Financial Institutions Law Blog

"A mortgage broker has fiduciary duties to a borrower. A mortgage lender does not."  A decision published on March 28, 2011 by the California Court of Appeals (2 Dist.) clarifies the differences between duties owed to a borrower by a mortgage broker and those owed by a mortgage lender. To avoid potential lawsuits for breach of fiduciary duty or negligence, mortgage lenders should take care not to assume the mantle a mortgage broker (e.g. soliciting lenders or negotiating loans with third party lenders on behalf of a borrowers for a fee).

Civil Code sections 2924 to 2924k provide a comprehensive framework for regulating nonjudicial foreclosure sales under deeds of trust. A recent decision by the California Court of Appeal (4th Dist.) finds that, under California’s statutory framework regulating nonjudicial foreclosures, borrowers cannot challenge the authority of a trustee, mortgagee, beneficiary, nominee, or other agent of the lender or holder of the note to pursue nonjudicial foreclosure. To hold otherwise would, “fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosure.”