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The homeowner defaults on the mortgage and the substituted trustee records a notice of default (NOD).
The PSA mandates all mortgages need to be transferred to the trust on or before its closing date; however, the trust deed is assigned four years after the closing date of the trust.
The successor mortgage holder then substitutes the trustee.
Holding: A California court of appeals holds the homeowner may not challenge the assignment of the trust deed and the assignment itself is not void but merely voidable since challenges to defects in the assignment of a trust deed are only allowed in cases of wrongful foreclosure and the assignment to a closed trust is only voidable by the mortgage holder. For both these reasons, the homeowner lacks standing to challenge the assignment of the deed of trust.
The servicer must conduct the foreclosure in Fannie Mae’s name when Fannie Mae is the mortgagee of record for all mortgage loans except for regular servicing option MBS mortgage loans that are secured by properties located in Utah or Mississippi.
The Court also expressly stated that it was not addressing the question of whether a borrower can preempt a threatened nonjudicial foreclosure by a suit challenging the foreclosing party's right to proceed.
The Supreme Court remanded the case to the Court of Appeal for further proceedings consistent with its opinion.
The Court also did not address the question of whether an alleged late assignment would give rise to an injunctive remedy prior to a foreclosure sale.
We anticipate extensive litigation over these issues at the trial and appellate levels in the near future.
In most states, the law firm must initiate the proceedings in the servicer's name when the servicer is the mortgagee of record or in the participating lender's name when the servicer is not the mortgagee of record for a participation pool mortgage loan.
The law firm must subsequently have title vested in Fannie Mae's name in a manner that will not result in the imposition of a transfer tax.