A decision last year in the case of Glaski v. Bank of America, 218 Cal. App. 4th 1079 (Cal: Court of Appeal, 5th Appellate Dist. 2013) addresses issues very familiar to homeowners who purchased homes prior to 2008 relying on adjustable rate mortgages from the now-defunct Washington Mutual Bank. The mortgage in question here, like many other adjustable-rate and subprime mortgages, were immediately sold to other banks or investors and packaged together as collateral for mortgage-backed securities. This case may provide a modicum of hope for borrowers who believe they were victimized by the practice and should give pause to holders of mortgages whose chain of title may be defective.
On July 6, 2005, Mr. Glaski purchased a home in Fresno County for $812,000. He procured a loan from Washington Mutual for $650,000 in order to pay for it. Under the adjustable rate mortgage, Glaski paid an initial monthly payment of $1750 per month. This amount rose to $1900 in August 2006 and $2100 in August 2007 due to the annual adjustments. Although Glaski sought to modify the terms of the loan in August 2008 as the next adjustment would be triggered, he defaulted on the loan and the mortgage went in to foreclosure.
Meanwhile, in late 2005, the WaMu Mortgage Pass-Through Certificates Series 2005-AR17 Trust was formed under New York law to hold in trust mortgage notes secured by liens on real estate. According to Glaski, notes intended to be included in the securitized trust were to be assigned by December 21, 2005 or 90 days thereafter. In his lawsuit, Glaski claims the note on his mortgage was not conveyed in a timely fashion. Hence, the subsequent non-judicial foreclosure of his home by a subsequent assignee, LaSalle Bank, NA, was not valid. (In September 2008 Washington Mutual was seized by the FDIC and later sold to JP Morgan Chase which transferred the particular mortgage to LaSalle after that.) Before the foreclosure date in May 2009, Glaski sought to negotiate with Chase but the foreclosure went forward after a woman named Deborah Brignac for a trustee identified as California Reconveyance signed the notice of sale. Glaski claims her signature was a forgery.
Glaski raised several claims in his lawsuit against multiple defendants including some of the mentioned banks. His case was dismissed entirely but he appealed and the Court of Appeals decided the trial court should hear claims relating to the chain of ownership of the note for his mortgage as well as the assertion that the signature on the notice of sale was forged. He will have the opportunity to seek a judgment establishing that the foreclosure was invalid. While all of the pertinent facts have yet to be established in this case, the ruling does give him the chance to recover his home or some value in lieu thereof. It also could set a precedent for the way similar California foreclosures involving notes packaged in to mortgage-backed securities should be treated in the future. It may also have some impact on the way in which courts view the now-disfavored practice of robo-signing where banks and other institutions automatically executed certain documents absent the exercise of due diligence to ensure the action being taken was technically appropriate.
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