Los Angeles Times writer Andrew Khouri reported this week that, “During the bust that followed last decade’s housing boom, hundreds of thousands of Californians lost their homes to foreclosure. It was a process later found to be rife with problems, such as overwhelmed bank employees who sometimes didn’t even read the foreclosure documents in front of them.
“But challenging foreclosures on the basis of paperwork problems proved to be mostly futile, given California courts had ruled that borrowers who weren’t paying their mortgages didn’t suffer financial harm.
“Now, a recent decision by the California Supreme Court will allow some of those former homeowners to pursue lawsuits and possibly win damages for wrongful foreclosure even if they were in default.”
Mr. Khouri explained that, “The Feb. 18 Supreme Court case did not involve problems with robo-signed documents, but it did address one aspect of the paperwork mess that emerged in the subsequent bust: whether uncertainty over the ownership of a borrower’s mortgage note could be the basis for challenging a foreclosure.”
The LA Times article added that: “‘The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security,’ wrote Associate Justice Kathryn M. Werdegar in the unanimous ruling.
“Although the Supreme Court opened the courthouse doors, what success foreclosed homeowners will have once they get inside is an open question.
“Legal experts said it’s highly unlikely that former homeowners could unravel their foreclosures and win back their homes, given strong legal protections afforded to those who would currently hold title to the homes…[L]egal experts also said the number of Californians who could take advantage of the decision is unknown because courts have yet to set a statute of limitations for such cases.”
