Mortgage holder activities prior to recording a notice of default (NOD)

The trustee begins the nonjudicial foreclosure process by recording a notice of default (NOD). The trustee ends the process on delivery of the trustee’s deed and disbursement of any sales proceeds. [Bank of America National Trust & Savings Association v. Century Land & Water Co. (1937) 19 CA2d 194; see RPI Form 471]

However, before recording an NOD on a first lien mortgage securing a purchase-assist loan on a principal residence, a mortgage holder needs to conduct a pre-foreclosure workout with the homeowner.

At least 30 days prior to recording an NOD, the mortgage holder needs to contact the homeowner to:

  • assess the homeowner’s financial situation;
  • explore options for the homeowner to avoid foreclosure;
  • advise the homeowner of their right to an additional meeting within 14 days to discuss their financial options; and
  • provide homeowners with the toll-free Department of Housing and Urban Development (HUD) phone number to find a HUD-certified housing counseling agency. [Calif. Civil Code §2923.5(a)]

Further, after attempting the initial contact, the servicer needs to send a written statement to the owner informing the owner of their right to:

  • additional protections and services if they are a service member or a dependent of a service member; and
  • request the note, trust deed, assignment and payment history. [CC §2923.55]

If the mortgage holder is unable to make contact with the homeowner, the mortgage holder:

  • sends the homeowner a first-class letter containing a toll-free number for a housing counselor certified by the HUD; and
  • calls the homeowner by the primary telephone number on file at least three times at different hours on different days. [CC §2923.5(e)]

The mortgage holder may record an NOD on a mortgage without complying with any of these 30-day pre-foreclosure requirements when the homeowner has:

  • surrendered the property to the mortgage holder either by a letter confirming the surrender or by delivery of the keys to the mortgage holder;
  • contracted with a person who facilitates a homeowner’s decision to leave their home by extending the foreclosure process and avoiding the mortgage holder’s enforcement of the loan; or
  • filed a bankruptcy petition which is pending. [CC §2920.5(c)(2)]