Fight a Foreclosure in Court

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How to Fight a Nonjudicial State Foreclosure in Court: when Lender has violated
CA Homeowner's Bill of Rights

• The LAWSUIT •
• COMPLAINT PLEADINGS •
• CA HOMEOWNER'S BILL OF RIGHTS •
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• CA Foreclosure Laws •
• Legal Actions against violations of HBOR •
• Ca CivCode 2923.5 Notice of Default Rules •
• CFR 1024.35 - Error resolution procedures •
• COVID Homeowner Relief Act •
• Mabry v. Superior Court •
• Reinstate the Loan •

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.

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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 to start 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.

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Fighting Your Foreclosure in Court 

Contesting a judicial foreclosure is different than fighting a nonjudicial foreclosure. By , 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 letterinitiating 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 or deed of trust you 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 or federal 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.

 

 

 

  Join others in this FIght:

Housing and Economic Rights Advocates - HERA fights abusive mortgage servicing, (foreclosure included). PLEADINGS Bank ! ( high volume means they don't do Marin and other counties according to phone voice message)

Find a FORECLOSURE lawyer or court program LawHelpCA.org    
Marin Court CIVIL  
NACA, National Association of Consumer Advocates - Find 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/

CARES ACT -- there is 12 months of forebearance

FightForeclosure.net:-

ORDER, DENYING TRO

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:

  • a preforeclosure breach letter

  • apply for loss mitigation

  • receive certain foreclosure notices

  • get current on the loan and stop the foreclosure sale

  • 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

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.

How to Find Federal Foreclosure Laws

If you're looking for federal laws, you might want to visit the Library of Congress's legal research website, which provides links to federal regulations and federal statutes.

How to Find State Foreclosure Laws

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.

More Foreclosure Resources

For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.

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).

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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.

Potocki v. Wells Fargo Bank, N.A. (3rd District, 7-11-19) 38 CA5th 566; 2019 CALexis 733; 251 CR3d 233; 2019 WL 3752577. 26.

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 communicate little 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.

https://www.courts.ca.gov/opinions/archive/C081345.PDF

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. (1) wrongful foreclosure;
  2. (2) violation of California Civil Code § 2924(a)(6); (
  3. 3) declaratory relief;
  4. (4) violation of California Business and Professions Code § 17200, (
  5. 5) breach of the covenant of good faith and fair dealing;
  6. (6) violation of California Civil Code § 2923.6. Id. ¶¶ 62-126.

seven cause of action for:

  1. (1) violation of section 2923.7 (the HBOR’s
    single point of contact provision);
  2. (2) violation of section 2923.6, subdivision (f) (the
    HBOR’s requirements for written denial of a loan modification);
  3. (3) violation of section
    2923.6, subdivision (c) (the HBOR’s dual tracking prohibition);
  4. (4) wrongful foreclosure;
  5. (5) violation of section 2924.17, subdivision (a) (the HBOR’s accuracy requirements for
    foreclosure documents);
  6. (6) cancellation of instrument (pertaining to the Corporation
    Assignment of Deed of Trust); and
  7. (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. [¶] (1) The loan is in payment default, or payment default is reasonably foreseeable.
  2. [¶] (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.

(b) Receipt of a loss mitigation application -

(1) Complete loss mitigation application. A complete loss mitigation application means an application in connection with which a servicer has received all the information that the servicer requires from a borrower in evaluating applications for the loss mitigation options available to the borrower. A servicer shall exercise reasonable diligence in obtaining documents and information to complete a loss mitigation application.

(2) Review of loss mitigation application submission -

(i) Requirements. If a servicer receives a loss mitigation application 45 days or more before a foreclosure sale, a servicer shall:

(A) Promptly upon receipt of a loss mitigation applicationreview the loss mitigation application to determine if the loss mitigation application is complete; and

(B) Notify the borrower in writing within 5 days (excluding legal public holi days, Satur days, and Sun days) after receiving the loss mitigation application that the servicer acknowledges receipt of the loss mitigation application and that the servicer has determined that the loss mitigation application is either complete or incomplete. If a loss mitigation application is incomplete, the notice shall state the additional documents and information the borrower must submit to make the loss mitigation application complete and the applicable date pursuant to paragraph (b)(2)(ii) of this section. The notice to the borrower shall include a statement that the borrower should consider contacting servicers of any other mortgage loans secured by the same property to discuss available loss mitigation options.

(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.

(c) Evaluation of loss mitigation applications -

(1) Complete loss mitigation application. Except as provided in paragraph (c)(4)(ii) of this section, if a servicer receives a complete loss mitigation application more than 37 days before a foreclosure sale, then, within 30 days of receiving the complete loss mitigation application, a servicer shall:

(i) Evaluate the borrower for all loss mitigation options available to the borrower; and

(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 -

(i) In general. Except as set forth in paragraphs (c)(2)(ii), (iii), and (v) of this section, a servicer shall not evade the requirement to evaluate a complete loss mitigation application for all loss mitigation options available to the borrower by offering a loss mitigation option based upon an evaluation of any information provided by a borrower in connection with an incomplete loss mitigation application.

(ii) Reasonable time. Notwithstanding paragraph (c)(2)(i) of this section, if a servicer has exercised reasonable diligence in obtaining documents and information to complete a loss mitigation application, but a loss mitigation application remains incomplete for a significant period of time under the circumstances without further progress by a borrower to make the loss mitigation application complete, a servicer may, in its discretion, evaluate an incomplete loss mitigation application and offer a borrower a loss mitigation option. Any such evaluation and offer is not subject to the requirements of this section and shall not constitute an evaluation of a single complete loss mitigation application for purposes of paragraph (i) of this section.

(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.

(A) Notwithstanding paragraph (c)(2)(i) of this section, a servicer may offer a borrower a loss mitigation option based upon evaluation of an incomplete application, provided that all of the following criteria are met:

(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.

(3) The borrower's acceptance of an offer made pursuant to paragraph (c)(2)(v)(A) of this section ends any pre-existing delinquency on the mortgage loan.

(B) Once the borrower accepts an offer made pursuant to paragraph (c)(2)(v)(A) of this section, the servicer is not required to comply with paragraph (b)(1) or (2) of this section with regard to any loss mitigation application the borrower submitted prior to the servicer's offer of the loss mitigation option described in paragraph (c)(2)(v)(A) of this section.

(3) Notice of complete application.

(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:

(A) That the loss mitigation application is complete;

(B) The date the servicer received the complete application;

(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.

(ii) A servicer is not required to provide a notice pursuant to paragraph (c)(3)(i) of this section if:

(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

(C) The servicer has already provided the borrower a notice regarding the application under paragraph (c)(1)(ii) of this section.

(4) Information not in the borrower's control -

(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 servicer must 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 servicer must 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.

(e) Borrower response -

(1) In general. Subject to paragraphs (e)(2)(ii) and (iii) of this section, if a complete loss mitigation application is received 90 days or more before a foreclosure sale, a servicer may require that a borrower accept or reject an offer of a loss mitigation option no earlier than 14 days after the servicer provides the offer of a loss mitigation option to the borrower. If a complete loss mitigation application is received less than 90 days before a foreclosure sale, but more than 37 days before a foreclosure sale, a servicer may require that a borrower accept or reject an offer of a loss mitigation option no earlier than 7 days after the servicer provides the offer of a loss mitigation option to the borrower.

(2) Rejection -

(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;

(ii) The borrower rejects all loss mitigation options offered by the servicer; or

(iii) The borrower fails to perform under an agreement on a loss mitigation option.

(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;

(2) The borrower rejects all loss mitigation options offered by the servicer; or

(3) The borrower fails to perform under an agreement on a loss mitigation option.

(h) Appeal process -

(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.

(2) Deadlines. A servicer shall permit a borrower to make an appeal within 14 days after the servicer provides the offer of a loss mitigation option to the borrower pursuant to paragraph (c)(1)(ii) of this section.

(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.

(k) Servicing transfers -

(1) In general -

(i) Timing of compliance. Except as provided in paragraphs (k)(2) through (4) of this section, if a transferee servicer acquires the servicing of a mortgage loan for which a loss mitigation application is pending as of the transfer date, the transferee servicer must comply with the requirements of this section for that loss mitigation application within the timeframes that were applicable to the transferor servicer based on the date the transferor servicer received the loss mitigation application. All rights and protections under paragraphs (c) through (h) of this section to which a borrower was entitled before a transfer continue to apply notwithstanding the transfer.

(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).

(2) Acknowledgment notices -

(i) Transferee servicer timeframes. If a transferee servicer acquires the servicing of a mortgage loan for which the period to provide the notice required by paragraph (b)(2)(i)(B) of this section has not expired as of the transfer date and the transferor servicer has not provided such notice, the transferee servicer must provide the notice within 10 days (excluding legal public holi days, Satur days, and Sun days) of the transfer date.

(ii) Prohibitions. A transferee servicer that must provide the notice required by paragraph (b)(2)(i)(B) of this section under this paragraph (k)(2):

(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.

(4) Applications subject to appeal process. If a transferee servicer acquires the servicing of a mortgage loan for which an appeal of a transferor servicer's determination pursuant to paragraph (h) of this section has not been resolved by the transferor servicer as of the transfer date or is timely filed after the transfer date, the transferee servicer must make a determination on the appeal if it is able to do so or, if it is unable to do so, must treat the appeal as a pending complete loss mitigation application.

(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.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013; 81 FR 72373, Oct. 19, 2016; 85 FR 39065, June 30, 2020]

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