Sheen v. Wells Fargo Bank, N.A.
Facts: An owner-occupant of a residential property further encumbers their property with a second trust deed mortgage. The owner defaults on the mortgage payments and voluntarily submits a mortgage modification application to the mortgage holder, who does not respond. The owner does not reinstate payments on the mortgage and the mortgage holder has the trustee commence foreclosure and conduct a trustee’s sale of the property. The owner is evicted and makes a demand on the mortgage holder for compensation equal to the loss of their property and lodging expenses.
Claim: The owner claims the mortgage holder has a general duty to respond to their mortgage modification application which was breached since the owner was never informed of the status of the application before the foreclosure sale.
Counterclaim: The mortgage holder claims the owner’s mortgage modification application does not require their response since the mortgage holder has the right under the trust deed to foreclose and sell the property when the owner defaults.
Holding: The California Supreme Court holds the second trust deed mortgage holder does not owe the property owner a general duty to respond when it receives a voluntary mortgage modification application since no legislation or regulation impose such a duty and the mortgage holder has the contractual right to foreclose by a trustee’s sale of the encumbered property when the owner defaults on their mortgage and does not reinstate the mortgage or redeem the property. [Sheen v. Wells Fargo Bank, N.A. (2022) 38 C5th 346]
Read Sheen v. Wells Fargo Bank, N.A here.
Related Reading:
Mortgage Loan Brokering and Lending
Chapter 37: The nonjudicial foreclosure process
