Legal Question in Real Estate Law in California
Pre-emptive Default Declared By My 2nd Mortgage Holder
On Fri - 3/31/2006 I verbally - telephone - agreed to a modified payment plan addressing only two monthly pymt dates with my 2nd Deed investor. The 1st pymt was to be received on 04/03/06 with the 2nd pymt made by the EOW or 04/07/06 thus achieving compliance with the Note. Also during the brief conversation of 03/31 the investor indicated that he would not place the loan into default status and I subsequently relied on this statement. After submitting my 1st pymt as agreed (I did exclude the late fees & can explain the reasoning) inexplicably the investor files a default on Thursday (04/06/06) the day before my 2nd pymt was EVEN DUE on 04/07/06 And he returned both checks + added an $1,800 foreclosure fee to my two pymts and late fees. My understanding is he was obligated to sned a written summary of our modified pymt schedule agreed to by phone and then allow me the full window of time to comply. Instead he references the two attempted payments by me as a default per the original note - which of course being due March and April 1st constitutes a default vis a vis April 4th and April 7th or later. Would really benefit from concise, accurate legal advice as the trustee sale process moves along - thanks in advance.
2 Answers from Attorneys
Re: Pre-emptive Default Declared By My 2nd Mortgage Holder
You need to bring this loan current ASAP. A lender is not required to work out any modifications with you, nor come to any agreement relative to bringing past due payments current. However, if they DO choose to come to some agreement with you, in order to be legally binding, it must be in WRITING and must have been negotiated with some officer of the lender who is authorized to enter into such arrangements. You contend that the lender was "obligated" to send you something in writing regarding your "modification"--there is no such legal obligation. You are at risk of foreclosure, so do what you can to cure the arrearages. Incidentally, the foreclosure fees are set by law and are added on to pay for the trustee's fees in doing the paperwork, recordaton, mailing, and conducting the sale.
Re: Pre-emptive Default Declared By My 2nd Mortgage Holder
The lender's actions are legally justified, and in his mind probably morally justified as well; he was probably angered by your sending payments minus the late fees, which was probably, to his thinking at least, an un-agreed-upon modification of the default workout the two of you had negotiated - whether or not you can explain why you did it.
Default doesn't necessarily lead to foreclosure. You can head off foreclosure by curing the default according to the terms of the original note. This is a statutory right; you are entitled to reinstatement.
There are some textbook theories under which you could try to defend against the foreclosure, such as waiver and estoppel, but these only have academic merit because going to court and asserting them against a forthcoming trustee's sale would be more expensive than curing, and the chances of losing would be very high.
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