The California Supreme Court recently caused quite a stir around the national real estate industry by upholding a case in which a resident was about to sue for wrongful foreclosure. Here are the major details of the case and how it may affect you if you are in a similar situation.
What is Yvanova v. New Century Mortgage Corp?
The California Supreme Court case Yvanova v. New Century Mortgage Corp, Case No. S218973 (Cal. Sup. Ct. February 18, 2016) is the recent case that is shaking up the industry because of the complete reversal of the trend in the court system. According to the Court decision, borrowers now have the right to challenge an allegedly wrongful foreclosure. Before this decision, the majority of courts in California upheld that borrowers did not have the right to challenge the void assignment of a note and deed of trust.
What was the Yvanova case about?
The borrower in the Yvanova case challenged her foreclosure on the grounds that it was given to a securitized trust after the date for the trust closing had already been set in the servicing agreement. This renders the assignment void according to the case, and the court agreed. Although this had always been a theory at the foreclosure defense bar, this decision helped to validate the theory.
Why did the Court reverse all of the lower court decisions?
The Supreme Court first acknowledged that most of the lower courts in California have stated the exact opposite of what the decision in Yvanova brought forth. The Court based its reversal of this trend on the decision made in Glaski v. Bank of America, 218 Cal.App.4th 1079 (2013), held in the Fifth District Court of Appeal. In this case, which was very close to the facts of Yvanova, the Appeals Court made a question of whether reassignment of the deed resulted in an automatic void of the previous assignment or simply a voidable assignment that could remain valid under certain circumstances. If an assignment loses its previous validity immediately upon being reassigned, says the Glaski decision, then future parties have no right to ratify that defective assignment. If the assignment is only possibly voidable, then future parties have the right to ratify it, taking over the foreclosure process legally.
Reassignments that lose validity must be denied standing by the court, according to the Glaski decision. In this case, borrowers are asserting interests that belong specifically to the parties in the original assignment, and only the original party has the ability to ratify that assignment. In an allegedly void assignment, the borrower is not asserting the interests of the party in the assignment, but rather her own interests in limiting any foreclosure proceedings on the property to those with the actual authority to do so.
What is the potential impact of this new decision?
Although the California Supreme Court seems to lay clear the right of borrowers in a reassigned, allegedly void assignment, the full brunt of the decision is going to take some time to figure out. There will definitely be a number of new cases brought forward throughout the court system that will use Yvanova as a new precedent. Although the statute of limitations for a wrongful foreclosure case is only around three years, the number of cases that have taken place in California within the past few years virtually ensures that the claimant number will be incredibly large following this news.
To the opposite viewpoint, just because the Supreme Court has upheld the void assignment theory once does not mean that it will apply in all cases. The decision papers in the Yvanova case actually raised more questions than they answered, because many legal and factual issues that are sure to arise in future cases of allegedly illegal foreclosure were left unanswered on purpose.
What are some of the issues that the Court left unanswered by the Yvanova case?
The California Supreme Court acknowledged many differences in state laws that refer to transfers of notes and deeds of trust into securitized trusts, especially if those trusts are held in another state. Specifically, the Court acknowledged that the Glaski decision, based on New York law, seemed to conflict with another decision made by the United States Court of Appeals for the Second Circuit in Rajamin v. Deutsche Bank Nat’.l Trust Co., 757 F.2d 79 (2d Cir. 2014). The Rajamin case considered Glaski and completely rejected it, unlike the Court’s interpretation of the Yvanova case.
California courts will have to deal with trusts that are held in many other states including Delaware. The states all have different laws that govern trusts under their jurisdiction, and in considering new foreclosure cases, the California courts are right to consider the laws from these other jurisdictions.
The Court also kicked the can on the issue of whether borrowers who bring forth a wrongful foreclosure case can also get an order that sets aside a foreclosure that has already been completed. Finally, in an issue made famous by Elizabeth Warren, courts will now have to deal with the fact that lenders must now physically produce a copy of any assignment to the deed of trust before moving forward with any foreclosure action on a delinquent property.
2 Point Highlight
Although the statute of limitations for a wrongful foreclosure case is only around three years, the number of cases that have taken place in California within the past few years virtually ensures that the claimant number will be incredibly large following this news.
The decision papers in the Yvanova case actually raised more questions than they answered, because many legal and factual issues that are sure to arise in future cases of allegedly illegal foreclosure were left unanswered on purpose.
