July 18, 2024

mortgage lendersIt's a shame, but in today's San Diego real estate environment, home lenders have taken on the personification of evil.  It seems we are always hearing about San Diego banks or home mortgage lenders who do not want to work with homeowners in trouble.

Though this may have held some validity a year or two ago, it is just the opposite today. Effective July 1, 2008, a new California law mandates that the lenders try to contact and work with homeowners prior to filing a notice of default. This requirement adds about an additional 30 days before a notice of default can be filed. From the notice of default date, there is a 90 day period at the end of which is a twenty-one day advertising period.  Only after this advertising of the pending foreclosure, can the actual sale or transfer of deed occur.

 So with all this time, why do we still hear ‘evil lender' stories?  Perhaps one reason is that many San Diego homeowners owe more than their homes are worth. They are under the misconception that they can give the deed back to the lender, avoid foreclosure and perhaps receive a less severe credit rating ding. The problem arises when there are junior liens on the property. These junior liens can be anything from an equity line to a personal loan secured by the home.

A lender may not want to take a deed in lieu of foreclosure because taking title in this manner does not extinguish any junior liens.  However, a foreclosure by a senior lien holder essentially wipes out all junior liens.

Also, a borrower cannot simply transfer title to the lender without the lender's permission.  Because some lenders have refused to negotiate and accept the deed in lieu of foreclosure, some creative homeowners have quitclaimed the property to the lender anyway, and have recorded the instrument without the lender's permission.

In 1993, the California legislature passed a statute to protect lenders from involuntary (and invalid) transfers of real property to the lender.  The lender must record a "notice of nonacceptance of a recorded deed" in the county where the real property is located.   Redelivering a grant of the real property back to the original homeowner (e.g., borrower) does not legally retransfer the title.  (Cal. Civ. Code § 1058.5.)

A few previous related posts:

California Home Foreclosure Filings fall 32%

San Diego Real Esate Sales Increase

San Diego Condominium Sales Price Appreciation

#1 Key To Purchasing Real Estate in the San Diego Market

San Diego California Home Sellers Lose Big

The San Diego California Real Estate Great Depression

1.2 Million Homes in Foreclosure

Survey Says Home Values Must Fall Another 14%

A Record Number of Homeowners Avoid Foreclosure in the Second Quarter

Jumbo Financing and the Impact on The San Diego Real Estate Market

san diego residential real estate


10 thoughts on “San Diego Home Mortgage Lenders … Hardball or Common Sense?

  1. There’s an extremely simple way to avoid foreclosure: make your mortgage payments on time every month. If you are unwilling or unable to do so, then you will lose your house. This is exactly what you agreed to in the mortgage contract that you signed. Expecting the rest of us to “bail you out” is a morally indefensible position.

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  2. Why always blame somebody else? What happened to self responsibility and self accountability? If you cannot afford the house payments then don’t buy a house. If you cannot qualify for a fixed-rate 30-year loan, then that means you are not qualified! It’s your responsibility to know how much you can afford. It’s as simple as that.

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  3. Americans’ Debt Load Threatens the Entire Financial System. Years of spending more than they earn have left a record number of Americans standing at the financial precipice. They have amassed a mountain of debt that grows ever bigger because of high interest rates and fees.

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  4. When I saw how the housing prices were going up, up, up and most peoples’ salaries didn’t pay enough to afford them, I knew the market was going to crash three or four years ago. Some real estate dealers and owners were just so incredibly greedy. They ask for a sales price or rent not based on how much they really need to charge to recover their expenses and make a reasonable profit, but on getting the maximum money for themselves, without regard for the effect on society.

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