How will SB 1079 affect lenders and servicers?

What is SB 1079?

As we wrap up 2020 and look forward to 2021, there is another law of which you need to be made aware. This law, known as SB 1079, goes into effect on January 1, 2021 and affects the finality of non-judicial foreclosure sales in California on dwellings containing no more than 4 units. 

SB 1079 came into existence as a means to counteract what we believe to be a misunderstanding of the purchasers at the foreclosure auction and to give certain other parties the right to bid on the foreclosed property post-sale.

Under current law, the “falling of the gavel” indicates that the foreclosure auction is over. The borrower’s rights in the property are terminated, junior liens are wiped out, and the foreclosing lender receives either title to the property or cash if a third-party purchaser came in. 

How does SB 1079 affect the foreclosure final sale results?

With SB 1079, the sale is still final as to the borrower and any junior lienholders on the property; their rights (except for any claim to surplus proceeds) are still foreclosed out.  However, the sale will not be deemed final until between 15 and 45 calendar days following the sale. 

Who can purchase the property after the sale under SB 1079?

Certain parties (listed below) have rights to purchase the property post-sale.  Following are the actions that can occur

  1. At the actual foreclosure auction, if a natural person gives an affidavit that such person will own and occupy the property as their personal residence.  In this case, the sale is final at the conclusion of the auction (so, essentially, no change from what happens now);
  2. Following the foreclosure auction, the tenants in the property can purchase the property by matching the highest price bid at the auction; and
  3. Following the foreclosure auction, certain entities have the right to purchase the property by exceeding the highest price bid at the auction.

The real question is how does this affect you, the lender or servicer?  This new law will likely require you to adjust both bidding and lending strategies.

**WEBINAR: TLS is hosting a webinar on January 7, 2021, at 1 PM Pacific Time, to let you know how to adjust your thinking as we head into this next year and beyond. There will be time allotted for Q&A towards the end of the webinar.

If you are interested and would like to attend, please email us at

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