Distinction Between 'Mortgage' & 'Deed Of Trust' Significant Under California Law Governing Foreclosures

In San Francisco, California, the San Francisco Chronicle reports:

• Does slipshod paperwork provide legal grounds to overturn a foreclosure? In Massachusetts, courts have said "yes" in two landmark cases upheld last year by the state's highest tribunal, the Supreme Judicial Court. Judges in other states have ruled likewise.



• But California courts have consistently refused to void foreclosures even when banks botched the process.



• Now a case argued in an appeals court in San Francisco last week might get the California Supreme Court to weigh in. The case hinges on a single word in a civil statute written over a century ago.

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• One of the biggest barriers for homeowners in foreclosure lawsuits turns out to be the definition of "mortgage." California Civil Code 2932.5, enacted in 1874, says lenders must record their ownership of a mortgage before foreclosing or selling a property. That sounds crystal clear.



• But nowadays, almost no home in California is secured with a mortgage. Instead the state uses a slightly different instrument called "deed of trust."

For more, see Is it important who forecloses?