After months of wrangling with the obvious due process issues involved in allowing a Trustee on the Deed of Trust to send a Notice of Default, Notice of Default and to file an eviction (unlawful detainer), it has occurred to me that the reasoning behind “non-judicial” process can be turned on its head in favor of the homeowner.
The reason why non-judicial foreclosure is NOT a denial of due process is two-fold:
(1) public policy and judicial economy favors it because until the mortgage meltdown era, nearly all judicial foreclosures had the same pattern, to wit: Suit in Foreclosure with Summons, No Answer by the the borrower, clerk’s default entered, Motion for Entry of Default Final Judgment, Judgment entered, Sale date is set, Auction on the courthouse steps and that’s it. It was a rare case in which the borrower had any legitimate defenses and virtually impossible for the foreclosing party to be the wrong party bring the suit.
The title record was clear, the bank held the note and mortgage, and but for some relatively minor TILA or RESPA issues it was highly unusual for predatory lending to be a factor in the case, and even if it was, the borrower simply didn’t raise it. Today, none of those assumption are true. Virtually all mortgages between 2001-2008 were between an undisclosed investor or group of investors and the borrower who was funded from proceeds of sales of unregulated securities. Everyone in between was merely an undisclosed conduit or middleman collecting an undisclosed fee as the money from the investor was parsed out for fees, profits, insurance premiums, rebates, kickbacks and of course funding of the alleged loan transaction. None of these middlemen have any loss, claim, or right to foreclose property and all of them have been superceded by the authority of the holders of mortgage backed securities.
Even the Trustee on the Deed of Trust has been superceded by at least two other Trustees. They don’t have the note, they don’t have the full record of all the parties who collected fees or paid the principal or interest on the note and mortgage, and they don’t really have any stake in the outcome of the foreclosure — because they didn’t fund the loan or lose any money.
(2) Under the legal theories that purport to support non-judicial foreclosure, it is said that non judicial foreclosure is a matter of private contract and not state action. Thus, the theory goes, parties are free to contract amongst themselves for authority to sell the property when the loan is reported by some party (alleging to be the beneficiary under the Deed of Trust). So anything the Trustee does that is wrong is really a matter of breach of contract, not violation of due process. If the Trustee on the deed of trust lacks authority, if the beneficiary is out of business and some other party is alleging it is now the new beneficiary, if anyone with or without knowledge alleges that the loan is in default and they are wrong or acting wrongfully, it is a matter of private contract, not subject to the rules of civil procedure governing the conduct of lawsuits in state or Federal Court.
It is a contract authorizing “self-help”. Thus I conclude that the homeowner is equally entitles to utilize self-help to preserve his interest in his real property. Of course filing a notice of intent to preserve interest in real property, a notice of non-compliance with statute, or some other instrument that clouds title could force the conversion to a judicial foreclosure where the Trustee and beneficiary would be required to step forward and reveal the true holder in due course, account for the flow of the funds paid thus far, etc. But adding the force of Federal Law (TILA, RESPA and HOEPA), and applicable state laws on deceptive lending practices, and applicable common law to the permission to use self-help gives the homeowner greater power than the entities that seek to use self-help to foreclose.
By filing a Qualified Written Request, Federal Law requires an answer and resolution. Barring that resolution, and using the common law doctrine of tacit procuration as a tool of enforcement at the end of the QWR, the homeowner has a legal right under color of state and federal law to file an instrument or reconveyance as attorney in fact for the “beneficiary” of record — forcing the “pretender lender” to either back off or prove their case.
REMEMBER, YOUR GOAL IS NOT TO ALLEGE THAT YOU DON’T OWE THE MONEY AT ALL. YOUR GOAL IS TO ALLEGE THAT IF YOU DO OWE MONEY IT IS NOT TO THE TRUSTEE OR THE PARTY PRETENDING TO BE THE BENEFICIARY. BASED UPON THE SEC FILINGS THERE IS PROBABLE CAUSE TO BELIEVE THAT YOUR LOAN WAS HANDLED AND TRANSFERRED, SOLD, SLICED AND DICED MANY TIMES. DESPITE THE CURRENT TREND OF COUNTRYWIDE AND OTHERS TO SAY THIS INFORMATION IS CONFIDENTIAL, THERE ARE VERY FEW JUDGES THAT WOULD AFFIRM THAT YOU HAVE NO RIGHT TO KNOW THE IDENTITY OF YOUR REAL LENDER. YOUR POINT IN GOING TO COURT IS NOT TO SAY THAT YOU AUTOMATICALLY WIN AND THEY LOSE. YOUR POINT IS TO SAY THAT YOU WISH TO BE HEARD ON THE MERITS OF THE DEFENSES, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS YOU HAVE AND THAT YOU WANT TO HAVE THE RIGHT OF DISCOVERY ALL UNDER THE RULES OF CIVIL PROCEDURE