Facts: An owner of property obtained a mortgage from a lender who later assigned the mortgage by transferring it to a mortgage-backed investment trust under a pooling and servicing agreement (PSA) with a mortgage holder. State law where the trust was based required mortgages to be transferred into the trust before the trust’s closing date. The transfer of the owner’s mortgage to the trust did not occur until after the closing date. The owner defaulted on the mortgage and the mortgage holder recorded a Notice of Default (NOD), and later a Notice of Trustee’s Sale (NOTS).

Claim: The owner sought to quiet title and stop the foreclosure process, claiming the new mortgage holder had no right, title, or interest in the property since the transfer of the mortgage to the investment trust occurred after the trust closed in violation of the governing state’s law and thus was improper and void.

Counterclaim: The mortgage holder sought to complete the foreclosure and proceed with the trustee’s sale, claiming that the post-closure assignment of the mortgage to the investment trust rendered the transfer voidable, rather than void, and the property owner had no standing to challenge the validity of the assignment since the owner was not a party to the transfer.

Holding: A California Appeals Court held that the mortgage holder may complete the foreclosure and proceed to the trustee’s sale, since the property owner was not a party to the transfer, and the owner remained obligated by the mortgage regardless of the assignment’s validity. [Kan v. Guild Mortgage Co. (2014) 230 CA4th 736]