In order to comply with state and federal regulations and avoid legal action, lenders need to be aware of these items before starting a nonjudicial foreclosure.
- The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)
Dodd-Frank only applies to consumer purpose loans on owner-occupied 1-4 family properties. Under Dodd-Frank, which is mostly enforced by the CFPB, a foreclosure cannot commence until 120 days after the first missed payment. As a federal law, Dodd-Frank requires compliance in every state.
- Homeowners’ Bill of Rights (“HBOR”)
The Homeowners’ Bill of Rights is applicable in both California and Nevada. Like Dodd-Frank, HBOR only applies to consumer purpose loans secured by a 1-4 family owner-occupied property. Lenders or servicers must comply with the bill’s requirements including contacting the borrower to advise them that alternatives to foreclosure are available (such as a refinance or sale of the property).
- Balloon Payment Notices
In California only, a balloon payment notice is statutorily required if the property is a 1-4 unit dwelling and the balloon payment is due on a date more than one year from the time the loan originated. The Balloon Payment Notice is required to be give no later than 90 or sooner than 150 days before the balloon payment date. Failure to timely send the notice simply adjusts the balloon payment date.
- Notices in General
Even if not statutorily required, notices must be sent if the loan documents state that such action will be taken. It is important to review all loan documents for agreed upon requirements prior to commencing foreclosure.
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Written by Chelcey DeSana