The Fifth Appellate District holds in Glaski v. Bank of America that a borrower may challenge a securitized trust’s claim to ownership of the deed of trust by alleging “the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust’s closing date. Transfers that violate the terms of the trust instrument are void under New York law, and borrowers have standing to challenge void assignments of their loans even though they are not a party to, or a third party beneficiary of, the assignment agreement.”
In Glaski the plaintiff alleged in his suit for wrongful foreclosure, declaratory relief, violation of the Unfair Competition Law, cancellation of instruments, and quiet title that the securitized trust that allegedly owned the note and deed of trust did not have the power to foreclose because the transfer of ownership into the trust occurred after the trust’s closing date. This allegation was sufficient to survive a demurrer.
The court clarified it holding as follows: “[A]lleging a cause of action under this theory requires more than simply stating that the defendant who invoked the power of sale was not the true beneficiary under the deed of trust. Rather, a plaintiff asserting this theory must allege facts that show the defendant who invoked the power of sale was not the true beneficiary.”
The court rejected the theory that “a borrower’s challenge to an assignment must fail once it is determined that the borrower was not a party to, or a third party beneficiary of, the assignment agreement.” While this may be true when an assignment is voidable, it is not a correct statement of law when the assignment is void.
Distinguishing Gomes v. Countrywide Home Loans the court stated: “In light of the limiting statements included in the Gomes opinion, we do not interpret it as barring claims that challenge a foreclosure based on specific allegations that an attempt to transfer the deed of trust was void. Our interpretation, which allows borrowers to pursue questions regarding the chain of ownership, is compatible with Herrera v. Deutsche Bank National Trust Co. . . .”
Allegations that tended to prove the foreclosure sale was void, i.e., that the attempted transfer to the securitized trust occurred after the trust’s closing date and was therefore void under applicable law, allowed the court to easily counter the bank’s tender argument: “Tender is not required where the foreclosure sale is void, rather than voidable, such as when a plaintiff proves that the entity lacked the authority to foreclose on the property.”
I consult with clients and accept cases involving foreclosure, including those involving allegations of wrongful foreclosure, void assignments, transfers, and sales, and suits to quiet title. For other types of cases I accept, please scroll my Home and My Practice pages. If you are seeking a legal consultation or representation, please give me a call at 818.971.9409. – Michael Daymude