In 2008, the California state legislature amended the state's foreclosure rules. It added the requirement that lenders must contact borrowers at least 30 days before beginning the foreclosure process to inform them they are at threat of foreclosure and providing information to facilitate alternatives. This notice is referred to as a notice of intent to foreclose.
California Foreclosure Process
California state law allows a foreclosing lender to use either a judicial or nonjudicial foreclosure process. Most lenders use the nonjudicial process because it is cheaper and faster than its judicial counterpart. The nonjudicial process begins with the lender recording a notice of default on the property title. Subsequently, the lender publishes, posts and mails a notice of sale and then sells the property at auction. The judicial process begins with the lender filing a lawsuit. After the judge enters a judgment against the borrower, the property is sold.
Senate Bill 1137
In July of 2008, the California legislature amended the state's foreclosure laws by requiring a foreclosing lender to contact, or attempt to contact if contact is not possible, the borrower at least 30 days before initiating the foreclosure process. The lender must advise the borrower he has a right to request a meeting with a lender's representative within 14 days and it must provide the borrower with the toll-free phone number of the Department of Housing and Urban Development, or HUD, to find a HUD-certified housing counselor. The law applies only to loans for owner-occupied homes issued between January 1, 2003 and December 31, 2007. These provisions expire January 1, 2013.
The purpose of SB 1137 is for the lender to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure. A subsection of SB 1137 states that a loan servicer is deemed to be acting in the best interest of all parties if it agrees to implement a loan modification or workout plan if the loan is in default and that would result in the lender netting more money than it would through foreclosure.
NOD Filing Requirements
SB 1137 also requires the lender to include a declaration with the notice of default that it has either contacted the borrower or has exercised due diligence in attempting to contacting the borrower to fulfill the requirements of the law. Alternatively, it can file a declaration that the borrower surrendered the property to the lender.
Mary Gallagher runs Mary Gallagher Planning (mgaplanning.com), an urban planning and consulting business in San Francisco. She is the former assistant planning director for San Francisco and planning director for San Mateo. Gallagher has been writing about real estate, development and land use for numerous websites since 1995. She holds a master's degree in historic preservation planning from Cornell University.