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Judge Hands Down Verdict in PennyMac Default Case

In a recent opinion published by California’s Second Appellate District, Myles v. Pennymac Loan Services, LLC, the court determined that a loan in default can still be assigned, JDSupra reports. The case saw the borrower, Myles, default on a loan in 2008, but on September 25, 2008, the federal government closed Washington Mutual. The Federal Deposit Insurance Corporation (FDIC) as receiver transferred Myles's mortgage to JPMorgan.

JPMorgan then assigned Myles’ mortgage to PennyMac, as reflected in a recorded assignment of the deed of trust.  PennyMac foreclosed in 2017, and Myles argued that the assignment was invalid because his loan was in default at the time of the assignment, arguing that PennyMac and MTC Financial had no rightful claim to foreclose on his home, on the following logic. Myles alleges Washington Mutual sold his mortgage "to another entity or entities. The entity or entities were not Defendants named in this action."

Myles's complaint argues his mortgage "was not legally transferred, conveyed, or assigned to Defendant [PennyMac]," claiming he had the power to invalidate mortgage assignments by deciding not to pay his mortgage.

After the trial court rejected Myles’ theory and dismissed the complaint on PennymMac’s demurrer, Myles appealed. After this, the trial court sustained the demurrer to Myles's wrongful foreclosure claim, claiming it as “illogical and incorrect,” concluding that borrowers cannot challenge an assignment of the loan merely by arguing that they were in default at the time of the assignment.

“Myles’s legal argument is incorrect because he does not explain how the assignments of his mortgage are void as a matter of law,” the court states. “His complaint seems to suggest that a borrower, by refusing to pay, can prevent a lender from assigning the debt.  Why? Myles does not give a logical basis for this strange suggestion. Neither does he support it with legal authority. The trial court properly sustained the demurrer.”

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.

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