Category Archives: Foreclosure

Maryland Banks Have 3 Years to Sue Foreclosed Homeowners, Not 12

Lady justice on top of a snailThe Maryland legislature just significantly shortened the time period in which banks can sue foreclosed homeowners for a deficiency. Under a loophole in the old law, banks often had 12 years to pursue foreclosure homeowners for unpaid mortgage debt. Starting July 1, 2014, they’ll  have to do it within three years.

What Is a Deficiency After Foreclosure?

If you lose your home through foreclosure in Maryland, it’s very possible that the foreclosure sale proceeds won’t be sufficient to cover the mortgage debt owed.

Example. Say your home, in the current market, is worth $200,000. But when you bought it ten years ago, it was worth much more. You still owe $250,000 to your mortgage lender. If the home is sold after foreclosure, and the price fetched is $200,000, you’ll still owe the lender $50,000 in mortgage debt. This is called a deficiency.

Some states don’t allow mortgage lenders to go after foreclosed homeowners for a deficiency. But in Maryland, the lender can sue you for a deficiency. Learn more about deficiency judgments after foreclosure in Maryland.

Statute of Limitations for Deficiency Actions in Maryland

The statute of limitations is the time period in which you must bring a lawsuit. If you don’t sue within the statute of limitations, you are barred from suing in the future.

Maryland has a specific statute of limitations law that applies to deficiency judgments after foreclosure. Under that law, the bank has three years from the foreclosure to file a lawsuit to collect the deficiency. But there’s a loophole in another part of Maryland’s statutes. A different law states that a creditor can pursue a deficiency based on a promissory note as long as it does so within 12 years.

The Maryland legislature sealed that loophole. The new law, which will become effective on July 1, 2014, specifically states that the 12-year statute of limitations for promissory notes does not apply to a deficiency based on a deed of trust, mortgage, or promissory note for a residential home. The three-year statute of limitations, therefore, will apply.

Banks Avoiding New California Foreclosure Protections?

FinalNoticeIStockAlmost a year and a half ago California’s Homeowner Bill of Rights went into effect. HBOR, as it’s often called, provides more protections to California homeowners in foreclosure. The goal of the law is to prevent some of the mortgage servicer abuses that plagued homeowners in previous years. But according to recent statistics from RealtyTrac, some banks are dealing with the new protections in HBOR by avoiding them altogether.

The California Homeowners’ Bill of Rights

HBOR, which became effective on January 1, 2013, requires banks and mortgage servicers to follow some new rules in nonjudicial foreclosures. (The nonjudical part is key – more on that later.)  A few highlights:

No dual tracking. If the homeowner submits a loan modification application, the servicer cannot start or continue with foreclosure until it’s made a decision on the application. Even if it denies the application, it must wait to foreclose until the appeal deadline has passed.

Single point of contact. Mortgage servicers must assign homeowners who are in foreclosure or seeking a loan modification with a single point of content – one person or team of people who have knowledge about the homeowner’s file and are responsible for the flow of information between the homeowner and servicer decision-makers.

Penalties and damages for violations . If a servicer files unverified documents (the practice of “robosigning” which was a major problem a few years ago), it may be on the hook for a $7,500 civil penalty. And if it violates HBOR, the homeowner can halt the foreclosure, or if it’s already gone through, sue for damages. These rules create more work for the mortgage servicers, slow the process down, and expose the lender to potential liability for missteps. (Learn more about the new requirements of HBOR for California foreclosures.)

Judicial v Nonjudicial Foreclosures in California

Here’s the key to the banks’ recent “workaround” when it comes to HBOR. HBOR rules only apply to nonjudicial foreclosures in California. In a nonjudicial foreclosure, the bank can foreclose on the homeowner without going through the courts. In contrast, in a judicial foreclosure, the bank must file a foreclosure lawsuit in court, follow the required litigation procedures, and get a court judgment before it can sell the home.

Judicial Foreclosures Have Spiked

In the past, most banks in California used the nonjudicial foreclosure process – it was easier and faster.  But not so in recent months.  According to RealtyTrac, in the first three months of 2013, banks filed just one nonjudicial foreclosure in California. Compare that to one year later (after HBOR had been kicking around):  in the first three months of 2014, banks filed 1,396 judicial foreclosures.  This is out of a total of 20,228 foreclosure starts during the same period. So while the majority of new foreclosure cases are still nonjudicial, the number of judicial foreclosures has certainly spiked to unprecedented numbers for California.

The judicial foreclosure process takes longer, but some mortgage lenders and servicers feel that avoiding the new HBOR requirements and eliminating the uncertainty of liability for civil penalties and economic damages is worth the extra time.

Can a Lender Take Your Mortgage Statements Hostage to Force You to Reaffirm?

HASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

I filed Chapter 7 bankruptcy in California the spring of 2013. I have a first and second mortgage on my home. Although it was, and still is, underwater, I want to keep it. My lawyer said I didn’t need to do anything in the bankruptcy other than continue making payments on both loans. 

My mortgage payments have not been appearing on my credit report. And my mortgage lender recently stopped sending monthly mortgage statements. When I called, the lender told me that because I didn’t reaffirm the debt in my bankruptcy, it cannot send mortgage statements or report my payments to the credit bureaus. 

The lender said that the only way to remedy this is to reopen my bankruptcy and reaffirm the loan. Did my lawyer mess up? 

Carol  

Dear Carol,

Your lawyer did nothing wrong. Here’s why.

Courts Don’t Like Home Loan Reaffirmations in Bankruptcy 

When you sign a reaffirmation agreement in bankruptcy, you agree to resume personal liability on a debt that the bankruptcy would have otherwise wiped out.

In California, most bankruptcy judges routinely refuse to approve the reaffirmation of mortgages. Bankruptcy judges don’t want people to saddle themselves with debt loads that were set to be discharged in bankruptcy. Most judges believe that it’s not in anyone’s best interest to reaffirm a mortgage. For the most part, reaffirmation agreements are unnecessary if you want to keep your home – if you keep paying your loan on time, you can keep the home.

If you don’t reaffirm, your payments won’t appear on your credit report. But the courts are more concerned with keeping everyone out of future debt trouble than with helping them get back into it.

Why It’s Usually Not a Good Idea to Reaffirm Your Mortgage

The danger of reaffirming is that if you later change your mind about keeping the house, or fall behind on payments and lose your home to foreclosure, you’ll be on the hook for a deficiency.

What’s a deficiency? If your home is underwater and you lose it to foreclosure, the difference between the sale proceeds from the foreclosure and what you still owe on your mortgages is called the deficiency. (Get details on how deficiencies work.)

In most situations, California law does not allow a mortgage lender to come after you for a deficiency on a first mortgage of your residence (but there are exceptions). Not so for the second mortgage. The mortgage lender can sue you to recover the deficiency and then once it gets a judgment, garnish your wages, levy your bank account, and more. (Learn more in Deficiency Judgments After Foreclosure in California.)

Your bankruptcy wiped out your personal liability on both the first and second mortgages – so the lender cannot come after you for a deficiency if you later lose the home to foreclosure. It would not have been in your best interest to reaffirm those loans in the bankruptcy, because then you would be liable for a deficiency. Of course, it would have been in your mortgage company’s best interest for you to reaffirm.

Your Lender Is Holding Your Mortgage Statements Hostage to Force You to Reaffirm

You say your mortgage company recently stopped sending you statements. If it couldn’t send statements because you didn’t reaffirm the mortgage, then why was it able to send statements from the spring or 2013 up until now? Obviously, your lender can send statements, if it chooses to.

And thanks to a new federal law, your mortgage lender might be required to send you periodical mortgage statements. There are exceptions to this new rule though.  (To learn more, see Nolo’s article The Periodic Statement Rule: Monthly Mortgage Statement Requirements.)

What Can You Do?

Your mortgage company has stopped sending statements in order to coerce you into reaffirming your loan. Nice people, huh?

I suggest you send a letter to your mortgage company referring to the periodic statement rule and requesting that it comply with the rule and start sending mortgage statements. You can tell the company that if it doesn’t comply with the rule, you’ll submit a complaint with the Consumer Financial Protection Bureau.

If that fails, talk to a lawyer.

-Leon

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

Find Leon on Google+

Mortgage Service Companies Blasted by Regulators and Housing Advocates

Customer service satisfaction surveyThe big banks have earned a pretty bad reputation over the last decade when it comes to servicing mortgages and, in particular, dealing with homeowners facing foreclosure or struggling to make mortgage payments. So regulators and housing lawyers were hopeful when some of the biggest banks began relying more on mortgage servicing companies to handle accounts. Unfortunately, according to a recent New York Times article, mortgage services are no improvement over the banks when it comes to serious blunders and terrible customer service. In fact, some say they are worse.

What Are Mortgage Servicers?

Your home loan holder (for example, the bank you took out your loan from) can transfer the servicing rights to your loan to a specialty mortgage servicing company. The bank pays the company to service your loan, which includes collecting mortgage payments and forwarding them to the loan holder, setting aside taxes and homeowner’s insurance (if you have an escrow account), and generally managing your account. Loan servicers can also negotiate foreclosure avoidance workouts, handle loan modification applications, and supervise foreclosure procedures.

While mortgage services are not new to the mortgage scene, in the last few years banks have been transferring servicing duties to these companies in record numbers.  Today, specialty mortgage servicers (the two biggest are Ocwen Financial and Nationstar) handle six times more mortgage accounts than they did in 2010.

Complaints About Specialty Mortgage Servicing Companies

According to the New York Times, the number of complaints about mortgage servicing companies has surged in recent years.  Here are just a few of the gripes against mortgage servicers (for a more detailed list, see Common Mortgage Servicer Violations in Loan Modifications).

  • The companies often fail to appoint a single point of contact and instead give homeowners the runaround when they are trying to get a loan modification or negotiate a workout.
  • Companies repeatedly ask homeowners for the same documents during loan modifications, so that homeowners get stuck on an endless document production treadmill without any resolution of their application.
  • Companies lose loan modification files when transferring the loan to another company.

A recent settlement highlights some of the specific complaints against Ocwen. According to the investigation that ended in the settlement, in the past few years Ocwen:

  • used robosigners (employees signed foreclosure documents but had no knowledge about the information in the documents)
  • charged improper fees
  • provided false or misleading reasons for denying loan modifications, and
  • dropped the ball on loan modification applications that were processed by previous servicers. (To learn more about the investigation and settlement, see Foreclosure Relief for Homeowners With Ocwen Mortgages.)

Worse Than the Banks?

According to regulators, customer service is sorely lacking with the mortgage servicing companies, even more so than with the banks.

What Can You Do?

If your mortgage servicer is stalling, giving you the runaround, or has made errors in your account, take action. Here are some things you can do.

Consult with a foreclosure attorney. You can contact a foreclosure or debt attorney to step in and help.

Submit a complaint to the Consumer Financial Protection Bureau. You can submit an online complaint with the CFPB.  The CFPB won’t represent you, but it does gather complaints so that it can track trends and take action where necessary. It will also forward your complaint to the mortgage servicer – but it won’t stop the foreclosure.

Contact Ocwen. If your loan is with Ocwen, you might be able to get assistance under the terms of the settlement agreement.  Call 800-337-6695 or email ConsumerRelief@Ocwen.com.

Facing an HOA Foreclosure? Get State-Specific Information From Nolo

Map of USAIs your homeowner’s association (HOA) or condominium association (COA) foreclosing on your home? Or are you struggling to make HOA dues and assessments and fear you will soon be in foreclosure? Turn to Nolo to find the information you need.

Learn About HOAs and HOA Foreclosures

In Nolo’s new HOA foreclosure section, you’ll find articles on

  • what constitutes an HOA assessment
  • the importance of your CC&Rs
  • what an HOA lien is and when an HOA or COA can foreclose on a lien
  • defenses to HOA foreclosures
  • how an HOA foreclosure will affect your credit score, and
  • when you might be able to get your home back after an HOA foreclosure.

And if your question is more specific, check out the Q&A section, which answers some of the more common questions people have about HOA foreclosures. For example, did you know that an HOA can foreclose on your home if you get behind in dues, even if you’re current on your mortgage payments? And that if your state provides a right of redemption, you might be able to get your home back after an HOA foreclosure?

State-Specific HOA Foreclosure Information

When you get down to the nitty-gritty of HOA and COA foreclosure procedure, state law governs.  Nolo recently published a 50-state article series on HOA foreclosures (it includes the District of Columbia too). Click on your state’s link to find your state-specific HOA foreclosure article. You’ll learn about:

  • what types of charges the HOA or COA can include in its lien
  • what the HOA or COA must do before foreclosing on its lien (for example, in some states it must record the lien in the county records office)
  • whether your state allows for HOA super liens
  • what notice procedures the HOA or COA must follow before foreclosing
  • whether the HOA has a limited period of time to foreclose on the lien (called the statute of limitations), and
  • where to find the statutes that cover HOA and COA foreclosures in your state.

Leon Bayer Talks About Foreclosure Laws on KALW

Recently, Nolo author Leon Bayer joined a panel of foreclosure and housing experts to discuss new federal rules that provide more protections to homeowners facing foreclosure. You can hear the podcast of the show, which aired February 5, 2014 on public radio station KALW, here.  Leon and the other panelists also fielded phone calls from consumers who had, or have, foreclosure issues.

The show covered some of the new rules in the foreclosure world, including:

  • rules prohibiting dual-tracking 
  • rules limiting force-placed insurance
  • information on where to go if you need help or advice about a foreclosure, and
  • much more.

You can also read about these new rules in Nolo’s article New Federal Rules Protecting Homeowners With Mortgages.

January Rings in New Federal Laws Protecting Homeowners

ring in the new yearIn early January, a number of new federal rules in the foreclosure and mortgage context became effective. The changes came out of the Dodd–Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) which provided authority to the Consumer Financial Protection Bureau (CFPB) to issue rules to implement the changes. The changes were many; below are just a few of the highlights.

No Dual Tracking

In recent years, dual tracking was a frequent practice among many mortgage lenders and servicers. With dual tracking, a bank would consider a homeowner’s application for a loan modification while simultaneously continuing to foreclose on the homeowner’s home.

A number of states passed laws prohibiting this practice in 2013, and the signatories to the National Mortgage Settlement agreed to stop this practice as well. But even better, as of January 10, 2014, federal law prohibits dual tracking. For details on the new rule, see New Laws Prohibiting Dual Tracking in the Foreclosure Context.

Ability to Pay Standards for Mortgages

In the 2000s, mortgage lenders often approved loans without running numbers or inquiring into whether the homeowner could actually afford the mortgage. Lenders signed people up for mortgages with “teaser rates” that later increased dramatically or low rate loans that had a large balloon payments after a few years. The homeowner would inevitably default and lose the home through foreclosure.

The new CFPB rules, which became effective January 10, 2014, require mortgage lenders to consider specific factors and make a good faith determination that the borrower has an ability to repay the loan. The “ability to repay” (ATR) requirements apply to almost all closed-end residential mortgage loans. (A closed-end loan is one that must be repaid by a certain date. Most mortgages are closed-end loans.) However, there are a number of loan types that are exempt from these requirements. For details on what the lenders must do under the new rule, and which loans it does and does not apply to, see New Mortgage Rules on Ability to Pay.

More Protections for Borrowers of High-Cost Home Loans

The Home Ownership and Equity Protection Act (HOEPA) provides protections to borrowers taking out certain types of loans with high interest rates or high fees. The Dodd-Frank Act expanded those protections and the CFPB’s rules implementing those changes became effective on January 10, 2014.

Among other things, the new rules:

  • require lenders offering high cost loans to provide more disclosures to borrowers
  • prohibit lenders from including certain types of onerous loan terms in the loans, like balloon payments, and
  • restricts fees that lenders can charge for these loans.

For details on which loans the new CFPB rule applies to, and what is required and prohibited, see New Protections for High-Cost Mortgages.

Other Mortgage Servicer Requirements

The CFPB implemented a whole host of other rules that protect mortgage holders, people shopping for mortgages, and those facing foreclosure. These new rules require mortgage servicers to:

  • provide monthly billing statements to borrowers (there are exceptions for some types of loans) that include specific information
  • notify borrowers when the interest rate changes on adjustable interest rate loans
  • promptly credit mortgage payments
  • provide alternatives to force placed insurance
  • quickly resolve errors and respond to borrowers’ information requests, and
  • contact any borrower who falls behind in payments.

To get details on these new rules, see Federal Rules Protecting Homeowners With Mortgages.

The National Mortgage Settlement and Lien Strip Poker

poker chipsASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

I am in Chapter 13 bankruptcy with a confirmed plan, and I did a lien strip to remove my second mortgage (it is a second deed of trust with Bank of America). I just got a letter from BofA saying they are forgiving my second mortgage, they will send documents showing the loan is forgiven, and there is more nothing I need to do. My bankruptcy lawyer says that I’m not supposed to get the lien strip until I complete my five year Chapter 13 plan and get a discharge, and that therefore I must finish my Chapter 13 case in order to gain the benefit of the lien strip.  Is the bank writing this off now rather than waiting the five years? 

I just want to get a second opinion because it’s confusing.  

Thanks, 

Molly

Why BofA Forgave Your Loan

Good Golly Miss Molly!

You’ve lucked out. And I get to answer a fun question.

Of course, I have not seen the actual letter you received. However, it sounds exactly like letters many of my own clients have received. If it is, your second mortgage lender has indeed decided to give up now, instead of waiting the five years. Assuming I’m right, I’ll explain why this happened. I’ll also explain where it puts you. (But you should still take all the paperwork to a lawyer who is familiar with this.)

The National Mortgage Settlement: Banks Must Pay Owe $10 Billion for Mortgage Reduction

The Bank of America, along with Ally, Wells Fargo and several other banks are parties to the National Mortgage Settlement (NMS), a legal settlement requiring them to forgive a certain amount of home mortgage debt, including second mortgages. The settlement allows the banks to decide which loans to forgive, but the loans must total $10 billion. (You can learn more about the NMS at http://nationalmortgagesettlement.com/.)

Think about this settlement as if it were a debt that the banks owe to the public. They pay the debt by forgiving loans totaling $10 billion. After they do that, the debt is paid. Sounds like a good deal for consumers, doesn’t it?

Did Government Lawyers Get a Good Deal for Homeowners?

In agreeing to this settlement, the banks (but maybe not the government) realized that they could get full credit towards paying the $10 billion they owed by forgiving loans that were uncollectable anyway. Think about your loan. You’re not making payments on your loan. Throughyour bankruptcy, you are on track to discharge your personal liability for the loan. And your loan is already subject to a lien strip order. From the bank’s point of view, their chances of collecting money on your loan are slim to none.

Forgiving an uncollectable loan, just like yours is, makes good sense for the banks. It is similar to you giving a bag of old clothes to charity and getting a tax deduction for worthless stuff you were about to put in the trash.

If You Were a Bank, Which Loans Would You Forgive?

You would certainly keep loans that customers pay on time. That improves your balance sheet and keeps the bank healthy.

Because you must forgive some loans, you would probably choose loans that are in default. Even better, you would look for defaulted loans that are already involved in bankruptcy with a lien strip.

Small wonder why the bank picked your loan to forgive. For them, using your loan to pay off a bet was like drawing four aces in poker. Forgiving your loan (and the loans of others) makes the public think they are swell guys, but in your case (and many others), it doesn’t really cost them anything. They weren’t going to get paid on that bag of old loans anyway. But forgiving uncollectable loans pays off the settlement.

All in all, your bank is likely very happy with this deal. It gets to pay the settlement with a big bag of trash, instead of paying with real money. It also gets a tax deduction, just like you do for donating a bag of old clothes.

Here’s Where This Leaves You

Do you still need your Chapter 13 bankruptcy?  If the only reason you filed for Chapter 13 bankruptcy was to strip off your second mortgage, then perhaps you can dismiss the case and get out of bankruptcy right now. (But don’t do that until the lender records a full reconveyance of the deed of trust and a bankruptcy lawyer gives you the OK to dismiss.)

If you still have other debts to discharge, you may be able to convert your Chapter 13 to a Chapter 7 case.

A good reason to stay in your Chapter 13 is to cure arrearages that you might owe on your first mortgage. The forgiveness of your second mortgage does not alter what you owe on your first mortgage. Your Chapter 13 bankruptcy might also be managing debts that are nondischargeable, like taxes.

A knowledgeable bankruptcy expert can guide you on making the best choices.

– Leon

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

Find Leon on Google+

Will the Mortgage Forgiveness Debt Relief Act Continue in 2014?

Cut Taxes shutterstock_120256129The Mortgage Forgiveness Debt Relief Act of 2007 expired on December 31, 2013. But because Congress is still considering a bill that would extend the Act through 2014, there’s no need to worry yet if you think you might have mortgage debt forgiven in 2014.

What Is the Mortgage Forgiveness Debt Relief Act?

If a creditor (such as your mortgage lender) forgives some or all of your debt, the IRS treats the forgiven debt as income. This means that you normally have to pay income taxes on forgiven debt. (There are some exceptions to the rule that you must pay taxes on forgiven debt.)

This could be bad news if you are a homeowner who recently had mortgage debt forgiven, perhaps after a foreclosure or short sale, or as part of a loan modification.  Luckily, about seven years ago Congress came to the rescue and passed the Mortgage Forgiveness Debt Relief Act of 2007.  Under the Act, homeowners with certain types of forgiven mortgage debt don’t have to pay income tax on the forgiven amount.  (Not all forgiven mortgage debt qualifies for this tax break. For details, see Nolo’s article Canceled Mortgage Debt: What Happens at Tax Time?)

The Act originally applied to mortgage debt forgiven between 2007 and 2009, but it has been extended several times. The most recent extension, however, expired on December 31, 2013.

Will the Act Be Extended Again?

A current bill in Congress, the Tax Extenders Act of 2013 (S. 1859), sponsored by Senator Harry Reid, would extend the Act through 2014. While not much seems to get done in Congress these days, some experts think that passage of the Mortgage Forgiveness Debt Relief Act likely.  We’ll keep tabs on the issue and report back on the bill’s progress.

Filing Bankruptcy on the Eve of a Foreclosure Sale

Bankruptcy_Petition_iStock_000008359066XSmallASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

I filed a Chapter 13 bankruptcy petition yesterday, late in the afternoon. I filed in California on my own, without an attorney. A foreclosure sale is set for tomorrow. After I got my bankruptcy case number I tried to contact the parties involved in the foreclosure to give them notice of my bankruptcy filing. I couldn’t reach anyone in the lender’s foreclosure office, nor can I find an email address or a fax number to notify anyone to stop the foreclosure. What should I do? 

Trista  

Dear Trista,

If you act quickly, you might be able to prevent the sale from going through. Even if the sale occurs, it’s possible you can void it (but it won’t be easy). Here’s what to do.

(Learn how Chapter 13 bankruptcy can help you save your home from foreclosure.)

Go to the Foreclosure Sale

You should attend the actual foreclosure sale, or send a reliable person to the sale. Get there early and provide proof of the bankruptcy filing to the auctioneer before the sale starts.

If You Can’t Attend, Record a Bankruptcy Notice

If you can’t attend the foreclosure sale, immediately record a Notice of Bankruptcy in the county recorder’s office. Do this in the county where the real estate is located.

Will the Bankruptcy Stop the Foreclosure?

The filing of a bankruptcy (assuming there are no prior bankruptcy filings), creates an automatic stay which prohibits most collection efforts, including a foreclosure. Courts have held that a foreclosure sale is void or voidable, when done in violation of the automatic stay. (Learn more about how the automatic stay stops foreclosure.)

Even so, it can get awfully tricky. Doubly so if the sale is conducted and the property gets purchased by an innocent buyer – what we lawyers call a BFP (“bona fide purchaser for value”).

There is at least one key court decision stating that the foreclosure sale is still voidable even if the property is bought by a BFP. However, it can be a litigation mess for a debtor who is trying to get a foreclosure sale rescinded. (In fact, I was the lawyer for the successful homeowner in that case. See Walker v. California Mortgage Service, 861 F.2d 597.)

If the Sale Has Occurred: Record the Bankruptcy Notice Before the Recordation of the Trustee’s Deed

Even if the sale has already been held, it is very helpful to record a bankruptcy notice before a trustee’s deed is recorded. The trustee’s deed upon sale is typically not issued to the successful bidder until a few days after the sale.

The recorded notice imposes what we lawyers call “constructive notice” upon all the parties involved. Constructive notice of the sale should remove any defenses that a BFP would raise if you have to bring a legal action seeking to void the sale.

Of course, you should continue efforts to notify the lenders and the foreclosure agents.

– Leon

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

Find Leon on Google+