Summary:
The problem in California is that Gavin Newsom has passed several laws to thwart the non-judicial process and delay the eventual foreclosure date. You can find certain instances by reading articles on my website; you can just search for SB-1079, AB-130, and AB-2424. Each article will discuss how the government has placed time barriers that are cumbersome and delay the inevitable. These new laws come on the back of foreclosure moratoriums during the COVID-19 fiasco.
There are separate articles on SB-1079, AB-130, and AB-2424 on my website. All real estate practitioners, including mortgage brokers, lawyers, title representatives, escrow holders, and trustees, must gain knowledge of these onerous bills, now a matter of state law.
Article:
Understanding the nuances of non-judicial and Judicial Foreclosure states is not just important, it's empowering. Each state has its unique procedures and regulations, and grasping these can give you a significant advantage in navigating the foreclosure process.
California's foreclosure procedure, particularly for single-family homes and residential income properties, is a complex and challenging process that can be likened to a monster. Although it subscribes to a non-judicial procedure, there are massive barriers to overcome to complete a foreclosure.
Non-Judicial is a statutory procedure handled outside the court system. In contrast, a judicial foreclosure requires that the lender file a court lawsuit within the court system and work their way through the whims of a bureaucratic court officer, including a potential ideological judge who will protect defaulting borrowers in most instances.
https://www.realtytrac.com/real-estate-guides/foreclosure-laws/
Non-Judicial Procedure:
In the non-judicial procedure, the lender has the authority to manage the entire process outside the court's jurisdiction, thereby avoiding potential bias. Once the notice of default is filed, a waiting period of about 90 days, plus 21 days for the notice of trustees' sale, is observed before the property is foreclosed on.
Judicial foreclosure procedure:
In a judicial foreclosure state, the lender, or the lawyer on behalf of the lender, must file a full-blown lawsuit against the defaulting borrower, which transfers the jurisdiction to the court. For those with experience, this is a long and arduous period fraught with expense and frustration. Judges and all those public employee labor union members in the court system seem to have no sense of urgency. If the defendants demand a jury, that selection takes a month or two. The jury pool is flawed because the most competent and employed parties will find a way out of serving in the charade. A judicial foreclosure can take one to three years, all the time, while the defaulted borrower lives rent-free.
Remember, you can always attempt a last-ditch negotiation before deciding to lose your property in foreclosure. Don't lose hope. There are still options available, and you'll be able to work toward a solution with determination.
Bankruptcy as an option:
Another option for the borrower facing foreclosure is to file Chapter 13, 11, or 7 under the Federal Bankruptcy Code. This can delay the foreclosure sale and transfer the property disposal jurisdiction to a Federal Court judge. While it means the borrower becomes subject to the decisions and whims of the court, the process can also provide an opportunity for the borrower to negotiate a more favorable outcome, such as a loan modification or a short sale, with the lender.
During the stay period, the borrower may attempt to find a solution by refinancing or selling the property to salvage some of the equity dollars. However, one thing for sure is that the judge will choose a court-appointed receiver to oversee the entire disposition of the property. In many cases, the trustees' fees can eat up most of the equity, and the borrowers get little or nothing.
The lenders, or lawyers representing the lenders, will file a motion for relief from stay to release the asset from the bankruptcy court so that they can complete the foreclosure. The borrower may have lawyers who argue against it by objecting based on numerous issues. The process could significantly delay the foreclosure, providing you with more time to find a solution. Bankruptcy judges routinely make decisions that benefit the consumer borrower, including ones contrary to established law. The lender will be the big bad wolf vs Goldilocks (the defaulting consumers).
The Courts are stacked with judges who protect consumers at the expense of lenders and investors:
The courts may be stacked with left-leaning judges, but successful arguments, no matter how rational and lawful, can significantly stall the foreclosure sale. This underscores the potential for a successful outcome, despite the odds, and should give you hope in your legal defense.
Dealing With an Adverse Tenant After Foreclosure:
After the foreclosure, the borrower is considered an adverse tenant. This legal term describes their status as tenants who have the property against the new owner's wishes, significantly limiting their rights and control over the property. As an adverse tenant, the borrower's rights to the property are restricted, and they can be evicted more easily than a regular tenant.
If the new owner of the property, following foreclosure, cannot negotiate with the adverse tenant to vacate, they will initiate a procedure known as an unlawful detainer action. This is a legal process that the new owner can begin to evict the adverse tenant from the property. The process involves filing a lawsuit in the appropriate court, serving the tenant with a notice to quit, and attending a court hearing to determine the tenant's right to remain on the property. Knowing this possibility and understanding your rights in such a situation is essential.
Some criminal-minded borrowers will seek protection under the Squatter laws. They will find a third party, even an illusory party, such as grandma, a cousin, or a newly manufactured tenant, to declare that they have an economic interest in the property, further complicating the process. The new party will claim that they have a right to occupy the property, and in crazy states like California, there are even laws called Squatters' Rights.
My frame of reference here is like the Bolshevik Revolution in 1917, when squatters took over private properties as part of a socialist state reset. The Russian Socialist Democratic Labor Party, led by Vladimir Lenin, later became known as the Communist Party of the Soviet Union.