Need help with pre-foreclosure

21 Replies

I’m Linda & I need some help, I’m brand new here & did an owner financing on deceased mom’s house. The buyer just had 2nd insurance cancelled in 5 months because it’s a commercial property with 1947 house & she says she lives there & buys home owner policy instead of vacant house policy. She does not live there, all utilities are off. She ignores my calls. Who can I hire to help me with a pre-foreclosure & write correct letters? 4 real estate attorneys say they can’t help me. A loan servicer maybe, any suggestions welcome. Also, every payment is late outside of grace period. Thanks so much for any help. I’m in California.

Why can’t attorneys help you?  I assume your mtg document Requires them to carry insurance.....typically, you put them on notice of the default, buy the insurance yourself, add it to their balance, etc.  Yes, you should have a servicer, you typically can’t foreclose until they are 90 days late or so.

Hi Wayne, the DOT does say they need fire insurance. This is the only property I have & unfortunately had no idea what I was getting into when I did this seller carry back that my realtor said "you just collect the money monthly or take the property back." I have not even been able to find a company that will FP insurance when I am not an investor & only have this 1 property that just needs fire insurance. My insurance agent doesn't even know what a FP policy is. Can't I foreclose just for not having the fire insurance? The attorneys I've contacted either say it's not worth their time to do this or don't understand owner financing & want $900 to write 1 letter because "there's a lot of research to write a letter." My biggest problem is I don't understand where to even begin, I just know there's a big problem. Note service companies I've contacted don't want to take this property on because the insurance is a mess & there's a problem because a house is on the commercial property & buyer says living there but really isn't. I appreciate any help of what to do or names of any note services who would take on a problem property. Thanks so much.

Originally posted by @Linda Kimbell :

Hi Wayne, the DOT does say they need fire insurance. This is the only property I have & unfortunately had no idea what I was getting into when I did this seller carry back that my realtor said "you just collect the money monthly or take the property back." I have not even been able to find a company that will FP insurance when I am not an investor & only have this 1 property that just needs fire insurance. My insurance agent doesn't even know what a FP policy is. Can't I foreclose just for not having the fire insurance? The attorneys I've contacted either say it's not worth their time to do this or don't understand owner financing & want $900 to write 1 letter because "there's a lot of research to write a letter." My biggest problem is I don't understand where to even begin, I just know there's a big problem. Note service companies I've contacted don't want to take this property on because the insurance is a mess & there's a problem because a house is on the commercial property & buyer says living there but really isn't. I appreciate any help of what to do or names of any note services who would take on a problem property. Thanks so much.

 $900 for a demand letter is cheap. Yes, you can foreclose for not having adequate insurance. Do you really want to save $900 only to spend thousands more for a wrongful foreclosure?

I'm not giving legal advice as I'm not an attorney (Thank goodness). That said, based on what you wrote, you have a default in the terms of the note. You send a demand letter with an expiration date, detailing the breach, the timeline to cure the breach, and the steps you will take should they not cure the breach. If they don't cure, you file a notice of default (Not you preferably but, a foreclosure trustee). Follow the process and timeline and once you get to sale, if they haven't cured, foreclose.

You have some issues with your scenario. While you can foreclose for insurance lacking, taking payments while initiating foreclosure will require some explaining so, maybe you want to stop taking payments. Maybe you take payments and hold them in suspense until the breach is cured. You have a commercial property for commercial purposes but, there is a single family residence that the borrower is claiming to occupy so, that will complicate matters further. If the loan is to a natural entity, regardless of intent, you might want to treat this as a single family, primary residence foreclosure just to be safe and as Wayne points out, you might not want to send that breach until they are 90 days down with your first legal fling starting at 120 days. if the loan is to a commercial entity (Meaning, some corporation, etc.) your process is MUCH easier. Most real estate attorneys won't have a clue how to navigate through this. That said, if you do it wrong, any attorney will quickly get brought up to speed to sue you.

My advice would be to google the "CFPB" and the California "HBOR" (Homeowners Bill of Rights) rules to see what your obligations and options are. Pay Attention to the differences between the two and understand that if California says one thing, if its less restrictive than the federal rules, use the federal rules. Whatever is more restrictive, that rule will apply between the two when they conflict. I would also read California Civil Code Section 2923.5 as this is the section regarding mortgage servicers and foreclosure.

There are tons of mom and pop loan servicers in California and elsewhere. Start dialing for dollars. Have them service your loan. Yeah, it's gonna cost you but, don't try and do a foreclosure on your own. Just call and tell them you are a single loan investor and you'd like a professional to service your loan. Tell them the borrower is in default. Spend what you have to spend OR...buy insurance yourself and be done with the issue.

Hi Ron, thanks for all your information. I have an insurance agent who covered this property for 4 years before I sold it this year. She just called & said the same insurance company from before will sell me a policy as 1st mortgagee for fire/liability on 3 vacant buildings (house, detached garages/workshop & shed). Are you saying just pay for it myself & I can be done with the issue for now. I had written a letter to the owner telling her if no fire insurance by October 12 I would FP insurance. Do I still try to get her to pay for the policy? 

@Linda Kimbell Look up your County's foreclosure records and see if you can find any list pendens documents. On those documents should be an attorney whose for foreclosing for a mortgage company. Give them a call and see if they will represent you or refer you to someone who will.

Hi Ibrahim,

There is a trustee but he said I need to do all the work before a foreclosure and that's what I'm just not understanding. I think I need to find a loan servicer asap who will do these correct things for me. Thanks so much:)

Originally posted by @Linda Kimbell :

Hi Ron, thanks for all your information. I have an insurance agent who covered this property for 4 years before I sold it this year. She just called & said the same insurance company from before will sell me a policy as 1st mortgagee for fire/liability on 3 vacant buildings (house, detached garages/workshop & shed). Are you saying just pay for it myself & I can be done with the issue for now. I had written a letter to the owner telling her if no fire insurance by October 12 I would FP insurance. Do I still try to get her to pay for the policy? 

If your note requires the borrower to carry acceptable insurance, AND, in the event that the borrower does not comply with that requirement, you will purchase insurance and charge them for that insurance, yes. It has to be specific in the note for you to do that but it's an every day, very common covenant of many security agreements. My process for when I do it is to send the borrower a demand to provide satisfactory evidence of insurance, with an expiration date. Then, another letter stating a repeat of the previous letter and threat that if they still don't comply, your purchasing and charging them and then finally, a 3rd letter, after you purchase insurance, stating you purchased it and that you are demanding payment but, added it to the balance of the loan. Doing it this way will protect you in the event of litigation. (I'm not an attorney). 

Originally posted by @Linda Kimbell :

Hi Ron, any ideas on loan servicers in California? Are you familiar with VIPloan.com in Glendale? Thank so much.

 Can't speak to them as I've never used them but, yes, I've heard of them.

Originally posted by @Linda Kimbell :

Hi Ibrahim,

There is a trustee but he said I need to do all the work before a foreclosure and that's what I'm just not understanding. I think I need to find a loan servicer asap who will do these correct things for me. Thanks so much:)

 If you are looking at vip, then it would appear you are in California, which if that is the case, you don't need to look for any foreclosure "list" pendens as there won't be any. Stick to what you started, and find a servicer to get the loan back on track or, down the path to foreclosure.

Hi Ron, the Installment note doesn't say anything about insurance, it only talks about payments, late fees, due on sale clause and balloon payment in 5 years.....The DOT says trustor to provide, maintain & deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary. Nothing about Force Placed Insurance. Since it's not in the note does that mean I can't even charge them for the insurance, I just buy it for fire & pay yearly myself?

Originally posted by @Linda Kimbell :

Hi Ron, the Installment note doesn't say anything about insurance, it only talks about payments, late fees, due on sale clause and balloon payment in 5 years.....The DOT says trustor to provide, maintain & deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary. Nothing about Force Placed Insurance. Since it's not in the note does that mean I can't even charge them for the insurance, I just buy it for fire & pay yearly myself?

It's covered in your DOT but, if there isn't language somewhere stating that you can charge them for necessary maintenance or protection, you may not be able to. You might, but you might not. Most real estate documents are national laserpro documents with uniform language. Did you create your own note and DOT? Most covenants for insurance look like this:

Hi Ron, I didn't create my own DOT/note. It was from an escrow company or Title Company. It doesn't have any part similar to your property insurance section. Starting at the top of this page is the only mention I see about insurance. Could #5 be talking about money I paid for the insurance? Thank you so much for your help!!!! I paid an outrageous amount for the insurance & it looks like I need to find an attorney now to decipher this DOT.

Hi Ron, I didn't create my own DOT/note. It was from an escrow company or Title Company. It doesn't have any part similar to your property insurance section. Starting at the top of this page is the only mention I see about insurance. Could #5 be talking about money I paid for the insurance? Thank you so much for your help!!!! I paid an outrageous amount for the insurance & it looks like I need to find an attorney now to decipher this DOT.


Originally posted by @Ron S. :
Originally posted by @Linda Kimbell:

Hi Ron, the Installment note doesn't say anything about insurance, it only talks about payments, late fees, due on sale clause and balloon payment in 5 years.....The DOT says trustor to provide, maintain & deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary. Nothing about Force Placed Insurance. Since it's not in the note does that mean I can't even charge them for the insurance, I just buy it for fire & pay yearly myself?

It's covered in your DOT but, if there isn't language somewhere stating that you can charge them for necessary maintenance or protection, you may not be able to. You might, but you might not. Most real estate documents are national laserpro documents with uniform language. Did you create your own note and DOT? Most covenants for insurance look like this:

Hi Ron, I didn't create my own DOT/note. It was from an escrow company or Title Company. It doesn't have any part similar to your property insurance section. Starting at the top of this page is the only mention I see about insurance. Could #5 be talking about money I paid for the insurance? Thank you so much for your help!!!! I paid an outrageous amount for the insurance & it looks like I need to find an attorney now to decipher this DOT.


Originally posted by @Ron S. :

Originally posted by @Linda Kimbell:

Hi Ron, the Installment note doesn't say anything about insurance, it only talks about payments, late fees, due on sale clause and balloon payment in 5 years.....The DOT says trustor to provide, maintain & deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary. Nothing about Force Placed Insurance. Since it's not in the note does that mean I can't even charge them for the insurance, I just buy it for fire & pay yearly myself?

It's covered in your DOT but, if there isn't language somewhere stating that you can charge them for necessary maintenance or protection, you may not be able to. You might, but you might not. Most real estate documents are national laserpro documents with uniform language. Did you create your own note and DOT? Most covenants for insurance look like this:

Hi Ron, I didn't create my own DOT/note. It was from an escrow company or Title Company. It doesn't have any part similar to your property insurance section. Starting at the top of this page is the only mention I see about insurance. Could #5 be talking about money I paid for the insurance? Thank you so much for your help!!!! I paid an outrageous amount for the insurance & it looks like I need to find an attorney now to decipher this DOT.


Originally posted by @Ron S. :

Originally posted by @Linda Kimbell:

Hi Ron, the Installment note doesn't say anything about insurance, it only talks about payments, late fees, due on sale clause and balloon payment in 5 years.....The DOT says trustor to provide, maintain & deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary. Nothing about Force Placed Insurance. Since it's not in the note does that mean I can't even charge them for the insurance, I just buy it for fire & pay yearly myself?

It's covered in your DOT but, if there isn't language somewhere stating that you can charge them for necessary maintenance or protection, you may not be able to. You might, but you might not. Most real estate documents are national laserpro documents with uniform language. Did you create your own note and DOT? Most covenants for insurance look like this:

Originally posted by @Linda Kimbell:

Hi Ron, I didn't create my own DOT/note. It was from an escrow company or Title Company. It doesn't have any part similar to your property insurance section. Starting at the top of this page is the only mention I see about insurance. Could #5 be talking about money I paid for the insurance? Thank you so much for your help!!!! I paid an outrageous amount for the insurance & it looks like I need to find an attorney now to decipher this DOT.


Originally posted by @Ron S. :

Originally posted by @Linda Kimbell:

Hi Ron, the Installment note doesn't say anything about insurance, it only talks about payments, late fees, due on sale clause and balloon payment in 5 years.....The DOT says trustor to provide, maintain & deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary. Nothing about Force Placed Insurance. Since it's not in the note does that mean I can't even charge them for the insurance, I just buy it for fire & pay yearly myself?

It's covered in your DOT but, if there isn't language somewhere stating that you can charge them for necessary maintenance or protection, you may not be able to. You might, but you might not. Most real estate documents are national laserpro documents with uniform language. Did you create your own note and DOT? Most covenants for insurance look like this: