Saturday, May 28, 2011

On Foreclosed Homeowners and Eviction

Peon doesn't generally comment on the practical issues for homeowners facing foreclosure. There are lots of public resources for homeowners, and very few for tenants, which is why I concentrate my energy there. (That's not to say that the resources provide the best information or advice, as many homeowners are better off defaulting than emptying their savings accounts for a loan "modification" that's doomed to failure. But I digress.)

The issue in question came up when a tenant suffered the following: in renting an apartment, the tenant-screening service found that he had been evicted from a previous home. As he'd never been evicted, he investigated further and found that his father (who shares the same name) had suffered eviction after the father's home had been foreclosed. Well and good, except that the father had abandoned the house before the foreclosure sale. There was no reason to evict the owners, as they were no longer living there.

After a Trustee Sale, the lender can, if the former owner has not already moved, serve a three-days notice to quit. Only after the three days has expired can the lender file an unlawful detainer (a court eviction). So if the former owner had already moved, how did the lender do this?

Well, it's likely that this is what happened: the lender's representative, finding no one at home, left a three-days notice at the house. Then after the three days had elapsed, the lender hot-footed it to the local courthouse and filed an unlawful detainer. When the former owner didn't file an answer, the lender obtained a default judgment against the former owner. The case then appeared in the court records and the tenant screening service picked it up.

But, you say, how could the former owner suffer this if he had never received any notice, not the three-days notice, not the lawsuit? Well, both the notice and the lawsuit are supposed to be served in accordance with the rules laid out in the Code of Civil Procedure. The lender can serve the notice to vacate and the unlawful detainer in one of three ways:

1. Handing the papers to you.

2. Handing the papers to a "person of suitable age and discretion" at the property and then mailing a copy of the papers to you.

3. Posting a copy at the property and mailing a copy to you. (Serving the unlawful detainer this way requires the permission of the court.)

As you can see with this, "nail and mail" (number 3) is ineffective notice if the tenant no longer lives at the property. Mail forwarding is remarkably iffy (I've personally received forwarded mail weeks after it was sent), so it would be very possible for an evictee to receive no notice of the court action, or no notice before the court had entered a default judgment for the lender.

Welcome to the second-class citizenship of tenancy in California. What should happen is that, before the lender can get permission for "nail and mail" service, the lender should have to show that it's reasonable to assume that the tenant still lives at the property. But judges are, shall we say, much disposed to sympathy for those who crashed our economy and very likely to treat it as a routine matter. And here we get beyond my skill level. It's possible that the lender's representative lied and said that personal service (#1) or substitute service (#2) was effected. A lawyer might be able to help you vacate the default, but the only guarantee in landlord-tenant law is that the landlord has both the law and the sentiment of the court on his side.

You might ask: why would the lender do that when the property is clearly unoccupied? The answer is simple--and not so simple. First the lender may be concerned that you haven't vacated the property, and doesn't want to be sued for a lockout (changing the locks on an occupied property). Second, some servicer contracts provide extra payment if the lender has to file a court eviction and what better way for the servicer to make some easy income than to evict a tenant who isn't there?

The best course of action is prevention. If you are a homeowner and your home is being foreclosed, notify the lender IN WRITING when you move. If possible, deliver the keys to the lender's representative. Keep copies of any missives you send or receive and get the card of the person who receives the keys. Then make sure that the lender knows your post-foreclosure address. Protect yourself, because you can't expect either the Legislature or the court to take the action to prevent these lender abuses.

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