New Point of Foreclosure Contention: Default Notice
www.foreclosureself-defense.com
Last year’s robo-signing scandals delayed tens of thousands of foreclosures in the 23 states where the process is handled in court. A new controversy could complicate foreclosures in the other 27 states.
At issue is the notice of default, the first letter that a mortgage lender or servicer sends to a homeowner who has fallen behind on payments. The notice typically starts the formal foreclosure process in nonjudicial states such as California, Arizona and Nevada.
California Court Rules ‘If Any’ Wording Sinks Notice of Default
In Anolik v. EMC Mortgage Corp., No. C044201 (Cal.App.4th, April 19, 2005), the California appellate court held that the addition of the words “if any” in a notice of default when referring to the fact of default violates the legal requirement that a creditor identify “actually known” breaches, and invalidates the entire notice.
EMC sought a nonjudicial foreclosure of a deed of trust securing the indebtedness of Jerry Anolik for the purchase of his home. When Anolik defaulted on his payment obligations, EMC delivered a notice of default that provided:
“A breach of, and default in, the obligations for which [the] Deed of Trust is security has occurred in that payment has not been made of: THE INSTALLMENT OF PRINCIPAL AND INTEREST WHICH BECAME DUE ON 3/01/2000 AND ALL SUBSEQUENT INSTALLMENTS, TOGETHER WITH LATE CHARGES AS SET FORTH IN SAID NOTE AND DEED OF TRUST, ADVANCES, ASSESSMENTS AND ATTORNEY’S FEES, IF ANY.”
Before a foreclosure sale could take place, Anolik sued for injunctive relief to prevent EMC from selling his home and for a declaration that the notice of default was invalid and void because it did not contain an affirmative statement that there had been an actual breach of an obligation secured by the deed of trust. The lower court ruled against Anolik and awarded EMC more than $83,000 in attorneys’ fees.
The California appellate court reversed the trial court and the award. In addressing the validity of the notice, the appellate court reviewed several key statutes and held that:
“To be valid, a notice of default must contain at least one correct statement of a breach of an obligation the deed of trust secures…. Moreover, the breach described in the notice of default must be substantial enough to authorize the use of the drastic remedy of nonjudicial foreclosure.”
The Court further observed that the purpose of requiring a notice of default to identify the breach that has occurred “is to put the beneficiary to the task of ascertaining the existence of a breach before the invocation of the power of sale. An assertion of a breach ‘if any’ utterly fails those purposes.” The Court went on to state that in order for a valid notice of default to be sufficient under California law, drafters must state at least one accurate instance of breach.
Following this decision, drafters may want to list or summarize all of the known breaches as of the date the notice of default is prepared, and add a separate statement to the effect that additional fees accrued after the notice of default may result in additional breaches of the underlying transaction documents.
Every notice of default has a signature on it. But just like the infamously rubber-stamped affidavits in the robo-signing cases, default notices, in at least some instances, have been signed by employees who did not verify the information in them, court papers show. In several lawsuits filed in nonjudicial states, borrower attorneys are arguing that this is grounds to stop a foreclosure.
“Whoever signs the NOD needs to have knowledge that there is in fact a default,” said Christopher Peterson, an associate dean and law professor at the University of Utah.
Uh oh, this could be very bad for the “banks.”
The report goes on to say…
In a lawsuit against Wells Fargo & Co. in Nevada, an employee for a title company who signed default notices admitted in a deposition this month that he did not review any documents or know who had the right to foreclose.
“They are starting foreclosures on behalf of companies with no authority to foreclose,” said Robert Hager, an attorney with the Reno, Nev., law firm Hager & Hearne, representing the borrower in the case. “The policy of these companies is to just have a signer execute a notice of default starting foreclosure without any documentation to determine whether they are starting an illegal foreclosure.”
Well, doesn’t that sound familiar…
In a deposition on Jan. 4, Stanley Silva, a title officer at Ticor Title of Nevada Inc., said he “technically signed” default notices for clients, which were often acting as agents of other parties, which in turn worked for others.
Ahhh, sounds a bit like MERS…
Silva said under oath that he never reviewed any documents or knew what company was the holder of the original note at the time he signed the notice of default.
Doh!
When asked by Hager if he signed notices of default “without verifying the accuracy of the information,” Silva replied: “Correct.”
“A huge percentage of notices of default and notices of trustee sales are legally questionable and probably void,” Hackett said. “Nobody with the authority to trigger the nonjudicial foreclosure process is triggering it — only third parties who claim they have the right to do so are triggering it.”
“Because there’s no court reviewing anything in nonjudicial states,” abuses are “probably even more rampant,” Gardner said. “This is just another example of robo-signing in a different context.”
So there you have it non-judicial states.
Here is a new area of attack on your new kind of Robo-signer…
