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CA Court Site Info on Foreclosure
Monday, September 15, 2014
HBOR, CFPB, and National Mortgage Setlement+ 4CA Cases
WARNING: CA FORECLOSURE BECOMES INCREASINGLY COMPLEX AND DIFFICULT AS NAVIGATION OF CODES AND OTHER REGULATIONS CONTINUE TO PILE UP, NEW CASE LAW CONTINUES TO CHANGE LANDSCAPE, AND FORECLOSURE STARTS TO BECOME AS COMPLICATED AS THE BANKRUPTCY CODE (from looking at the exceptions to many case fact patterns)
4 CA cases: Fonteno, Alvarez, Mendoza, and Yvanova
Rejection of Glaski; Prejudice Required in Wrongful Foreclosure Claims; Defaulting Borrowers Lack Standing to Pursue Robo-Signing Claims
Mendoza v. JP Morgan Chase Bank, N.A., 228 Cal. App. 4th 1020 (2014): In general, California borrowers lack standing to allege violations of pooling and servicing agreements (PSAs), contracts between their lender and a third party trust. Here, borrower claims her loan was improperly assigned to a trust (securitized) because servicer attempted the assignment after the trust had already closed, violating the trust’s own PSA. The court considered Glaski v. Bank of Am., N.A., 218 Cal. App. 4th 1079 (2013), a recent California Court of Appeal case thatdid grant borrower standing to challenge a foreclosure based on a similar PSA violation and New York trust law. This court disagreed with Glaski’s standing analysis: “[w]e can find no state or federal cases to support the Glaski analysis and will follow the federal lead in rejecting this minority holding.” Even if the loan was actually assigned to the trust late, in violation of the PSA, and even if borrower presented specific evidence demonstrating this violation, nothing in California’s nonjudicial foreclosure statutory framework allows a borrower to challenge a foreclosure based on a “glitch in an attempted securitization.” The securitization of borrower’s loan —botched or not—“did not deprive the beneficiary of the deed of trust of the legal right to foreclose.”
To state a valid wrongful foreclosure claim, a borrower must show that the problems in the foreclosure process that made it “wrongful” prejudiced borrower in some way, specifically, in their ability to pay their mortgage. A borrower can also demonstrate prejudice by showing “that the original lender would not have foreclosed under the circumstances.”
If the proper party could have foreclosed, in other words, the borrower cannot sue the improper party who actually foreclosed, if foreclosure was warranted because of borrower’s default. And simply pointing to irregularities in the foreclosure process does not allege prejudice. Here, borrower alleged the failed assignment to the trust voided the assignment, robbing the foreclosing party of the authority to foreclose and rendering the foreclosure itself void.
This fails to allege prejudice. Borrower defaulted on her loan and did not demonstrate how the voided assignment prevented her from paying her mortgage. Notably, the Glaski court did not address prejudice at all. The Court of Appeal affirmed the trial court’s grant of servicer’s demurrer and published its decision.
Many federal cases have held: “where a [borrower] alleges that a document is void due to robo-signing, yet does not contest the validity of the underlying debt, and is not a party to the assignment, the [borrower] does not have standing to contest the alleged fraudulent transfer.” Here, borrowers alleged that two assignments of their loan were robo-signed by employees who either did not work for the entity listed in the assignment, or who held different titles than those listed in the assignment. The Court of Appeal agreed with the lower court and the many federal courts that have found robo-signing claims unavailing. First, borrowers did not allege that the employees actually lacked authorization to sign the assignments.
Second, borrowers made no allegations that the financial institutions in question did not eventually ratify their employee’s (or their non-employee’s) signatures. Most critically, as non-parties to the assignments, borrowers lack standing to challenge the propriety of those assignments. Finally, borrowers have not alleged how any robo-signing, even if true, affected their ability to pay their mortgage. The robo-signing did not harm them in any way. The Court of Appeal granted servicer’s demurrer on borrowers’ robo-signing claim; this constitutes the first published Court of Appeal opinion on this issue.
Yvanova v. New Century Mortg., 226 Cal. App. 4th 495 (2014), depublishedand review granted, __ P.3d __, 2014 WL 4233383 (Cal. Aug. 27, 2014) (No. S218973).
In general, California borrowers do not have standing to allege violations of pooling and servicing agreements (PSAs), contracts between their lender and a third party trust. Here, borrower citedGlaski v. Bank of Am., N.A., 218 Cal. App. 4th 1079 (2013), a California Court of Appeal case that did grant borrower standing to challenge a foreclosure based on PSA violations and New York trust law.
Borrower alleged that the assignment to the trust and the substitution of trustee were both backdated, in violation of trust rules, and therefore void. The Court of Appeal affirmed the trial court’s grant of defendants’ demurrer, explicitly rejecting Glaski. Without really analyzing Glaski, the court chose to follow Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497 (2013), a pre-Glaski case that denied borrower standing to challenge the PSA. Following Jenkins, the Court of Appeal reasoned that botched assignments or substitutions are not the borrower’s problem: they do not affect the borrower’s obligation to pay their mortgage.
If any entity is harmed and deserves a chance to challenge a PSA, it would be the “true” owner of the loan, who should have had the right to foreclose, but was deprived of it by the improper assignment. The Court of Appeal opinion was published, but the California Supreme Court recently granted borrower’s petition for review, asking: “In an action for wrongful foreclosure on a deed of trust securing a home loan, does the borrower have standing to challenge an assignment of the note and deed of trust on the basis of defects allegedly rendering the assignment void?” The grant of review supersedes the Court of Appeal opinion, which is no longer published or citable.