The issues before the Second District Court of Appeal ("Appellate Court") in this published opinion were 1) whether a borrower has standing to challenge the validity of an assignment of a promissory note and deed of trust from Mortgage Electronic Registration Systems, Inc. ("MERS") to U.S. Bank National Association ("U.S. Bank") and; 2) whether California recognizes a preforeclosure cause of action to challenge the authority of a person initiating foreclosure. (Keshtgar v. U.S. Bank, N.A. (June 30, 2014, B246193) — Cal.App.4th —- [2014 WL 2943240]).
The facts were that Saeed Keshtgar ("Keshtgar") obtained a loan from Resource Lenders, Inc. ("Resource Lenders") secured by a deed of trust that named MERS as the beneficiary, acting as nominee for Resource Lenders. Later, MERS assigned the deed of trust to U.S. Bank. After defaulting on the loan, Keshtgar filed a lawsuit to prevent U.S. Bank from foreclosing on the real property that secured the deed of trust.
The Appellate Court found that stripped to its essence, Keshtgar's complaint alleges nothing more than the assignment between MERS and US Bank did not occur or is void. The Appellate Court noted that California's statutory nonjudicial foreclose scheme allows no preemptive action to challenge the authority of a person initiating foreclosure. The Appellate Court also noted that even in post-foreclosure actions, a borrower lacks standing to challenge an assignment absent a showing of prejudice. The Appellate Court affirmed the trial court's judgment sustaining U.S. Bank's demurrer without leave to amend holding that whether the transfer is alleged to be void or never made, there is no preforeclosure cause of action to challenge the authority of the person initiating foreclosure.
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