I caught a news article recently in a nationally syndicated web service that will be of interest for Humboldt County and Californiadistressed homeowners going thru a foreclosure process. A law firm in Southern California representing distressed home owners in foreclosure and home owners who had been foreclosed on is now taking the foreclosing lenders to court, challenging the lenders right to a non-judicial foreclosure.


California is one of the few states that allows lenders to foreclose on homes without a court proceeding. A lender can initiate a Notice of Default, wait 90 days, send out a Notice of Sale, and then 21 days later take the property back at auction. The process is systematic, efficient, and requires no judicial interaction.


The problem develops when a homeowner is attempting to pursue a loan modification. How many times have I spoken with a distressed homeowner who was thinking that the lender was working on a loan modification and auction day arrives. The lender forecloses and takes back the property. When challenged by a frustrated, distressed homeowner, the customer service rep typically responds under the guise of missing documentation or “non-responsiveness” from the homeowner. In many cases, it’s the lender at fault because of there keen ability to lose documents, failure to communicate with the homeowners, and the rampant turnover of employees in the lender’s loan servicing departments.


The law firm is attempting to demonstrate in court how lenders need to be held accountable for their actions, or some cases, their inactions. In some cases, the lender has ignored a home owner who may have qualified under Obama’s Home Affordability Stability Plan (HASP).


It will be interesting for Eureka, Arcata, Fortuna, and McKinleyville area distressed homeowners working thru the foreclosure process to see how the courts respond to this legal action.