The California Court of Appeal’s June 8, 2012 decision in Skov v. U.S. Bank N.A. clarified the applicability of state statute 2923.5, which imposes certain duties on residential lenders prior to initiating nonjudicial foreclosure.
In this case, U.S. Bank initiated nonjudicial foreclosure proceedings against Skov by filing a notice of default, a requirement of California Civil Code section 2923.5. Skov filed a complaint alleging, among other things, that U.S. Bank failed to comply with the requirements of section 2923.5 because it did not contact or attempt to contact her to discuss her options to avoid foreclosure prior to filing the notice of default.
U.S. Bank filed a demurrer, requesting judicial notice of the notice of default and other documents. The trial court granted the request for judicial notice, sustained the demurrer, and dismissed Skov’s case with prejudice.
On appeal, Skov argued that section 2923.5 granted private individuals the right to bring a cause of action against lenders and assignees for noncompliance, and that U.S. Bank failed to comply with the law. U.S. Bank argued that the National Banking Act preempts state law, because 2923.5 purports to regulate loan servicing and processing, a matter regulated by the National Banking Act.
The Court ruled in favor of Skov, holding that section 2923.5 grants private individuals the right to sue mortgage holders for failing to comply with section 2923.5; that section 2923.5 is not preempted by federal law; and that the trial court erred in taking judicial notice of the notice of default and supporting declaration of compliance.
Because the demurrer was improvidently sustained, the appellate court reversed the decision and remanded the case to the trial court for further action.
This is an important case for lenders or assignees holding residential mortgages in California, because failure to comply with the notice requirements of 2923.5 will result in further delays in an already lengthy foreclosure process.
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 Skov v. U.S. Bank National Association, H035483 (Calif. App. June 8, 2012).