California Appeals Court: Mortgage Transfers To Securitized, NY-Organized Trust After Closing Date Are Void, Giving Homeowners Standing To Challenge Loan Assignments
In Fresno, California, the Central Valley Business Times reports:
- In a ruling that could impact other home foreclosures in California under similar circumstances, the state’s 5th District Court of Appeal says “that a borrower may challenge the securitized trust’s chain of ownership by alleging the attempts to transfer the deed of trust to the securitized trust … occurred after the trust’s closing date.”
The Fresno-based appellate court says transfers that violate the terms of the trust instrument are void under New York trust law, and borrowers have standing to challenge void assignments of their loans.
Thomas Glaski, a resident of Fresno County, sued Bank of America, losing at the Superior Court level but prevailing on several arguments upon appeal.
Mr. Glaski purchased a home in Fresno for $812,000 in 2005 with a variable interest rate loan of $650,000, issued by Washington Mutual and California Reconveyance Company as the trustee.
After several interest rate adjustments, with ever-higher monthly payments, Mr. Glaski defaulted in 2007.
But like many mortgages prior to the burst of the housing bubble, his mortgage had been sold into a securitized trust known, in this case, as the WaMu Securitzed Trust. “In simplified terms, ‘securitization’ is the process where (1) many loans are bundled together and transferred to a passive entity, such as a trust, and (2) the trust holds the loans and issues investment securities that are repaid from the mortgage payments made on the loans,” the court explains.
Three years after the original mortgage was signed, WaMu was broke, with JPMorgan Chase Bank picking up its pieces and parts.
Mr. Glaski contends that the attempt to assign his note and deed of trust to the WaMu Securitized Trust was made after the closing date and, therefore, the assignment was ineffective.
“If Glaski‟s loan was not validly transferred to the WaMu Securitized Trust, it is possible, though not certain, that JP Morgan acquired the Glaski deed of trust when it purchased WaMu assets,” the court of appeal says.
“Another possibility, which was acknowledged by both sides at oral argument, is that the true holder of the note and deed of trust cannot be determined at this stage of the proceedings,” the court says. “This lack of certainty regarding who holds the deed of trust is not uncommon when a securitized trust is involved.”
The foreclosure process bumped along and a notice of sale was signed on March 10, 2009, by Deborah Brignac, as vice president for California Reconveyance.
Mr. Glaski alleges that Ms. Brignac‟s signature was forged to effectuate a fraudulent foreclosure and trustee’s sale of his home.
He also says that from March until May 2009, he was led to believe by his negotiations with Chase that a loan modification was in process with JP Morgan. Despite the negotiations, a nonjudicial foreclosure sale of the home was conducted on May 27, 2009. Bank of America, as successor trustee for the WaMu Securitized Trust and beneficiary under Mr. Glaski’s deed of trust, was the highest bidder at the sale.
“Among other things, Glaski raised questions regarding the chain of ownership, by contending that the defendants were not the lender or beneficiary under his deed of trust and, therefore, did not have the authority to foreclose,” the court says.
While agreeing in some parts with the Superior Court’s ruling against Mr. Glaski, the 5th District Court of Appeal sides with the homeowner on a key argument.
“We conclude that Glaski‟s factual allegations regarding post-closing date attempts to transfer his deed of trust into the WaMu Securitized Trust are sufficient to state a basis for concluding the attempted transfers were void. As a result, Glaski has a stated cognizable claim for wrongful foreclosure under the theory that the entity invoking the power of sale (i.e., Bank of America in its capacity as trustee for the WaMu Securitized Trust) was not the holder of the Glaski deed of trust,” it says.
The appellate court ruling returns the case to the Superior Court for further arguments.
For the court ruling, see Glaski v. Bank Of America, No. F064556 (Cal. App. 5th Dist. July 31, 2013) (unpublished).
Editor's Note: Subsequent to the issuance of this ruling, the California appeals court determined that the nonpublished opinion filed on July 31, 2013 meets the standards for publication specified in the California Rules of Court, rule 8.1105(c). Accordingly, it ordered that the opinion be certified for publication in the Official Reports. Opinion ordered published on 8/8/13.
Thanks to Deontos for the heads-up on the order of publication.