They call it “retroactive effective date” we call it “backdating” Ohlendorf Court weighs in and calls it potentially an invalid Notice of Default….
Here is the scenario, when a foreclosure is about to take place MERS (our friendly neighborhood software company) typically assigns a Deed of Trust to the party that supposedly owns your loan so that they can go ahead with a private non-judicial foreclosure sale. This assignment often takes place after the Notice of Default is filed. So, in order to make things appear nice and pretty and to try to convince everyone that the assignment was made before the Notice of Default was filed they will often indicate on the Assignment of Deed of Trust that it is “effective January 1, 2011” (for example) although the assignment is notarized on the let’s say April 15, 2011.
If the assignment of deed of trust was “effective” on January 1, 2011 then why wasn’t it signed and notarized on that date? What happened on January 1, 2011 to make the assignment “effective?” Did the trustee of the securitized loan trust call MERS and tell them the assignment is effective, prepare the documents and we will notarize it in a few months? That seems unlikely. Yet this is the game they play. As Plaintiff counsel, this seems like another piece in the bogus scheme to foreclose on people by doing whatever they want, saying whatever they want, and expecting everyone to go quietly into the foreclosure night.
One court recently weighed in on this suspicious backdating of real estate documents, and stated that it may be improper and may taint the Notice of Default. The case of Ohlendorf v. American Home Mortgage Servicing, No. CIV. S092081 LKK/EFB (E.D. Cal.2010, Mar. 31, 2010), discussed this phenomena when MERS made TWO ASSIGNMENTS both with back-dated “effective dates”:
“Nonetheless, plaintiff may have stated a claim against defendants that they are not proper parties to foreclose. Plaintiff and AHMSI, Deutsche, and MERS have requested that the court take judicial notice of the assignment of deeds of trust which purport to assign the interest in the deed of trust first to AHMSI and then to Deutsche. As described above, the deed of trust listed MERS as the beneficiary. On June 23, 2009, T.D. recorded a notice of default that listed Deutsche as the beneficiary and AHMSI as the trustee. Nearly a month later, on July 20, 2009, MERS first recorded an assignment of this mortgage from MERS to AHMSI, which indicated that the assignment was effective June 9, 2009. Eleven seconds later, AHMSI recorded an assignment of the mortgage from AHMSI to Deutsche, which indicated that the assignment was effective June 22, 2009. The court interprets plaintiff’s argument to be that the backdated assignments of plaintiff’s mortgage are not valid, or at least were not valid on June 23, 2009, and therefore, Deutsche did not have the authority to record the notice of default on that date. Essentially, the court assumes plaintiff argues that MERS remained the beneficiary on that date, and therefore was the only party who could enforce the default.
While California law does not require beneficiaries to record assignments, see California Civil Code Section 2934, the process of recording assignments with backdated effective dates may be improper, and thereby taint the notice of default. Defendants have not demonstrated that these assignments are valid or that even if the dates of the assignments are not valid, the notice of default is valid. Accordingly, defendants motion to dismiss plaintiff’s wrongful foreclosure is denied insofar as it is premised on defendants being proper beneficiaries. As discussed below, defendant is invited, but not required, to file a motion addressing the validity of the notice of default given the suspicious dating in the assignments with respect to both their motion to dismiss and their motion to expunge the notice of pendency.”
Interestingly, in Ohlendorf, the Bank made the usual “tender” argument, but the Court did not require a tender and instead stated:
A. Failure to Allege Ability to Make Tender
Defendants AHMSI, ADSI, Deutsche, and MERS argue that all of plaintiff’ claims are barred by plaintiff’s failure to allege his ability to tender the loan proceeds. Defendants assert that Abdallah v. United Savings Bank, 43 Cal. App. 4th 1101, 51 Cal. Rptr. 2d 286 (1996), requires a valid tender of payment to bring any claim that arises from a foreclosure sale. Abdallah, however, merely requires an allegation to tender for “any cause of action for irregularity in the [foreclosure] sale procedure.” Id. at 1109. Here, plaintiff asserts no causes of action that rely on any irregularity in the foreclosure sale itself. Indeed, the only claim addressed by the motions that may concern irregularity in the foreclosure itself is the wrongful foreclosure claim, which the court rejects below. Accordingly, the court concludes that plaintiff need not allege tender, and defendants’ motion is denied on this ground
Other Courts have agreed with this type of analysis in regard to the vailidity of the Notice of Default and whether or not this makes a foreclosure wrongful. For example, in Castillo v. Skoba, Vice President of Aurora Loan Services, LLC 2010 WL 3986953 (N.D.Cal., November 30, 2010), the United States District Court in San Diego held (in granting an injunction to halt a foreclosure sale):
“The Court also concludes that Plaintiff is likely to succeed on the merits of his claim that neither Aurora nor Cal-Western had authority to initiate the foreclosure sale at the time the Notice of Default was entered. Under Cal. Civ.Code § 2924(a)(1), “the trustee, mortgagee, or beneficiary, or any of their authorized agents” are authorized to file a notice of default. Documents do not support a finding that either Cal-Western was the trustee or Aurora was the beneficiary on May 20, 2010 when the Notice of Default was recorded.
On a document dated May 17, 2010, MERS substituted Cal-Western as a trustee under the deed of trust. (Exh. 4) If Cal-Western had been trustee at this time, it would have had authority to conduct the foreclosure process. See Cal. Civ.Code § 2924(a)(1). However, this document was notarized on June 7, 2010, (id.), and thus it appears likely that Plaintiff can succeed on a claim that the substitution occurred no earlier than June 7.
Similarly, on June 8, 2010, MERS, the beneficiary under the deed of trust, executed an assignment of its beneficial interest to Aurora, with a backdated effective date of May 18, 2010. (Exh 6) Based on the face of this document, Plaintiff is likely to prevail on a claim that Aurora did not have authority to record the Notice of Default on May 20, 2010. See Ohlendorf v. Am. Home Mortg. Servicing, No. CIV. S-09-2081, 2010 U.S. Dist. LEXIS 31098 (E.D.Cal. Mar. 30, 2010) (recipient of backdated assignment may not have had authority to record Notice of Default).
The power of sale in a nonjudicial foreclosure may only be exercised when a notice of default has first been recorded. See Cal Civ Code § 2924; see also 5-123 California Real Estate Law & Practice § 123.01. Here, the Notice of Default appears to be void ab initio. Therefore, any foreclosure sale based on a void notice of default is also void. Accordingly, the Court GRANTS Plaintiff’s motion and enjoins a foreclosure sale based on Defendants’ noncompliance with prerequisites to engage in a foreclosure sale set forth in Cal. Civ.Code § 2924.
What does all this mean? It means, if MERS is playing games with “effective dates” on your assignment of Deed of Trust that should at least be used to argue that the Notice of Default may be tainted. You really have to look at the recorded chain of title and see what you find. If there is improper backdating this may give rise to a challenge (not to the foreclosure “sale” – which requires tender), but to the foreclosure laws in California which require a valid Notice of Default before foreclosing. For this challenge, the Ohlendorf case says no tender need be alleged. For anyone that has been closely examining Assignments of Deed of Trusts involving securitized loans, this is an every day occurrence. They call it “retroactive effect” I call it complete nonsense. At least a few courts agree.