1. What Is a Wrongful Foreclosure?
A wrongful foreclosure occurs when a lender or trustee violates foreclosure statutes or breaches the loan agreement while taking a home.
California follows nonjudicial foreclosure laws under Cal. Civ. Code §§ 2924–2924k. Any failure to comply with these strict procedures may give homeowners grounds to challenge the sale.
Common errors include:
- Recording a Notice of Default before required borrower contact (§ 2923.55)
- Proceeding with dual tracking—foreclosure while a loan modification is under review (§ 2923.6)
- Improper notice or posting of sale documents
- Foreclosing without proving *legal authority or assignment of the note
2. Breach of the Homeowner Bill of Rights (HBOR)
Since 2013, HBOR has provided critical protections against lender misconduct.
Homeowners can seek injunctions or damages if servicers fail to:
- Assign a Single Point of Contact (SPOC)
- Review complete loss-mitigation applications
- Provide written denial reasons and appeal rights
- Halt foreclosure until review is complete
Violations may entitle borrowers to statutory penalties and recovery of attorney’s fees if successful (Cal. Civ. Code § 2924.12).
3. Procedural Defects and Lack of Standing
A foreclosure may be voidable if:
- The trustee wasn’t properly substituted
- Assignments of the deed of trust were fraudulent
- The lender lacked standing to foreclose at the time of sale
California courts (e.g., Yvanova v. New Century Mortgage Corp., 62 Cal.4th 919 (2016)) have recognized borrowers’ limited right to challenge assignments that are void, not merely defective.
4. Breach of Contract or Good Faith
If the lender violates the terms of your loan agreement, misapplies payments, or fails to follow modification terms, that can form the basis of a wrongful foreclosure claim.
The covenant of good faith and fair dealing implies that servicers must act honestly and reasonably when enforcing loan rights.
5. How to Protect Your Rights
- Keep copies of all notices and correspondence.
- Verify trustee identity and sale dates directly from official records.
- Consult a qualified real-estate or foreclosure defense attorney before filing any action—timing is crucial.
- Consider injunctive relief before the sale occurs; once the property is sold, the remedy may be limited to damages.
Wrongful foreclosure suits are complex but winnable when grounded in documentation and statutory violations. Knowledge is your first line of defense.
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