Ordinarily, one who is assigned the beneficial interest in a debt secured by real property must record evidence of the assignment prior to exercising any power of sale by foreclosure or otherwise. Not so for deeds of trust says the Second District Court of Appeal.
In its September 2011 decision in Calvo v. HSBC Bank USA, N.A. (2011) Cal.App. Lexis 1184, the Court ruled that the requirement that an assignment of a beneficial interest in a debt secured by real property must be recorded in order to foreclose on the property applies only to mortgages and not deeds of trust. The Court’s decision constitutes an extremely narrow interpretation of California Civil Code section 2932.5, which provides as follows:
“Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded.”
Consistent with the plaintiff’s position in Calvo, opponents of the decision argue that the Court’s interpretation of Civil Code section 2932.5 is antiquated because, in the “modern era”, there is essentially no difference between a mortgage and a deed of trust. Citing to cases from jurisdictions outside California, opponents contend that drawing a distinction between a mortgage and deed of trust will deprive foreclosed borrowers of the due process of law.
Nevertheless, as it currently stands, there is no requirement to record an assignment of a deed of trust prior to pursuing foreclosure of the deed in California. Given the current state of the real estate market in California and the arguments proffered by certain consumer groups, however, this is surely not the last that we will hear on this subject. Stay tuned.