California: Defaulted borrowers can challenge RMBS assignment
Appellate court rules against Bank of America foreclosure
By a California appellate court's admission, California homeowner Thomas Glaski's tale of his Bank of America (BAC) foreclosure is "somewhat confusing and may contain contradictions," but he still has the right to challenge the claim of transfer of his mortgage into a residential mortgage-backed securitization.
The decision, which was delivered by the Fifth Appellate District Court of Appeal in California, overturns an earlier ruling in favor of Bank of America. The ruling said Glaski could effectively prove the title chain of his mortgage broke upon transfer into a trust for securitizing. And therefore, he can challenge the foreclosure.
"We conclude that a borrower may challenge the securitized trust's chain of ownership by alleging the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust's closing date," the ruling reads.
The California Supreme Court must now address the case if California is going to learn how to proceed with non-judicial foreclosures. Another ruling in the state, known as the Jenkins case, appears contradicted in the latest decision.
Washington Mutual originally financed the purchase of Glaski's home in August 2006. Under the adjustable-interest rate agreement, a year later the monthly payments grew from $1,900 to $2,100. That Glaski stopped paying the mortgage is not in dispute.
Glaski's loan was assigned to the WaMu Mortgage Pass-Through Certificates Series 2005-AR17 Trust, created two years before he received the loan. Putting a new loan into an old trust is essentially the successful argument used by Glaski's attorneys.
While JPMorgan Chase took over WaMu, Bank of America later became trustee. BofA also was the highest bidder for the Glaski foreclosure at auction on May 27, 2009.
According to the ruling, the application of New York trust law was key.
"We conclude that Glaski's factual allegations regarding post-closing date attempts to transfer his deed of trust into the WaMu Securitized Trust are sufficient to state a basis for concluding the attempted transfers were void," the ruling states.
"As a result, Glaski has a stated cognizable claim for wrongful foreclosure under the theory that the entity invoking the power of sale (i.e., Bank of America in its capacity as trustee for the WaMu Securitized Trust) was not the holder of the Glaski deed of trust," the appellate court concludes.