The Game-changer Court Case Impacting Foreclosures
During the last few years, the real estate and, more specifically, the foreclosure laws in our state are evolving in a way that is quite favorable to borrowers.
Previously, if a homeowner fell behind on your mortgage payments – that person would be in the unenviable position of experiencing the foreclosure process first-hand.
Hand in hand with this concept, in virtually all instances the “close calls” were issued in favor of the banks.
As a result, the banks consistently got their way and consistently the local landscape has been littered with distressed borrowers and unseemly foreclosures.
In August of 2012 however, the landscaped changed radically.
The Bain v. Metropolitan decision was issued by the Washington State Supreme Court and this decision dealt the banks a very significant setback.
That Court limited the authority of a bank-oriented party that is usually involved in the foreclosure process: Mortgage Electronic Registration Systems, Inc. (MERS).
The Court essentially ruled that under ordinary circumstances, MERS would not be permitted to act as beneficiary for the banks (something it had been doing for years).
This ruling seems to have had a domino effect causing the courts to take a much closer look at the facts of each subsequent foreclosure case and issue an opinion based on a true reading of the facts and law instead of simply rubber-stamping the decision in favor of the banks.
This “closer look” has led to a series of outcomes that are much more balanced – which has led to a series of positive results for borrowers.
Consider Bavand v One West Bank, (FSB, 176 Wn. App. Div. 1 2013) which is a court of appeals decision issued in Division One.
In Bavand, one of the important issues addressed was whether if a “to-be” beneficiary had appointed a successor trustee legitimately (oversee the upcoming foreclosure ofBavand’s home) if the appointment had taken place one day before that party had been actually appointed beneficiary.*
Before the Bain decision, our guess is that a mistake of this nature would have been glossed over by the Bank and the court would have allowed the process to proceed.
But post-Bain, the situation has changed, frankly, in a way that is completely consistent with the law and is beneficial to under-water borrowers.
In Bavand the court held that One West had not complied with the process and therefore it would be appropriate to hold that any action taken by the inappropriately apointed trustee would be void.
The court further enlightened everyone when it held as follows: here, OneWest and MERS both conceded at oral argument in this appeal that MERS never had possession of the promissory note that Bavand executed in favor of Indy Mac Bank in 2007. A legal consequence of this failure to establish possession of the promissory not is that MERS was never a “holder” of this instrument.
Generally speaking, the law regarding non-judicial foreclosures is this: because there is no judicial supervision (no lawsuit), all the t’s must be crossed and all the i’s must be dotted – every single one – or the action fails.
Previously, despite these laws the courts would overlook minor transgressions.
Since Bain and Bavand, that no longer seems to be the case.
This is very good news to all beleaguered borrowers.
In that case, the court found that the Trustee had not been properly appointed and therefore the foreclosure process may well have been void.
The playing field is now level. We can call out the banks and their lawyers whenever there is an inappropriate action.
There are other post-Bain cases – that hold similarly on various other aspects of the appropriateness of the foreclosure process.
Good news for people trying to stay in their homes!
*Under our statutes only the beneficiary can appoint successor trustees.