May a mortgage holder who records a notice of trustee’s sale (NOTS) while an application for mortgage modification is pending avoid violating the Homeowner’s Bill of Rights (HBOR) by filing a new NOTS more than a year after the application is denied?

Facts: A mortgage holder records a notice of trustee’s sale (NOTS) setting the time and place for a foreclosure sale of an owner’s property. The owner submits an application for a mortgage modification to the mortgage holder. While the application is pending, the mortgage holder records another NOTS. Later, the mortgage holder denies the application. Greater than one year after the mortgage holder’s denial of the application, the mortgage holder records a new NOTS and sells the property.

Claim: The owner claims the mortgage holder violated the Homeowner’s Bill of Rights (HBOR) since the mortgage holder recorded a NOTS while an application for mortgage modification was pending.

Counterclaim: The mortgage holder claims they did not violate HBOR since they denied the application and recorded a new NOTS more than a year later.

Holding: A California appeals court holds the mortgage holder did not violate HBOR by recording a NOTS while the owner’s loan modification application was pending since the mortgage holder recorded a new NOTS more than a year after denying the application. [Reese v. Select Portfolio Servicing, Inc. (2024) 107 CA5th 1179]

Reese v. Select Portfolio Servicing, Inc.

Real Estate Finance Chapter 44 The nonjudicial foreclosure process