Compliance Bulletin

Second Decision is Published on a Debtor’s Ability to Challenge Non-Judicial Foreclosure
June 13, 2016

Earlier this year the California Supreme Court in the case Yvanova v. New Century Mortgage ruled that a debtor in default whose residential mortgage had been foreclosed had standing to challenge the assignment of her mortgage into a loan pool if the assignment was void but not if it was merely voidable. If the assignment turns out to be void, then the trustee or assignee under the mortgage had no authority to conduct the foreclosure sale. (An assignment that was merely voidable is still valid but could be challenged by an actual party to the assignment).The Yvanova Court clearly stated that it decision applied only post foreclosure, and it did not rule on the validity of the assignment, that is, whether it was void or voidable. Subsequently, in Saterbak v. JPMorgan Chase Bank, N.A., a case with similar facts that had been held pending the Yvanova decision, an Appellate Court held that under New York law an assignment of the debt after the closing date of the loan pool (in this case late by four years) was a voidable assignment but not void. Thus Saterbak had no standing to challenge the assignment. This decision, like others still to be adjudicated, involved a plaintiff seeking to thwart a pending foreclosure, not a completed one. Since Yvanova applies only to completed foreclosures, one of these cases may be taken up for review. See CBA’s Regulatory Compliance Bulletin for more information.