Source: http://ashouri.com/non-judicial-foreclosure/
Timestamp: 2017-07-20 22:44:43
Document Index: 416429389

Matched Legal Cases: ['§2924', '§2924', '§2924', '§2924', '§ 2923', '§ 2923', '§ 2923', '§ 580']

Non Judicial Foreclosure – Ashouri Law Office
Non Judicial Foreclosures, the Process:
STEP ONE - NOTICE TO CURE AND INTENTION TO ACCELERATE
Generally, Borrower/Owner has missed between 1-3 months of payments.Lender sends letter demanding payment.Sometimes Lender will not send this letter and just go to Step Two.Under certain cases Request for Special Notice must be filed pursuant to Civil Code §2924b(a)
STEP TWO - NOTICE OF DEFAULT AND ELECTION TO SELL UNDER DEED OF TRUST (Civil Code §2924c)
Borrower/Owner did not pay full amount due and owing.Lender Records a Notice of Default and mails Borrower/Owner a copy by regular and certified mail. Lender is also required to give notice to any party who has recorded a Request for Special Notice. Substitution of Trustee may also be recorded at this time.
STEP THREE - NOTICE OF TRUSTEE’S SALE (Civil Code §2924f)
At least 3 months have passed since Notice of Default was recorded, and Borrower/Owner did not pay the entire past due amount.Lender records the Notice of Trustee’s Sale and mails Borrower/Owner a copy.Sale is set at least 20 days after recording the Notice of Trustee’s Sale.
STEP FOUR - FORECLOSURE SALE (Civil Code §2924h)
STEP FIVE - NOTICE TO QUIT (EVICTION NOTICE)
New owner has recorded the trustee’s deed upon sale.Borrower has 3 days to vacate after getting Notice to Quit.
STEP SIX - UNLAWFUL DETAINER (EVICTION)
Borrower receives Summons and Complaint.Borrower has 5 days to answer or risk default.Trial set within 21 days of service of Complaint.
STEP SEVEN - LOCK OUT BY SHERIFF
Sheriff will post 5 day Notice to Vacate.Borrower locked out on or after posted date.
Note in California: Under California's Perata Mortgage Relief Act (Civil Code § 2923.5 et seq.), applicable to loans secured by owner-occupied residential real property containing no more than four dwelling units and recorded from January 1, 2003 to December 31, 2007, lenders (mortgagees, trustees, beneficiaries or their agents) may not file a notice of default until 30 days after (i) initial contact with the borrower; or (ii) satisfying statutorily-mandated “due diligence” requirements for contacting the borrower. (See Civil Code § 2923.5(a),(g),(i)--"owner-occupied" means borrower's principal residence "as indicated to lender in loan documents" ; Mabry v. Super.Ct. (Aurora Loan Services) (2010) 185 Cal.App.4th 208) Before filing a notice of default, the lender must contact (or attempt to contact) its borrower in person or by telephone to assess the borrower's financial situation and explore options for avoiding foreclosure. During the initial contact, the borrower must be advised of his or her right to request a subsequent meeting and, if requested, the lender must schedule the meeting within 14 days. (Civil Code § 2923.5(a)(2)-- the lender must provide the borrower with HUD's toll-free telephone number for purpose of finding HUD-certified housing counseling agency at initial or subsequent meeting; see also Mabry v. Super.Ct. (Aurora Loan Services), 185 Cal.App.4th 208)
Foreclosure Notice Timeline
Within 10 days of recording the Notice of Default, copies of the recorded document (NOD) are mailed to the Borrower(‘s) and anyone requesting Special Notice.
At the end of 3-month, pre publication period, the Lender can then instruct the Trustee to set a sale date
Publish Notice of Sale, post Notice of Sale, mail Notice of Sale.
Send beneficiary request
Record Notice of Trustee's Sale
The property sale is postponed to a new sale date or the property is sold to high bidder, or the property reverts to the foreclosing beneficiary
POSSIBLE TAX CONSEQUENSES
A. Yes. However, the income is taxed differently depending on several factors, including whether there was a foreclosure, a deed in lieu of foreclosure given to the lender, or a short sale (a sale where the lender agrees to reduce the amount owed in order to facilitate a sale), and whether the underlying debt is ?recourse? (the borrower is personally liable for the debt) or ?nonrecourse? (the borrower is not personally liable for the debt).
A. A foreclosure refers either to a trustee's sale foreclosure (not a judicial proceeding) or to a judicial foreclosure (a judicial proceeding). A deed in lieu of foreclosure means that the lender has agreed to accept title to the property and the borrower transfers title to the lender rather than waiting until the lender forecloses on the property. A deed in lieu of foreclosure is not a special instrument. It is simply a conveyance of the property to the lender by grant deed or quitclaim deed; and, in exchange, the lender cancels the promissory note secured by the real property. In this way the lender can avoid the foreclosure process to regain title to the property.
A. A foreclosure proceeding, whether through a trustee sale or judicial foreclosure, and a deed in lieu of foreclosure given to the lender are treated the same as a sale for income tax purposes. The foreclosure or deed in lieu of foreclosure is reported on the taxpayer's tax return as a sale or exchange in the year the foreclosure is finalized or the deed in lieu of foreclosure is given to the lender.
In a foreclosure or deed in lieu of foreclosure, the owner can receive "capital gain or loss" as in any other sale of real property (i.e., be subject to capital gains taxation or receive a credit for a capital loss). Additionally, the owner can receive "forgiveness of debt" income. This is also referred to as "cancellation of debt" income. Whether the owner is subject to taxation on this income may depend on whether the debt is "recourse" or "nonrecourse." If the debt is a recourse debt, the owner may be deemed to have received taxable income in the amount of debt that is forgiven by the lender (except in certain situations discussed below where the owner will not be taxed). If the debt is nonrecourse debt, there is no taxable income from forgiveness (or cancellation) of debt, but the owner may be still be subject to capital gains taxation.
Q 4. What is "nonrecourse" debt?
When the loan is made to purchase a one-to-four unit property and the borrower intends to occupy at least one of the units, or
When the seller carries back financing for all or a portion of the purchase price of any real property. (Cal. Code Civ. Proc. § 580b.)
Q 5. What is "recourse" debt?
Q 6. How is the amount realized (taxable income) calculated for a "recourse" debt in a foreclosure?
However, if the cancelled debt amount is considered "qualified principal residence indebtedness" pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, there will be no taxation on this forgiveness of debt (cancellation of debt) income. See Question 9 for a definition of "qualified principal residence indebtedness."
The taxpayer's adjusted basis in the property is $200,000.
FMV $250,000 Less Adjusted Basis $200,000 Capital Gains $ 50,000
Amount Owed 300,000 Less FMV $250,000 Ordinary Income $50,000
FMV $400,000 Less Adjusted Basis $200,000 Capital Gains $200,000
Q 7. How is the amount realized (taxable income) calculated for a "nonrecourse" debt in a foreclosure?
A. If the debt is nonrecourse, meaning the owner is not personally liable for any deficiency (beyond the value of the property), the amount realized is the difference between (a) the greater of: (i) the FMV or (ii) the entire outstanding debt; and (b) the adjusted basis of the property.
This amount is treated as capital gains and there is no taxation for forgiveness of debt income. Even though the adjusted basis might exceed the FMV and the outstanding debt, generally no capital loss would be allowed because nearly all nonrecourse debt is associated with a principal residence. (Capital losses are applicable only to investment property.)
Greater of FMV ($250,000) OR Unpaid Debt ($300,000)
Greater of the above $300,000 Less Adjusted Basis $200,000 Capital Gains $100,000
A . A deed in lieu of foreclosure is treated as a sale and taxed just like a foreclosure.
For a complete and other related articles visit California Association of Realtors