The one action rule in California says that if you hold a debt secured by real property, you are required to foreclose against the real property to collect on the debt. You don’t have a choice of saying you don’t want to sell the property. Instead of foreclosing, you’ll sue the debtor for the full amount owed. The one action rule limits a lender’s options once the real property-secured loan goes into default. It must initiate a foreclosure, whether judicial or non-judicial. It can’t pursue the borrower in a civil action instead for a money judgment for the full amount of the loan.
How Often Do Lenders Fail to Comply with Foreclosure Procedural Requirements? What are the Effects?
It happens but it’s unusual, because most lenders use professional foreclosure services to process everything. It’s not as if some clerk at a bank is trying to figure out what to do next; the lender will hire a title company with a professional foreclosure department to process the foreclosure for them. It’s like anyone else who does one thing for a living; he usually does it pretty well. Procedural violations are unusual. They arise from time to time, but they typically arise in complex commercial settings and it typically won’t be a procedural deficiency with respect to the foreclosure process, but some event that occurred earlier in the loan or default process that causes one party to claim that the other party is in breach. Procedural defects in the actual foreclosure process are somewhat unusual.
What Outcomes do People Generally Experience in A Foreclosure?
If the client is simply in economic difficulty but still has an income and resources and they simply can’t afford the payments most loans will be modified and the foreclosure avoided. Lenders by and large don’t want to foreclose on your property. It’s a financial difficulty for them and, they usually take a write- down on the loan. They don’t want to own the property, and the typical buyer at a foreclosure sale is the lender, which means that it has to maintain and insure the property, then sell it. It’s a pain for them and something they try to avoid.
In circumstances in which the borrower’s financial circumstances are more difficult, meaning they’ve lost their jobs or for some other reason their income has stopped or reduced significantly so that they can’t even make reduced payments, eventually the property gets foreclosed.
Typically, it seems as though it would be easier to simply go to the lender and sign over the title, thereby avoiding the foreclosure process. However, for various reasons, most lenders in fact end up completing the entire foreclosure process to make sure that they get good title to the property and that any junior liens are extinguished. Typically, depending on circumstances, either the loan is modified or foreclosured.
For more information on One Action Rule and Foreclosure, a free initial consultation is your best next step. Get the information and legal answers you’re seeking by calling (916) 635-0302 today.