ANYWHERE. ANY WAY. ANY HOW. ANY TIME. BAR NONE. A foreclosure information sharing site committed to saving homes from foreclosure and facing any challenge that comes our way with Wisdom, Intelligence, Gratitude, and Grace. Nothing is too Good to be true. Nothing is too much to ask of the Power of God that can do anything. No weapon formed against you shall prosper! Onward!
A month has passed since the California Court of Appeal handed down their decision in Glaski v. Bank of America, N.A.,
218 Cal. App. 4th 1079 (2013). In that month, the opinion has been
published and Bank of America’s petition for rehearing denied. Now
binding on all California trial courts, the opinion has attracted much
attention and praise in the foreclosure defense world. This article
summarizes the court’s major findings, places the decision into the
current legal landscape, and analyzes both its potential impact and its
I. The Court’s Conclusions
the court’s conclusions are rooted in two basic and related inquiries
that clarify (and in some respects simplify) the “authority to
foreclose” question in California, at least for the time being. First,
does the borrower allege that the foreclosing party was not the
beneficiary based on specific facts? Second,if borrower’s claim is
based on a failed assignment, was the assignment void, or voidable? If
borrowers can allege specific facts showing that the purported beneficiary derived their authority from a void assignment, their claims, under Glaski, may now survive the pleading stage in California courts.
that the Assignment Granting the Beneficiary’s Power to Foreclose is
Void, is a Specific, Factual Allegation and the Basis for a Valid
Wrongful Foreclosure Claim
court divides wrongful foreclosure claims based on an authority to
foreclose theory into two categories: 1) borrowers who allege,
generally, that the foreclosing entity was not the “true beneficiary
under the deed of trust;” and 2) borrowers who allege, with specific facts, that the foreclosing entity was not the true beneficiary. Borrowers
in the first category rarely make it past the pleading stage, but
borrowers in the second group may. In other words, it is not enough to
say “X is not the true beneficiary,” but it may be enough to allege “X
is not the true beneficiary because Y.”
If “Y” is a specific, factual allegation that shows the foreclosing
entity did not have the authority to foreclose, then the claim is
The court then explained that “[o]ne basis
for claiming that a foreclosing party did not hold the deed of trust”
is if the assignment purportedly giving that party foreclosing power is
void.The court did not say that attacking a beneficiary’s assignment is the only way
to bring a wrongful foreclosure claim, only that this particular
defect, when alleged with specific facts, is enough to put the authority
to foreclose at issue. Glaski alleged that the assignment of his deed
of trust and note to the WaMu Securitized Trust was void because it occurred after the trust’s closing date.
B. Standing: Void vs. Voidable Assignment
Many securitization-based wrongful foreclosure claims fail because the
borrowers do not have “standing” to challenge how their loan was
securitized. The Glaski court
framed this issue simply, focusing on the assignment: “When a borrower
asserts an assignment was ineffective, a question often arises about the
borrower’s standing to challenge the assignment of the loan (note and
deed of trust) –an assignment to which the borrower is not a party.” The court cites federal cases from other circuits, and
a California Jurisprudence treatise to conclude, “a borrower can
challenge an assignment of his or her note and deed of trust if the
defect asserted would void the assignment.” California
courts have largely adopted a knee-jerk reaction to securitization
theories, throwing those claims out because the borrower is not a party
to, or third-party beneficiary of, the assignment agreement (the PSA in
most cases). The Glaski court
broke with California precedent in framing the issue as one of void
versus voidable assignments, allowing theories based on void assignments
to survive pleading.
C. A Post-Closing Date Transfer to Trust Renders the Assignment Void
court had thus far established: 1) Glaski’s attack on the beneficiary’s
assignment was specific enough that it went beyond a general challenge
foreclosing party’s right to foreclose; and 2) generally, void
assignments give a borrower standing to challenge the loan’s
securitization, even though the borrower was not a party to, or
third-party beneficiary of, the PSA. The court then analyzed whether
Glaski’s specific allegations, taken as true, would void the assignment,
giving him standing.
many mortgage loans, Glaski’s note and deed of trust were sold
(assigned) to a trust to be bundled with other mortgages, sliced up and
sold again. Through a subsequent FDIC takeover, acquisition, and more
assignments, defendant Bank of America either became the “successor
trustee” to the WaMu trust, or acquired the Glaski deed of trust from JP
Morgan, who bought all of WaMu’s assets from the FDIC.Either
way, the possible chains of title are broken because the transfer from
JP Morgan Chase to the WaMu Securitized Trust occurred long after the
closing date of the trust.
But does a post-closing assignment to a trust render that assignment void? To answer this question, the Glaski court analyzed New York law, which, according to the pleadings, was controlling, to conclude that an assignment transferred after a trust’s closing date is void, rather than voidable.
Glaski pled both threshold questions with the requisite specificity: 1) he alleged that Bank of America was not the beneficiary because the
assignment purporting to give it foreclosing power was invalid; and 2)
the assignment was void, not voidable, because the transfer to the trust
occurred after the trust’s closing date. The first point got him past Gomes, and the second established his standing.
The court addressed the tender issue briefly, but it was still critical
to its ruling and again emphasizes the importance of distinguishing
whether a foreclosure sale is void or voidable. “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.” Because
tender was not required, and because Glaski stated a cognizable claim
for wrongful foreclosure, the court reversed the trial court’s dismissal
of the complaint, and vacated and overruled the order sustaining the
Bank of America’s demurrer.
II. Placing Glaski in the California Foreclosure Landscape
A. Distinguishing Gomes: Specificity
probably Glaski’s biggest hurdle. The court dedicated an entire section
of its opinion to differentiate its findings from those in Gomes. The borrower in Gomes also
brought a wrongful foreclosure claim, alleging that the foreclosing
entity, MERS, was not the beneficiary’s nominee because the unknown
beneficiary did not appoint MERS as nominee, or give MERS authorization
to foreclose. Unlike Glaski, however, Gomes left his argument there. He did not take the crucial step of explaining why MERS, who was listed as beneficiary and nominee in the deed of trust,was not the true beneficiary. Rather,
Gomes alleged that CC § 2924 afforded him the right to “test” whether
MERS had the beneficial interest before the sale took place. “Whether” is the key word and the difference between a Gomes claim and a Glaskiclaim. Gomes wanted to investigate whether or not MERS was the beneficiary. By contrast, Glaski alleged that Bank of America was definitely not the beneficiary because the assignment giving them beneficiary status was late to the trust, and therefore void. Gomes asked, “who has the authority to foreclose?” whereas Glaski stated: “X definitely does not have authority for these reasons . . . .” The Gomes court found that CC § 2924 provides no right for borrowers to ask “whether” the foreclosing party had the authority to do so.
B. Distinguishing Nguyen: Void vs. Voidable
TheGlaski court also had to reckon with Nguyen v. Calhoun,
105 Cal. App. 4th 428 (2003), which held that anything outside of the
foreclosure sale process cannot be used to challenge a presumably valid
and complete sale. Specifically,
the court had to consider whether an “ineffective transfer to the WaMu
Securitized Trust” was an aspect of the foreclosure sale, or if it fell
outside of that sale and was therefore irrelevant. Because
the transfer to the trust was fundamental to Bank of America’s
authority to foreclose, and would void the sale itself, the court
decided that the trust transfer was part of the foreclosure sale and a
valid basis for challenging the foreclosure.
C. Distinguishing Fontenot: Burden Shifting
The Glaski opinion nowhere cites Fontenotv. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256 (2011), but it is important to recognize why Glaski came out differently from that case. As inGlaski, the borrower in Fontenot alleged that an invalid assignment voided the entire foreclosure transaction. Unlike
Glaski, however, Fontenot based her invalid assignment theory, not on
specific facts like a late transfer to a trust, but on the theory that
the assignor (MERS) had the burden to prove the assignment was valid,
and could not do so. The
court determined that MERS did not bear that burden because nothing in
the statutory scheme regulating nonjudicial foreclosures created that
duty: “[A] nonjudicial foreclosure sale is presumed to have been
conducted regularly, and the burden of proof rests with the party
attempting to rebut this presumption.” If
“‘the party challenging the trustee’s sale [can] prove such
irregularity and . . . overcome the presumption of the sale’s
regularity,’” that could shift the burden to defendant to show a valid
is precisely what Glaski accomplished: by pleading specifically that
the assignment is void because of the late transfer to the trust, Glaski
rebutted the presumption of regularity, which is all he needed to do at
the pleading stage.
III. The Promise & Limits of Glaski
Glaski cannot be used to bolster every securitization theory. To employ Glaski principles
effectively, advocates should undertake the same analysis the court
did. First, does the borrower simply allege the foreclosing party does
not hold the beneficial interest in the deed of trust (Gomes), or does the borrower allege that the foreclosing party could not possibly be the rightful beneficiary because the assignment giving them that interest was invalid? (Glaski). Second, do the borrower’s allegations render the assignment void or voidable? If void, then Glaski could lend support to both the borrower’s standing and their wrongful foreclosure claim. The HBOR Collaborative will monitor Glaski’s implications and influence as other courts interpret this important decision.
See Glaski v. Bank of Am., N.A., 218 Cal. App. 4th 1079, 160 Cal. Rptr. 3d 449, 460 (2013).
Glaski, 160 Cal. Rptr. 3d at 461 (emphasis added).
Rodenhurst v. Bank of Am., 773 F. Supp. 2d 886, 898-99 (D. Haw. 2011)
(“[C]ourts have uniformly rejected the argument that securitization of a
mortgage loan provides the mortgagor a cause of action.”); Junger v.
Bank of Am., N.A., 2012 WL 603262, at *3 (C.D. Cal. Feb. 24, 2012)
(“[P]laintiff lacks standing to challenge the process by which his
mortgage was (or was not) securitized because he is not a party to the
PSA.”); Bascos v. Fed. Home Loan Mortg. Corp., 2011 WL 3157063, at *6
(C.D. Cal. July 22, 2011) (“Plaintiff has no standing to challenge the
validity of the securitization of the loan as he is not an investor in
of the loan trust.”).
Id. The WaMu trust, by its own terms, closed in 2005. Id.
at 454. An assignment recorded in 2008 “stated that JP Morgan
transferred and assigned all beneficial interest under the Glaski deed
of trust [and note] to ‘LaSalle Bank NA as trustee for WaMu [Securitized
at 463 (“[T]he [WaMu trust] trustee’s attempt to accept a loan after
the closing date would be void as an act in contravention of the trust
document.”). The closing date is meant to protect the interests of the
trust’s investors because it ensures REMIC status, exempting investors
from federal income tax (with respect to the trust). Id. at 460 n.12, 463.
Gomes claimed he “‘d[id] not know the identity of the Note’s beneficial
owner,’” but that whoever “authorized” MERS to foreclose was not the
beneficiary or the beneficiary’s agent.Id.
at 1152. He gave no specific reason for believing this, other than that
his loan was “sold . . . on the secondary mortgage market.” Id.