ARIZONA SUPREME COURT SIDES WITH LENDERS ON KEY TRUSTEE SALE ISSUE

Posted by mmadmin on December 19, 2011 , No comment

IN VASQUEZ V. SAXON MORTGAGE, INC., ET. AL., the Supreme Court of Arizona recently held that Arizona’s trustee sale statute does NOT require the recording of an assignment of a deed of trust to reflect the interest of the foreclosing lender (as the current beneficiary under the Deed of Trust) before a trustee sale can be conducted.  The U.S. Bankruptcy Court for the District of Arizona certified 2 questions for the Court’s consideration:

     1.    IS THE RECORDING OF AN ASSIGNMENT OF DEED OF TRUST REQUIRED PRIOR TO THE FILING OF A NOTICE OF TRUSTEE’S SALE UNDER A.R.S. § 33-808 WHEN THE ASSIGNEE HOLDS A PROIMSSSORY NOTE PAYABLE TO BEARER?

 AND

     2.    MUST THE BENEFICIARY OF A DEED OF TRUST BEING FORECLOSED PURSUANT TO A.R.S. § 33-807 HAVE THE RIGHT TO ENFORCE THE SECURED OBLIGATION (that is being foreclosed)?

 On the 1st issue, the Court focused on Arizona’s trustee sale process and the statutes that govern how a trustee’s sale is conducted.  Finding no authority in Arizona statutes for the idea that an assignment of a Deed of Trust must be recorded in the County Recorder’s office to provide evidence that the foreclosing beneficiary is the current holder of the beneficial interest of the Deed of Trust being foreclosed, the Court refused to impose such a requirement as a condition to a trustee’s sale.  The Court was mindful to articulate the reasons why an assignment of a Deed of Trust would be appropriate, but explained that such an assignment is discretionary and only impacts the rights of the parties to the assignment and potentially a third party that would buy an interest in the trust property without knowledge of the assignment.  However, as between the owner and the lender, the Court found that an assignment is not necessary and cannot be used by an owner to stop a trustee from carrying out the authority granted to it in the Deed of Trust.

 The Court declined to address the 2nd issue, finding that the answer to this question would not help decide any issues in the underlying bankruptcy action since the foreclosing lender, Deutsche Bank, had been assigned the promissory note in question before the notice of trustee’s sale (related to the Vasquez foreclosure) was recorded.  As a result, this issue remains open to debate, although it will likely be clarified by decisions of Arizona courts in the near future.  Until then, some borrowers will choose to push this issue to the forefront of their disputes with their servicers/lenders. 

 Unfortunately, in not addressing the 2nd issue presented, the Court left unanswered a very important question plaguing the non-judicial foreclosure process (i.e., trustee’s sales) and, in my opinion, a question that goes to the heart of the issues in many foreclosure disputes.  The basic argument behind the 2nd issue is that when mortgages were sold in the securities markets, the note and collateral were separated and the collateral securing the note was never assigned to the parties that actually own the note.  Since the collateral is being sold to satisfy obligations under the note, how can a party that can’t prove it owns the note, and thus the right to enforce the note, authorize a trustee to sell the property at a foreclosure auction?  In many cases, it simply is not clear who actually owns the note that is causing the foreclosure.  If the trustee takes direction from a beneficiary (or its agent) as to when to record a notice of trustee’s sale and when to conduct a foreclosure, this begs the question – does the party that is telling trustees to foreclose on Arizona properties actually own the notes that are the subject of the foreclosure (or work for someone that does)?  If not, then one question looms large – who the heck is telling the trustees to foreclose?

 Losing a home is a pretty big deal.  Doesn’t common sense tell us that if you are going to take someone’s home, someone’s property, you better be able to establish that you own the note (or work for someone that does) that is the underlying reason for the foreclosure?  If not, can’t anyone allege they own the note or work for someone that does, never have to prove their position, pick their own trustee to do the trustee’s sale and provided the trustee follows the statutory process, sell a borrower’s house out from under them.  And what is the justification for looking the other way on this issue – simply because the borrower is delinquent?  Perhaps, but does a delinquency justify such sloppy and questionable business practices? 

Marc McCain, Esq.

McCain & Bursh, PLC

www.mccainbursh.com

www.mmccain@mblawaz.com

602 604-2138

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