Publication
Recently Enacted California Assembly Bill 2424 and Its Impact on Non-Judicial Foreclosure Procedures
The California legislature recently passed Assembly Bill 2424, which, as more fully explained below, will have a significant and imminent impact on the nonjudicial foreclosure process of residential real estate.
Existing foreclosure laws impose certain requirements on lenders or foreclosing parties before exercising a power of sale under any mortgage or deed of trust (i.e., recordation of a notice of default, providing copies of a recorded notice of default, providing notice related to sale, etc.).
Assembly Bill 2424 calls for a codified expansion of these requirements as they relate to residential real property.[1] This expansion, effective January 1, 2025, is summarized[2] as follows:
1. A lender or foreclosing party must provide notification to third parties, such as a family member, HUD-certified housing counselor, or attorney, who have recorded a request to receive copies of any notice of default and notice of sale at specified times in the loan and foreclosure process. This notification is intended to allow the third party to assist the borrower in avoiding foreclosure.
2. A scheduled foreclosure sale must be postponed for at least 45 days following the scheduled date of sale if the trustee receives, at least 5 business days before the scheduled date of sale, from the mortgagor or trustor, a listing agreement for the sale of the property subject to the power of sale.
3. If a scheduled foreclosure sale has been postponed pursuant to the procedure set forth in Paragraph 2 above, and the trustee receives, at least 5 business days before the scheduled date of sale, from the mortgagor or trustor a copy of a purchase agreement[3] for the sale of the property at least 5 business days before the scheduled date of sale, the trustee shall postpone the scheduled date of sale to a date that is at least 45 days after the date on which the purchase agreement was received by the trustee.
4. A lender or foreclosing party must provide the trustee with a recent[4] assessment of the fair market value (FMV) of the property subject to the power of sale at least 10 days prior to the initially scheduled trustee’s sale, with the understanding that the trustee will be prohibited from selling the property at the initial trustee’s sale for less than 67% of the FMV amount. If the property remains unsold after the initial trustee’s sale, the trustee must postpone the sale for at least 7 days and then may sell the property to the highest bidder.
Each of the foregoing codified requirements renders the foreclosure process lengthier[5] and more costly for lenders or foreclosing parties. Lenders should proceed with caution in foreclosing on residential real property, ensuring that they are not running afoul of the new requirements set forth in the newly enacted bill. Where appropriate, it is recommended that lenders or foreclosing parties confer with legal counsel before proceeding.
Footnotes
These laws apply if the collateral at issue is residential real property containing no more than four dwelling units, irrespective of whether the loans are for commercial or consumer purposes.
See amendments to California Civil Code Sections 2923.5, 2923.55, and 2924f, and the addition of new California Civil Code Section 2932.2 for details.
The purchase agreement must be fully executed with a purchase price amount equal to or greater than the amount of the unpaid balance of all obligations of record secured by the property, and should include other specific information including the name of the buyer, closing date, etc.
The FMV assessment must be made within 6 months of the initially scheduled trustee’s sale and determined by: (1) an opinion of a licensed real estate broker, (2) an appraisal from a licensed appraiser, (3) a value from a commercially utilized automated valuation model, or (4) a value from a computerized property valuation system that is used to derive a real property value.
In culmination, the postponements described by items #2 and 3 above can result in a total of 90 or more days.
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