As part of a larger goal to help protect consumers, the State of California has enacted several new pieces of legislation aimed at helping homeowners avoid predatory loan practices and renegotiate their mortgages when facing foreclosures. As a lender or a borrower, understanding the updated regulations and protections can help aid in the legal process of foreclosures, and avoid unnecessary court costs or legal issues.
In California, lenders can foreclose on borrower’s properties through two main avenues: a judicial and non-judicial foreclosure. As their names imply, the court system may or may not be involved depending on the process by which the foreclosure occurs.
Typically, lenders prefer to follow a non-judicial foreclosure due to the expedient process and the ability to avoid involving the court in the foreclosure. This is most often done when a “power of sale” clause is included in the loan contract.
In the case of a non-judicial foreclosure, a 90-day Notice of Default and 21-day Notice of Trustee’s Sale is involved – allowing for the borrower to come to terms with their lender and retain their property. Failure to do so allows the lender to take control of the property and sell to recoup their losses.
The ability to handle foreclosures out of court has given rise to “foreclosure consultants” who have historically harassed those facing foreclosure. This predatory behavior, as well as the increase in foreclosure rates statewide, has prompted California to pass new regulations to protect homeowners from malicious entities.
For example, an increase in the number of “consultants” that attempt to provide assistance to homeowners in default through contracted compensation has left many property owners without the means to pay their loan or the protections falsely promised.
California Civil Code 2945-2945.11 declares:
“homeowners whose residences are in foreclosure are subject to fraud, deception, harassment, and unfair dealing by foreclosure consultants from the time a Notice of Default is recorded pursuant to Section 2924 until the time surplus funds from any foreclosure sale are distributed to the homeowner or his or her successor.”
The new code protects homeowners and gives them the right to demand that any foreclosure consultant services have contracts provided in writing. This code intends to promote fair dealings across the system and ensures that foreclosures do not harm borrowers outside of what is legally required of them in the forfeiture of their property through the non-judicial process.
According to Civil Code Section 2945, if a foreclosure consultant violates the code may face a fine of $25,000 up to imprisonment. Homeowners are also protected through the ability to recover damages and legal fees incurred through the process.
In addition to the above code and regulations, the state of California has put in place a 90-day foreclosure moratorium on foreclosures to provide the opportunity for borrowers to either pay their back-owed payments or come to terms with their lenders through renegotiation of their loan.
Move Through Foreclosure Safely With Legal Aid
In foreclosure situations, it is vital that borrowers and lenders both understand their legal standing and protections. Both judicial and non-judicial foreclosures require a great deal of care and due-process to ensure that the rights of a borrower are not infringed. The increase in regulations and protections means that lenders must work closely with legal aid to ensure that they follow a proper process when proceeding with a foreclosure.
If you are a lender or a borrower involved in a foreclosure suit, contact the Law Offices of R. Grace Rodriguez for the legal aid you need to move ahead confidently. Working with clients across Los Angeles, Ventura and Orange counties, and the San Fernando Valley, our team is experienced in all types of foreclosure law – helping all parties to come to terms expediently.
To learn more about the specific process involved with both judicial and non-judicial foreclosures, or discover the new protections provided under California state law, contact our team today.