California Supreme Court Issues Decision Allowing Borrowers to Challenge Foreclosure by Claiming Void Assignment
Earlier this month, the California Supreme Court issued an important decision giving borrowers additional grounds to fight lenders and banks attempting to foreclose. The case is entitled Yavanova v. New Century Mortgage Corporation (Supreme Court Case #218973). In Yavanova the borrower claimed that the foreclosure of the property was wrongful because the foreclosure documents were not in order. Specifically, the borrower claimed that the assignment of the deed of trust was void. However, to appreciate that argument, one must generally understand how a mortgage works under California law.
In California, real estate mortgages are comprised of a deed of trust and a promissory note. The promissory note is the document wherein the borrower promises to repay the loan. The deed of trust is the security instrument that creates a lien interest in the property. In other words, the deed of trust allows the lender to foreclosure if the borrower defaults on the payments he or she promised in the promissory note. (This basically gives the bank, lender or creditor the right to repossession upon default—similar to the way a lender can repossess your car if you fail to make payments). The deed of trust also specifies other agreements between the lender and the borrower including the duties of the borrower and lender with respect to each other and details regarding the foreclosure process should it be necessary.
Often times, the original lender will not remain as the party to whom the borrower must pay back. The original lender has the right to transfer or sell the mortgage loan to a new party. If that situation arises, the borrower is still obligated to repay the mortgage loan. However, the borrower will repay the person or party to whom the mortgage loan was assigned or transferred. However, to properly assign a mortgage loan, certain steps must be followed. If those steps are not followed, then the person or party to whom the loan was assigned may not be able to enforce the mortgage loan. Generally, the transfer of a mortgage loan is properly accomplished by the execution of a document entitled an “Assignment of Deed of Trust” coupled with an endorsement of the note.
In Yavanova, the borrower claimed that the foreclosure was wrongful because the assignment of deed of trust was void. The Borrower sought to have the foreclosure declared invalid and to have title restored back in the borrower’s name. However, the lower court held that the borrower, as an unrelated third party to the assignment, did not have standing to challenge the validity of the assignment and dismissed the lawsuit. This decision was ultimately presented to the California Supreme Court on Appeal.
On February 18, 2016, the California Supreme Court issued a 31 page opinion overturning the lower court ruling. In doing so, the California Supreme Court created new law holding that a “home loan borrower has standing to claim a non-judicial foreclosure was wrongful because an assignment by which the foreclosing party purportedly took a beneficial interest in the deed of trust was not merely voidable but void, depriving the foreclosing party of any legitimate authority to order a trustee’s sale.” In simple terms, the opinion means that a borrower may claim that an assignment of a mortgage loan is void and, if proven, the foreclosure is not only wrongful but also invalid.
Contact the Piccuta Law Group today if you or a loved one is facing foreclosure. Principal attorney, Charles Tony Piccuta, spent six years representing banks and mortgage companies in foreclosure lawsuits before changing sides to represent plaintiffs and borrowers. He has unique experience in defending against foreclosures and bringing mortgage related and wrongful foreclosure lawsuits. He understands how these cases are defended by the other side. He will give you every chance in saving your home and protecting your most important assets. Contact the Piccuta Law Group today for a free consultation.
