Even If A Mortgagor Had Standing To Challenge The Assignment Of A Mortgage Under A PSA, His Claim For Wrongful Foreclosure Fails If He Does Not Also Allege He Suffered Prejudice Or That The Outcome Of A Non-judicial Foreclosure Would Have Turned Out

In Diunugala v JP Morgan Chase Bank, N.A., 12CV2106-WQH-NLS (S.D. Cal. Oct. 3, 2013) the mortgagor sued the loan assignee(s) and the servicer under a host of theories. The servicer had previously represented that one banking entity was the owner/creditor of Plaintiff’s loan as trustee for a securitized trust, but the foreclosure agent represented that it was owned by a different banking entity and instituted the foreclosure in that name. Plaintiff’s fourth cause of action for cancellation of documents, alleged that the actions by the servicer and agent purporting that either had standing as trustee of the securitized trust to foreclose or assign the loan were in contravention of the trust and were void which meant that the foreclosure was also void. The Defendants answered that a plaintiff cannot challenge the foreclosing entities’ standing to foreclose or assign a mortgage. The appellate court agreed with the Defendants that a transfer of a deed of trust in contravention of the trust documents is only voidable so a mortgagor lacks standing to challenge the validity of the assignment. The court went on to say, however, that even if a mortgagor could challenge the validity of the assignment, he must still allege facts showing prejudice as a result of any lack of authority of the parties participating in the foreclosure process. The court found that the assignment of the deed of trust and the note did not change the Plaintiff’s obligations under the note, and there was no reason to believe that the original lender would have refrained from foreclosure in these circumstances. Absent any prejudice, the Plaintiffs have no standing to complain about any alleged lack of authority or defective assignment. There was no allegation that Plaintiff was current on his mortgage obligations, or that more than one entity concurrently attempted to collect mortgage payments or foreclose on the property. Although Plaintiff alleged that the loan servicer failed to use the correct underwriting standards when offering Plaintiff a loan modification, Plaintiff failed to plausibly allege that the loan modification offer would have been materially different had a different company’s underwriting standards been used.

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