SAN FRANCISCO – California borrowers whose homes were foreclosed on during the collapse of the housing market beginning in 2008 now have a legal recourse to question the validity of the reassignment of those loans into securitized trusts, thanks to a recent state Supreme Court decision.
In its decision last month in Yvanova v. Century Mortgage Corp., the court put the question before it as follows: “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?”
In previous years, lower courts in California had ruled that borrowers have no such standing in foreclosure challenges because they are not a holder of the debt and thus did not have standing to assert defects in the assignment.
Richard Antognini, who served as one of the attorneys for plaintiff Tsvetana Yvanova, said the court’s ruling reaffirms that those in the financial industry must stick to established legal principles and process paperwork properly to ensure the assignment of loans passes muster.
“It’s not asking them to do anything new,” Antognini told the Northern California Record. “They’ve been obligated to do these things.”
He noted that the 2012 national mortgage settlement signed by 49 state attorneys general, the federal government, the District of Columbia and the nation’s five largest mortgage servicers – Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo – required lenders to live up to such obligations.
“They should do the work to show that the paperwork is done correctly,” Antognini said.
In the Yvanova case, the plaintiff eventually lost her Irvine home after a foreclosure in September 2012 in the wake of the collapse of the housing bubble, the suit states. Her original lender, New Century Mortgage Corp., went bankrupt in 2007, but New Century allegedly didn’t actually transfer her mortgage to an investment trust controlled by Morgan Stanley until 2011. Yvanova argued, in part, that the time lapse rendered the assignment void.
Antognini explained that the paper trail indicated that the loan was somehow transferred from an entity that went bankrupt years beforehand and no longer existed. Yvanova’s mortgage was legally supposed to have been placed in the pool by Jan. 27, 2007, according to the state Supreme Court’s decision.
Antognini, whose law offices are based in Grass Valley, said it was unclear whether the court’s ruling would result in a flood of litigation about foreclosure cases.
“I don’t know if more borrowers will challenge their foreclosure assignments,” he said. “There may be a statute of limitations in some cases.”
In the Yvanova case, the state Supreme Court did not rule on the facts of Yvanova’s claim, only that she has standing to challenge how the deed of trust was assigned and to continue her legal fight for possible compensation. Antognini said the case will now go back to the state court of appeals and perhaps eventually to a trial court.
One of the court’s conclusions was that, “A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity‘s hands.”