If a borrower can establish that the assignment is void, he can now survive a demurrer or summary judgment. has standing to contest allegedly unlawful mortgage loan securitization
The Court has recently determined that a void assignment causes a break in the chain of title, giving the borrower standing to sue for wrongful foreclosure. This is a significant shift for plaintiffs, but it effectively means that the majority of cases will live to see another day.
A trustor filed a quiet title action against her lender and its successors, alleging that her loan was wrongly placed into a securitized trust and then foreclosed on. The trial court upheld her demurrer to the suit, and the Court of Appeal upheld it, finding that she had failed to allege tender of her debt. “Because only the original beneficiary of a deed of trust or its assignee or agent may direct the trustee to sell the property in a nonjudicial foreclosure, an allegation that the assignment was void, and not merely voidable at the behest of the parties to the assignment, will support an action for wrongful foreclosure,” the California Supreme Court ruled. So now the Court has decided that “a borrower who has been the victim of a nonjudicial foreclosure does not lack standing to sue for wrongful foreclosure based on a void assignment simply because he or she was in default on the loan and was not a party to the challenged assignment,” following Glaski v. Bank of America, 218 Cal.App.4th 1079, rather than the numerous cases that had disagreed with that decision.
As a result, if an assignment is void, the foreclosing party is foreclosing without legal power and is committing a wrongful foreclosure. When an assignment is just voidable, on the other hand, the authority to ratify or avoid it rests solely with the parties to the assignment, and it is not void unless and until one of them does so, implying that the objecting borrower is asserting an interest that is not hers.
The court rejected the claim that the assignment did not do the borrower any harm because she still owing the mortgage debt; instead, the court decided that it was enough that she lost her ownership due to an allegedly improper trustee’s sale. “The borrower owes money to a specific person or institution, not to the world at large, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.”
The court stated that it was not deciding whether a borrower could prevent a threatened nonjudicial foreclosure by filing a lawsuit challenging the foreclosing party’s right to proceed, whether Yvanova had alleged enough facts to show the assignment was void, or the substantive elements of the tort of wrongful foreclosure. The only question was whether a borrower had the standing to dispute a note and deed of trust assignment on the basis of asserted faults that rendered the assignment void.”
CASE UPDATE: Wrongful Foreclosure Plaintiff Can Challenge The Validity Of The Assignment Of The Underlying Note And Deed Of Trust.
The California Supreme Court resolved a split of authority in the appellate courts in Yvanov v. New Century Mortg. Corp., (2016) 62 Cal.4th 919, holding that a borrower who has suffered a nonjudicial foreclosure has the standing to sue for wrongful foreclosure based on an argument that the foreclosing loan beneficiary and trustee lack foreclosure authority because the loan was not properly assigned. In general, “standing” refers to a constitutional requirement that a plaintiff in a lawsuit has a legally protectable and physical stake in the case.
The following were the fundamental facts in this case: In 2006, the plaintiff signed a note secured by a deed of trust in favor of New Century, the lender and beneficiary. New Century declared bankruptcy in 2007-08, and all of its assets were liquidated. In 2011, New Century claimed to have assigned the deed of trust to Deutsche Bank, the Morgan Stanley investment trust’s trustee. The Morgan Stanley investment trust had a January 2007 “close date,” which was the deadline for transferring all loans, mortgages, and trust deeds into this investment pool. Western Progressive took over as trustee from Deutsche Bank in 2012, provided notice, and conducted the foreclosure sale. The plaintiff claimed that New Century’s 2011 assignment to Deutsche Bank was null and void because:
Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497 found that because it was not a party to the assignment, a wrongful foreclosure plaintiff had no standing to contest an erroneous assignment. Glaski v. Bank of America, National Association (2013) 218 Cal.App.4th 1079, on the other hand, held the opposite. The California Supreme Court followed the reasoning of the Glaski decision, which stated that an invalid assignment is “void” (meaning that it has no legal force or effect), and if the assignment of a deed of trust is void, the purported new beneficiary and trustee do not have the legal authority to proceed with the nonjudicial foreclosure process, and such an authorized sale constitutes a wrongfeasance.
Glaski questioned the chain of ownership, claiming that the defendants were neither the lender nor the beneficiary under his deed of trust, and thus lacked the jurisdiction to foreclose.
Glaski objected to the demurrer, claiming that he had properly alleged breakdowns in the chain of possession of his deed of trust. He claimed Brignac’s signature was forged, and that the assignment including the fraud was null and void. His opponent also presented a more extensive explanation of why he believes his deed of trust was not properly transferred to the WaMu Securitized Trust, which owned the pool of home loans. As a result, Glaski believes that Bank of America’s claim to be the successor trustee is invalid because the trust never held his debt.
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