Fighting Hard to Protect California Homeowners Facing Foreclosure
Homeowners today face a variety of hardships that lead to mounting debt and the inability to make timely payments on their mortgages. Job loss due to the pandemic or other reasons, or reduction in salary; unforeseen medical expenses; changes in loan terms, (such as an adjustable-rate mortgage); divorce, separation or the loss of a wage earner may all jeopardize your home. Many homeowners delay acting out of fear when they do have options other than foreclosure. At Advocate Legal, we are dedicated to helping you understand your rights and enabling you to use all the legal options available to avoid foreclosure. With over a decade of legal experience in foreclosure, we fight to prevent foreclosure and other unjust or unnecessary actions by banks and other lenders.
What Happens in judicial and non-judicial Foreclosure?
A default occurs when a borrower stops paying his/her mortgage, regardless of hardship or any other reason. Foreclosure occurs if borrowers don’t cure their default by paying all their arrears plus late fees and penalties. After a period of months (this varies by state), your lender will begin foreclosure and you will receive a notice of default (in a non-judicial state) or be a defendant in a foreclosure lawsuit (in a judicial state). Whether you are required to come to court as a defendant (judicial), or simply receive foreclosure notices (non-judicial), will be dictated by whether you have a mortgage (judicial foreclosure) or a deed of trust (non-judicial foreclosure) and this will also vary by state. The type of foreclosure will depend on whether your state operates under lien theory or title theory.
Non-judicial foreclosure/ title theory states — This type of foreclosure is an out-of-court process that occurs in title theory states, is not supervised by the court, and occurs strictly by statute and recorded documents.
In title theory states, the borrower gives up title to the property under a deed of trust, and the title is held in trust by the trustee who is a third party to the agreement until the debt is paid off. This third-party trustee, under the direction of the lender, will utilize the power of sale clause in the deed of trust to conduct a non-judicial foreclosure sale.
An important benefit of a non-judicial foreclosure is that lenders may not pursue deficiency judgments against borrowers for purchase-money loans secured by real property.
Non-judicial foreclosure is the main method of foreclosure in California.
Judicial foreclosure/ lien theory states — This type of foreclosure occurs in lien theory states where the borrower retains title to his/her property, and the mortgage is considered a lien against the property.
In lien theory states, the borrowers have mortgages, not deeds of trust and the mortgage is a two-party instrument. There is no trustee, and the lender must sue the borrower in court to foreclose.
In lien theory states, the lenders are sometimes allowed to pursue deficiency judgments against the borrower.
In judicial foreclosure, the burden is on the lender to prove that he/she has the right to foreclose and the borrower (the defendant) may challenge the lender (the plaintiff)’s standing to foreclose. These are states where the “show me the note” argument may be effective if there are breaks in the chain of title. The “show me the note” argument refers to a demand by the borrower that a beneficiary prove standing, by providing a promissory note as well as chain of title, prior to receiving a foreclosure judgment.
What Is Wrongful Foreclosure?
Wrongful Foreclosure is a generic term that relates to specific violations of state and federal law that may cause a foreclosure to be wrongful. Wrongful Foreclosure cases are fact-specific and may be based on the lack of standing to foreclose due to a void assignment of the deed of trust, mistakes on the recorded documents attributable to fraud or negligence, or statutory violations pursuant to new foreclosure statutes put in place after the first mortgage crisis. Once a house is sold at a foreclosure sale to a third party (a bonafide purchaser) the title to the property is only rarely returned and the wrongful foreclosure cause of action (by whatever means) becomes one for damages, but not possession. At Advocate Legal we help clients stop the foreclosure process whenever possible to avoid a change in title and retain possession. When there is sufficient equity in a property we can also provide investors to pay of the lender thereby allowing homeowners to benefit from their equity by getting the best price for their home at a regular sale.
Wrongful foreclosure includes loan modification abuse such as when lenders and servicers engage borrowers in the loan modification process by taking trial payments, by offering trial payment plans, or by promising modification and then breaching these promises.
The California Homeowners Bill of Rights was enacted on January 1, 2013 with many sections renewed and modified as of January 1, 2019. It provides borrowers with significant additional rights before, during and after foreclosure including statutory damages when lenders commit certain statutory violations.
Your Rights Pre-Foreclosure
California Civil Code §2923.5 requires a servicer to contact the homeowner about foreclosure alternatives before recording a notice of default. It also allows the borrower an opportunity to pursue some alternatives to foreclosure including:
Loan modifications, including modifications under the Making Home Affordable (MHA) programs
Mediation under a court-approved program
Mortgage loan forbearance for temporary hardship
Refinance, sale, short sale or deed in lieu of foreclosure
Reinstatement after the Notice of Default
The business of mortgage lenders is not to do what is best for the homeowner but to maximize their own profits by systemically repositioning your assets from you to them. Armed with the right information, and with legal experts on your side, you can aggressively protect your home from being sold by your lender.
Even if your lender has refused you a reasonable loan modification, you may have grounds to stop a foreclosure sale. Homeowners may sue a lender based on violations of statutes, breach of contract or promissory estoppel which occurs if the lender promises trial payment plans or loan modification agreements to the homeowner but fails to fulfill the promise. Depending on the case, results may include loan rescission, modification, money damages or a trial.
Just because the bank has proceeded with a foreclosure does not mean the homeowner is out of options. In certain cases, a lender may not have had standing to foreclose on a property, thereby giving the homeowner the right to sue for wrongful foreclosure and money damages. In addition, when your home is purchased at a foreclosure sale or auction, the purchaser must still go through a formal eviction process. Through Los Angeles Litigation Support Los Angeles Eviction Defense, homeowners may have another opportunity to fight to remain in the home for as long as possible.
Get the Help You Need Against Lenders in Los Angeles, San Bernardino, Ventura, San Diego, Santa Barbara, Riverside, Contra Costa and Kern County and All of California
At Advocate Legal, our attorneys apply over a decade of legal experience in foreclosure litigation and unwavering dedication to help homeowners hold onto their properties and avoid foreclosure or eviction.