In the recent tough times, lenders have had to conduct a number of non-judicial foreclosures. Of course, the California courts have seen a number of borrower challenges to those foreclosures.
In Debrunner v. Deutsche Bank, the California appellate court concluded that NO, the original promissory note is NOT required to start a non-judicial foreclosure sale.
This is different from a judicial foreclosure where the lender must give the Court clerk the original promissory note for the clerk to hand cancel before the Court issues a judgment. In that circumstance the lender is replacing the debt instrument of the promissory note with the court judgment.
Also in 2012, the case of Haynes v. EMC Mortgage came down and the borrower tried to argue that foreclosure was invalid because the lender did not record an Assignment of the loan before commencing foreclosure. All of California’s non-judicial foreclosure law is statutory which means if it is not in the statute, it is not required. Here, there is no statutory requirement for a lender to record an assignment of the deed of trust before starting a foreclosure. Similarly, the statutes did not require that the lender possess the original promissory note which explains the holding in Debrunner.
Lastly, in the case of Skov v. US Bank, the court actually sided with the borrower in this case and concluded that the bank had not presented enough evidence to show that it had complied with the statutory requirement to contact the borrower before beginning foreclosure. Skov was interesting for another reason as well since it took place here in our backyard, as it involved a multi-million dollar home in Saratoga, California.
In summary, these three foreclosure cases demonstrate that the Courts were very strict in applying the non-judicial foreclosure statutes of the Civil Code. Under the new Homeowner’s Bill of Rights which went into effect at the beginning of the year, it remains to be seen whether the new code sections are sufficiently clear for the courts to enforce consistently.
At Brewer Offord & Pedersen LLP, we have had substantial experience in representing private lenders. If you have questions regarding the collection of a judgment, we would be happy to help. We can be reached at (650) 327-2900 or on the web at www.brewerfirm.com.