Knowledgeable Attorneys at Advocate Legal Help Homeowners Protect Their Rights Against Mortgage Servicers
The last crisis in home loans was brought by originators and lenders who gave bad (subprime) loans to homeowners based on inflated property appraisals and false income assessments. The originators didn’t care whether borrowers could pay back these subprime loans since their profit was made immediately by “flipping” the loan to a real estate investment trust to be sold on Wall Street as a stock. After the crash the originators continued to make a profit from these bad loans by retaining the servicing rights on behalf of these trusts and then cornered a third income stream if they were lucky enough to force a borrower into default and foreclose. This was a win-win-win for the mortgage servicers, but not so great for those borrowers caught in the scheme. Foreclosure statutes were then enacted in California to ensure that borrowers could modify these bad mortgages and not lose their homes.
While the economic crisis that resulted from this explosion of subprime lending is over, a foreclosure crisis is ongoing; this is a result of the corrupt structure that led up to the first crisis which was never addressed and still continues. This is the system of split risk and reward by which mortgage debt (the risk) is held by passive investor/ stockholders and the rights to service the debt (the reward) are held by mortgage servicers with a substantial incentive to trick borrowers into all manner of fees and inevitably foreclosure. In this war on borrowers, the borrower is a casualty caught in the middle, but Advocate Legal arms you with the information and support you need to fight back. This includes some statutes put in place to protect you that you might not be aware of.
The Right to Reinstate after Default
In California, once a borrower defaults on their mortgage, a Notice of Default is recorded which gives you an approximation (usually over-stated) of the amount you owe in missed payments – the reinstatement amount. Ninety days after the Notice of Default is recorded the trustee will record a Notice of Trustee’s Sale which will list the foreclosure sale date and will state a second amount which is the full amount due for the entire mortgage including penalties and missed payment – the repayment amount. What many people do not know is that even after the Notice of Trustee’s Sale is recorded, you still have the ability to pay the missed payments and Reinstate your mortgage. These two rights – Reinstatement and Repayment-are different and have different timelines.
According to the California Foreclosure Statutes, a borrower has a Right of Reinstatement of a defaulted mortgage up until five business days prior to a scheduled foreclosure sale. [Cal. Civ. Code §2924c(e).] You reinstate by sending a certified letter to your trustee demanding a reinstatement amount, payment instructions, and a window of time when that amount will be correct. To be safe, you should do this at least three weeks before the foreclosure sale date on the Notice of Trustee’s Sale, to give the trustee sufficient time to respond because if you wait too long they will use that as an excuse not to respond to you. Once the trustee receives your request, they must respond with this information within a reasonable amount of time for you to pay this amount. If they don’t you have to start up the chain of command to the CEO of the company if necessary!
Repayment is different than Reinstatement because it means repayment of the full amount of the loan, plus back payments penalties and fees. In order to repay you follow the same process with the trustee but this time you ask for a repayment amount along with payment instructions. A repayment can occur any time up to the foreclosure sale, but you should leave the proper number of days for cash to transfer between accounts or risk losing your property at a foreclosure sale. If your timing is even slightly off, the trustee will sell your property and you will have a losing case against the bona fide purchaser that bought your home fairly at the foreclosure sale.
With both Reinstatement and Repayment, it is best to resolve these issues prior to an escrow where the lender will use the leverage of your impending sale against you to force you to accept their version of the fees you owe without recourse. Whereas you will be signing off on these fees if you agree to pay them through escrow in your sale, you will retain the right to challenge these fees later in small claims court if you pay them as part of the reinstatement and then go into escrow.
Recent Foreclosure Law and the Effect on Homeowners
Advocate Legal can assist borrowers in defending their rights under a broad range of new foreclosure statutes. Our workflows and updates will show you how these statutes affect homeowners’ rights and how you can use them for additional protection against predatory mortgage servicers, corrupt trustees and unscrupulous investors:
- California Foreclosure Prevention Act was signed into law on Feb. 20, 2009 giving qualifying borrowers an additional 90 days from the date the lender filed the notice of default before the trustee can give notice of sale in a non-judicial foreclosure, essentially giving homeowners six months to work out a more affordable loan modification. A lender or mortgage loan servicer may obtain an exemption when it can prove it provides a comprehensive loan modification program offered to borrowers with the purpose of helping them keep their homes.
- California Homeowner Bill of Rights (HBOR) was signed into law on July 11, 2012, and became effective Jan. 1, 2013. This landmark legislation was created to combat the foreclosure crisis and hold accountable the lenders responsible for creating it. The HBOR allowed a private right of action for borrowers against the country’s five largest servicers (GMAC, Citi, Bank of America, Chase and Wells Fargo) despite their participation in the National Mortgage Settlement (NMS).
Some of the key provisions of the HBOR include:
- A servicer may not record a notice of default until 30 days after contacting a borrower to discuss alternatives to foreclosure.
- Borrowers who successfully bring claims under HBOR may enjoin the sale of their property, or, if a sale has already occurred, they may receive statutory damages.
- The HBOR prohibits “dual tracking,” meaning that a servicer may not proceed with the foreclosure process if a borrower has submitted a completed loan modification application.
- The HBOR also forbids a servicer from proceeding with a foreclosure against borrowers in trial payment plans or other “approved foreclosure prevention alternatives” if the borrower is in compliance with the plan.
- The HBOR provides additional challenges in unlawful detainer cases if the borrower can prove that the foreclosure was wrongful.
- The HBOR allows borrowers to demand a single point of contact who will be able to make a decision on their loan modification application.
- Robo-signing is forbidden, and lenders that record and file unverified documents may be subject to penalties.
- Loan servicers must provide a denial in writing that includes the reasons for denial and information about the appeal.
- Borrowers have the right to appeal a denial of their loan modification application within 30 days of a denial.
- Tenant rights include a 90-day notice prior to eviction proceedings and the honoring of fixed-term leases.
Contact Advocate Legal for Help with holding your lender or servicer accountable
With over a decade of litigation experience that includes foreclosure, mortgage fraud and title issues, our lawyers at Advocate Legal have the knowledge and skill to help you successfully enforce your rights against your lender or mortgage servicer.