All Forum Posts by: Mark Hamilton

Thanks to Rick and all,

Actually I educated myself (and my attorney) by reviewing the case law, reading some law articles, and talking to another attorney. Till now, I really couldn't find enough depth on the issue to satisfy myself (the issue is still pending).

Here is the scoop...

There are two kinds of sale cancelations: "Voidable" sales and "Void Sales". Most of us have experience with "voidable" sales wherein we buy a property and before we get the trustee deed, the sale is voided. "Voidable" sales is a sale in which there is a flaw in the foreclosure process (as in the California Code) and if the sale were to proceed it would cause a much lower price in the sale than if the sale had been properly conducted.

Hence, if the Trustee cancels the sale BEFORE the Trustee Deed is obtained for the above reasons then the foreclosure purchaser has little recourse (a recent California Supreme Court Opinion gives a long explanation of what constitutes a "voidable" sale.

However once the Trustee Deed is mailed to a bonafide purchaser of value (that is us) and it is recorded THEN the only way the sale can be rescinded is if the sale itself was "void", meaning that the trustee never had the right to sell the property to begin with (e.g. fraudulent mortgage, wrong trustee sold the property, etc.).

In my case it is uncertain if a court would find our purchase a "void" sale. I could go into detail, but at this point we are trying to settle before court. I can give more detail if interested.

Chris,

If a BKruptcy is filed before the auction sale, the Trustee will later contact the buyer, rescind the sale, and return the buyer's money (in California 100 percent of the price is paid at the auction...no deposits).

If a BKruptcy is filed even an hour after the auction sale, the property goes to the foreclosure buyer.

K Marie,

No I am not that Mark and don't know Judy or her problem solving meetings. At 'the other site' I am Mark H. But if you make it tomorrow feel free to submit my problem.

So far we do think the second was noticed properly - it the lawsuit it specifically asks the court to stop the foreclosure sale (in one week) and states that the second has asked repeatedly and the trustee has refused. The suit papers show the two were in contact and arguing about the seniority issue PRIOR to the sale.

What happened (I suspect) is that the day of the sale I use the title company that underwrote the second (Fidelity). They researched the record and the escrow papers and confirmed no subordination agreement was recorded or gotten by the escrow officer for recording.

They notified their corporate HQ THAT I just bought the first and that they (Fidelity) underwrote the second's title insurance.

The next day the LIS Pendens was filed. While the sale was over, I had to wait till I got the trustee deed 10 days or so later. In Calif. if you record the trustee deed not more than two weeks after the sale the effective date of the sale is the day of the auction. So I made the deadline.

My attorney is now contacting the stakeholders to find out if they have any other basis to cancel the sale.

Yes I was on another board - a long time poster over there said I best post my question here because he prefers to answer questions at this website. (That other board has slowed a lot in the last year or two).

And you and I are on the same page. I am toying with the idea of fighting this but if they make a reasonable offer it is likely I would take it. The question is, what is reasonable?

But if not, I will likely pursue this further. IF they can show a procedural error that is different, but so far all I see is that the trustee may have screwed up seven years ago and wants to dodge it.

I guess NC is a judicial foreclosure state. California is a non JF state (we don't call the document 'mortgage' but the "deed of trust", not to be confused with 'trustee deed').

Most western states were formed as new concepts in law were developing - one of them was non-judicial foreclosures. Much faster and less expensive than judicial foreclosues.

Foreclosures are down to nothing in the Republic of California (although our Democratic legislature has done its best to keep it going by putting up delays in the process).

How is it going in NC...I expect you all still have a backlog?

Yes, this is the order of actions.

1. Oldest outstanding loan was HELOC. HELOC was foreclosed on.
2. Suit filed in court by the "second" junior loan protesting seniority of liens.
3. Title check at time of sale showed NO legal action pending (no Lis Pendens).
4. HELOC bought by me at foreclosure sale.
5. Lis Pendens filed and recorded AFTER foreclosure sale. Now in title record.
6. Trustee Deed Mailed to me and I recorded.
7. Trustee has a change of heart and rescinds sale.

In California, if and when I sell the property (or take a loan against the property) the escrow company changes the trustee deed to a Grant Deed for the owner (or new owner).

In California the purchase of a foreclosure 'wipes off the record' all junior liens (mortgages etc.) 'off the record'.

I am protesting the recsending of sale. I am also thinking of filing in court to wipe the "Lis Pendens" off the record because it was filed AFTER the foreclosure sale and clouds my title.

I can see there are big differences from State to State.

In California judges and attorneys are not normally in the process. The property goes into foreclosure when the homeowner is 90 days or more in default. The trustee puts it up for auction at the Courthouse steps.

I bid on it, and won the bid. About a week or two later a person gets the trustee deed in the mail. Once it is recorded at the recorders office it is usually a done deal.

If there is a material irregularity in the foreclosure process and it results in a low price the trustee who foreclosed can revoke their sale (no time limit). But no irregularity is being claimed in my case.

On the other hand, their is now a Lis Pendens (notice of suit) on the title record, which is not insured. So if I want to keep the property I am going to have to sue the trustee who sold it to me OR see if they back down.

The facts are straight forward:

1. I bought a Home Equity Loan in foreclosure. It was in the first position because a subsequent 'first' loan did not have a subordination agreement recorded. I received and recorded the Trustee Deed.

Three weeks later I found out that one week before the foreclosure sale the beneficiary/trustee of the 'second' position filed a suit against the bene/trustee of the first (the Home Equity Loan) claiming that the order ought to be reversed because the 'second' bene paid the first off the home equity loan 7 years ago but that it was never recorded and the Home Equity Loan was maintained active when it should have been closed.

3. Although the suit was filed, the lawyers for the 'second' forgot to file a Lis Pendens SO I bought the 'first' Home Equity Loan being unaware their was a suit disputing the seniority.

4. The Trustee now wishes to rescind the sale - which is not something I am sure that I want. Here is my take:

First, it is my understanding that once a trustee deed is issued and recorded there creates a conclusive presumption of validity of the sale in favor of the bona fide purchaser.

Second, if there is a material procedural error in the foreclosure process and it is discovered before the issuance and recording of a trustee deed and it results in a price significantly less that what otherwise might be obtained, the trustee can abort the sale and return the funds (with interest) to the purchaser - but this is not the case. At this point there is no allegation or proof of any material error in the statutory foreclosure process, AND in any event the deed has been delivered and recorded. This sounds like an issue for the title company insurers to work out.

Third, it seems to me that the trustee and beneficiary of the 'first' home equity loan is attempting to create full immunity for foreclosure choices it made prior to the sale. If in 2005 it were negligent in its duties as alleged , and was fully aware the suit against them, and then they chose to go forward then that was their choice within the process (not a flaw in the process itself). A change of heart is not a sufficient reason to pretend the sale and recording did not occur.

Finally, the failure of lawyers of the 'second' trustee/bene to timely record a Lis Pendens prior to the foreclosure sale suggests that if there is a flaw it is that such was not posted in the record and bidders are the ones that should have the option to cancel the purchase. I am unclear if recordation of a Lis Pendens is a statutory foreclosure procedure.

I think I have a strong case for a very valuable property - thoughts? Should I fight it?