Avoiding Foreclosure and Eviction without an Attorney in California
Foreclosure is a scary, cumbersome process that often renders homeowners desperate for help, and all too often they call upon unqualified, or unethical, self-proclaimed foreclosure defense attorneys or advocates.
There are two types of foreclosure in the United States: judicial and non-judicial. We will discuss primarily non-judicial foreclosures in California. However, for comparison, a judicial foreclosure state is one that requires a lender to institute a legal action to collect on its security interest. There is no Deed of Trust in these states, only a mortgage. On the other hand, non-judicial foreclosure states, like California, do not require a legal action to foreclose. The security interest the lender has in the home is called a Deed of Trust. This instrument allows the lender to immediately begin the foreclosure process. Many of these loans are pooled into what is called a collateralized debt obligation, and investors, like the ones in The Big Short, use what is called a credit default swap to make millions, if not billions, in profits betting against the real estate market. But I digress.
If you default on your mortgage in California, after ninety (90) days, you will be contacted by your lender to discuss alternatives to foreclosure, and your right to apply for a modification, record a deed in lieu of foreclosure, or proceed with a short sale. Two of these options are free and homeowners can use them to prevent foreclosure, and save necessary funds to either move out, or hire an attorney to help fight the banks. If you do nothing, your lender will record a Notice of Default, and if you still do nothing, your lender will then record a Notice of Trustee's Sale, which will include the date, time and place of your foreclosure sale.
In my experience, homeowners who apply for a request for mortgage assistance, otherwise known as a loan modification, have a far lower success rate than homeowners who hire an attorney, but this is still nevertheless a good free option to buy you time. A request for mortgage assistance stalls the foreclosure process, because California Civil Code Section 2923.6, requires a lender to review the request, and bans it from recording a Notice of Default and/or Notice of Trustee's Sale, and the lender is prohibited from foreclosing. There is one requirement, however, as you must submit a "complete" request for mortgage assistance. An experienced attorney will know every document you need to submit, however, you can ask your lender to provide a list of documents you need to submit. Even if you do not submit a "complete" request for mortgage assistance, you will still benefit from the foreclosure stalling, as virtually every lender will simply send you a written request for additional paperwork. It is extremely important to reply to this letter with all requested documents. The letter will typically indicate a deadline to submit outstanding documents; always meet these deadlines.
A request for mortgage assistance can last several months, and this is precious time you can use to save your money. If your lender approves your modification, and you can afford the modified payments, your lender will place you in a trial period plan, which invariably requires three payments to prove you can afford them. When you complete these payments, your lender will send a final modification, which is usually very close to the same monthly payment in your trial period plan. An attorney will come handy in this area to negotiate more favorable terms, however, you are free to negotiate with your lender too. When your lender sends the final modification, and you check the numbers and are confident you can make the payment, be sure you sign the final modification and return it to your lender within the applicable deadline, along with payment.
If you are not approved for a modification, you have a right, per statute, to appeal the decision. Your request to appeal must be in writing and sent to the appropriate address. It is always necessary to cal your lender before you send it to ensure you have the correct address. Always write down every conversation you have with your lender, as this may prove beneficial should you need to sue your lender. During the modification process, if your lender records a Notice of Default or a Notice of Trustee's Sale, call a foreclosure attorney immediately, as time is of the essence. If you are still at a point where you cannot afford an attorney, then send your lender a Qualified Written Request.
A Qualified Written Request ("QWR") is a formal request to your lender to provide certain documents, and adhere to foreclosure laws during your modification review. You will want to request copies of your payment history, deed of trust, pooling and servicing agreement, any recorded documents, among others. Your QWR should also include every provision of the California foreclosure statutes that your lender has violated. This will require some research, however, there are samples of QWR's online, but you should always proceed with caution when using a boilerplate sample document you find online. The purpose of this document is to put your lender on notice that it is proceeding illegally with foreclosure, and that you are requesting documents, which they are required to provide before foreclosing. The QWR is another free tool to buy you more time. Your lender must provide all documentation that you request before it can foreclose, and this can take up to two months, depending on the depth of the QWR. If all of these methods fail, proceed to a short sale.
A short sale is a real estate transaction in which you are requesting your bank to accept an offer from a buyer for less than the value of the mortgage debt. Even if you do not intend to proceed with the short sale, this is still a good method to delay foreclosure, as your lender is required to entertain a short sale package. It would be very prudent to hire a real estate agent with specific experience in short sales. A short sale can take six months, which is more time you gain in you home, and more money you can save to hire a professional to help you.
There is one last option to buy you time without having to hire an attorney: bankruptcy. While you will need an attorney to navigate successfully through a full bankruptcy, you do not need an attorney to file an emergency bankruptcy. An emergency bankruptcy is a "skeleton" bankruptcy in which you provide only a portion of all the required documents. Typically, you will file a voluntary bankruptcy petition, and the documents required by the three-day deadline under the bankruptcy code, but your filing will not include the schedules and chapter 13 plan. The mere filing of a voluntary bankruptcy petition will give you the benefit of the "automatic stay," which prevents your lender from taking any actions whatsoever. The automatic stay will last up to thirty days, or until your lender files a motion for relief from automatic stay.
If you have exhausted all of these methods, and your modification was not approved, and your lender did not accept your short sale, eventually your home will be sold at foreclosure, and you will face eviction. However, before you are foreclosed on, if these methods have given you the necessary time to save money to hire an attorney, you would be wise to do so. Often, you can find an attorney for less than your mortgage costs each month, and a skilled foreclosure attorney can offer long-term, permanent solutions to your foreclosure. The above self-help methods are simply bandaids, but the bleeding will eventually happen, and you will want to do your research and find an ethical, highly experienced, foreclosure attorney.
Before you hire an attorney, make sure you do your homework. Research every attorney you can find, and interview each one. Always, always, always ask how long the attorney has practiced foreclosure law. If the answer is less than one year, look elsewhere. There are far too many attorney out there who set up shop for the purpose of ripping off consumers, and they get away with it for a year, but not much longer. Choose an attorney who has practiced foreclosure for at least more than a year, as any foreclosure attorney who is unethical will not be around that long.
When you decide which attorney to represent you, be sure to cover all of your options. You will usually want to start at square one, with a request for mortgage assistance. This time you will have the benefit of having an attorney oversee the process to ensure you are treated fairly. Your attorney can also help you prepare all the required documents to submit a "complete" package. Your attorney should also go over a short sale option, bankruptcy, and, finally, a lawsuit. Ask what your lawsuit will be based on, and the specific causes of action your attorney intends to use. If your attorney cannot answer these questions in detail, consider hiring a different attorney.
While your best option is to always hire an experienced, aggressive, and ethical attorney, you do have free options available to you. To summarize, consider utilizing the following free options to give you the time you need to save money: (1) request for mortgage assistance and appealing a denial; (2) Qualified Written Request; (3) bankruptcy; and, (4) short sale. If these fail, do your research and hire a foreclosure attorney immediately.
ABOUT THE AUTHOR: Blake Wilson
Attorney Blake Wilson is the owner of Blake WIlson Law Group, a boutique law firm in Imperial Beach, California. He focuses on foreclosure defense, bankruptcy, real estate, estate planning, and corporate. He founded Blake Wilson Law Group in 2012, and has helped many homeowners avoid foreclosure, and successfully obtain loan modifications and damages against lenders.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.