The most popular method of in California is non-judicial foreclosure. This is not administrated by the court, but rather through contractual obligations. Deeds of trusts usually have a provision called a power of sale clause, which allows a trustee to sell a property if the borrower has defaulted on the property loan. The trustee, acting as a representative of the lender, may auction off the property. In California, unlike many other states, title companies generally serve as trustees.
It may be processed through judicial procedures if no power of sale language was included in the property’s loan documents.
Under the one-action rule, a lender may not recover a deficiency judgment if the foreclosure has been completed by non-judicial means. He or she may recover a deficiency judgment if the foreclosure went through a judicial process, but only in certain circumstances.
A notice of default is usually not recorded unless the loan in question has been in substantial default for a significant period of time (six months or more) referred to as the redemption period. After the notice is recorded, at least 60 days must pass before the process moves forward. Then a notice of sale can be recorded. It must contain the name and address of the trustee, certain disclosures that explain the circumstances of the sale, the name of the beneficiary, and other relevant information. It must be recorded in the county in which the property is located at least 14 days before the sale is conducted.
Notice of the sale must be both mailed to the affected borrower and posted at the property at least 20 days before the sale. If the borrower wishes to prevent the process from beginning, he or she has the option of paying all arrearages at least five days before the sale. If he or she is not able to do so, then the trustee may go through with the sale as early as 21 days after the first publication.
A sale must be conducted at the location referenced on the notice of sale between 9 a.m. and 5 p.m. The borrower may postpone the sale, but only for one day.
It generally takes no less than 120 days to process, and that’s the estimate for uncontested non-judicial foreclosures. Procedures may be elongated if the borrower pursues litigation, files for bankruptcy, or seeks delays and adjournments of sales.
In California, a party whose property has been foreclosed can reclaim it by paying the full sum of the unpaid loan plus other costs one year after the sale. However, if the foreclosed property was sold at full price bid, then the original borrower has only up to three months to reclaim the property.
On January 1, 2013, the California Homeowner Bill of Rights became law, ensuring all California homeowners protection from unfair lending and borrowing practices. Some key provisions in the bill include restriction on dual tracking, guaranteed single point of contact, tenant rights, measures against mortgage fraud, and more.
In effect since July 21, 2011, the Real Estate Settlement Procedures Act (RESPA) is administered and enforced by the Consumer Financial Protection Bureau (CFPB). Under this statute, borrowers must receive certain vital information and services concerning the purchase of real estate. Lenders, services and brokers that fail to comply with their required duties may be subjected to paying any resultant damages.
Borrowers can request certain information pertaining to their mortgage loan (including status of a modification) or dispute an action committed by their mortgage servicer (such as charging unwarranted late charges or misapplying payments) by sending a qualified written request (QWR) to the servicer.
A QWR can be handwritten or typed as long as the media is appropriate (QWRs cannot be written on payment media). The borrower must make his/her name and account information along with the details of his/her request or concern clear to the servicer. The document must also identify itself as a “qualified written request under Section 6 of RESPA.” A signature is not necessary.
Response by the Loan Servicer
Upon receiving a QWR, the loan servicer must commit the following actions as is appropriate within 30 days (barring weekends and legal holidays):
- Correct any errors, such as crediting unwarranted charges or penalties, and send a notification to the borrower that includes the contact information of a loan representative who can provide further assistance
- If the alleged error is actually a legitimate action taken by the servicer, the borrower must receive a detailed explanation of the reasons why the action is valid along with the contact info of a loan representative who can provide further assistance.
- Provide the requested information to the borrower or, if the request is not valid, an explanation of why the requested information is not available, in addition to the contact info of a loan representative who can provide further assistance
If the servicer requires more time to formulate a response, they may request a 15 day extension as long as the borrower is notified of the extension before the end of the initial 30 day period.
As mentioned above, it is often initially small issues between landlord and tenant that cause unlawful detainer actions. Some common issues that create landlord tenant disputes include the following:
- Tenants failure to pay rent
- Landlords failure to repair the property
- Disputes over utilities
- Parking issues
- Security deposit disputes
- Maintenance of the property
- Lease extensions
- Damage or destruction
Frequently, a tenant will become unhappy with the condition of some aspect of the property, or the failure of the landlord to repair the property, and decide to withhold rent. This can be acceptable under some circumstances and not acceptable for others. Contrast toxic mold creating a hazardous environment vs. a tenant unhappy with the gardener. In any event, it is helpful, and often critical, to have the representation of a skilled landlord tenant attorney to assist you.
An unlawful detainer (UD) action filed after a foreclosure is similar to a typical unlawful detainer with a few distinct defenses that can be raised. When the person in the property is the former owner, the process is very similar. Former owners like to raise issues about the unfairness or unlawfulness of the foreclosure itself, but unfortunately, judges rarely care about such issues in the unlawful detainer court. The reason is that the unlawful detainer process is limited to determining who is entitled to possession of the property presently. The manner in which that party came to be the owner is not something UD judges want to get into. That battle would be in another court. Nonetheless, there are often defenses that can validly be raised for a former owner to have an opportunity to sue in Superior Court or to get more time to move in an orderly fashion. Additionally, the process can be slightly different when the lender, or beneficiary, took the property back at the foreclosure sale (no bids), as compared to a third party purchaser who is the plaintiff in the UD action.