Facts: A homeowner executes a promissory note secured by a trust deed on their home. The trust deed permits the lender to assign the note to third parties and substitute the trustee without notice. The lender goes into bankruptcy and the trust deed is assigned to a new lender by means of a pooling and servicing agreement for a mortgage-backed security. The new lender then substitutes the trustee. The homeowner defaults on the note, and fails to cure the default. The new trustee nonjudicially forecloses on the property.

Claim: The homeowner seeks to set aside the foreclosure and quiet title to the property, claiming the assignment of the note and trust deed was completed improperly and, thus, the new trustee did not have the authority to foreclose.

Counter claim: The new lender claims the foreclosure is valid since the details of the assignment were immaterial to the homeowner’s obligations under the note and the homeowner’s failure to cure the default left the homeowner without standing to contest the foreclosure or clear title via a quiet title action.

Holding: A California court of appeals upheld the foreclosure and barred the homeowner from clearing title to the property since the details of the assignment were immaterial to the homeowner’s obligations under the note and the homeowner’s failure to cure the default left the homeowner without standing to contest the foreclosure or clear title via a quiet title action. [Yvanova v. New Century Mortgage Corporation (April 25, 2014)_CA4th_]

Editor’s note — The California Supreme Court has recently taken up this case and will conduct a new analysis of a borrower’s standing to challenge a lender’s assignment of their trust deed under a pooling and servicing agreement after the successor lender foreclosures on the defaulting borrower’s property. [See the September 2014 first tuesday Supreme Court Watch]