To fight a
nonjudicial foreclosure, you'll have to start a lawsuit.
To get your day in court to challenge a nonjudicial
foreclosure, you must file a lawsuit against the foreclosing party. In the
lawsuit, you ask the court to enjoin (stop) the foreclosure proceedings
until a judge can hear your reasons as to why the foreclosure shouldn’t
proceed.
Prior to or accompanying the lawsuit, you may ask the court for three
things, in this order:
• a temporary restraining order
• a preliminary injunction, and
• a permanent injunction.
Temporary Restraining Order (TRO)
Your application for a
temporary restraining order (TRO) must convince the judge
that you will suffer “irreparable injury” if the judge doesn’t stop the
foreclosure immediately. Because you will lose your home if the foreclosure
is allowed to proceed, most courts accept that a foreclosure causes
irreparable injury.
TROs are typically granted without a formal notice or
hearing, which means the foreclosing party might have only a day or two of
notice in which to prepare a response. If no response is filed, the judge
may well grant the TRO, but require you to post a
bond to protect the foreclosing party from economic harm in case
you lose the case down the line. A bond
can be costly, assuming you can get one at all. You might be able to get the
bond requirement
waived if your income is low enough. The
court may grant a waiver if any of the following is true:
The delay required by the
lawsuit will not cause unreasonable harm to the foreclosing party.
The validity of your mortgage
is in question.
The foreclosing party’s
interest in pushing ahead with the foreclosure can be protected by some
other method, such as by requiring you to make reasonable monthly payments
during the course of the lawsuit.
Whether or not you’ll be able to get the bond requirement
waived depends largely on if the court believes your claims have any merit.
The TRO will typically
last until the date set for a hearing on whether the court should issue a
preliminary injunction—which would stop the foreclosure until a full trial
on the matter can happen.
Preliminary Injunction
At the preliminary injunction hearing, the court will
review each party’s paperwork. At this hearing, the court must decide
whether:
you are likely to prevail if the case proceeds to trial,
and
the injury that you would suffer from the foreclosure
outweighs the injury that the foreclosing party is suffering by not
getting paid (called "balancing the equities").
If the judge decides these issues in favor of the
foreclosing party, the TRO will end, and your motion for a preliminary
injunction will be denied. While you're technically allowed to continue
with your lawsuit, the foreclosure will likely proceed in the absence of a
preliminary injunction. Your only remedy at this point—and it’s a
considerable long shot—would be to ask a higher court for an order (called
a “writ”) overruling the lower court’s denial of the preliminary
injunction.
But if the judge decides these issues in your favor,
then the judge will issue a preliminary injunction. The preliminary
injunction may order the foreclosing party to take corrective action—for
example, by issuing a new payoff statement and giving you a chance to
reinstate the mortgage. Or it might simply keep the TRO in effect.
Permanent Injunction
Because it often takes a very long time to bring a case
to trial on a permanent injunction, getting a preliminary injunction is
pretty much equivalent to a victory for you. Typically, the foreclosing
party will either attempt to reach a settlement with you, like by giving
you a loan
modification, drop the current foreclosure and begin from scratch, or
meet any conditions laid down by the court and then go back into court to
ask that the injunction be lifted.
The burden is on you to prove that the foreclosing party didn’t comply
with state
foreclosure laws or the terms of the mortgage. You meet this burden with
the documents you file—typically, declarations or affidavits from you and
various witnesses that establish the facts you believe entitle you to stop
the foreclosure. For example, if you contest the accuracy or legality of the
fees the foreclosing party required you to pay to reinstate the
mortgage or other
fees, you would attach a sworn statement to your application for a TRO
or preliminary injunction, setting out the facts as you know them.
If the foreclosing party produces documents that contradict yours, then
you'll need to convince the judge at the preliminary injunction stage that
you deserve to have the foreclosure put on hold until you can produce your
full case at trial. Because most preliminary injunction hearings don’t
involve live witnesses, your paperwork might have to carry the day.
============== ================= =====
How Foreclosures Work: Judicial and Nonjudicial Processes
Depending on state law and the circumstances, the lender might foreclose
through either a nonjudicial
process (also known as a power
of sale foreclosure) or a judicial
foreclosure process. In a nonjudicial foreclosure, the lender follows
specific out-of-court steps set out in the state statutes to foreclose. In a
judicial foreclosure, the lender files a lawsuit against you in court.
You’ll receive a complaint, along with a summons giving you a deadline to
file a written answer to the suit. The deadline to respond is usually 20 or
30 days after you receive the paperwork.
So, you’ll get the chance to file an answer
in a judicial foreclosure, but not in a
nonjudicial one. If you want to fight a
nonjudicial foreclosure in court, you’ll
have tostart
your own lawsuit.
Temporary
Restraining Order
What’s an Answer?
If you want to respond to the suit, an answer is the document that you
file with the court and serve to the other parties in the case. Your answer
tells the court your side of the story.
In the answer, you must respond to the complaint’s allegations and you
can ask that the lender prove its allegations, like how much it claims you
owe under the loan documents. You should also raise any defenses—like
the lender lacks standing
to foreclose or that the foreclosure documents were robosigned—and
counterclaims. Counterclaims are things you think your lender or servicer has
done wrong.
Why You Might Want to File an Answer
Again, if you have a defense to the foreclosure or want to assert a
counterclaim, you should file an answer to preserve your rights. You also
might want to file an answer to get more time to work out a loss
mitigation option, like a loan
modification. Also, once you file an answer, you’re entitled to be kept
informed of anything happening in your court case.
If you file an answer, the lender
can't get a default
judgment—an automatic win—against you. Depending on the strength of the
answer, the lender might then file a motion for summary
judgment. In a motion for summary judgment, the lender asks the court to
rule in its favor without a trial or any further legal proceedings because
there is no dispute as to the important facts of the case, your defense
lacks merit, or you didn't prove wrongdoing on the part of the lender. But
if the court denies summary judgment, the case will proceed toward a trial.
(To learn more about what happens after you file an answer, see How
to Fight a Foreclosure in Court: Judicial Foreclosure.)
What Happens If You Don’t File a Timely Answer
If you don’t file an answer by the deadline, the lender’s attorney will
most likely ask for a default judgment. To get the court to set aside
(annul) a default judgment, you’d have to file a motion and show good cause
for not filing an answer. It’s very difficult to get a court to set aside a
default judgment.
In addition, if you don't file an answer, you aren’t entitled to get
notifications about what’s happening in your foreclosure case. The court may
proceed with the foreclosure without your involvement or notifying you about
the proceedings. You also will likely lose the right to assert any defenses
you could have against the foreclosure. If you don't include particular
defenses or counterclaims in an answer, you might not be able to bring them
up later on in the foreclosure.
Of course, you shouldn’t file a frivolous answer, otherwise you might get
stuck paying costs and expenses of the opposing parties, including their
attorneys’ fees.
============== ================= ========
Fighting Your Foreclosure in Court
Contesting a
judicial foreclosure is different than
fighting a nonjudicial foreclosure. By Amy
Loftsgordon,
Attorney
How hard it is to challenge a foreclosure depends
greatly on what type of foreclosure you're facing: judicial
or nonjudicial. It’s easier and less expensive to jump into the existing
lawsuit with a judicial
foreclosure than it is to challenge a nonjudicial
foreclosure. If your foreclosure is nonjudicial, which means it proceeds
outside of the court system, you’ll have to file a lawsuit to challenge the
process.
While every foreclosure case is unique and different states have their
own procedures, here's a summary of how you might go about challenging each
type of foreclosure, with more details on the procedures below.
To contest a judicial foreclosure, you have to file a written answer to the
complaint (the lawsuit). You'll need to present your defenses and explain
the reasons why the lender shouldn’t be able to foreclose. You might need
to defend yourself against a motion for summary judgment and at trial. If
you have strong evidence that the lender or servicer made an error in the foreclosure
procedures, like by failing to send you a breach
letter, initiating
the foreclosure too soon, or not following state foreclosure procedures, you might be
able to force it to start the foreclosure over. Or you might get enough
leverage to work out a way to save your home, like with a loan
modification.
With a nonjudicial
foreclosure, the process happens outside of a court's supervision, so
you’ll have to file a lawsuit, TRO, to get
a judge’s attention. And you’ll have the burden of proof because you want
the judge to stop a proceeding (the foreclosure) that's already authorized
by the mortgage ordeed
of trustyou signed when
you took out the loan.
How to Fight a Judicial Foreclosure
In a judicial foreclosure, the foreclosing party (the "lender") must file
a lawsuit to get the foreclosure started. You'll be notified of the
foreclosure case when papers called a summons
and complaint (or petition) are delivered to (served on) you. The
documents will advise you of the lawsuit and give you a limited amount of
time to respond if you choose to contest it. And, significantly, the lender
will have the burden of proving to the judge that the foreclosure is
justified under the terms of the mortgage.
What Proof Will the Lender Provide?
The proof will typically consist of the documents you signed when taking
out or refinancing your loan, like a mortgage (or deed of trust) and a promissory
note. The paperwork might also include copies of notices the servicer
sent to you, signed agreements, assignments
and endorsements, internal accountings of payments both made and missed,
and written statements under oath—called declarations or, if sworn before a
notary public, affidavits—from employees of the lender or servicer who claim
to have knowledge of how many payments you missed and the lender’s
compliance with your state’s
laws regarding foreclosure procedures.
As a general rule, if you don’t point out errors or omissions in the
paperwork or procedures, the court will accept them as sufficient evidence,
award the lender a default
judgment, and order a foreclosure sale.
Filing an Answer to the Lawsuit
If you decide to respond to the suit, you'll have the opportunity to tell
a judge why you think the foreclosure isn't warranted. You have to present
your objections to the foreclosure by filing an “answer”
with the court by a specific deadline. The deadline is usually between 20 and 30
days after service, though it varies. Check the summons you received along with the complaint to
find out how much time you have to file an answer in your case. You
must prepare your answer in the proper format, including responses to each
of the claims made by the lender and any defenses you might have. For each numbered paragraph in the
complaint, you should admit, deny, or say you don’t have sufficient
information to admit or deny (and so you deny) the allegations contained in
that particular paragraph.
You may also ask that the lender
prove its claims, like how many payments it says you've missed and the fees
it claims you owe. Be aware that if you admit an allegation, the lender
doesn’t have to prove it. You’ll also need to raise any defenses and
affirmative defenses in your answer, such as the lender doesn’t have the
right to foreclose (called "standing"),
as well as any counterclaims, like the servicer violated federal
mortgage servicing laws, if
applicable.
What Happens After You File an Answer: The Lender Might
Ask for Summary Judgment
The lender might then file a summary
judgment motion, asking the judge to decide the case without a trial.
You get the right to oppose the motion by submitting your arguments and
evidence in a response to the motion. You need to serve your response to the other parties,
and the court may then hold a hearing. If the court determines that
you don’t have evidence supporting a defense, the lender will win the
motion, get a judgment of foreclosure, and be able to go forward with a
foreclosure sale. If the judge denies the lender’s motion, the court will
allow the case to proceed to trial.
Discovery
Before the trial, discovery will take place. This process is when you and
the lender ask each other for facts, documents, and other information before
the trial. In a foreclosure, each side may ask the other to provide certain
information (through a demand for production of documents, interrogatories,
and depositions) that might help prove or disprove the right to foreclose.
Handling a Trial
At the trial, the lender must try to prove it has the right to foreclose.
Then, you must show that the lender shouldn't be permitted to foreclose.
You'll both present your cases, sometimes through witnesses who can be
questioned by the judge and cross-examined by the other side. For example,
if you and the lender disagree about how many payments you've missed, both
you and a representative who works for the loan servicer would testify, and
the judge would decide which of you is most likely telling the truth.
At the end of the trial, the judge will either:
order the foreclosure to go
ahead and in many states, set the sale date, or
dismiss the case, probably “without
prejudice,” which means the lender can still foreclose, but it has to
start the process over.
How to Fight a Nonjudicial Foreclosure in Court
Because nonjudicial foreclosures proceed outside of court, you’ll have to
file a suit in court to get a judge to review the matter. And you’ll have
the burden of proof because you want the judge to stop a proceeding—the
foreclosure—that's already authorized by the mortgage contract. You'll need to include a motion for a
temporary
restraining order (TRO) and preliminary injunction to enjoin (stop) a
foreclosure sale while your claims are being litigated. Usually, homeowners also ask the court for a permanent
injunction.
Asking for a Temporary Restraining Order
In your application for a TRO, you'll have to show the judge that
you’ll suffer “irreparable injury” if the foreclosure happens. Courts often
agree that losing your property to foreclosure causes irreparable harm.
Courts sometimes grant TROs without
a formal notice or hearing, so the lender might not have much time to
respond. If the lender doesn’t respond to your motion, the judge will
probably grant the TRO. Though, you might have to post a bond to
protect the lender from economic harm if you eventually lose the case. A
bond could be expensive, but you might, in some circumstances, get the bond
requirement waived, like if you don't have much income or if the court
decides that the lender’s interest is adequately protected. Some courts have
said that bonds aren't required in foreclosures, especially in cases where
the property value exceeds the amount the borrower owes, because the lender
has a secured interest in the property and can eventually foreclose if the
borrower loses the case. Or, you could suggest paying the bond by making
payments, such as at your regular monthly mortgage payment amount or in an
amount that would offset any expense the lender might incur during the
process, or in a minimal (de minimus) amount.
A temporary restraining order usually lasts until a court hearing in
which you'll try to get a preliminary injunction stopping the foreclosure
pending a full trial.
Preliminary Injunction
At the preliminary injunction hearing, the court will review each party’s
documents. (The documents are usually the same type of paperwork that's used
in judicial foreclosures.) You'll have to prove your case, like by showing
that the lender didn't follow state orfederal
foreclosure laws or the terms of the deed of trust. You’ll have to convince
the judge at this preliminary injunction stage that the foreclosure should
be put on hold until you can produce your full case at trial. You might use
declarations or affidavits from you and other witnesses to establish the
facts you believe should stop the foreclosure.
At this hearing, the court must look at whether:
you’re likely to win at trial, and
the injury that you would suffer from the foreclosure
outweighs the injury that the lender is suffering by not getting paid.
If the judge decides for the lender, the TRO will end, and the court will
deny your motion for a preliminary injunction. While you can
still proceed with your lawsuit, the
foreclosure will likely go
ahead because an injunction isn't in place to prevent it. While it’s a
long shot, you might be able to ask a higher court to overrule the denial.
But if you're able to convince the judge to halt the foreclosure until
you can present your full case at trial,
the judge will issue a preliminary injunction. The lender might then try to
settle with you, give up on the current foreclosure and start over, or meet
any conditions the court sets and then ask the court to lift the injunction.
Otherwise, you'll go to trial. The
preliminary injunction enjoins the foreclosure pending the trial.
When It Might Be Worth Fighting Your Foreclosure
If it’s clear that the lender failed to follow the law and, as a result,
you were deprived of an important right, it might be worth it to fight the
foreclosure in court. After all, if you could get the foreclosure dismissed
or significantly delayed, you might be able to stay in your house much
longer than you
would otherwise. Or you might gain leverage that could help you in
working out a way to keep it.
You might have a decent shot at stopping or at least delaying a
foreclosure if you have a strong defense,
for example:
the lender started the foreclosure based on false
information, like if your payments were credited to the wrong party and
you were never behind, or the servicer substantially overstated the amount
you had to pay to reinstate your
mortgage, depriving you of your reinstatement rights under state law, or
you can prove that the lender didn’t follow state
requirements for a foreclosure, like by failing to properly send you a
notice of intent to foreclose, if required in your state, or it violated
federal mortgage servicing laws.
Sometimes, though, filing an answer
in a judicial foreclosure or starting a
suit to fight a
nonjudicial foreclosure isn’t the best
option.
Say you’re facing a judicial foreclosure and
you have an argument that requires you to file another type of pleading to
preserve your rights.
Filing an incorrect response might cause you to lose an important right.
For instance, if the lender made an error, like failing to serve you with
the foreclosure lawsuit properly, you can dispute the court’s jurisdiction
by filing a motion to dismiss.
If you win, the foreclosure has to start over.
But if you file an answer, you likely
stipulate (agree) that the court has the right to hear the case, and the
foreclosure goes ahead.
Litigation is complicated, and most people fare better after getting help
from an attorney.
Marin County Law Library has a program, "Lawyers in the Library"
currently being held virtually, twice a month, with access to an attorney
for free for 20 minutes. Contact them for their calendar as well as
scheduling an appointment to do research:
https://www.marincountylawlibrary.org/
WHO OWNS THE NOTE?
Your goal is to make certain the institution suing you is, in fact, the
owner of the note (see steps to follow below). There is only one original
note for your mortgage that has your signature on it. This is the document
that proves you owe the debt.
During the lending boom, most mortgages were flipped and sold to another
lender or servicer or sliced up and sold to investors as securitized
packages on Wall Street. In the rush to turn these over as fast as possible
to make the most money, many of the new lenders
did not get the proper paperwork to show they own the note and mortgage.
This is the key to the produce the note strategy. Now, many lenders are
moving to foreclose on homeowners, resulting in part from problems they
created, and
don’t have the proper paperwork to prove they have a right to foreclose.
The lawsuit would allege that:
the lender has sent a Notice of Intent to Foreclose ( Notice of Default) ;
the homeowner is unsure as to whether the lender still possesses the
original debt instrument, upon which the lender claims the right to
foreclose; the homeowner wants proof of such authority; and the court should
intervene and prevent the foreclosure from taking place unless and until
such proof is presented.
REINSTATE LOAN right
2924.12c
The borrower filed suits against the assignee to the mortgage, which
alleged that the assignee violated California’s reinstitution law because it
demanded
excessive amounts to reinstate the loan.
The assignee sought and was granted summary judgement by the trial court.
https://www.keepyourkeys.org/modificationdeclineappeals07272019
A Notice
of Default,
gives the borrower 90 days to cure the default. If the borrower does not,
then the lender files a 21-day Notice
of Trustee’s Sale.
After 21 days, the house is then sold at auction.
However, the borrower has until up to five days prior to the sale to cure
the default to stop the sale.
Marin Legal Self Help Center
(They do not do TROs for Foreclosure)
Phone: (415) 444-7130
Email: selfhelp@marincourt.org
Monday, Wednesday and Friday, 8:30am to 12:00pm;
Tuesday and Thursday, 8:30am to 12:00pm and 1:00pm to 3:00pm.
California Foreclosure Laws and
Procedures
Learn how a California foreclosure
works, including preforeclosure steps, foreclosure procedures, and
homeowners’ rights under both state and federal laws.
Foreclosure Moratoriums During the Coronavirus Crisis
---
Federal actions, some state laws, and various local orders protect
many homeowners from a foreclosure during the COVID-19 national crisis.
Before the foreclosure crisis, which peaked in 2010,
federal and state laws regulating mortgage
servicers and foreclosure procedures
were relatively limited and tended to favor foreclosing lenders. Now,
however, federal and state laws heavily regulate loan servicing and
foreclosure processes. And most of the laws give protections to borrowers.
Servicers generally have to provide borrowers with loss
mitigation opportunities, account for each foreclosure step, and
strictly comply with foreclosure laws. Also, most people who take out a loan
to buy a residential property in California sign a promissory
note and a deed
of trust, which is like a mortgage. These documents give homeowners some
contractual rights in addition to federal and state legal protections.
In a California foreclosure, you’ll most likely get the
right to:
receive special protections if
you’re in the military
pay off the loan to prevent a
sale
file for bankruptcy, and
get any excess money after a
foreclosure sale.
So, don’t get caught off guard if you're a California
homeowner who’s behind
in mortgage payments. Learn about each step in a California foreclosure,
from missing your first payment to a foreclosure sale. Once you understand
the process, you can make the most of your situation and, hopefully, work
out a way to save your home or at least get through the process with as
little anxiety as possible.
What Is Preforeclosure?
The period after you fall behind in payments, but before a
foreclosure officially starts, is generally called the "preforeclosure"
stage. (Sometimes, people refer to the period before a foreclosure sale
actually happens as "preforeclosure," too.) During this time, the servicer
can charge
you various fees, like late charges and inspection fees, and, in most
cases, must inform you about ways to avoid foreclosure and send you a
preforeclosure notice called a “breach letter.”
Fees the Servicer Can Charge During Preforeclosure
If you miss a payment, most loans include a grace period
of ten or fifteen days, after which time the servicer will assess a late
fee. Each month you miss a payment, the servicer will charge this fee. To
find out the late charge amount and grace period for your loan, look at the
promissory note you signed. You can also find this information on your
monthly mortgage statement.
Also, most California deeds of trust allow the lender (or
the current loan holder, referred to as the “lender” in this article) to
take necessary steps to protect its interest in the property. Property
inspections are performed to ensure that the home is occupied and
appropriately maintained. Inspections, which are generally drive-by, are
usually ordered automatically once the loan goes into default and
typically cost around $10 or $15.
Other types of fees the servicer might charge include
those for broker’s price opinions, which are like appraisals, and property
preservation costs, such as for yard maintenance or winterizing an abandoned
home.
Federal Mortgage Servicing Laws and Foreclosure
Protections
Under federal
mortgage servicing laws, the servicer must contact, or attempt to
contact, you by phone to discuss loss mitigation options, like a loan
modification, forbearance, or repayment plan, no later than 36 days
after you miss a payment and again within 36 days after each following
delinquency. No later than 45 days after missing a payment, the servicer has
to inform you in writing about loss mitigation options that might be
available and appoint personnel to help you try to work out a way to avoid
foreclosure. A few
exceptions are in place for some of these requirements, though, like if
you've filed bankruptcy or asked the servicer not
to contact you pursuant to the Fair
Debt Collection Practices Act. (12 C.F.R. § 1024.39, 12 C.F.R. §
1024.40).
Federal mortgage servicing laws also prohibit dual
tracking (pursuing a foreclosure while a complete loss mitigation
application is pending).
What Is a Breach Letter?
Many California deeds of trust have a provision that
requires the lender to send a notice, commonly called a “breach
letter,” informing you that the loan is in default before the lender
can accelerate
the loan. The breach letter gives you a chance to cure
the default and avoid foreclosure.
When Can Foreclosure Start?
Under federal law, the servicer usually can’t officially begin
a foreclosure until you're more than 120 days past due on payments,
subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period
provides most homeowners with ample opportunity to submit a loss mitigation
application to the servicer.
What Is the Foreclosure Process in California?
If you default on your mortgage payments in California,
the lender may foreclose using a judicial or nonjudicial method.
How Judicial Foreclosures Work
A judicial
foreclosure begins when the lender files a lawsuit asking a court for an
order allowing a foreclosure sale. If you don’t respond with a written
answer, the lender will automatically
win the case. But if you choose to defend the
foreclosure lawsuit, the court will review the evidence and determine the
winner. If the lender wins, the judge will enter a judgment and order your
home sold at auction.
How Nonjudicial Foreclosures Work
If the lender chooses a nonjudicial
foreclosure, it must complete the out-of-court procedures described in
the state statutes. After completing the required steps, the lender can sell
the home at a foreclosure sale. Most lenders opt to use the nonjudicial
process because it’s quicker and cheaper than litigating the matter in
court.
Which Is the Most Common Foreclosure Process in
California?
Again, most residential foreclosures in California are
nonjudicial. Here’s how the process works.
Preforeclosure Borrower Outreach Requirements
California law requires that your servicer personally
contact you, or meet specific requirements for trying to contact you, by
phone or in person at least 30 days before recording a notice
of default (see below). The purpose of the contact is to assess your
financial situation and explore options to avoid foreclosure. (Cal. Civ.
Code § 2923.5).
During the initial contact, the servicer must advise you
that:
you have the right to request
a subsequent meeting, and
if requested, the mortgage
servicer will schedule the meeting, which can be over the phone, to occur
within 14 days.
The assessment of your financial situation and discussion
of options may occur during the first contact or subsequent meeting. Either
way, the servicer must also provide you with the toll-free telephone number
to find a HUD-certified
housing counseling agency.
If the servicer isn't able to get in contact with you, it
can't record the notice of default until 30 days after it has done all of
the following:
Sent a first-class letter that
includes the toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
Attempted to contact you by
telephone at least three times at different hours and on different days at
the primary telephone number on file. This requirement is deemed satisfied
if the servicer determines that the primary telephone number and secondary
telephone number or any other numbers on file have been disconnected.
Sent a certified letter two
weeks after the telephone requirements are met that provides a way for you
to contact it in a timely manner, including a toll-free telephone number
that will provide access to a live representative during business hours.
Posted a prominent link on its
website homepage with information about options to avoid foreclosure,
financial documents borrowers should collect if they want to discuss such
options, a toll-free telephone number to call to discuss alternatives to
foreclosure, and the toll-free telephone number to find a HUD-certified
housing counseling agency.
These outreach requirements are applicable to first lien
mortgages or deeds of trust secured by owner-occupied residential real
property containing no more than four dwelling units.
But the servicer doesn't have to contact you—or attempt to
contact you—to assess your financial situation and explore options to avoid
foreclosure if you notify the servicer in writing to cease further
communication with you.
Dual Tracking Isn't Permitted Under California Law
California law bans dual tracking. If you submit a
complete first lien loan modification application (assuming you didn't
previously apply for a modification or you've had a material change in your
financial circumstances since your previous application) at least five
business days before any scheduled foreclosure sale, the servicer can’t
proceed by recording a notice of default or notice of sale, or conducting a trustee’s
sale until:
it makes a written
determination that you're not eligible and the appeal period has expired
you don't accept an offer
within 14 days, or
you accept a written first lien loan
modification, but default on or otherwise breach your obligations under
the first lien loan modification. (Cal. Civ. Code § 2923.6).
Notice of Default
The nonjudicial
foreclosure process formally begins when the trustee records
a notice of default at the county recorder's office. The notice of default
includes information like the nature of the breach and how to cure it.
Within ten business days of
recording, the trustee mails a copy of the notice of default to the borrower
and anyone requesting such notice. Within one month, the trustee
mails a copy of the notice of default to any other interested parties, like
the borrower's successor in interest and junior mortgage holders, among
others. (Cal. Civ. Code § 2924b).
The notice of default gives the borrower
three months to cure the default. (Cal. Civ.
Code § 2924).
Notice of Sale
If you don't cure the default, a notice of sale will be
recorded. It can be recorded up to five days before the end of the
three-month period. The notice of sale will contain the time and place of
the sale, along with other information, like the property address. The
foreclosure sale date must be at least 20 days after the end of the three
months. (Cal. Civ. Code § 2924).
The notice of sale will be:
posted at the property and in
a public place in the city where the property is to be sold at least 20
days before the sale date
published once a week for
three consecutive weeks, with the first publication occurring at least 20
days before the sale date, and
mailed to the borrower, anyone
who requested notice, and any successor in interest, among other parties,
at least 20 days before the sale date. (Cal. Civ. Code § 2924b, § 2924f).
The Foreclosure Sale
The foreclosure sale must be held between the hours of
9:00 a.m. and 5:00 p.m. on any business day, Monday through Friday. (Cal.
Civ. Code § 2924g). At the sale, the lender usually makes a credit
bid. The lender can bid up to the total amount owed, including fees and
costs, or it may bid less. In some states, when the lender is the high
bidder at the sale but bids less than the total debt, it can get a deficiency
judgment against the borrower. Deficiency judgments usually aren't
allowed in California (see below).
If the lender is the highest bidder, the property becomes
what’s called “Real Estate Owned” (REO). But if a bidder, say a third party,
is the highest bidder and offers more than you owe, and the sale results in excess
proceeds—that is, money over and above what’s needed to pay off all the liens
on your property—you're entitled to that surplus money.
How Can I Stop a Foreclosure in California?
A few potential ways to stop a foreclosure include
reinstating the loan, redeeming the property before the sale, or filing for
bankruptcy. (Of course, if you're able to work out a loss mitigation option,
like a loan modification, that will also stop a foreclosure.)
Reinstating the Loan
Under California law, the borrower can reinstate at
any time until five business days prior to the sale date in a
nonjudicial foreclosure. (Cal. Civ. Code §
2924c).
Redeeming the Property Before the Sale
One way to stop a foreclosure is by “redeeming” the
property. To redeem, you have to pay off the full amount of the loan before
the foreclosure sale.
Some states also provide foreclosed borrowers with a
redemption period after the
foreclosure sale, during which they can buy back the home. However,
California law doesn’t give borrowers a statutory
right of redemption after a nonjudicial foreclosure. Once your
California home has been foreclosed, you can’t redeem it.
Filing for Bankruptcy
If you're facing a foreclosure, filing for bankruptcy might
help. In fact, if a foreclosure sale is scheduled to occur in the next day
or so, the best way to stop the sale immediately is by filing for
bankruptcy. Once you file for bankruptcy, something called an "automatic
stay" goes into effect. The stay functions as an injunction, which
prohibits the lender from foreclosing on your home or otherwise trying to
collect its debt, at least temporarily.
In many cases, filing for Chapter
7 bankruptcy can delay the foreclosure by a matter of months. Or, if you
want to save your home, filing for Chapter
13 bankruptcy might be the answer. To find out about the options
available to you, speak with a local bankruptcy attorney.
California Deficiency Judgment Laws
In a foreclosure, the borrower’s total mortgage debt
sometimes exceeds the foreclosure sale price. The difference between the
total debt and the sale price is called a “deficiency.” For example, say the
total debt owed is $600,000, but the home sells for $550,000 at the
foreclosure sale. The deficiency is $50,000. In some states, the lender can
seek a personal judgment against the debtor to recover the deficiency.
Generally, once the lender gets a deficiency judgment, the lender may collect this
amount—in our example, $50,000—from the borrower.
A deficiency judgment isn't
allowed following a nonjudicial foreclosure in California. (Cal. Code
Civ. Proc. § 580d). Because residential foreclosures are usually nonjudicial,
most Californians going through foreclosure don't have to worry about being
on the hook for a deficiency judgment.
How Long Do You Have to Move Out After Foreclosure in
California?
If you don’t vacate the property following the foreclosure
sale, the new owner will probably:
The eviction process starts with a three-day notice to
quit. If you still don’t leave after three days, the new owner will go
through the court system to evict you and get possession of the property.
Where to Find Your State’s Statutes and More Foreclosure
Resources
In this article, you’ll find details on foreclosure laws
in California, with citations to statutes so you can learn more. Statutes
change, so checking them is always a good idea.
To find California’s laws, search online for “California
statutes” or “California laws.” Make sure you’re reading the most recent,
official laws. Usually, the URL will end in “.gov” or the statutes will be
on an official state legislature webpage.
Although the programs under the Making Home Affordable (MHA)
initiative have expired, the MHA website still contains useful
information for homeowners facing foreclosure.
Getting Help
How courts and agencies interpret and apply laws can
change. And some rules can even vary within a state. These are just some of
the reasons to consider consulting a lawyer if you’re facing a foreclosure.
If you have questions about California’s foreclosure process or want to
learn about potential defenses to a foreclosure and possibly fight
the foreclosure in court, consider talking to a foreclosure attorney.
It’s also a good idea to talk to a HUD-approved housing counselor if you
want to learn about different loss mitigation options. You can use the
CFPB's Find a Counselor tool to get a list of
HUD-approved housing counseling agencies in your area. You can also call
the Homeownership
Preservation Foundation (HOPE) Hotline, which is open 24 hours a day,
seven days a week, at 888-995-HOPE (4673).
========== ======== ===============
25. Mortgages. Where secured lender on home denies homeowner a permanent
loan modification based on "investor disallowance,"
without "identifying the reasons for the denial,"
homeowner may state a cause of action per CC § 2923.6(f) of the
Homeowners Bill of Rights to enjoin threatened foreclosure sale.
Held: lender's demurrer for failure to state c/a granted. Reversed on
appeal for homeowner.
Here, a claim was stated as to the
denial of the HAMP modification.
The explanation that “[we] do not have the contractual authority to modify
your loan because of limitations in our servicing agreement,”
does not suffice as an explanation — at least for purposes of a
demurrer.
The statement is ambiguous and appears to imply the investor has not
allowed the modification.
If that is the case, subdivision (f)(2) requires the “specific reasons for the investor disallowance.”
As is, the explanation appears to communicatelittle more than the modification was denied because the investor did
not want to approve it.
Wells Fargo responds by noting that where a trustee’s deed upon sale
has not been recorded (the case here), a borrower may only bring a claim
for injunctive relief to enjoin a material violation of section
2923.6. (§ 2924.12, subd. (a)(1).) To that, Wells Fargo maintains
any violation of section 2923.6 was not material in that
plaintiffs would not have been better able to protect their rights or
achieve a more favorable outcome absent the violation.
We disagree. Without knowing the investor’s actual reason for
denying the HAMP modification, we cannot say for certain that the
failure to provide “specific reasons for the
investor disallowance” was not material. We will reverse the
trial court’s order sustaining the demurrer to the section 2923.6 claim
and remand for further proceedings.
Mortgages. Borrower who obtains a TRO enjoining a trustee's sale is
considered the prevailing party under Civ.Code § 2924.12(b), and therefore
could recover attorney's fees and costs because the statutory text refers to
injunctive relief per se and makes no exception for temporary injunction.
Borrower is so entitled to attorney's fees & costs despite the trial court
having denied a preliminary injunction and vacating the TRO upon finding
that borrower had not shown a likelihood of prevailing on the merits. P
the servicer applied a Net Present Value (NPV)
test to assess whether the modified mortgage's value to the servicer
would be greater than the return on the mortgage if unmodified.
The NPV test is “essentially an accounting calculation to determine whether
it is more profitable to modify the loan or allow the loan to go into
foreclosure.
” Williams v. Geithner, No. 09–1959 ADM/JJG, 2009 WL 3757380, at *3 n. 3 (D.Minn.
Nov. 9, 2009).
If the NPV result was negative—that is, the value of the modified mortgage
would be lower than the servicer's expected return after foreclosure—the
servicer was not obliged to offer a modification.
If the NPV was positive, however, the Treasury directives said that “the
servicer MUST offer the modification.” Supplemental Directive 09–01. B. The
Trial Period Plan
"First, the borrower had to meet certain threshold requirements, including
that the loan originated on or before January 1, 2009; it was secured by the
borrower's primary residence; the mortgage payments were more than 31
percent of the borrower's monthly income; and, for a one-unit home, the
current unpaid principal balance was no greater than $729,750.
"Second, the servicer calculated a modification using a 'waterfall' method,
applying enumerated changes in a specified order until the borrower's
monthly mortgage payment ratio dropped 'as close as possible to 31 percent.'
"Third, the servicer applied a Net Present Value (NPV) test to assess
whether the modified mortgage's value to the servicer would be greater than
the return on the mortgage if unmodified. The NPV test is 'essentially an
accounting calculation to determine whether it is more profitable to modify
the loan or allow the loan to go into foreclosure.' [Citation.] If the NPV
result was negative—that is, the value of the modified mortgage would be
lower than the servicer's expected return after foreclosure—the servicer was
not obliged to offer a modification. If the NPV was positive, however, the
Treasury directives said that 'the servicer MUST offer the modification.'" (Wigod
v. Wells Fargo Bank, N.A., supra, 673 F.3d at pp. 556-557, fn. omitted,
italics added; see Majd v. Bank of America, N.A. (2015) 243 Cal.App.4th
1293, 1300-1302.)
Beier's application was denied because
(1) the total unpaid principal balance was too high;
(2) Beier's monthly income was too low; or
(3) an affordable payment could not be created without changing the terms of
the loan beyond the program limits. The issue of net present value was never
reached.
Because Plaintiffs had accepted a previous loan modification in 2011, Bank
had no obligation to review their August 2, 2017 loan modification unless
Plaintiffs had submitted documentation establishing a material change in
their financial circumstances.
six causes of action:
(1) wrongful foreclosure;
(2) violation of California Civil Code § 2924(a)(6); (
3) declaratory relief;
(4) violation of California Business and Professions Code § 17200, (
5) breach of the covenant of good faith and fair dealing;
(6) violation of California Civil Code § 2923.6. Id. ¶¶ 62-126.
seven cause of action for:
(1) violation of section 2923.7 (the HBOR’s
single point of contact provision);
(2) violation of section 2923.6, subdivision (f) (the
HBOR’s requirements for written denial of a loan modification);
(3) violation of section
2923.6, subdivision (c) (the HBOR’s dual tracking prohibition);
(4) wrongful foreclosure;
(5) violation of section 2924.17, subdivision (a) (the HBOR’s accuracy
requirements for
foreclosure documents);
(6) cancellation of instrument (pertaining to the Corporation
Assignment of Deed of Trust); and
(7) violation of Business and Professions Code
section 17200 et seq. Defendants again responded with a general demurrer
to each cause
of action.
Bank countered in its demurrer
that the explanation complied with the HBOR, which, except in the cases of
denials based
on “investor disallowance” or “a net present value calculation” (§ 2923.6,
subd. (f)(2)
& (3)),6 requires only “a written notice to the borrower identifying the
reasons for denial”
and “[t]he amount of time from the date of the denial letter in which the
borrower may
request an appeal of the denial.” (§ 2923.6, subd.
(f)(1).) The trial court agreed that the
Net present value refers to the lender’s basis for calculating the amount of
anticipated recovery through either a loan modification/workout plan or
foreclosure.
The HBOR declares that “a mortgage servicer acts in the best interests of
all parties to the
loan pool or investors in the pooling and servicing agreement if it agrees
to or
implements a loan modification or workout plan for which both of the
following apply:
[¶] (1) The loan is in payment default, or payment default is
reasonably foreseeable.
[¶] (2) Anticipated recovery under the loan modification or workout
plan exceeds the
anticipated recovery through foreclosure on a net present value basis.”
(§ 2923.6,
subd. (a), italics added.) Here, Bank of America’s stated reason for
denying Plaintiff’s
modification request concerned the limits of its principal reduction
program, not a net
present value calculation.
“letter contains a sufficient explanation for denial of Plaintiff’s loan
modification.” We
reach the same conclusion.
Nothing in the statute requires the loan
servicer to provide
additional information underpinning its reasons in the denial letter—written
notice
“identifying the reasons for denial” satisfies the statutory mandate. (Ibid.)
As for an explanation concerning the “limits of the ‘program’,” Plaintiff
does not allege that Bank
concealed this information from her, either in the connection with
considering her loan for a modification or during the appeal period
following the denial.
On appeal, Plaintiff implicitly argues the reason Bank gave for the
denial was not true. She contends the court erred by sustaining the demurrer
without
leave to amend because “what the bank could do with respect[] to ‘the limits
of the
program’ as stated within the letter is a triable issue of fact to be
determined by
evidence.”
The problem with this argument is Plaintiff fails to state the facts she
could
allege to create a triable issue. For instance, Plaintiff does not state
what she could allege
about the amount she currently owes on the loan or her current monthly
income and
expenses as these pertain to an “affordable payment.”
Nor does she allege what the limits of the
modification program are—information that is presumably available
to her upon
request to Bank . RFI
Without these minimum allegations, Plaintiff fails to show that a triable
issue indeed exists. As the appellant, this was her burden.
Her conclusory argument, without specific factual allegations to support
it, does not establish reversible error. (See Rakestraw, supra, 81
Cal.App.4th at pp. 43-44.)
§ 1024.41 Loss mitigation procedures.
(a)Enforcement
and limitations. A borrower may enforce the provisions of this
section pursuant to section 6(f) of RESPA (12
U.S.C. 2605(f)). Nothing in § 1024.41 imposes a duty on a servicer to
provide any borrower with any specific loss
mitigation option. Nothing in § 1024.41 should be construed to create a
right for a borrower to enforce the terms of any agreement between a servicer and
the owner or assignee of a mortgage
loan, including with respect to the evaluation for, or offer of, any loss
mitigation option or to eliminate any such right that may exist pursuant
to applicable law.
(ii)Time
period disclosure. The notice required pursuant to paragraph
(b)(2)(i)(B) of this section must include a reasonable date by which the
borrower should submit the documents and information necessary to make the loss
mitigation application complete.
(3)Determining
protections. To the extent a determination of whether protections
under this section apply to a borrower is made on the basis of the number
of days between
when a complete loss
mitigation application is received and when a foreclosure sale occurs,
such determination shall be made as of the date a complete loss
mitigation application is received.
(ii) Provide the
borrower with a notice in writing stating the servicer's determination of
which loss mitigation options, if any, it will offer to the borrower on
behalf of the owner or assignee of the mortgage. The servicer shall include in
this notice the amount of time the borrower has to accept or reject an offer
of a loss mitigation program as provided for in paragraph (e) of this
section, if applicable, and a notification, if applicable, that the borrower
has the right to appeal the denial of any loan modification option as well
as the amount of time the borrower has to file such an appeal and any
requirements for making an appeal, as provided for in paragraph (h) of this
section.
(2)Incomplete
loss mitigation application evaluation -
(iii)Short-term
loss mitigation options. Notwithstanding paragraph
(c)(2)(i) of this section, a servicer may
offer a short-term payment forbearance program or a short-term repayment
plan to a borrower based upon an evaluation of an incomplete loss
mitigation application. Promptly after offering a payment forbearance
program or a repayment plan under this paragraph (c)(2)(iii), unless the
borrower has rejected the offer, the servicer must
provide the borrower a written notice stating the specific payment terms and
duration of the program or plan, that the servicer offered
the program or plan based on an evaluation of an incomplete application,
that other loss
mitigation options may be available, and that the borrower has the
option to submit a complete loss
mitigation application to receive an evaluation for all loss
mitigation options available to the borrower regardless of whether the
borrower accepts the program or plan. A servicer shall
not make the first notice or filing required by applicable law for any
judicial or non-judicial foreclosure process, and shall not move for
foreclosure judgment or order of sale or conduct a foreclosure sale, if a
borrower is performing pursuant to the terms of a payment forbearance
program or repayment plan offered pursuant to this paragraph (c)(2)(iii). A servicer may
offer a short-term payment forbearance program in conjunction with a
short-term repayment plan pursuant to this paragraph (c)(2)(iii).
(iv)Facially
complete application. A loss
mitigation application shall be considered facially complete when a
borrower submits all the missing documents and information as stated in
the notice required under paragraph
(b)(2)(i)(B) of this section, when no additional information is
requested in such notice, or once the servicer is
required to provide the borrower a written notice pursuant to paragraph
(c)(3)(i) of this section. If the servicer later
discovers that additional information or corrections to a previously
submitted document are required to complete the application,
the servicer must
promptly request the missing information or corrected documents and treat
the application as
complete for the purposes of paragraphs (f)(2) and (g) of this section until
the borrower is given a reasonable opportunity to complete the application.
If the borrower completes the application within
this period, the application shall
be considered complete as of the date it first became facially complete, for
the purposes of paragraphs (d), (e), (f)(2), (g), and (h) of this section,
and as of the date the application was
actually complete for the purposes of this paragraph (c). A servicer that
complies with this paragraph (c)(2)(iv) will be deemed to have fulfilled its
obligation to provide an accurate notice under paragraph
(b)(2)(i)(B) of this section.
(v)Certain
COVID-19-related loss mitigation options.
(1) The loss mitigation option permits
the borrower to delay paying covered amounts until the mortgage loan is
refinanced, the mortgaged property is sold,
the term of the mortgage loan ends, or, for
a mortgage loan insured by
the Federal Housing Administration, the mortgage insurance terminates. For
purposes of this paragraph (c)(2)(v)(A)(1), “covered
amounts” includes, without limitation, all
principal and interest payments forborne
under a payment forbearance program made available to borrowers experiencing a financial
hardship due, directly or indirectly, to the COVID-19 emergency, including a
payment forbearance program made pursuant to the Coronavirus Economic
Stabilization Act, section 4022 (15 U.S.C. 9056); it also
includes, without limitation, all other principal and interest payments that
are due and unpaid by a borrower experiencing financial hardship due,
directly or indirectly, to the COVID-19 emergency. For purposes of this
paragraph (c)(2)(v)(A)(1), “COVID-19
emergency” has the same meaning as under the Coronavirus Economic
Stabilization Act, section 4022(a)(1) (15 U.S.C. 9056(a)(1)). For
purposes of this paragraph (c)(2)(v)(A)(1), “the term of
the mortgage loan” means the term of the mortgage loan according to
the obligation between the parties in effect when the borrower is offered
the loss mitigation option.
(2) Any
amounts that the borrower may delay paying as described in paragraph (c)(2)(v)(A)(1)
of this section do not accrue interest; the servicer does not charge
any fee in
connection with the loss mitigation option; and
the servicer waives all
existing late charges, penalties, stop payment fees, or similar charges promptly upon the
borrower's acceptance of the loss mitigation option.
(i) Except as
provided in paragraph
(c)(3)(ii) of this section, within 5 days (excluding
legal public holi days,
Satur days,
and Sun days)
after receiving a borrower's complete loss
mitigation application, a servicer shall
provide the borrower a written notice that sets forth the following
information:
(C) That the servicer expects
to complete its evaluation within 30 days of
the date it received the complete application;
(D) That the
borrower is entitled to certain foreclosure protections because the servicer has
received the complete application,
and, as applicable, either:
(1) If the servicer has
not made the first notice or filing required by applicable law for any
judicial or non-judicial foreclosure process, that the servicer cannot
make the first notice or filing required to commence or initiate the
foreclosure process under applicable law before evaluating the borrower's
complete application;
or
(2) If the servicer has
made the first notice or filing required by applicable law for any judicial
or non-judicial foreclosure process, that the servicer has
begun the foreclosure process, and that the servicer cannot
conduct a foreclosure sale before evaluating the borrower's complete application;
(E) That the servicer may
need additional information at a later date to evaluate the application,
in which case the servicer will
request that information from the borrower and give the borrower a
reasonable opportunity to submit it, the evaluation process may take longer,
and the foreclosure protections could end if the servicer does
not receive the information as requested; and
(F) That the
borrower may be entitled to additional protections under State or
Federal law.
(A) The servicer has
already provided the borrower a notice under paragraph
(b)(2)(i)(B) of this section informing the borrower that the application is
complete and the servicer has
not subsequently requested additional information or a corrected version of
a previously submitted document from the borrower pursuant to paragraph
(c)(2)(iv) of this section;
(B) The application was
not complete or facially complete more than 37 days before
a foreclosure sale; or
(i)Reasonable
diligence. If a servicer requires
documents or information not in the borrower's control to
determine which loss mitigation options, if any, it will offer to the
borrower, the servicer must
exercise reasonable diligence in obtaining such documents or information.
(ii)Effect
in case of delay. (A)(1) Except as
provided in paragraph (c)(4)(ii)(A)(2) of this
section, a servicermust not deny a complete loss
mitigation application solely because the servicer lacks required
documents or information not in the borrower's control.
(2) If a servicer has
exercised reasonable diligence to obtain required documents or information
from a party other than the borrower or the servicer,
but the servicer has
been unable to obtain such documents or information for a significant period
of time following the 30-day period identified in paragraph
(c)(1) of this section, and the servicer,
in accordance with applicable requirements established by the owner or
assignee of the borrower's mortgage
loan, is unable to determine which loss
mitigation options, if any, it will offer the borrower without
such documents or information, the servicer may
deny the application and
provide the borrower with a written notice in accordance with paragraph
(c)(1)(ii) of this section. When providing the written notice in
accordance with paragraph
(c)(1)(ii) of this section, the servicermust also provide the borrower with a copy of the written
notice required by paragraph
(c)(4)(ii)(B) of this section.
(B) If a servicer is
unable to make a determination within
the 30-day period identified in paragraph
(c)(1) of this section as to which loss mitigation options, if any, it
will offer to the borrower because the servicer lacks
required documents or information from a party other than the borrower or
the servicer,
the servicer must,
within such 30-day period or promptly thereafter, provide the borrower a
written notice, informing the borrower:
(1) That
the servicer has
not received documents or information not in the borrower's control that
the servicer requires
to determine which loss mitigation options, if any, it will offer to the
borrower on behalf of the owner or assignee of the mortgage;
(2) Of the
specific documents or information that the servicer lacks;
(3) That
the servicer has
requested such documents or information; and
(4) That
the servicer will
complete its evaluation of the borrower for all available loss
mitigation options promptly upon receiving the documents or information.
(C) If a servicer must
provide a notice required by paragraph
(c)(4)(ii)(B) of this section, the servicer must
not provide the borrower a written notice pursuant to paragraph
(c)(1)(ii) of this section until the servicer receives
the required documents or information referenced in paragraph (c)(4)(ii)(B)(2)
of this section, except as provided in paragraph (c)(4)(ii)(A)(2)
of this section. Upon receiving such required documents or information, the servicer must
promptly provide the borrower with the written notice pursuant to paragraph
(c)(1)(ii) of this section.
(d)Denial of loan modification
options. If a
borrower's complete loss mitigation application is
denied for any trial or permanent loan modification option available to the
borrower pursuant to paragraph (c) of this
section, a servicer shall state in the notice sent to
the borrower pursuant to paragraph (c)(1)(ii) of
this section the specific reason or reasons for the servicer's determination
for each such trial or permanent loan modification option and, if
applicable, that the borrower was not evaluated on other criteria.
(i)In
general. Except as set forth in paragraphs (e)(2)(ii) and (iii) of
this section, a servicer may
deem a borrower that has not accepted an offer of a loss
mitigation option within the deadline established pursuant to paragraph
(e)(1) of this section to have rejected the offer of a loss
mitigation option.
(ii)Trial
Loan Modification Plan. A borrower who does not satisfy the servicer's
requirements for accepting a trial loan modification plan, but submits the
payments that would be owed pursuant to any such plan within the deadline
established pursuant to paragraph
(e)(1) of this section, shall be provided a reasonable period of time to
fulfill any remaining requirements of the servicer for
acceptance of the trial loan modification plan beyond the deadline
established pursuant to paragraph
(e)(1) of this section.
(iii)Interaction
with appeal process. If a borrower makes an appeal pursuant to paragraph
(h) of this section, the borrower's deadline for accepting a loss
mitigation option offered pursuant to paragraph
(c)(1)(ii) of this section shall be extended until 14 days after
the servicer provides
the notice required pursuant to paragraph
(h)(4) of this section.
(f)Prohibition
on foreclosure referral -
(1)Pre-foreclosure
review period. A servicer shall
not make the first notice or filing required by applicable law for any
judicial or non-judicial foreclosure process unless:
(i) A borrower's mortgage
loan obligation is more than 120 days delinquent;
(ii) The
foreclosure is based on a borrower's violation of a due-on-sale clause; or
(iii) The servicer is
joining the foreclosure action of a superior or subordinate lienholder.
(2)Application
received before foreclosure referral. If a borrower submits a
complete loss
mitigation application during the pre-foreclosure review period
set forth in paragraph
(f)(1) of this section or before a servicer has
made the first notice or filing required by applicable law for any judicial
or non-judicial foreclosure process, a servicer shall
not make the first notice or filing required by applicable law for any
judicial or non-judicial foreclosure process unless:
(i) The servicer has
sent the borrower a notice pursuant to paragraph
(c)(1)(ii) of this section that the borrower is not eligible for any loss
mitigation option and the appeal process in paragraph
(h) of this section is not applicable, the borrower has not requested an
appeal within the applicable time period for requesting an appeal, or the
borrower's appeal has been denied;
(g)Prohibition
on foreclosure sale. If a borrower submits a complete loss
mitigation application after a servicer has
made the first notice or filing required by applicable law for any judicial
or non-judicial foreclosure process but more than 37 days before
a foreclosure sale, a servicer shall
not move for foreclosure judgment or order of sale, or conduct a foreclosure
sale, unless:
(1) The servicer has
sent the borrower a notice pursuant to paragraph
(c)(1)(ii) of this section that the borrower is not eligible for any loss
mitigation option and the appeal process in paragraph
(h) of this section is not applicable, the borrower has not requested an
appeal within the applicable time period for requesting an appeal, or the
borrower's appeal has been denied;
(1)Appeal
process required for loan modification denials. If a servicer receives
a complete loss
mitigation application 90 days or
more before a foreclosure sale or during the period set forth in paragraph
(f) of this section, a servicer shall
permit a borrower to appeal the servicer's
determination to deny a borrower's loss
mitigation application for any trial or permanent loan modification
program available to the borrower.
(3)Independent
evaluation. An appeal shall be reviewed by
different personnel than those responsible for evaluating the borrower's
complete loss
mitigation application.
(4)Appeal
determination. Within 30 days of
a borrower making an appeal, the servicer shall
provide a notice to the borrower stating the servicer's
determination of whether the servicer will
offer the borrower a loss
mitigation option based upon the appeal and, if applicable, how long the
borrower has to accept or reject such an offer or a prior offer of a loss
mitigation option. A servicer may
require that a borrower accept or reject an offer of a loss
mitigation option after an appeal no earlier than 14 days after
the servicer provides
the notice to a borrower. A servicer's
determination under this paragraph is not subject to any further appeal.
(i)Duplicative
requests. A servicer must
comply with the requirements of this section for a borrower's loss
mitigation application, unless the servicer has
previously complied with the requirements of this section for a complete loss
mitigation application submitted by the borrower and the borrower has
been delinquent at all times since submitting the prior complete application.
(j)Small
servicer requirements. A small servicer shall
be subject to the prohibition on foreclosure referral in paragraph
(f)(1) of this section. A small servicer shall
not make the first notice or filing required by applicable law for any
judicial or non-judicial foreclosure process and shall not move for
foreclosure judgment or order of sale, or conduct a foreclosure sale, if a
borrower is performing pursuant to the terms of an agreement on a loss
mitigation option.
(ii)Transfer
date defined. For purposes of this paragraph (k), the transfer date
is the date on which the transferee
servicer will begin accepting payments relating to the mortgage
loan, as disclosed on the notice of transfer of loan servicing pursuant
to §
1024.33(b)(4)(iv).
(A) Shall not make
the first notice or filing required by applicable law for any judicial or
non-judicial foreclosure process until a date that is after the reasonable
date disclosed to the borrower pursuant to paragraph
(b)(2)(ii) of this section, notwithstanding paragraph
(f)(1) of this section. For purposes of paragraph
(f)(2) of this section, a borrower who submits a complete loss
mitigation application on or before the reasonable date disclosed to the
borrower pursuant to paragraph
(b)(2)(ii) of this section shall be treated as having done so during the
pre-foreclosure review period
set forth in paragraph
(f)(1) of this section.
(B) Shall comply
with paragraphs (c), (d), and (g) of this section if the borrower submits a
complete loss
mitigation application to the transferee or transferor
servicer 37 or fewer days before
the foreclosure sale but on or before the reasonable date disclosed to the
borrower pursuant to paragraph
(b)(2)(ii) of this section.
(3)Complete
loss mitigation applications pending at transfer. If a transferee
servicer acquires the servicing of
a mortgage
loan for which a complete loss
mitigation application is pending as of the transfer date, the transferee
servicer must comply with the applicable requirements of paragraphs
(c)(1) and (4) of this section within 30 days of
the transfer date.
(i)Determining
appeal. If a transferee
servicer is required under this paragraph (k)(4) to make a determination
on an appeal, the transferee
servicer must complete the determination and provide the notice required
by paragraph
(h)(4) of this section within 30 days of
the transfer date or 30 days of
the date the borrower made the appeal, whichever is later.
(ii)Servicer
unable to determine appeal. A transferee
servicer that is required to treat a borrower's appeal as a pending
complete loss
mitigation application under this paragraph (k)(4) must comply with the
requirements of this section for such application,
including evaluating the borrower for all loss
mitigation options available to the borrower from the transferee
servicer. For purposes of paragraph (c) or (k)(3) of this section, as
applicable, such a pending complete loss
mitigation application shall be considered complete as of the date the
appeal was received by the transferor
servicer or the transferee
servicer, whichever occurs first. For purposes of paragraphs (e) through
(h) of this section, the transferee
servicer must treat such a pending complete loss
mitigation application as facially complete under paragraph (c)(2)(iv)
as of the date it was first facially complete or complete, as applicable,
with respect to the transferor
servicer.
(5)Pending
loss mitigation offers. A transfer does not affect a borrower's
ability to accept or reject a loss
mitigation option offered under paragraph (c) or (h) of this section. If
a transferee
servicer acquires the servicing of
a mortgage
loan for which the borrower's time period under paragraph (e) or (h) of
this section for accepting or rejecting a loss
mitigation option offered by the transferor
servicer has not expired as of the transfer date, the transferee
servicer must allow the borrower to accept or reject the offer during
the unexpired balance of the applicable time period.
