The problems banks have with what is called “Chain of Title”.
When banks wrote loans, they attempted to transfer the rights to get paid to investors.
However, they simply do not have the original promissory notes and power of sale documents and can’t explain where they went, which is what is required under the uniform commercial code.
In many instances, banks or mortgage lenders ineffectively assigned or transferred the loan to the beneficiary, for whom the bank purports to have the right to foreclose upon the debtor homeowner.
A section of the new Homeowner Bill of Rights states that no entity shall initiate foreclosure.
These pretender lenders, in most instances, don’t own the power of sale document called Deed of Trust and the right to get paid, and neither do the investors the banks purport to foreclose on behalf of.
Therefore, they have no right to foreclose.
If there is no such right to foreclose, the banks can be forced to keep their promises to do workouts with qualifying homeowners when the taxpayers bailed them out.
Some of this analysis is laid out in a California case called Glaski v Bank of America.
Other courts in California have disagreed with Glaski. The California Supreme Court will have to rule on what is called “standing issues.”
The banks and mortgage industry has tried several times to have the California Supreme Court depublish Glaski, so it will have no precedent in California.
Just yesterday, the High Court slammed the door on the banks and has kept Glaski in force in California.
The Glaski case did not cite the sections above in HBR, but its holding is consistent with what is now legislative policy in California. This may have been the reason for the Court not to have unpublished Glaski, even though they are under heavy pressure from the mortgage industry.
Stephen R. Golden