Glaski vs. Bank of America

Several important California decisions had an impact on real estate contracts. The most critical case was Glaski vs. Bank of America. In the case of Glaski vs. Bank of America, the California court held that a borrower has the standing to state a claim for wrongful foreclosure based on the alleged improper securitization of the borrower’s note and deed of trust.

The court found that, as a result of the void nature of the foreclosure sale, the borrower had the standing to challenge the foreclosure of his property based upon an alleged violation of the PSA

Glaski’s home was foreclosed after he defaulted on his mortgage loan. He later filed a wrongful foreclosure lawsuit alleging that the foreclosing entity was not the legal lender of the loan because a defective transfer had broken its chain ownership of the loan. Washington Mutual (WaMu) made a loan to Glaski in 2005, and he later alleged that an attempt to assign his note and deed of trust to a WaMu Securitized Trust was ineffective because it was made after the trust’s closing date of December 21, 2005.

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In 2008, the FDIC seized Washington Mutual and was sold to JP Morgan Chase, and Glaski commenced a loan modification process with the new owner JP Morgan Chase. At the end of 2008, Chase transferred the Glaski deed of trust to the Washington Mutual Securitized Trust and filed a notice of default and election to sell the property. Bank of America, as successor trustee to the Securitized Trust, purchased the property in a trustee sale. The trial court sustained Bank of America’s demurrer, apprehending that Glaski could not challenge the power of the foreclosing party.

That Court apprehended that California’s non-judicial foreclosure system is a regulatory structure that did not permit, the homeowner, to challenge the authority of the authorized agent to foreclose.

On the other hand, the court of appeal apprehended that a homeowner has the right to challenge an assignment if the defect would void it, but not when it is simply voidable by the assignor.

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