Before a Notice of Default can be filed, the California mortgage foreclosure laws require that lenders comply with Civil Code section 2923.5. This California mortgage foreclosure law requires the lender to make efforts to contact the borrower to identify alternatives to foreclosure, 30 days prior to filing the Notice of Default.
Notice of Default Process
The California mortgage foreclosure laws also provides for the Notice of Default process in Civil Code section 2924.
This California mortgage foreclosure law specifies that the Notice of Default is recorded “in the office of the recorder of each county wherein the mortgaged or trust property or some part or parcel thereof is situated”. The Notice of Default is also published in a newspaper of general circulation within the county.
Additionally, the California mortgage foreclosure laws require that a copy of the Notice of Default is mailed or delivered to the property owner.
The language in the Notice of Default document itself is also specified in the California mortgage foreclosure laws. While this document appears to be very carefully worded, it has created confusion for the many property owners who have received one, because this document indicates that the property may be sold at an auction. As a result, many property owners mistakenly believe that this document is a Notice of Trustees Sale. However, the Notice of Trustees Sale will include the scheduled auction date – the Notice of Default does not include an auction date.
Notice of Default and Loan Modification
Often homeowners receive a Notice of Default while they are actively pursuing a loan modification with their lender. This often creates fear and panic because many homeowners seeking loan modifications were lead to believe that the negotiations were proceeding well. This event may also create possible legal issues because, clearly, the lender is moving forward with the foreclosure process before completing its evaluation of foreclosure alternatives – the legal issue arises because Civil Code section 2923.5 requires this evaluation 30 days before sending out a Notice of Default.
Unfortunately, loan modification approval rates are hovering well below 10 percent. It is becoming increasingly clear that the attorney-lead loan modification programs are failing horribly! Borrowers’ backs are against the wall and many are filing lawsuits in an effort to avoid foreclosure. The only real winners are the attorneys.
The problem is that most attorneys are using legal tactics in an effort to resolve financial issues. There is a major disconnect here! Attorneys often perform their legal maneuvering without truly understanding the borrowers’ (complex) financial issues and the lenders’ financial pressure points.
Property owners need an alternative to the typical attorney-based negotiations. Fortunately, a much better alternative does exist.
The borrowers’ financial issues and the lenders’ financial pressure points must be understood and then used in the negotiations with the lenders to find the middle ground. While the attorney-based approach may be useful for creating delays in the process, unless some financial creativity is injected into the process, you cannot expect your attorney to force the lender’s attorney to agree to something simply because you want them to.
You Need a Foreclosure Avoidance Team
Instead, property owners should work with a foreclosure avoidance team that understands the lenders’ financial pressure points and knows how to use them to your advantage. The process must also include a thorough financial evaluation to identify all the important issues. This leads to an evaluation of possible opportunities to resolve the matter in a way that is beneficial for you, the borrower, while convincing the lender that they are absorbing the minimum cost compared to what they would face should they not approve the request. By approaching the matter in a way that makes sense for the lender (minimizing their losses), you can get them to say “YES” to your proposal!
Attorneys are an important part of the team, as they have the expertise to resolve legal issues that may arise. After performing a thorough evaluation, an attorney may be needed to implement parts of the strategy. For example, a forensic loan audit might be recommended based on your circumstances, and it might identify contractual defects in the loan document that violate State or federal laws. This is an important pressure point that should be included in any negotiation. Or, other legal issues might be identified that require the use of “big guns”.
In summary, think of your foreclosure avoidance team as a toolbox. You need to have the appropriate set of tools (experts) to do the job right. Most distressed borrowers need experts in finance, income taxes, real estate sales, appraisal, legal, etc. At this important juncture, it is absolutely critical that you have a team of experts to help you be sure that you get the most favorable outcome possible, not just an attorney.