Foreclosure Laws

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California Foreclosure Procedure

Judicial Foreclosure Available: Yes

Non-judicial Foreclosure Available: Yes

Non-judicial Sale Typically, a title insurance company is named as the trustee to arrange the sale of the real estate.

California is famous for its one-action rule, in which a lender must carefully elect one action to take against the borrower if the borrower defaults. If the lender forecloses the deed of trust out of court, the lender has chosen one action and may not bring a lawsuit to recover a deficiency, which would be a second action. If the lender chooses to sue the borrower and obtain both a foreclosure order, and if the proceeds of the judicial sale of the real estate are not sufficient to repay the loan balance, then a deficiency for the balance. Such a suit is permitted as the lender’s one action.

California lenders rarely elect judicial foreclosures.

Preliminary Notice: Non-judicial

Notice of Sale

The notice of sale must contain the name, street address and phone number of the trustee conducting the sale and the original trustor, along with a statement warning borrowers that their property is about to be lost at a public foreclosure sale and to contact a lawyer for an explanation.

The notice must give the street address. If no street address exists, the notice must state the address of the beneficiary from whom a set of directions to the property may be obtained I they are requested in writing within ten days from the first publications of the foreclosure notice.

Advertising

A copy of the notice of sale must be posted in a conspicuous place on the property to be sold at least 20 days before the sale. If access to the property is restricted by means of a central guard gate, then the notice must be posted on the guard gate. A copy of the notice must be posted at one public place in the city where the property is to be sold (or judicial district in rural areas) at least 20 days before the sale.

Recording

A notice of trustee sale must be recorded at least 14 days before the sale.

Mailing

A notice of trustee sale must be mailed by certified mail, return receipt requested, 20 days before the foreclosure sale to the borrower, to anyone who requests notice or recorded a request and to the trustors, beneficiaries or parties at interest.

SaleProcedures: Non-judicial

Time

All sales under a power of sale in a deed o f trust will be made between the hours of 9:00 a.m. and 5:00 p.m. on any business day, Monday through Friday, at the time specified in the notice of trustee sale.

Place

The sale shall commence at the location specified in the notice of sale.

Manner

The sale must be made a public auction to the highest bidder. The trustee has the right to require every bidder to show evidence of ability to pay the full bid in cash, cashier’s check or certain bank checks. Each bid is by law an irrevocable offer to purchase. However, a higher bid cancels an earlier bid. It is unlawful and a criminal offense (a fine of $10,000 or up to one year in jail) to offer anyone consideration not to bid, or to fix or restrain the bidding process in any manner.

Postponement

Sales may be postponed by announcement at the time and location specified for the intended sale. The borrower may postpone the sale in order to obtain cash, provided the written request for postponement identifies source from which the funds are to be obtained, and the postponement is only for one business day. The borrower may obtain one such postponement.

Reinstatement

Debtors may reinstate up to five days before non-judicial foreclosure sale.

Junior

Junior lien holders may no longer redeem, so they may try to protect themselves by (1) advancing funds to bring the senior loan payments current, then foreclosing for the sums advanced; (2) bidding at the foreclosure sale so the price will be sufficient to pay off the senor and the junior liens; or (3) acquire the property by bidding at the foreclosure. If the debtor has a right to redeem and does so, the junior who purchased the home must be reimbursed. Junior liens do not reattach the property if a borrower redeems a senior lien whose foreclosure extinguished the junior. This helps borrowers by encouraging the junior to bid up to the property to fair market value at the foreclosure sale, or else lose out, giving borrowers closer to fair value at sale.

Deficiency

Lenders may not seek a deficiency judgment if (1) the foreclosure is non-judicial or if (2) foreclosure is on a purchase money obligation. The same rules do not apply to guarantee or later lien holders. The lenders may seize alternative collateral. If the lender forecloses by filing a lawsuit, then the lender can obtain both a foreclosure sale order and a judgment against the borrower for a deficiency after the court-ordered sale, but only for the difference between the judgment and the fair value of the security.

Redemption

A borrower’s right to redemption is terminated when a deficiency judgment is waived or prohibited. When redemption is permitted, after judicial foreclosure, only the borrower can now redeem and junior lien holders or "redemptionors" may not. When the lender is permitted to seek a deficiency, elects to pursue a deficiency and forecloses judicially, the borrower may redeem 12 months after sale, but a full credit bid by the lender cuts it to 3 months.

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Colorado Foreclosure Procedure

Judicial Foreclosure Available: Yes

Non-judicial Foreclosure Available: Yes

Public Trustee - A Colorado Concept

In contrast to most states, where the trustee is usually the hired gun of the lender, Colorado has an impartial, accountable, "public trustee" appointed by the Governor for each county, who handles power of sale foreclosures on request. The public trustee may take only the compensation set by law. A private lender engages a public trustee by filing with the trustee two copies of a notice of election and demand for sale, the original note or a suitable bond and a mailing list of persons who must receive foreclosures notices.

Non-judicial Foreclosure

Preliminary Notices

Advertising

A notice of sale stating the time and place of the foreclosure must be advertised in accordance with the terms of the deed of trust, but under Colorado law all deeds of trust must prescribe a weekly advertising period for the notice of sale in a newspaper of general circulation, of not less than four weeks.

Recording

The public trustee must record the lender’s notice of election and demand for sale.

Mailing

The public trustee must mail, within ten days after the publication of the notice of election and demand for sale, a copy of the same and a notice of sale as published in the newspaper, to the borrower and any owner or claimant of record, at the address given in the recorded instrument. The public trustee must also mail, at lease 21 days before the foreclosure sale, a notice to the borrower describing how to redeem the property.

Right-to-Cure Default

If the loan default is due to nonpayment, then the borrower can give notice of an intention to cure the default at least seven days before the foreclosure sale. The trustee must then, on request, investigate and tell the borrower the sum due on the loan. If, on or before 12:00 noon of the day before the date of the sale, the owners, parties or borrowers pay to the officer conducting the sale all delinquent principal and interest payments that are due as of the date of such payment, plus costs, expenses, late charges and attorney’s fees, but not future principal (since no extra debt is allowed due to acceleration) then the foreclosure must be stopped. This right my be exercised more than one time.

SaleProcedures

Date

The foreclosure sale must be held between 45 days and 60 days after the recording of the election and demand for sale.

Place

The public trustee may conduct the sale at any door or entrance to a courthouse, not withstanding the deed of trust’s provisions, or the trustee may conduct the sale at the location specified in the deed of trust.

Post-Sale Matters

The trustee will pay an excess proceeds from the foreclosure sale to creditors in order of their priority, and the balance to the grantor, who has five years to claim it. Title is conveyed by deed to the higher bidder, who may be the lender.

Deficiency

The lender may sue for a deficiency.

Redemption

The borrower has 75 days after the date of sale to redeem the premises by paying the public trustee the sum for which the property was sole, with interest. A variety of redemption periods exists for junior lien holders. Special rights exist in the case of agricultural borrowers.

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Connecticut Foreclosure Procedure

Judicial Foreclosure Available: Yes

Non-judicial Foreclosure Available: Yes

Preferred Method

Judicial foreclosure. Connecticut allows foreclosure by two strange judicial methods, strict foreclosure and decree of sale.

Strict Foreclosure

Connecticut is one of the few states that still uses strict foreclosure. In strict foreclosure, there is not foreclosure sale at all, not even at the courthouse steps. The lender must go to court and obtain a court order showing the borrower to be in default under the terms of the mortgage. At that point, title shifts to the lender. However, the borrower has a length of time set by the court to redeem the property. If the borrower fails to come up with the money during that time, then the borrower is forever barred from asserting a claim to the property and title becomes absolute in the lender. From that date, the lender has one month to record a certificate of foreclosure describing the premises, the mortgage, the foreclosure proceedings, and the date title became absolute. If the lender demands possession in the foreclosure suite, the court may issue an execution of ejectment against the person in possession of the property. Possession may also be obtained by peaceable entry, unless the mortgage says otherwise. The disadvantage to the borrower is that the lender obtains title to land that might be worth much more that what was owed on the original loan. This is fort of windfall profit for the lender.

Decree of Sale

Upon motion by any party, a court may allow a mortgage to be foreclosed by a decree of sale. In a decree of sale, the court will appoint a committee to sell the property. The court also sets the time and manner of the sale. The court further appoints three appraisers. The borrower may stop the proceedings at any time by paying the balance due on the loan. If not, the committee will make the sale. Afterwards, the sale will be ratified by the court which executes a deed to the purchaser. The grantee in the deed may obtain possession of the property by court order. A supplemental judgment can direct the distribution of the proceeds of the sale. The lender need only bring those proceeds to court which exceed the balance due on the loan, which included interests and costs.

Special Protections for Unemployed Borrowers

If a residential borrower has lived in the home as a principal residence for at least two years, and the borrower (1) has not had a foreclosure action commenced against him or her in the past seven years, and (2) is unemployed or underemployed as defined by law, then the borrower can claim protection from foreclosure under Connecticut statues. Borrowers are underemployed or unemployed under Connecticut law if the aggregate earned income of all the homeowners of the real property during the year preceding the foreclosure was under $50,000 and less that 75 percent of the average aggregate annual income during the two years prior to one year before foreclosure.

Eligibility

A court may decide that borrowers are eligible for special protection after considering two criteria: (1) the likelihood the borrower will be able to make timely payments on a restructured mortgage by the time a restructuring period ends and the likelihood of a substantial prejudice to a lender or a subordinate lien holder due to the restructuring of the mortgage debt.

Protection from Foreclosure

Under Connecticut law borrowers can get two forms of protection: foreclosure is stopped during the restructuring period. Which may last up to six months, and borrowers can obtain court ordered restructuring of their mortgage so as to eliminate overdue payments.

Restructuring the Loan

The ceiling for restructured debt is either (1) the amount of the original debt or (2) 90 percent of the fair market value of the property as determined by an appraiser at the time of the restructure. No additional debt may be restructured. Missed payments can be added to the balance of the loan in a Connecticut restructure. However, the borrower must pay interest on the amount in arrears that is added to the loan. Interest accrues on any sums added to the old mortgage debt at the end of the restructuring period, which may be fixed or variable, depending on the original note. A composite rate must be used on fixed rate loans so that the restructured debt must pay current interest rates which the main part of the loan continues at its original rate. Such composite rates are not necessary for variable interest rate loans.

Deficiency Judgment

The strict foreclosure proceeding does not include an action against the borrower for payment, but the lender can sue the borrower directly. In an independent action brought prior to or during the strict foreclosure proceeding. Once the borrower’s time limit to pay the balance due on the loan expires, the lender obtains title to the property. If the property is worth more than the balance owed on the loan, the lender cannot sue for a deficiency. Please not, the lender receives all the equity in the property without paying anything in this situation. In proceedings to foreclosure by sale rather than by strict foreclosure, additional proceedings to collect a debt from the borrower are stayed during the suit seeking a sale. If the proceeds of the sale exceed the appraised value of the property , but are not enough to pay the lender’s past due loan balance, then a deficiency judgment may be rendered against the borrower. If at the court-ordered sale, the property is sold for less than the appraised value, then no other proceedings to collect the debt from the borrower may be undertaken until one-half the difference between the debt and the appraised value is subtracted from what the borrower owes the lender.

Redemption

Redemption is determined by the court in strict foreclosure. Redemption by a junior lien holder is subject to any prior liens.

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