Q and A Regarding the "Notice of Intent to Foreclose" in California

Dear Readers and Bloggers,

I received an e-mail from a borrower who is currently behind on his payment. I have included our correspondence in this post to insure that you, the reader, can get a clear picture of the questions and processes that a borrower needs to know. Please note that the borrower's correspondence is in yellow.

"I have not made a payment on my mortgage since August. The mortgage company gave us a foreclosure notice September 5, 2007. We called and tried to work things out with them and they said they did not have any programs to help. They were going to send us forms to fill out and they sent nothing. Well it's now January and they have not foreclosed. What are the limits of the first foreclose notice? I herd form a broker, the mortgage company missed the window to file and have to start the foreclosure process over. Is this true??? Thanks for your help"

To which I responded:

I need to get a little bit of info from you:

1) 1st or 2nd mortgage?
2) Who is the mortgage with?
3) Was the foreclosure notice a letter, Notice of Default, or an auction notice?
4) They said they do not have any programs to help, but they were going to send you forms. What were the forms regarding?

To which he answered:

1) 1st or 2nd mortgage? "I have both but only the first has sent a notice of intent to foreclose. "
2) Who is the mortgage with? "The mortgage is with Carrington Mortgages Services, LLC "
3) Was the foreclosure notice a letter, Notice of Default, or an auction notice? "Notice of Intent to Foreclose on September 5, 2007 "
4) They said they do not have any programs to help, but they were going to send you forms. What were the forms regarding? "It was a finance forms package. I started to call them en early August and they stated I needed to miss a payment before they could help us. I missed the payment and then called them and they stated they had no program and to call back in a few weeks. I called in September and they said they would send a package out for us to fill out and send back. It never arrived. I called back two weeks later and they were sending out another package for us to fill out. It never came. I called back, two weeks later, they took all the information over the phone and said they would send out a package to fill out and send back. It never came. CMS called and they took the same information as before and said they would send out the package for us to fill out and it would be there in 3 to 5 days and to call if it does not make it. The package never made it. I called and they took the information again and said another package is on the way. It never came. CMS called again and took all the information again and said they would send out another package and it never came. My last correspondence with CMS was the end of October. I just received, yesterday, the billing statement for December. Please let me know what my options are. Thanks"

Okay. Let's start with the first issue: Since the lender, Carrington, issued the Notice of Intent to Foreclose on September 5, 2007, and they have not done anything since then, do they have to start the whole process over again?

I think your broker friend is a little off or you misunderstood. The Notice of Intent to Foreclose is simply that: a notice letting you know that if you did not mail in the required amount (generally, past due payments, late fees, etc) by September 5, 2007, then the lender would take the next step, filing an NOD, Notice of Default. My friends in the Loss Mitigation world inform me that the Notice of Intent (in CA) is a form with a vague shelf life which can last for several months without clearly defined "expiration". The confusion with your broker may lie in the fact that IF you made a payment that was accepted by the lender SINCE the Notice of Intent was sent, THEN the lender is obliged to resend a new Notice of Intent if you still remain behind on your payments (buying another 30 days until a NOD can be filed). Otherwise, the Notice of Intent continues to be, almost simply, a notice letting you know that the lender intends on filing a Notice of Default should you not cure your mortgage.

The word on "The Street" is that many lenders, including Carrington, are inundated with delinquent mortgages and that they are simply behind on their filings. The Lender's lack of follow-up indicated by the borrower's letter seem to support this assertion. The borrower is living on borrowed time until the lender catches up. Of course, the borrower could try to send in a regular payment and see if they accept it. If they accept the payment, this would obligate the lender to resend a new Notice of Intent which buys the borrower another 30 days until an NOD can be filed. The snag here is that attempted payment may also trigger the lender to realize that our borrower friend has fallen through the cracks and then they will reject the payment and issue a NOD immediately. I, of course, do not offer legal advice and have been known to make mistakes, but I would probably lay low until the inevitable happens.

I would also be interested to know if the borrower is making the payment on the second TD or if they simply have not caught up with him yet?

I am assuming that the "finance forms" that the lender is supposed to have sent (on numerous occasions), are forms to initiate the loss mitigation process. Our borrower is in a tough position: he can call and potentially trigger a NOD or he can wait for the lender to catch up and send it to him. If he believes he can handle the potential loss mitigation package, it may behoove him to contact the lender. He certainly has shown an interest in getting help as evidenced by his numerous calls! If he knows that he is fighting a losing battle, regardless of any reasonable Note Modification, he may want to sit in the house until the NOD arrives. If the borrower chooses the latter, I would advise him to take some of his savings (from not making a mortgage payment) and consult a bankruptcy or real estate attorney. Despite their reputations, attorneys are well worth their cost.

MortgageMaster