Source: http://journal.firsttuesday.us/judicial-foreclosure/257/
Timestamp: 2017-04-30 05:10:34
Document Index: 667068227

Matched Legal Cases: ['§726', '§2924', '§ 726', '§726', '§701', '§580', '§729', '§729', '§729', '§729']

Judicial foreclosure | first tuesday Journal
Posted by ft Editorial Staff | May 5, 2007 | Latest Articles | 0 | This article outlines the judicial foreclosure process, and presents the rights exercisable by property owners and junior lienholders before and after a judicial foreclosure sale.
The litigation guarantee lists all parties with a recorded interest in the property and their addresses of record. The litigation guarantee ensures that all junior lienholders of record are named and served, and their interests are eliminated at the judicial foreclosure sale. If a junior lienholder is not named as a defendant:
· his lien is not affected by the outcome of the foreclosure proceedings; and · his lien on the property being foreclosed remains of record. [CCP §726(c)]
At the time the lawsuit is filed, the foreclosing lender records a Notice of Pending Action against the secured property, called a lis pendens. The lis pendens places a cloud on the title of the secured property, giving notice of the judicial foreclosure action and subjecting later acquired interests by buyers, tenants or lenders to the result of the litigation without their being named or served with a lawsuit.
After recording the lis pendens, the title company issuing the litigation guarantee is asked to date down the policy through the recording date of the lis pendens to discover any intervening recordings which might affect the proceedings, such as federal tax liens. Reinstatement Until the court enters a judgment ordering the sale of a property, called a foreclosure decree, the borrower has the right to bring the delinquencies in the note and trust deed current during a period of time called the reinstatement period. The borrower reinstates the loan prior to the foreclosure decree by tendering payment of:
· accrued interest; and · the lender’s foreclosure costs such as litigation expenses. [CC §2924c]
The court’s final judgment, referred to in foreclosure proceedings as a foreclosure decree, orders the sale of the real estate to satisfy the outstanding debt and cover foreclosure sale expenses incurred by the lender. [CCP § 726(a), (b)] The foreclosure decree also states whether the borrower will be held personally liable for any deficiency in the property’s fair market value which may later exist at the time of the foreclosure sale. [CCP §726(b)]
· posted in a public place in the city or judicial district where the property is located, and on the property itself; and · published weekly in a local newspaper of general circulation. [CCP §701.540(g)]
Often, the foreclosing lender is the highest, or only, bidder at a judicial sale. When intending to seek a deficiency judgment, the lender must bid no less than an amount it believes the court will set as the fair market value (FMV) of the property. If he allows the property to be bid in at the sale for less than its FMV, the lender incurs an uncollectible loss for the difference. Judicial sale completed
Redemption follows foreclosure On a judicial foreclosure, a trust deed which secures a seller carryback note as a lien solely on the property sold, or a lender’s purchase-assist loan as a lien on a buyer-occupied, one-to-four unit residence, the property owner: · is not liable for any deficiency in the property value to fully satisfy the debt [CCP §580b]; and · has three months after the judicial sale to redeem the property by paying off the entire debt and costs. [CCP §729.030]
However, if the owner is liable on a recourse debt for a deficiency in the property’s value, the owner has up to one year after the judicial sale to redeem the property. [CCP §729.030] The property can only be redeemed by the owner or the owner’s successor-in-interest since all junior lienholders are wiped out by the judicial foreclosure sale, ending their period for redemption. Successors-in-interest to the owner are lienholders or buyers who acquire the owner’s interest in the property by deed prior to the judicial foreclosure sale. [CCP §729.020; 15 Calif. Law Revision Commission Reports 2001]
For example, a junior lienholder holds a trustee’s foreclosure sale and bids in the property and receives a trustees deed prior to completion of the senior lienholder’s judicial foreclosure sale. Since the junior lienholder owns the property at the time of the judicial foreclosure sale, he is considered the owner’s successor-in-interest. As the successor-in-interest to the owner, the junior lienholder is entitled to redeem the property after the senior lienholder’s later judicial foreclosure sale, subject to the redemption period rights which are available only to the owner. [CCP §729.020]
At the deficiency hearing, the lender is awarded a money judgment calculated as equal to the sums of all amounts remaining unpaid on the note and trust deed, minus the fair market value (FMV) of the property on the date of the foreclosure sale rather than the amount of the underbid, plus the unpaid property taxes. Within one year after the foreclosure sale, the owner redeems the property for the amount of the underbid entered by the lender, plus interest on that amount from the date of the foreclosure sale.
The redemption amount is less than the fair price the court set for the lender’s security interest since the lender’s underbid was less than the fair price of the lender’s security interest in the property. As a result, the difference between the amount of the underbid and the greater fair price of the lender’s security interest becomes an unrecoverable loss for the lender, since the owner redeemed the property and paid the money judgment. However, the property is still encumbered by the unpaid property taxes.
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