Court Dismisses Pre-Foreclosure Action Challenging the Validity of the Lender’s Interest in the Deed of Trust

In Kan v. Guild Mortgage Company, a California Appellate Court recently dismissed a pre-foreclosure lawsuit against the lender wherein the borrower claimed there were discrepancies in the assignment of the loan. In Kan, plaintiffs borrowed money from defendant under two promissory notes secured by deeds of trust on real property. Subsequently, the trustee was substituted and the notes were assigned to different lenders. The plaintiff defaulted on the loans and filed a quite title action against the lender, claiming discrepancies in the “securitization process.” Defendants filed a demurrer, which the Court sustained and the appellate court affirmed, dismissing the case. The appellate court affirmed clear state law, holding that California courts were unwilling to delay the non-judicial foreclosure process by allowing debtors to pursue “preemptive judicial actions to challenge the right, power, and authority of the foreclosing beneficiaries agents who initiate and pursue foreclosure.”

Shannon B. Jones, Partner, sbj@sbj-law.com