How to Postpone a Trustee Sale in California
We see many clients who have had their properties sold at a trustee sale while they were in the process of applying for a loan modification. Many completed a trial modification under the federal government’s HAMP loan modification program and still lost their homes to foreclosure. Unfortunately, many borrowers don’t understand how mortgage servicers typically work. One day you may think you're getting a loan modification approved, and the next day either a realtor shows up letting you know your home has been sold or a sheriff shows up to evict you. We see it all the time in California--the mortgage servicer's right hand works on a a borrower's loan modification application while the servicer's left hand aggressively pursues the foreclosure.
If you are a California resident with a trustee sale date scheduled, your foreclosure may be postponed for up to one year according to California Civil Code Section 2924g(c)(1). Some possible reasons for postponement are outlined below. Keep in mind that if a sale is postponed for more than 365 days, a new notice of trustee sale must be posted and filed.
The most common reason for a trustee sale postponement is the bank and the borrowers have agreed to postpone the sale. The agreement to postpone may come about through the homeowner requesting more time to cure a mortgage default or a formal agreement, such as a forbearance agreement. Many homeowners do not realize that when they enter into a forbearance or trial modification agreement, the foreclosure process continues unless the agreement explicitly provides for a postponement of the foreclosure sale. Without an explicit postponement, if the borrower missses an agreed-upon mortgage payment, the property can be sold on the next scheduled foreclosure sale date without further notice. Many homeowners, who are either attempting a loan modification, have completed a trial modification, or are trying to short sale their property, have had their homes sold at a foreclosure sale without further notice.
When a homeowner files for either Chapter 7 or Chapter 13 bankruptcy protection, an automatic stay stops all debt collection efforts, including a foreclosure. It's important to understand that filing for bankruptcy does not automatically cancel a foreclosure, as many may believe. Instead, it delays the sale of the property until the homeowner resolves the debt or, in many cases, the lender gets approval from the bankruptcy court to continue the sale (this is called "lifting the stay"). Bankruptcy is an effective tool to stop foreclosure if you will have sufficient income to repay your mortgage through a Chapter 13 bankruptcy plan. If you file for Chapter 7 bankruptcy, you must be able to bring your past due mortgage payments current or your foreclosure will continue. We recommend consulting a bankruptcy attorney early in the foreclosure process to figure out what is best for you and your situation.
A trustee sale may be postponed by the lender. The lender may decide to postpone the sale for a few reasons: the lender may think it will be paid in full or that the foreclosure is wrongful, or the homeowner may be in the process of a loan modification or short sale approval.
The trustee may choose to postpone the sale. Typically reasons for this is that the trustee is unable to reach the lender for sale instructions or there is pending litigation.
Operation of Law
Although rare, a judge may order the postponement of the sale. The order to postpone is usually in the form of a temporary restraining order, or TRO. The most likely reasons for a judge issuing such an order would be that there are material questions regarding the lender's right to foreclose or there is a plausible allegation of fraud against the lender.