Non-Judicial Foreclosure Against Deceased Borrowers in California
Can a lender foreclose on a deceased borrower in California? The answer is yes, but recently enacted California legislation puts restrictions on mortgage servicers which effectively prevent successors in interest to deceased borrowers from being foreclosed upon.
Non-Judicial Foreclosures in CaliforniaA non-judicial foreclosure (trustee's sale) brought under a power of sale to enforce a deed of trust is an action to enforce the lien against the property that is subject to the lien, not against the borrower. If the lender initiates a non-judicial foreclosure, the borrower's estate has no personal liability if the loan is a "purchase money mortgage". The lender must look exclusively to the property securing the debt and cannot obtain a deficiency judgment.
California Homeowner Bill of Rights (HBOR)Beginning in 2008, California faced a foreclosure crisis, with rapidly dropping home values and skyrocketing job losses. Indiscriminate lenders were commencing foreclosure proceedings while borrowers and their families were in the middle of applying for a loan modification. In response, California's Homeowner Bill of Rights (HBOR) enacted in 2013 stopped mortgage servicers from engaging in abusive practices that were leading to unnecessary foreclosures on families throughout the state. However, the Homeowner Bill of Rights did nothing to address helping the most common scenario of a surviving widow owns her home, but is not listed on the mortgage loan.
California Homeowner Survivor Bill of RightsEffective January 1, 2017, a new law went into effect in California called the Homeowner Survivor Bill of Rights (California Senate Bill 1150, adding section 2920.7 to the California Civil Code, effective until January 1, 2020) which effectively mitigates the power of mortgage servicers to foreclose on an affected property. The law now requires mortgage servicers and lenders to provide successors in interest to deceased borrowers with key information about outstanding mortgages previously held by the deceased borrowers, requires servicers and lenders to allow successors in interest (widowers, widows, and the surviving family of a deceased borrower) to assume those mortgages and to apply and be considered for foreclosure prevention alternatives in connection with those mortgages, and provides judicial enforcement mechanisms for use by successors in interest to compel lenders and servicers to comply with the bill's provisions.