Turner v. Seterus, Inc.

Facts: A homeowner experiences financial difficulties after losing their job and obtains a mortgage modification, but still falls behind on their mortgage payments. The lender issues a notice of default (NOD) and a notice of trustee’s sale (NOTS) is later recorded against the property. Greater than five days before the trustee’s sale, the homeowner offers to cure the default and reinstate the mortgage by paying the outstanding balance, but the lender refuses to accept payment since the homeowner is no longer actively in the mortgage modification process and sells the property.

Claim: The homeowner seeks money losses, claiming the lender improperly prevented them from curing the default and reinstating their mortgage by refusing to accept payment.

Counterclaim: The lender claims the homeowner could not cure the default to reinstate their mortgage since they may only do so if they are in the mortgage modification process, which the homeowner was not as they went into default on the modified mortgage.

Holding: A California court of appeals holds the lender may not prevent the homeowner from curing the default to reinstate their mortgage since they have until up to five days before the foreclosure sale to pay the outstanding balance. [Turner v. Seterus, Inc. (September 24, 2018)_CA6th_]

Editor’s note – See Real Estate Finance Chapter 42: Reinstatement and redemption periods during foreclosure.

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