A Borrower May Not Bring An Action To Determine Whether The Owner Of A Mortgage Note Has Authorized A Nonjudicial Foreclosure

Civil Code sections 2924 to 2924k provide a comprehensive framework for regulating nonjudicial foreclosure sales under deeds of trust. A recent decision by the California Court of Appeal (4th Dist.) finds that, under California’s statutory framework regulating nonjudicial foreclosures, borrowers cannot challenge the authority of a trustee, mortgagee, beneficiary, nominee, or other agent of the lender or holder of the note to pursue nonjudicial foreclosure. To hold otherwise would, “fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosure.”

In Gomes v. Countywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011), the California Court of Appeal affirmed the lower court’s decision to sustain defendants’ demurrer without leave to amend. At the lower court, plaintiff attempted to plead a cause of action for wrongful foreclosure by alleging that MERS (the nominee of the note holder) “did not have authority to initiate the foreclosure because the current owner of the note did not authorize MERS to proceed with the foreclosure.” Plaintiff also pled a related cause of action for declaratory relief asking the court to determine whether Civil Code section 2924(a) allows a borrower, before his or her property is sold, to bring a civil action in order to test whether the person electing to sell the property is authorized by the note holder to foreclose the property. The Court of Appeal found that a borrower cannot bring such claims.

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