16 Aug Surviving Foreclosure in California: What Homeowners Should Know Before the Clock Starts Ticking
Foreclosure — it can happen to anyone. A job is lost, bills are piling up, and mortgage payments are late. Now what? Thousands of California homeowners are faced with this question every year. Those that do their homework and communicate with their mortgage lender are more likely to come out on the other side with their homeownership intact.
Here are some facts and tips to help California homeowners navigate the rough waters of impending foreclosure:
1. Laws Are in Place to Protect Homeowners
On January 1, 2013, the California Homeowner Bill of Rights became law. It generally applies to owner-occupied 1-4 family residential properties, and its purpose is to protect California homeowners from unfair lending practices that often surface during the foreclosure process. It contains four key statutes:
- No Dual-Tracking: This prevents a lender from proceeding with a foreclosure and sale while a loan modification application is pending.
- Lenders Must Provide a Single Point of Contact: Homeowners are guaranteed a single representative or an interactive team who has knowledge of the loan modification status at all times and who will facilitate the distribution of documents during the loan modification review process.
- Lenders Must Verify Foreclosure Documents (No “Robo-Signing”): This imposes a civil penalty (up to $7,500 per loan) on lenders that don’t take the time to review and verify the accuracy of documents prior to requesting signatures.
- Homeowners Have the Right to Sue Lenders for Violations: If the lender violates any portion of the California Homeowner Bill of Rights, the homeowner may seek an injunction (halt a foreclosure sale). If the sale has already happened, the homeowner may sue for monetary damages.
No one may legally request up-front payment in exchange for assistance in negotiating a mortgage loan modification. The Office of the Attorney General in California warns homeowners to be wary of these scams.
2. Homeowners Should Communicate Directly with the Lender (the Earlier the Better)
The best advice to those who find themselves one or two mortgage payments behind is to pick up the phone and call the lender. This proactive step will go a long way in finding a solution with which both the lender and the homeowner can live.
There are several options the lender might suggest:
- If the value of the property is greater than the loan balance and the homeowner does not want to stay in the home, the best option is to sell the home, pay the mortgage in full, and move on to other living arrangements in order to regain financial stability.
- If the value of the property is less than the loan balance and the homeowner does not want to stay in the home, options known as “short sale” and “deed in lieu” should be explored and discussed in detail with the lender.
- If the homeowner wants to stay in the home, a loan modification might be the answer. Completing the loan modification application is the very important first step. This is key—and often overlooked due to stress and anxiety—but procrastinating or ignoring this application is unwise.
The terms of a modification will vary with each borrower and with each lender, but the submission of a loan modification application suspends the foreclosure process while the application is being reviewed.
3. A Foreclosure Attorney Could Be the Solution
If the foreclosure process reaches the point that the lender has filed a Notice of Default and a foreclosure sale is eminent, it’s time to talk to a foreclosure attorney. There are legal avenues available that can help homeowners avoid losing their homes.
For everyone involved, foreclosure is a messy process. Due diligence and proactive communication on the part of the homeowner are key to working through this arduous process. And, of course, a little courage and determination won’t hurt either.
RA & Associates is a fiercely dedicated team of skilled real estate and property damage attorneys based in Los Angeles.
RA & Associates
505 N. Brand Blvd.
Glendale, CA 91203
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