When a foreclosure sale occurs, the lender often bids at the sale the entire amount due on the loan. If no one bids higher, they obtain the property. But are they entitled to then collect insurance for pre-foreclosure damage? Sometimes insurers obtain their own insurance policy, which covers them for…
The security first rule is one of the numerous anti-deficiency protects provided to borrowers under California law. “Security first” means that a creditor must first exhaust all real property security through judicial process in the “one form of action” authorized by Code of Civil Procedure section 726–that is, a judicial…
“Equitable subordination” is used to correct equitable wrongs in the priority of liens on real property. If fairness requires, a first lien or deed of trust can be subordinated, or reduced in priority below, a second lien, swapping their positions. (Civ. Code, §§ 2876, 2903, 2904. A lengthy description…
A Deed of Trust in California can be used to secure contract obligations other payment of money. Usually, the primary obligation secured is the repayment of the loan. There are ancillary duties usually set out in the deed of trust, such as keeping the property in good repair, maintaining insurance,…
The Marketable Record Title Act (MRTA, Civil Code section 882.02+) was enacted so that ‘ancient mortgages’ would not last forever. Prior to the act, lost or forgotten mortgages and deeds of trust would continue to be a cloud on title. The MRTA became law in 1982 to put an outside…
A Loan Guaranty is a promise by the guarantor to pay the debt of another. In commercial real estate loans they are commonly used to provide additional security to the lender. Such loans are often given to new entities without a financial history, and the lender wants a person (with…
The California Legislature enacted, and then revised, Code of Civil Procedure section 580e in response to the collapse of the housing market. As reported elsewhere, 580e now prohibits deficiencies whenever a short sale is approved by a lender on a residential property. Prior to that, it was common for lenders…
Acceleration clauses are standard in loans secured by California real estate. The clause provides that on the happening of a listed event, the lender (or beneficiary) may call the entire loan balance due and payable immediately. The events stated are usually a) if the borrower (trustor) defaults on any provision…
Since the start of the HAMP program, servicers have been providing trial plans while leaving the door open to claim that there has not been a modification. As described by Diane Thompson in “Foreclosure Modifications” (86 Wash. L.Rev. 755) servicers recover all their costs after a foreclosure) and receive fees…
California residential borrowers, in trouble on their mortgage, know the lengthy frustrating process for seeking a loan modification. Some have told me that they believe it is a con game, where they get the borrower to make more payments under a trial program, with no intent to modify the loan…