Legal Question in Real Estate Law in California

Many lenders seem to have a policy that if you are not delinquent on your loan payments, they will not discuss relief like short sales, loan modification, principal reduction, etc. with you, because, if you can pay on time, you obviously don't need the relief.

So, the borrower stops paying and starts the negotiation process to find a short-sale buyer and get the offer approved, or submits an application to stretch out the loan, or whatever.

Then, after several months of no results, a foreclosure happens. This may be policy, or it may be an accident because Department X at Megabank doesn't know what Departments Y and Z are doing, or pretending to do. I truly don't know, but this foreclosure-during-negotiations back-stabbing seems to be happening to quite a few LawGuru users lately.

Now, the question remains: How does the homeowner not know the foreclosure is coming in all these cases, including yours? I know the usual lender practice is to send the notices by both certified mail and regular (first class) mail, because they know some people just don't call for their certified stuff. The notices themselves are not very clear - too much legal jargon and too few plainly-stated facts. Could be the addresses don't open them, don't read them, or don't understand them when they do read them. It's also possible they read and understand them, but don't believe there actually will be a trustee sale because they're in negotiations.

The starting points for investigating whether the pre-foreclosure procedures were followed is to obtain copies of the recorded notices from the county recorder, and as much of the mailed notices as possible, including the proofs of mailing and delivery or other postal service records showing mailing and delivery of the certified notices. Does your paper trail include such items? If so, what is there about it that points improper recording?

If the only thing that makes the recording improper is that you were in negotiations, do you have anything showing the lender's promise to forbear so long as negotiations were under way? That would be very helpful. If there is no express promise to forbear, your case may be weak and you may be, or become, a victim of the lender's bad mistake or dirty trick, with limited or no recourse.

In any event, more details here would be helpful. If you believe you have a good case, see a lawyer in your county.