Los Angeles bankruptcy is governed by strict federal and state statute. Lenders are required to abide by specific guidelines through all of the steps of the bankruptcy proceeding.
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There are two types of foreclosure in California. There are judicial foreclosures when the lender actually sues the owner in order to have the property foreclosed on. And secondly‚ there are non-judicial foreclosures‚ which are more common in California. Non-judicial foreclosure is when lenders relinquish their rights to collect from borrowers and simply seek the proceeds from the sale of the property. Non-judicial foreclosures are favored by lenders because the process occurs quickly without the necessary costs of litigation.
Non-judicial foreclosures in California are governed by the Civil Code 2924.
Kekauoha-Alisa‚ et al. v. Ameriquest Mortgage Company‚ et al. is a recent bankruptcy case decided by the Ninth Circuit Court of Appeals. The problem in this case was that Ameriquest Mortgage Company (Lender) failed to publicly announce the foreclosure sale postponement for the property owned by Kekauoha-Alisa (Borrower).
Borrower refinanced the mortgage to her property in Hawaii‚ and executed a promissory note to the Lender. Because the borrower defaulted on this loan many times‚ the lender initiated foreclosure proceedings to begin in May of 2005. Three days before the foreclosure sale‚ the borrower filed for Chapter 13 bankruptcy.
Upon the filing of a Chapter 13 bankruptcy an automatic stay is placed on the sale of all of the property involved in the bankruptcy proceedings. Statute in Hawaii allows a mortgagee or the mortgagee’s representative to postpone a foreclosure sale after making a public announcement. See Hawaii Revised Statute §667-5.
The lender complied with this policy and the foreclosure sale was postponed three times. On the fourth time‚ the lender’s counsel sent a firm secretary to the scheduled auction. Because the secretary was inexperienced‚ she only asked people within the group if they were interested in the borrower’s property. She failed to announce or post notice to the group that was present. The lenders wanted the foreclosure sale to proceed‚ so they asked the court for relief from the stay. This relief was granted and the borrower’s home was sold.
The borrower filed a complaint with the bankruptcy court alleging that by allowing the property to be sold‚ the automatic stay was violated. Additionally‚ borrower argued that the lenders had breached the terms of the mortgage contract between the parties‚ and violated the requirements stipulated in the state code regarding non-judicial foreclosure. Borrower even argued that the lender was engaging in unfair and deceptive trade practices.
The bankruptcy court cited relevant law in this case. There is a public announcement requirement in state statute as well as in the mortgage contract. Also‚ where no notice is given to the public of a foreclosure sale postponement‚ the postponement is considered improper. When there is an improper postponement‚ the lender can be accused of engaging in unfair and deceptive trade practices.
The court in this case held that by failing to publicly announce the foreclosure sale‚ the lender violated Hawaii statute. Because of this violation‚ the court found that the lender had engaged in deceptive practices. The sale of borrower’s property was voided and the case was remanded to the bankruptcy court to determine incidental damages for the borrower.
If you are considering filing for bankruptcy‚ contact Encino bankruptcy attorneys at Cal West Law to schedule your free consultation. Call (800) 568-0707.
Kekauoha-Alisa‚ et al. v. Ameriquest Mortgage Company‚ et al.‚ No. 09-60019 (9th Cir. Mar. 26‚ 2012).