i.e. the note holder.
As far as the claim regarding the findings of a 'forensic audit' supporting the tenant's position...they might want to consider the consumer fraud alert that was published by the CA DRE, & sent out to all of us who were brokers in CA during the depths of the housing crash:
http://www.dre.ca.gov/files/pdf/ca/2...LoanAudits.pdf
"...a Forensic loan audit has absolutely no value as a stand-alone document."
"There is no...data that supports the claims that a forensic loan audit will...stop foreclosure."
"...even assuming that the audit is “favorable” and identifies legal violations by your
lender in the loan origination process, your loan may be owned by an investor – that is,
someone other than your lender. The investor will most assuredly argue that your claims
against your originating lender do not apply against the investor (the purchaser of your
loan). And even if your lender still owns the loan, they are not legally required to modify your
loan or to halt the foreclosure process if you are behind in your payments. Also, the
violations may be minor or inconsequential."
"Even if the audit discovers fraud, and/or something more than insignificant violations of
federal/state legal requirements, you might have to commence a lawsuit against an investor
or your lender. That is costly in terms of court fees, deposition costs, attorneys’ fees, and the
like, time-consuming (it can take years), and there is absolutely no guarantee with regard to
an outcome. Then there are the costly and time-consuming appeals."
End result?
I suspect that a CA real estate attorney will tell 'this person' that they have no case, & it's time to move on.