In late September and early October several major lending institutions began voluntarily halting foreclosures in select states while they reviewed their foreclosure processes. This action is in response to findings that questioned whether some lenders/servicers were following the correct procedures to foreclose on a property.
MAKING SENSE OF THE STORY
- To date, Bank of America is the only lender that has extended its foreclosure moratorium to California, where the vast majority of foreclosures are conducted without a court order.
- Non-judicial foreclosures in California, however, do have legal requirements that lenders must follow. For example, California law requires that lenders for certain mortgage loans made between Jan. 1, 2003, and Dec. 31, 2007, attempt to make contact with borrowers to discuss options for avoiding foreclosure at least 30 days before filing a notice of default. Lenders also must sign a declaration in the notice of default stating that they tried to contact the borrower, made contact with the borrower, or fall within an exception (such as a bankruptcy filing).
- This halting of foreclosures is a voluntary action taken on the part of these lenders/servicers and has not been mandated by either the states or the federal government. The participating lenders and servicers believe their internal review processes should take anywhere from a few weeks to 30 days to complete.
- It is important to note that Bank of America is temporarily suspending foreclosure sales, but not necessarily halting its actions during other stages of the foreclosure process.