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Max Gardner’s Top 11 Economic Predictions for 2011 (via Foreclosureblues)

Max Gardner’s Top 11 Economic Predictions for 2011 Max Gardner’s Top 11 Economic Predictions for 2011 Today, December 27, 2010, 1 hour ago | O. Max Gardner III At least 20 cities will be forced to file for Chapter 9 relief and the defaults on municipal bonds will hit all time highs.  Two major cities-such as Detroit and San Diego will join the others that go broke.  And, the Muni bonds are clearly headed for Puni-grounds. The number of Consumer Bankruptcy filings will reach an all time record and … Read More

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Subpoenas Withdrawn: Ally (GMAC, owned by USA) to Pay Fannie (owned by USA) $462 Million for “BuyBacks” (via Foreclosureblues)

Subpoenas Withdrawn: Ally (GMAC, owned by USA) to Pay Fannie (owned by USA) $462 Million for “BuyBacks” Subpoenas Withdrawn: Ally (GMAC, owned by USA) to Pay Fannie (owned by USA) $462 Million for “BuyBacks” Today, December 28, 2010, 4 hours ago | Neil Garfield COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COVER-UP CONTINUES EDITOR’S COMMENT: Confused? Ally, wholly owed by GMAC, which is 80% owed by our Federal government has agreed to pay $462 MILLION on “repurchase demands” (i.e. legal damages) to Fannie Mae … Read More

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SPECIAL GUEST POST: Bob Cratchit Speaks Out on Christmas Foreclosure Freezes, Rated ‘PG-13’ (via Foreclosureblues)

SPECIAL GUEST POST: Bob Cratchit Speaks Out on Christmas Foreclosure Freezes, Rated ‘PG-13’ SPECIAL GUEST POST: Bob Cratchit Speaks Out on Christmas Foreclosure Freezes, Rated ‘PG-13’ Today, December 23, 2010, 4 hours ago | Mandelman Cratchit here… Well, it’s ‘that’ time of the year once again… the Christmas holidays.  For most people, in addition to being the celebration of the birth of our Lord and Savior, Jesus Christ, it’s also a time to spend with loved ones… our family members and close friends… a time to share in the spirit of gi … Read More

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Fraud Ruling Against Wells Fargo in Minnesota Points to Widespread Abuses in Securities Lending Program (via Foreclosureblues)

Fraud Ruling Against Wells Fargo in Minnesota Points to Widespread Abuses in Securities Lending Program Fraud Ruling Against Wells Fargo in Minnesota Points to Widespread Abuses in Securities Lending Program Yesterday, December 23, 2010, 11:44:55 PM | Yves Smith A fraud and breach of fiduciary duty ruling against Wells Fargo in a major scandal in Minnesota may have much broader ramifications for this sanctimonious bank. The facts are not pretty. Wells Fargo, in its investment management operation, used securities lending to boost returns. But the r … Read More

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Christmas Stories (via Foreclosureblues)

Christmas Stories Christmas Stories Yesterday, December 23, 2010, 7:32:34 PM | Michael If you and your family are blessed and prosperous this holiday season, you should consider yourself to be very fortunate, because there are tens of millions of other Americans that are desperately hanging on by their fingernails.  The Christmas stories that you are going to read below aren't going to give you any warm fuzzies.  They aren't about "Santa Claus" sliding down the ch … Read More

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Accelerated mortgage defaults likely choice to deleverage household debt (via Foreclosureblues)

Accelerated mortgage defaults likely choice to deleverage household debt Accelerated mortgage defaults likely choice to deleverage household debt Today, December 24, 2010, 3 hours ago Most economists agree that households will continue to deleverage. Bank of America believes over $1,000,000,000 will come from strategic default. Irvine Home Address … 65 GRANDVIEW Irvine, CA 92603 Resale Home Price …… $2,320,000 In the town where I was born, Lived a man who sailed to sea, And he told us of his life, In the land of … Read More

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ROBO SIGNING - LENDERS DELAYING FORECLOSURES INTO FEBRUARY 2011? ROBO SIGNING – LENDERS DELAYING FORECLOSURES INTO FEBRUARY 2011? Today, December 24, 2010, 5 hours ago | Richard Zaretsky, Florida Real Estate Attorney (Richard P. Zaretsky P.A. – Bd Certified Real Estate Attorney) Robo sigining foreclosure affidavits and other documents has been in the news for months – forcing lenders to suspend foreclosures in process.  Recently many banks reported that their self imposed moratorium on foreclosure prosecution … Read More

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State Pension Problems Are Billions Worse Than Advertised (via Foreclosureblues)

State Pension Problems Are Billions Worse Than Advertised State Pension Problems Are Billions Worse Than Advertised Today, December 24, 2010, 7 hours ago | Mike "Mish" Shedlock The Wall Street Journal reports New Jersey Pension Gap Hits $54 Billion. New Jersey’s pension gap grew to $53.9 billion in the last fiscal year, up from $45.8 billion, thanks to market losses and a lack of state funding, according to figures released Thursday. Gov. Chris Christie’s administration said the gap, which reflected the … Read More

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Geithner on Foreclosure Fraud: What’s the Problem? | MyFDL (via Foreclosureblues)

Geithner on Foreclosure Fraud: What’s the Problem? | MyFDL Geithner on Foreclosure Fraud: What’s the Problem? | MyFDL Today, December 24, 2010, 13 hours ago | (Alrady) Geithner on Foreclosure Fraud: What’s the Problem? | MyFDL: "Comments with regard to the Congressional Oversight Panel hearing Dec. 16, 2010, with Treasury Secretary Timothy Geithner: Mr. Geithner disingenuously blamed the American public for borrowing too much credit without acknowledging that homeowners relied upon (al … Read More

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FORECLOSUREBLUES MOST READ THIS WEEK 12.25.2010 (via Foreclosureblues)

FORECLOSUREBLUES MOST READ THIS WEEK 12.25.2010 2010-12-18 to Today Title Views Home page 2,381 The Sum Of All Eviction Fears…"Families Exchange Homes to Stop Foreclosure." 1,622 Meredith Whitney, Chris Christie On 60 Minutes: Illinois & California Are Bankrupt, States Face Reckoning Day 356 Arizona Attorney General Charges BANK of AMERICA with Mortgage and foreclosure fraud…Complaint Here… 172 State of Nevada vs Bank of America – Nevada Attorney General Sues Bank of America for Dece … Read More

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Foreclosure Fraud | Bank Of America’s Christmas Present: Foreclose Even Though Not A Payment Missed (via Foreclosureblues)

Foreclosure Fraud | Bank Of America’s Christmas Present: Foreclose Even Though Not A Payment Missed Foreclosure Fraud | Bank Of America’s Christmas Present: Foreclose Even Though Not A Payment Missed Today, December 25, 2010, 46 minutes ago | Foreclosure Fraud The moral to the story below is if you are put into a “loan modification” your regular payments will not be applied, late fees will occur, your credit will be ruined because you are reported as NOT making your payments when in a modification, and once you sent in your trail payments, they … Read More

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7 Things I Refuse to Worry About In 2011 (via Foreclosureblues)

7 Things I Refuse to Worry About In 2011 7 Things I Refuse to Worry About In 2011 Today, December 25, 2010, 1 hour ago | James Altucher I began worrying in 1995. I had two jobs: my fulltime job at HBO during the day and by night I was starting a company which built websites for other companies. In the summer of 1995 I would work all day at HBO and then at night was building and I had deadlines everywhere and on the other side of those deadlines were very … Read More

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Mortgage Lending and Foreclosure: ‘There Should be Compensation For People Who Have Been Harmed (via Foreclosureblues)

Mortgage Lending and Foreclosure: ‘There Should be Compensation For People Who Have Been Harmed Share | Charlene Crowell NNPA Columnist December 25, 2010 As temperatures plummet across much of the country, multiple developments related to foreclosure and fair lending are heating up. From yet another multi-million dollar settlement to attorneys general investigations and potential actions against mortgage servicers, it is clear that consumers have … Read More

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SEIU's "Where's The Note" Campaign Meeting With Hostility By Note-Lacking Lenders? (via Foreclosureblues)

Sunday, December 26, 2010 SEIU's "Where's The Note" Campaign Meeting With Hostility By Note-Lacking Lenders? A recent campaign by the Service Employees International Union ("SEIU") encouraging its homeowning members, whether facing foreclosure, having an underwater mortgage, or who are simply concerned over home lenders' rampant inability to account for the whereabouts of the original promissory notes, to contact their bank and demand to see the … Read More

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New Lawyers Face Probes, Pop Up at Other Firms (via Foreclosureblues)

New Lawyers Face Probes, Pop Up at Other Firms Foreclosure Fraud – New Lawyers Face Probes, Pop Up at Other Firms Today, December 26, 2010, 33 minutes ago | Foreclosure Fraud New lawyers face probes, pop up at other firms By Christine Stapleton and Kimberly Miller Palm Beach Post Staff Writer Recently out of law school and looking for work, scores of young Florida attorneys found steady paychecks in burgeoning firms whose business is based on repossessing the American dream. Today, more than … Read More

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ST. PETERSBURG TIMES SAYS- YOUR FIGHT IS TOP 10 STORY OF 2010 ST. PETERSBURG TIMES SAYS- YOUR FIGHT IS TOP 10 STORY OF 2010! Today, December 26, 2010, 2 hours ago | Matthew D. Weidner, Esq. Today’s edition of the St. Petersburg Times recognized the top ten people who made a difference in 2010, and make no mistake about it… if you’re reading this blog…you are one of those who made a difference! In 2010, Florida’s economy struggled with a growing housing crisis and historically high unemployment. • Locally, t … Read More

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Virginia puts homeowners on fast track to foreclosure (via Foreclosureblues)

Virginia puts homeowners on fast track to foreclosure Virginia puts homeowners on fast track to foreclosure Today, December 26, 2010, 3 hours ago | Neil Garfield COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary Message from sender… Garfield’s Note: The sender is from Harvard University. Here is a clear example of Wall Street money at work on the state level getting legislators to trash their state in exchange for money, gifts and other promises. Virginia has now … Read More

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Judge's decision set aside, canceled, voided, avoided, discharged, nullified… (via Foreclosureblues)

Judge's decision set aside, canceled, voided, avoided, discharged, nullified… by Slade Smith | 2010/12/09 | You may not remember the court case IndyMac v. Yano-Horoski by name, but there's probably a good chance that you remember the story.  This was the case where a judge wiped out a mortgage and gave the defaulted homeowners their home free and clear because IndyMac (now part of OneWest) had acted in such bad faith in dealing with the homeown … Read More

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Banks Don’t Have to Follow the Rules in Lee County, Says Judge Starnes (via Foreclosureblues)

Banks Don’t Have to Follow the Rules in Lee County, Says Judge Starnes by Mike on December 11, 2010 This ruling is a disgrace: Lee County Judge Hugh Starnes has ruled that banks in foreclosure cases don’t have to follow court rules. At a recent foreclosure hearing, the defense attorney (Conrad Willkomm) argued that the bank had violated an important evidentiary rule: the bank was relying on its business records, but no one swore that those record … Read More

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New Tactic of Suing Lawyers Defending Homeowners Not Brilliant Strategy (via Foreclosureblues)

New Tactic of Suing Lawyers Defending Homeowners Not Brilliant Strategy New Tactic of Suing Lawyers Defending Homeowners Not Brilliant Strategy Today, December 11, 2010, 9 hours ago | findsenlaw Nationwide Title Clearing, the company that brought us three widely publicized depositions of employees describing an assembly line process of signing assignments and affidavits, is now suing Matt Weidner, Florida foreclosure defense attorney, claiming they were defamed by his characterization of the signers as being robotic. … Read More

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ACLU – Foreclosure “Robo-signers” Under Scrutiny | Foreclosure Fraud Fighters Under Attack (via Foreclosureblues)

ACLU – Foreclosure “Robo-signers” Under Scrutiny | Foreclosure Fraud Fighters Under Attack ACLU – Foreclosure “Robo-signers” Under Scrutiny | Foreclosure Fraud Fighters Under Attack Today, December 11, 2010, 3 hours ago | Foreclosure Fraud ACLU Appeals Gag Order on Homeowner’s Attorney FOR IMMEDIATE RELEASE December 9, 2010 CONTACT: (786) 363-2737 or SARASOTA, Fla. – The ACLU of Florida, on behalf of attorney Christopher Forrest and The Forrest Law Firm, today asked Florida’s Second District Court of Appeal to reverse … Read More

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The Economy Cannot Recover Until the Big Banks Are Broken Up (via Foreclosureblues)

The Economy Cannot Recover Until the Big Banks Are Broken Up The Economy Cannot Recover Until the Big Banks Are Broken Up Today, December 11, 2010, 27 minutes ago | (George Washington)   A lot of people still haven't heard that the economy cannot recover until the big banks are broken up. But as everyone from Paul Krugman to Simon Johnson has noted, the banks are so big and politically powerful that they have bought the politicians and captured the regulators. In addition, as Fortu … Read More

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WEIDNER: BIGGEST RICO CASE ON EARTH Posted on October 19, 2010 by Neil Garfield by Matt Weidner on IRS Form 938 Sometimes this all becomes a bit too overwhelming, trying to unravel this whole foreclosure cataclysm.  This is so far beyond the simple situation where a borrower borrows money from a bank and doesn’t pay….that bank is clearly entitled to their money back. I’m a fairly bright guy with a good education and a fair to ‘middlin grasp on co … Read More

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The Cause of the Foreclosure Crisis (via Foreclosureblues)

The Cause of the Foreclosure Crisis The Cause of the Foreclosure Crisis Today, December 12, 2010, 2 hours ago | Mark Stopa David Bornstein of the New York Times penned a nice article today called When Lenders Won’t Listen.  Here’s the part that really jumped off the page at me… After describing the injustices experienced by several homeowners in their experiences with lenders, a competing view was presented: There are those of us who were raised with the idea that if you make a bar … Read More

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Legal Aid for Homeowners: Perhaps the only thing on the planet for which TARP funds CANNOT be used. (via Foreclosureblues)

Legal Aid for Homeowners: Perhaps the only thing on the planet for which TARP funds CANNOT be used. Legal Aid for Homeowners: Perhaps the only thing on the planet for which TARP funds CANNOT be used. Yesterday, December 11, 2010, 9:32:56 PM | Mandelman The Nation is reporting a story about Treasury Secretary Tim “Transparency” Geithner that proves that he actually is a “by-the-books” guy who is very concerned about protecting the taxpayer’s money from being spent in unauthorized ways.  I’m not kidding about that… that’s what the story shows.  W … Read More

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The Foreclosure Crisis as seen in Florida – A Slide Show

Their Mission, According to their Website…

Facing Change: Documenting America is a non-profit collective of dedicated photojournalists and writers coming together to explore America and to build a forum to chart its future. Mobilizing to document the critical issues facing America, FCDA teams will create a visual resource that raises social awareness and expands public debate.

I think their mission is an important one for our times.  They’ve produced a slide show documenting some of what the foreclosure crisis looks like up close.  I’d suggest clicking through it slowly… it deserves that.  Just click the link in RED below… And then would someone please write in and remind me… who’s winning here?  With this many losing, someone should be winning.  Is anyone winning?

The Foreclosure Crisis – A Slide Show

Why modify

California Loan Modification Lawyer

(Effective October 11, 2009  The McCandless Firm complies with SB 94)

By now, you may have made your own attempts at loan modification. You now know what we have known: Despite all the government and media hype, the voluntary loan modifications are not the silver bullet to the foreclosure crisis. Even after President Obama introduced the HAMP program, only about 8% of the anticipated 9 million loan modification applications have been considered. Never forget that lenders and loan servicers are in the business of making money for their shareholders, not solving people’s financial problems. Despite the incentives created by the government, loan servicers remain inconsistent, negligent, understaffed, arrogant and just plain indifferent to the financial plight of most folks. If you’ve ever wondered why the bank doesn’t seem to care? Consider that it is the investor, not loan servicer, takes the financial hit when a property is foreclosed. Loan servicers make more money when a borrower falls into foreclosure. Servicers have an incentive to drag out the foreclosure and loan modification process. Despite what the government and the lenders may say, the loan modification or short sale process is not as quick and easy as has been portrayed.


Whether hiring a lawyer will increase your chances for success a little or a lot depends on whether the lender has done something wrong. This is why Attorney Roberts encourages every client to commission an audit of the original loan documents, review the appraisal and take measure of any agency relationships between the broker, the lender, the appraiser, the escrow and the title companies. Anecdotally, Attorney Roberts believes that your chances of success increase fourfold if there is litigation or bankruptcy. Hiring a lawyer to review your options and handle the process makes sense. Your chances of obtaining a substantial loan modification will be greatly improved if the lender has violated the law…but how will you ever know? A lawyer can help you gain negotiating leverage on your behalf by finding violations of the law or capitalizing on provisions of the bankruptcy code.


A loan modification can still be secured even where violations do not exist or the borrower chooses to ignore them. In California, SB94 was recently signed into law effectively banning advance fee loan modification services by even lawyers. Attorney Roberts operates in full compliance of the new law. If you hire a lawyer to provide loan modification services rather than to pursue a violation of your rights, special rules now apply and specific disclosures must be made letting you know that you can do the loan modification yourself and avoid fees.

It’s true; you can pursue a loan modification yourself, just as you have the right to represent yourself in court. And to be honest, even with a lawyer, unless a violation has occurred, you are at the mercy of the loan servicer’s interpretation and analysis of your situation. If the servicer loses your paperwork, berates you, keeps you on hold for hours, ignores you, or simply denies the loan modification without explanation…you have NO RECOURSE. You are not entitled to a loan modification and you have no right to sue if denied. Even if the lender ignores the guidelines of the government’s HAMP program, you can’t sue. When you apply for a front door loan modification, you are asking for a break. It is you and not the lender, who seeks to break the mortgage contract. You have no leverage. You cannot force the lender to give you any consideration, whatsoever. Even if you clearly qualify for a loan modification under the printed guidelines of the government HAMP program, if the lender believes that it would make more money in the long run by foreclosing, you can legitimately be denied.

Why pay a lawyer to work on your loan modification? A lawyer adds attention to detail and diligence to the process, as well as a better idea of the location of each loan servicers’ “sweet spot”. Experience and daily contact with the loan servicers provides some advantage as well. The law firm may act as a force to counter act the incompetence built into the lender’s process. Attorney Roberts and his staff simply assume that the loan mod process will be screwed up by the lender, repeatedly. The firm expects that the lenders will lose paperwork, fail to respond and provide conflicting information. The firm is not shocked when a home is improperly sold despite an approval of a loan modification as it happens all the time. The Law Office of The McCandless Firm is there to respond to these constant lender screw ups and bear the brunt of your frustration.

The The McCandless Firm is always prepared to react to the latest bank screw-up or client crisis. One of the favorite tricks of the lenders is to wait to the very last minute before the sale to approve or deny a postponement or a loan modification. This game of chicken may happen every month as the loan modification process drones on. The firm is always ready with a PLAN B if the lender, in its sole discretion, denies the modification. Having the ability to plan and execute a contingency plan, whether it be Chapter 7, 11, 13, a short sale or a federal lawsuit, is truly the firm’s core strength.

A foreclosure relief company or real estate agent is unqualified to provide you with any of this legal insight – but a California loan modification lawyer at the The McCandless Firm has the knowledge and experience to help. California attorney Joseph Arthur “Joe” Roberts can act as your legal counselor and help you get out of the financial situation that you find yourself in. With offices located in Newport Beach, attorney Roberts helps clients throughout California, including Los Angeles, Orange, Riverside County and the surrounding areas.

Loan Modification Attorney in Los Angeles, Orange and Riverside County, California

In California, voluntary loan modification programs of different companies vary. Most loans are owned in pools by “trusts” and not by the servicing agent with whom you deal. The contract between the trust and the servicing agent, called a PSA, limits the number of loans that can be modified in a given pool. Typically, the PSA limits the number of loans that can be modified in a given pool at 5%. However, that restriction is lifted in the event of a bankruptcy or litigation.

Most servicing agents are understaffed, overwhelmed and for the most part…simply don’t care about you. The servicing companies typically make more money off of late fees, costs and penalties when you remain in default. If the property gets foreclosed on, it becomes the trust’s problem, not necessarily the service agent’s. The application process can take months and usually involves rejection or a token change in the loan terms. Amid the flood of modification requests, mistakes frequently get made and the ball gets dropped. In the meantime, the countdown to foreclosure sale continues. Homeowners already under distress get left with little time to act if a modification is not granted. You need to have a backup plan in place in case the lender’s process fails.

Loan modification is driven by income and complicated when there is a second mortgage company involved. If you lack the income to fund whatever plan the lender is willing to give you, you will be denied. Even if the first mortgage company is willing to modify your loan, it doesn’t mean that the second mortgage company will play ball. In the absence of litigation or bankruptcy, the loan modifications have economic limits. A reduction in principal balance is rare. A mortgage holder will not reduce the principal balance below the value of the property. Interest rate adjustments and recapitalization of back payments are more common. However, don’t expect to get an interest only or negative amortization loan. The very best you can hope for is a fixed rate amortized over 30 years at a decent rate based on the current value of the house. Finally, if the lender “cancels” some of your debt, it may still be considered taxable income by the IRS, despite the passage of the limited Mortgage Forgiveness Debt Relief Act of 2007. Only debt from buying or improving the property is covered by the new law.

How a California Loan Modification Lawyer Can Help

loan modification process can be complex, and it is easy for a lender or servicing agent to take advantage of you. Using an experienced lawyer to assert your rights gets you to the front of the line in this process. The possibility of litigation or bankruptcy may increase your negotiating leverage with your lender. Lenders are forced to get their own lawyers involved in your case, not just an administrative person from the loss mitigation department. We welcome you to contact our firm to discuss your loan, your budget and the benefits of attorney negotiated loan modification.

Contact  loan modification attorney The McCandless Firm today! Northern California 925-957-9797and in Southern California 909-890-9192

Debt settlement: A costly escape not always the best solution

Negotiating away your bills is legal, but it may not be your best solution. And sometimes, hiring a professional to help you isn’t as good an idea as doing it yourself.

If you’re drowning in unpaid bills and desperately looking for a way out, chances are you’ve come across an offer that sounds something like this: For a fee, a professional debt-settlement company will help rid you of your debt for as little as half the amount you owe.

Sounds like a scam? Or like you’re finally getting the break you deserve?

The answer may surprise you. Debt settlement is, in fact, a perfectly legal solution for consumers who are in deep and seeking an alternative to bankruptcy. But having a debt-settlement company do the legwork for you is fraught with risk, not to mention outrageous fees.

Here’s what you need to know about debt settlement and the companies that claim to do it for you:

The basics

It’s a little-known fact that when you fall further and further behind on your payments, creditors would much rather agree to settle your debts than have you file bankruptcy and not get paid at all, says debt expert Gerri Detweiler, author of “The Ultimate Credit Handbook”.

In exchange for an agreed-upon one-time payment — typically, between 20% and 75% of what you owe — the creditor forgives the rest of your debt and starts reporting it to the credit bureaus as settled. Meanwhile, you’ll need to put money aside toward the settlement and stop making payments to your creditors. On your credit reports, the balances of settled debts will show $0. However, any previous history of delinquent payments or charge-offs will remain on your report.

Not surprisingly, creditors don’t like to advertise debt settlement. They also make it an extremely difficult solution to pursue. As a rule, creditors won’t negotiate with consumers who are current on their bills, often refusing to discuss settlements unless you’re at least three to six months behind, explains Detweiler. That means dodging collections calls while trying to save up the cash for a settlement.

If you’re working with several creditors — you’d typically tackle the debts one at a time as you collect the money to pay them off — it’s hard, if not impossible to know which creditor might agree to settle earlier than others. “There’s an art to it,” Detweiler notes.

The problem with debt-settlement companies

With that in mind, it would be great to have an experienced, knowledgeable debt-settlement company hold your hand through the process, right? Not really.

Once you sign up with a company, chances are you’ll pay dearly for its services, says Deanne Loonin, a staff attorney with the National Consumer Law Center (NCLC) who has investigated the practices of debt-settlement companies.

Outrageous fees

Just how much will you pay? Good luck finding that out.

“I’ve never seen a company that’s given a straight answer,” says Loonin. The industry’s fees and fee structures are all over the place. Some companies charge a percentage of the total debt — typically 15% or 18% — that’s paid before you start accumulating savings. Others charge a percentage of the debt savings — usually 25% — once you settle, plus an initial sign-up fee and monthly service charges. Then there are those that charge a flat monthly fee throughout the length of the program.

Even the industry admits figuring out the costs is a challenge. “I have seen every kind of (fee) model you can think of,” says Jenna Keehnen, the executive director of the U.S. Organizations for Bankruptcy Alternatives (USOBA), an industry trade group. “It’s very confusing.”

Worse than confusing, it’s prohibitively expensive, says Katie Porter, a professor of bankruptcy law at the University of Iowa. She recently came across an offer to settle $33,551 in debt that projected a $5,032 service fee that was to be paid in monthly installments. Only after the service fee was paid off, two years later, did the client actually start saving for the settlement.

“That $5,000 buys a substantial amount of attorney time,” she says. “You can get a consumer (or bankruptcy) attorney to represent you and help with your debt problems for a lot less than that.”

Questionable services

What does a debt-settlement company do for you? In theory, it’s supposed to help you negotiate your debts. In practice though, that doesn’t really happen, says Porter. During the two or more years that you’re saving money — typically in an escrow account that the debt-settlement company has access to — the company does nothing but withdraw fees.

“A lot of consumers think they’ve taken care of the problem after contacting a company, but the reality is the debt-settlement company hasn’t settled anything in the beginning,” Porter says.
The companies also claim that they’ll help you dodge collections calls. But referring collections calls to your debt-settlement company often backfires, says Leslie Linfield, the executive director at the Institute for Financial Literacy, an organization that provides pre-bankruptcy counseling.

“Many creditors, once they know a client is working with a debt-settlement company, will escalate the account,” she notes. That means sending it to a collections agency sooner or even suing you. And when a creditor takes legal action, the debt-settlement companies drop the account: They don’t have the right to give legal advice or represent you in court.

High dropout rates

While there’s no independent research on the average success rate of debt-settlement programs, anecdotal evidence shows many consumers drop out before the company reaches a settlement with their creditors, Linfield says. “As you talk to bankruptcy attorneys you’ll hear horror stories of clients who paid thousands of dollars to a company and they’re still in the exact same place,” she says.

Consider what happened at National Consumer Council, which was shut down by the Federal Trade Commission in 2004 on accusations of falsely claiming nonprofit status. The company’s court records show that only 1.4% of the consumers who signed up for the program ever completed it. Nearly half — 42.9% — dropped out, paying an average of $1,780 in fees and saving $966 in their escrow accounts.

Secrets of the trade

Here’s what debt-settlement companies might not tell you:

Debt settlement may not be right for you. Debt settlement is a niche solution that’s right only for a small segment of the population. You could be a good candidate for debt settlement if you’re heading toward bankruptcy but don’t qualify for filing Chapter 7, Phelan explains. (Under Chapter 7, most of your unsecured debts are written off, but you’ll most likely have to sell some property including your home). “Most people who can qualify for Chapter 7 in all likelihood lack the cash flow to make debt settlement work for them,” he says. Debt settlement, in other words, might be a viable alternative to Chapter 13, which sets up a three- to five-year schedule with your creditors to repay your debts.

Likewise, if you can scrape up the cash to pay off your debts in a debt-management program  where you work with a debt-management company to pay off your balances in full but with lower interest rates, then debt settlement isn’t the best solution.

Your credit will suffer. Creditors don’t settle unless you’re severely behind on your payments. That means one thing: Debt settlement is damaging to your credit. Just how damaging it is depends on your track record. If you’re already behind on payments, your credit will suffer less than if you’ve managed to avoid delinquencies and credit charge-offs.

You could get sued. With bankruptcy, creditors have to stop collections efforts as soon as you file. That’s not the case with debt settlement. Even if you inform your creditors of your efforts to settle, they won’t stop trying to collect, Phelan says. Worst-case scenario, they could sue you for the amounts you owe. Should that occur the only way to avoid a black mark on your credit record would be to pay off the debt in full.

There are tax consequences. Debt settlement is a taxable event. Any forgiven balance that exceeds $600 is taxable income, says Linfield. “Sometimes that tax event can put people in worse shape than they were in to begin with,” she says. Consider this: If your tax rate is 15%, $5,000 of forgiven debt will carry a $750 tax liability. That’s a debt that the Internal Revenue Service won’t forgive. One exception: If you’re insolvent — namely your assets are less than your liabilities — you can petition the IRS to waive that tax liability by filing Form 982.

Their services might be illegal. Though the laws regulating debt-settlement companies vary greatly by state, it’s worth noting that 12 states prohibit for-profit debt management. Since debt-settlement companies are for-profit entities, they’re not allowed to practice there. Those states are Arizona, Georgia, Hawaii, Louisiana, Maine, Mississippi, New Jersey, New Mexico, New York, North Dakota, West Virginia and Wyoming.

If you live in one of those states, remember: It is illegal for for-profit debt-settlement companies to contact you and work with you, even if they’re based in another state. “Many companies do it anyway,” Linfield says. “And that’s a big red flag.”

Foreclosure Deed may be Voided by Mortgage Transfer or Servicing Problems

By Max Gardner

A Federal District Court, in a December 7 order, has denied a motion to
dismiss a homeowner’s lawsuit to set aside the nonjudicial Missouri
foreclosure sale based on a deed of trust, based on allegations that 1)
the homeowner was not in default and 2) the nonjudicial sale was baed on
an invalid transfer of the mortgage and note. This decision illustrates
the potentially broad ramifications that defective mortgage transfers
and wrongful foreclosures will have for any house titles derived from
foreclosure sales in nonjudicial foreclosure states.
More specifically, the homeowner alleges that she made all payments when
due, until instructed by the servicer to stop making payments in order
to qualify for a modification. She also submitted the mortgage transfer
documents that showed a significant break in the chain of ownership. In
a deed of trust state, instead of a mortgage the loan originator
typically files a deed of trust, which transfers a power of sale from
the homeowner to a trustee, usually a local lawyer, on behalf of the
trust deed beneficiary, who is the lender or investor. In order to
transfer the mortgage, there needs to be a transfer of the note and a
change in the beneficiary of the trust deed. This is routinely done by
filing a substitution of trustee with the local recorder of deeds. The
substitution of trustee names a new trustee with a power of sale, and a
new beneficial owner of the mortgage/deed of trust. In this case the
substitution of trustee form listed a grantor of the transfer, i.e. the
prior owner of the loan, that did not match the identified beneficial
owner of the original deed of trust. This break in the chain, according
to the court and basic logic, would render the subsequent trustee deed
A second, independent basis for setting aside the foreclosure deed was
the alleged absence of a default. In a nonjudicial foreclosure, there
is no court judgment establishing that the homeonwer defaulted on the
loan. For that reason, a completed foreclosure sale can later be set
aside if there was in fact no default. The homeowner’s allegation in
this case was that she was current in payments until the servicer
instructed her to stop paying so that it could modify her loan. This
type of servicer-induced payment interruption can be characterized as
either nondefault based on a modification of the contract, a waiver of
the payment obligation by the servicer as agent for the mortgagee, or
perhaps a repudiation by the servicer. In any case, this scenario is
sufficiently common to raise serious questions about large numbers of
property titles in nonjudicial foreclosure states.

Securitization Workshop in Sacramento, December 11, 2010… for Attorneys & Other Interested Parties (via Foreclosureblues)

Securitization Workshop in Sacramento, December 11, 2010… for Attorneys & Other Interested Parties Securitization Workshop in Sacramento, December 11, 2010… for Attorneys & Other Interested Parties Today, December 06, 2010, 4 hours ago | Mandelman On December 11th, 2010, in Sacramento, California, DTC Systems, Inc. and Secure Document Research is holding a Securitization Workshop designed to help attorneys get quickly up-tp-speed on the topic of mortgage securitization as related to the financial and resulting foreclosure crises that conti … Read More

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A question we get alot – can my house be saved after the foreclosure sale? Answer – Maybe, and it is expensive. (via Foreclosureblues)

A question we get alot – can my house be saved after the foreclosure sale? Answer – Maybe, and it is expensive. A question we get alot – can my house be saved after the foreclosure sale? Answer – Maybe, and it is expensive. Today, December 06, 2010, 7 hours ago | Foreclosure Defense Attorney Steve Vondran If your house sells, you are in a tough spot in California and Arizona. Normally, we would need to see if there was any fraud/robosigner in the sub of trustee. It is tough to reverse a sale where the notice of default and notice of sale and other document … Read More

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25 year foreclosure from Hell

OKEECHOBEE COUNTY, Fla.—Patsy Campbell could tell you a thing or two about fighting foreclosure. She’s been fighting hers for 25 years.

The 71-year-old retired insurance saleswoman has been living in her house, a two-story on a half acre in a tidy middle-class neighborhood here in central Florida, since 1978. The last time she made a mortgage payment was October 1985.

The familyPatsy Campbell



And yet Ms. Campbell has been able to keep her house, protected by a 105-pound pit bull named Dodger and a locked, rusty gate advising visitors to beware of the dog.

“They’re not going to take this house,” says Ms. Campbell. “I intend to stay in this house and maintain it as my residence until I die.”

Ms. Campbell’s foreclosure case has outlasted two marriages, three recessions and four presidents. She has seen seven great-grandchildren born, plum real-estate markets come and go and the ownership of her mortgage change six times. Many Florida real-estate lawyers say it is the longest-lasting foreclosure case they have ever heard of.

The story of how Ms. Campbell has managed to avoid both paying her mortgage and losing her home, which is currently assessed at more than $203,000, is a cautionary tale for lenders that cut corners and followed sloppy practices when originating, processing and servicing mortgages. Lenders are especially vulnerable in the 23 states, including Florida, that require foreclosures to be approved by a judge.

Robbi Whelan/The Wall Street JournalMs. Campbell’s home in Okeechobee County, Fla.



Robbi Whelan/The Wall Street JournalVarious lenders have been trying to repossess the home since 1985.



Ms. Campbell has challenged her foreclosure on the grounds that her mortgage was improperly transferred between banks and federal agencies, that lawyers for the bank had waited too long to prosecute the case, that a Florida law shields her from all her creditors, and for dozens of other reasons. Once, she questioned whether there really was a debt at all, saying the lender improperly separated the note from the mortgage contract.

She has managed to stave off the banks partly because several courts have recognized that some of her legal arguments have some merit—however minor. Two foreclosure actions against her, for example, were thrown out because her lender sat on its hands too long after filing a case and lost its window to foreclose.

Ms. Campbell, who is handling her case these days without a lawyer, has learned how to work the ropes of the legal system so well that she has met every attempt by a lender to repossess her home with multiple appeals and counteractions, burying the plaintiffs facing her under piles of paperwork.

She offers no apologies for not paying her mortgage for 25 years, saying that when a foreclosure is in dispute, borrowers are entitled to stop making payments until the courts resolve the matter.

“This is every lender’s nightmare,” says Robert Summers, a Stuart, Fla., real-estate lawyer who represents Commercial Services of Perry, an Iowa-based buyer of distressed debt that currently owns Ms. Campbell’s mortgage and has been trying to foreclose. “Someone defending a foreclosure action can raise defenses that are baseless, but are obstacles for the foreclosing lender,” he says, calling the system “an unfair burden” for lenders.

While Ms. Campbell is an extreme case, more homeowners in trouble are starting to use similar tactics and are hiring defense lawyers to challenge their foreclosures, hoping to drag out the foreclosure process long enough to reach a settlement with the lender.

Nationwide, there were 2.1 million mortgages in some stage of foreclosure as of October, according to research firm LPS Applied Analytics. The average loan in foreclosure—the process typically starts when a loan becomes 90 days past due and a bank files a complaint—had been in default for 492 days as of October, up from 289 days at the end of 2005, according to LPS. In Florida, one of the states where foreclosures are handled by courts, the average loan in foreclosure has been delinquent 596 days.

Okeechobee County, a rural jurisdiction of 40,000 known for bass- and perch-fishing festivals, hasn’t experienced a foreclosure problem as intense as in many coastal regions of the state. Ms. Campbell’s house—which has vinyl siding, boards over the windows (to protect it from storm damage, she says), a crumbling backyard swimming pool and an old sedan rusting in the driveway—stands out among the manicured lawns, stucco ranch houses and cattle pastures interspersed among the houses.

In the town of Okeechobee, the county seat, signs of a local economy dependent on agriculture abound: stores selling pre-fab barns, animal feed and lumber line State Road 710 leading into town.

Robbi Whelan/The Wall Street JournalLawyer Robert Summers, below, who represents the current owner of her loan, has faced seven appeals of the foreclosure action from Ms. Campbell since 2000.



Brian Whitehall, Okeechobee’s city administrator, says unemployment in the area is hovering around 14.5%, slightly higher than the statewide average of 12% in September. Foreclosure filings have nearly doubled each year since the state’s housing market peaked in 2006, with 617 filed in 2009. But the national housing slump and the area’s economic woes aren’t immediately apparent in Okeechobee’s quiet neighborhoods.

“We’re not like the Port St. Lucies of the world, where entire subdivisions are empty and it’s like a ghost town,” Mr. Whitehall says.

Court records outline the rocky road Ms. Campbell’s loan has taken over the past 32 years. In 1978, Paul Campbell purchased the house on SW 19th Lane, a few minutes’ drive from the small pharmacy he owned, using a $68,000 mortgage from First Federal Savings and Loan of Martin County. He married Patsy in 1980, and died later that year from emphysema, leaving the property to his wife.

In 1985, Ms. Campbell stopped making mortgage payments because of an illness that caused her to lose income and get behind on her bills, she says.

By then, the savings-and-loan crisis had begun to take hold. First Federal merged with First Fidelity Savings and Loan, which assumed ownership of the Campbell loan. In 1987, First Fidelity sold the mortgage to American Pioneer Savings Bank, an Orlando-based lender that collapsed in the early 1990s.

The loan would change hands four more times, and four different lenders would try to foreclose on her. But every lender that held her loan either merged or collapsed. Each time ownership of the lender changed, the foreclosure case against Ms. Campbell would be dropped.

The loan eventually made its way to the Resolution Trust Corp., the federally owned asset manager that liquidated assets of insolvent S&Ls, and later, to the Federal Deposit Insurance Corp.

In June 1998, the FDIC sold the mortgage to Commercial Services of Perry, which filed to foreclose in 2000. After another illness, Ms. Campbell deeded the house to her daughter, Deborah Pyper. Years later, after Ms. Campbell recovered, the house was deeded back to her. Ms. Pyper declined to comment.

Ms. Campbell’s early briefs in the case were strongly worded and colorful, drafted with the help of a now-retired Okeechobee County lawyer.

The briefs presented dozens of reasons why Ms. Campbell thought the bank didn’t have the right to her house: Paul Campbell’s signature was forged on the original mortgage, she said, and the original sellers never received money from the bank. At other times, she said the mortgage was never properly conveyed between banks and federal agencies, and she demanded paperwork that they were unable to immediately produce.

Attorneys’ fees and court costs from previous cases hadn’t been paid, or the amounts were wrong, she argued. One brief said that “Defendant Campbell specifically denies the existence of any ‘debt.'”

In 2007, a trial-court judge tossed out all but two of Ms. Campbell’s defenses, calling the case an “unnecessary paper chase which has been an unproductive and unnecessary use of judicial resources.”

Commercial Services paid a court-determined amount to settle court costs from previous cases, and moved to take the foreclosure to trial, with a date set for early October 2010.

In response, Ms. Campbell filed for bankruptcy, effectively blocking the foreclosure until a stay is lifted by a bankruptcy-court judge.

Her filing lists $225,000 in real-property assets, and lists a secured creditor’s claim of $63,801, which is equal to the unpaid principal on her mortgage. In previous court arguments, she had maintained that no lender held a secured claim against her because the note was improperly assigned.

A stern, confident woman who can quote Florida civil-procedure statutes by reference number, and who adores cooking Southern food and listening to classic Grand Ole Opry-era country music, Ms. Campbell steadfastly believes she is right. Her most recent argument in the case is that under Florida homestead law, the bank can’t seize her house because it is exempt from liens and forced sales.

“Commercial Services of Perry is in the business of doing this. They win some, they lose some,” she says. “If they had a case, they would have already won it, years ago.”


She maintains that at this point, no one owns her mortgage note, and that because of fraud and paperwork mistakes by the banks that transferred it over and over again in the 1990s, the debt has been made void.

Mr. Summers, the lawyer for the lender, calls the case “the foreclosure from hell.” He says Ms. Campbell has appealed the case seven times since he took it on in 2000, and all of her arguments are just stalling tactics.

“It’s almost like clockwork. You know you’re going to get another three-inch stack of documents every month or so, and you have to take the time to read through it,” Mr. Summers says. “That is a burden on the courts, a burden on lawyers to decipher it, and it has enough meat in it that it’s not all void.”

For example, according to Mr. Summers and to court filings, in 2007, when a judge remanded the case to the trial court, a court clerk failed to issue a mandate establishing the lower court’s jurisdiction. Ms. Campbell appealed the case on those grounds.

The bankruptcy should take about four months to adjudicate, Mr. Summers says, at which point he intends to take the foreclosure to trial. According to Commercial Services of Perry’s latest filings, Ms. Campbell owes the $63,801 in principal plus $148,000 in interest.

“All she’s got to do is pay what she owes: the principal, the interest, plus court costs and attorneys’ fees,” Mr. Summers says. “But she doesn’t get a free ride.”

California to join multi-state investigation into foreclosures

By Dale Kasler
Published: Tuesday, Oct. 12, 2010 – 10:56 am
Last Modified: Tuesday, Oct. 12, 2010 – 1:17 pm

California officials are joining a multi-state effort to investigate mortgage “robo-signers” – employees of lending institutions who’ve approved foreclosures without reading the documents.

Jim Finefrock, a spokesman for California Attorney General Jerry Brown, said today his office will participate in the investigation. The effort is to be led by Iowa Attorney General Tom Miller.

Brown has previously called on all lenders to halt foreclosures in California temporarily. He also issued demands to two lenders – Ally and JP Morgan Chase – to stop California foreclosures until they can show they’re following state law.

Finefrock said Brown’s lawyers are in talks with Ally and Chase. California law prohibits lenders from issuing default notices – the first step toward foreclosure – until they’ve made serious efforts to contact homeowners to see if their loans can be modified. The law applies to mortgages issued from 2003 to 2007.

Now that he is Governor he probably will not do anything. He has to “work” with the banks to help get California out of it fiscal mess. When running for office you must criticize the status quo and vow  to change it if elected. Once elected you must preserve the status quo. Its right out of the election play book.

Saving your home





By far the most important decision that must be initially made is whether the property is worth saving.  This is often ignored and wasted effort is expended when there is no “equity” (realistic fair market value minus all debt, liens, property taxes, anticipated foreclosure costs, late fees, and selling costs) in the property.

The options are as follows:

1.         Reinstatement.  Pay the costs and late charges and stop the process.  In most non-judicial foreclosures this is permitted up until the date of sale.  In Washington the lender must allow reinstatement 10 days prior to the sale date.  See RCW 61.24.  Often a lender or relative will loan necessary funds and take a subordinate lien on the property to do so.  The makes sense only if the new payments are within the means of the debtor.

2.         Sell the Property.  If there is equity, but no ability to reinstate, then immediately list and sell the property to recoup equity.

3.         Obtain Foreclosure Relief.  Most government insured loans (if, VA, FHA) have programs allowing (or requiring) lenders to assist defaulting borrowers.  See discussion under §V infra.  Check into these options immediately.

4.         Give Up.  This is actually an option as most state laws permit the debtor to remain in possession during the foreclosure process and redemption period rent-free.  Most laws, especially in non-judicial foreclosure states – do not allow (or at least limit) deficiencies.  Debtors contemplating bankruptcy should take advantage of homestead rights and redemption rights.  If there is no equity or negative equity and no ability to make payments, there is no economic reason to try to avoid foreclosure.

5.         Defend the Foreclosure.  After all of the above have been considered, defense of the foreclosure may be warranted.  This outline discusses some defenses that may result in re-instatement of the mortgage or recovery of equity.


In addition to defenses that may be raised, there may be affirmative claims that can be brought against the lender which should be immediately determined and raised in a counterclaim or set-off or, in the case of non-judicial foreclosure, brought by separate suit and coupled with an injunction against continuing the non-judicial foreclosure.  These claims can also be brought in bankruptcy.  See, e.g. In re Perkins, 106 BR 863 (1989).

A few examples of affirmative claims:

1.         Truth-in-Lending Act Violations.  Often lenders will hand the debtor a claim, which can turn a debt into an asset.  If the Truth-in-Lending disclosure statement is less than one year old, there may be damage claims for improper disclosure.  See, 15 U.S.C. 1635.  More importantly, there may be a right of rescission, which can be exercised up to three years after the closing resulting in a tremendous advantage to the borrower.  See, e.g., Beach v. Ocwen Fed Bank, 118 S. Ct. 1408 (1998).

2.         Usury.  If a state usury law applies (usually on seller financed real estate), this can parlay a debt into an asset.  Federal pre-emption generally prevents this, but there are exceptions.  See, RCW 19.52.

3.         Mortgage Broker Liability, Lender Liability, Unfair or Deceptive Acts or Practices.  Numerous claims that arise in the mortgage financing context give rise to set-offs that can allow negotiation out of the foreclosure.  See e.g. Mason v. Mortgage America, 114 Wn. 2d 842 (1990).  Intentional breach of contract gives rise to emotional stress damages.  See, Cooperstein v. Van Natter, 26 Wn. App. 91 (1980); Theis v. Federal Finance Co., 4 Wn. App. 146 (1971).

Under a new federal statute to regulate high interest, predatory loans, Congress enacted in 1994 the Home Ownership and Equity Protection Act (effective on loans after October 1, 1995).  This amendment to the Truth-In-Lending Act requires greater disclosures in loans where a number of factors exist such as, points exceeding 8% and other excessive costs.  Penalties include enhanced damages and rescission.  See 15 U.S.C. 1602(u) and 15 U.S.C. 1640(a).

The Mortgage Broker Practices Act, RCW 31.04 and the Consumer Protection Act also have enhanced damages and attorney fees.




The deed of trust is currently one of the most common devices for securing conventional and government insured or guaranteed real estate loans.  The deed of trust may be typically foreclosed either judicial­ly as a mortgage or non-judicially. Set forth below are the jurisdictional variations in security agreements and the most common foreclosure procedures[1]. Nonjudicial foreclosure is allowed in approximately one-half of the states.  Also listed are the states that permit nonjudicial foreclosure and their relevant statutes[2]. With nonjudicial foreclosure, it is not necessary to utilize the court for the foreclosure sale unless a deficiency judgment is sought. Nonjudicial foreclosure is often the preferred method of foreclosure because it is more efficient than judicial foreclosure and quicker. The nonjudicial foreclosure procedure has been found constitutional between private parties on the basis that there is no state action[3], but there is a serious question as to whether the government can direct a lender to use a nonjudicial procedure[4].


Anyone having an interest in the real property security, including the borrower, may restrain the non-judicial foreclosure of a deed of trust on any proper ground[5].  Proper grounds for enjoining a trustee’s sale include: (1) there is no default on the obligation, Salot v. Wershow, 157 CA.2d 352, 320 P.2d 926 (1958), (2) the deed of trust has been reinstated, (3) the notice of default, notice of sale, or proposed conduct of the sale is defective, Crummer v. Whitehead, 230 CA.2d 264, 40 CR 826 (1964), (4) the lender has waived the right to foreclose, (5) a workout/settlement has been agreed to, (6) equitable reasons that would entitle a debtor to close a sale of the property or complete a refinance, (7) to enforce government relief programs, and trustee misconduct.  Finally, there may be defenses to the debt (i.e. usury, truth in lending violations, misrepresentation of the seller, breach of warranty by the seller, etc.) or set-offs, which substantially reduce the debt.

1.         Time for Filing Action

The action can presumably be filed any time before the scheduled trustee’s sale, but the sooner the better.  Under Washington law, if one seeks to restrain the sale, five days notice must be given to the trustee and the beneficiary.  See the Revised Code of Washington (hereinafter “RCW”) 61.24.130(2); Note, supra, footnote 4.  A trustor in California has at least one hundred and ten days (after the recording of the notice of default) to seek to enjoin the sale. In California, fifteen days are required for noticing a motion for a preliminary injunction. See CCP section 1005.

2.         Effect of Lis Pendens

Filing a lis pendens at the time the lawsuit is com­menced constitutes constructive notice to purchasers and others dealing with the property of the claims and defenses asserted by the plaintiff[6].  Even if the plaintiff does not seek an order restraining the trustee’s sale or a restraining order is denied, purchasers at the sale acquire the property subject to the pending litigation[7].

3.         Notice of Application for Restraining Order

In Washington, a person seeking to restrain a trustee’s sale must give five days notice to the trustee setting forth when, where and before whom the application for the restraining order or injunction will be made. See RCW 61.24.130(2).  See also Civil Rules 6 and 81 of the Civil Rules for Superior Court regarding computation of time.

4.         Payment Obligation

When a preliminary injunction is sought, many states require the petitioner to post an injunction bond to protect the lender from injury because of the injunction[8].  Some courts require the party seeking the injunctive relief to pay to the court the amount due on the obligation[9].  If the amount due on the obligation is in dispute, most courts will require the borrower to tender at least what he/she acknowledges is due[10].

Under Washington law, if the default is in making the monthly payment of principal, interest and reserves, the court requires such sum to be paid into the court every thirty days.  See RCW 61.24.130(1)(a).  A practice tip: even if local law does not require this, it would advantageous to offer to make ongoing payments.  Then the creditor loses nothing during the pendency of the suit.  In the case of default on a balloon payment, the statute requires that payment of the amount of the monthly interest at the new default rate shall be made to the court clerk every thirty days. See RCW 61.24.130 (1)(b).  If the property secured by the deed of trust is an owner occupied single family dwelling, then the court must require the party seeking to restrain the trustee’s sale to make the monthly payment of principal interest and reserves to the clerk of the court every 30 days.  See RCW 61.24.130(1).

Although the amount that the party seeking to restrain the trustee’s sale must pay as a condition of continuing the restrain­ing order would ordinarily be the regular monthly payment on the obligation, RCW 61.24.130(1)(a), when there is a balloon payment past due, RCW 61.24.130(1)(b) provides:

In the case of default in making payments of an obligation then fully payment by its terms, such sum shall be the amount of interest accruing monthly on said obligation at the non-default rate, paid to the clerk of the court every thirty days.


This is consistent with the intent to preserve the status quo while the lawsuit is pending and provide security only for prospec­tive harm.

Failure to seek a restraint may constitute a waiver of all rights to challenge a sale for defects whenever the party who received notice of the right to enjoin the trustees sale, had actual or constructive knowledge of a defense to foreclosure prior to the sale, and failed to bring an action to enjoin the sale.  The doctrine of waiver would thus preclude an action by a party to set aside a completed trustee’s sale[11].  Finally, RCW 61.24.130 allows the court to consider the grantor’s equity in determining the amount of security.  This would significantly help a borrower avoid a costly bond.  An appraisal showing equity should persuade a court that the lender is protected while the underlying dispute is resolved in court.

When a party knew or should have known that they might have a cause of action to set aside the sale but unreasonably delayed commencing the action, causing damage to the defendant, the doctrine of laches may bar the action[12].


Most defenses that are available in judicial foreclosures are also available in nonjudicial foreclosures of deeds of trust.  Defenses may include violation of Truth-in-Lending, usury statutes, other consumer protection legislation, or special requirements when the government is the lender, insurer, or guarantor, infra.  Other defenses are unique to nonjudicial foreclosure of deeds of trust because they relate to the particular obligations imposed upon trustees who conduct the sale of the real property.

1.         Breach of Fiduciary Duties

A trustee selling property at a nonjudicial foreclosure sale has strict obligations imposed by law.  In most states, “a trustee is treated as a fiduciary for both the borrower and the lender.”[13]

In McPherson v. Purdue, 21 Wn. App. 450, 452-3, 585 P.2d 830 (1978), the court approved the following statement describing the duties of a trustee from California law:

Among those duties is that of bringing “the property to the hammer under every possible advantage to his cestui que trusts,” using all reasonable diligence to obtain the best price.


In Cox v. Helenius, 103 Wn.2d 383, 388, 693 P.2d 683 (1985), the Washington Supreme Court adopted the following view:

Because the deed of trust foreclosure process is conducted without review or confrontation by a court, the fiduciary duty imposed upon the trustee is “exceedingly high”.


The court went on to illuminate four duties of the trustee:

(1)        The trustee is bound by his office to use diligence in presenting the sale under every possible advantage to the debtor as well as the creditor;

(2)        The trustee must take reasonable and appropriate steps to avoid sacrifice of the debtor’s property and his interest;

(3)        Once a course of conduct is undertaken that is reasonably calculated to instill a sense of reliance thereon by the grantor, that course of conduct can not be abandoned without notice to the grantor; and

(4)        When an actual conflict of interest arises between the roles of attorney for the beneficiary and trustee, the attorney should withdraw from one position, thus preventing a breach of fiduciary duty.

In Blodgett v. Martsch, 590 P.2d 298 (UT 1978), it was stated that “the duty of the trustee under a trust deed is greater than the mere obligation to sell the pledged property, . . . it is a duty to treat the trustor fairly and in accordance with a high punctilio of honor.” The Supreme Court in Blodgett went even further and found that the breach of this confidential duty may be regarded as constructive fraud[14].

The general rule is summarized in Nelson & Whitman, Real Estate Finance Law, (West Publishing Co., 3d Ed. 1994), §7.21:

. . . a trustee in a deed of trust is a fidu­ciary for both the mortgagor and mortgagee and must act impartially between them.  As one leading decision has stated, “the trustee for sale is bound by his office to bring the estate to a sale under every possible advan­tage to the debtor as well as to the creditor, and he is bound to use not only good faith but also every requisite degree of diligence in conducting the sale and to attend equally to the interest of debtor and creditor alike, apprising both of the intention of selling, that each may take the means to procure an advantageous sale.”


Mills v. Mutual Building & Loan Association, 216 N.C. 664, 669, 6 S.E.2d 549, 554 (1940).

The fiduciary duty of a trustee to obtain the best possible price for trust property that it sells has been discussed in nonjudicial and other contexts[15].

However, this “fiduciary” characterization of a trustee is not accepted in all jurisdictions. The California Supreme Court has stated,

“The similarities between a trustee of an express trust and a trustee under a deed of trust end with the name. ‘Just as a panda is not a true bear, a trustee of a deed of trust is not a true trustee.’ *** [T]he trustee under a deed of trust does not have a true trustee’s interest in, and control over, the trust property. Nor is it bound by the fiduciary duties that characterize a true trustee.”


Monterey S.P. Partnership v. W.L. Bangham, Inc. 49 Cal.3d 454, 462, 261 Cal.Rptr. 587,592 (1989).

In most jurisdictions, a trustee cannot, without the express consent of the trustor, purchase at the sale that he conducts[16].  A court may impose additional affirmative duties (beyond the statutory requirements) upon the trustee in certain circumstances.  This could include a requirement that a trustee’s sale be con­tinued, if necessary, to prevent a total loss of the debtor’s equity.  West v. Axtell, 322 Mo. 401, 17 S.W.2d 328 (1929). RCW 61.24.040(6) authorizes a trustee to continue a trustee’s sale for a period or periods totaling 120 days for “any cause he deems advantageous.”

However, the Washington Court of Appeals has ruled that the trustee need not exercise “due diligence” in notifying interested parties of an impending sale.  Morrell v. Arctic Trading Co., 21 Wn. App. 302, 584 P.2d 983 (1978).  Further, the general rule is that a trustee is not obligated to disclose liens or other interests which the purchaser could or should have discovered through his or her own investigation. Ivrey v. Karr, 182 Md. 463, 34 A.2d 847, 852 (1943). The Washington courts have held that even when a trustee is aware of defects in title, the trustee only undertakes an affirmative duty of full and accurate disclosure if s/he has made any representations or answered any questions concerning the title.  McPherson v. Purdue, 21 Wn. App. 450, 453, 585 P.2d 830 (1978). However, despite this general rule, there is authority behind the proposition that a trustee has a fiduciary duty to restrain the sale due to defects known to the trustee. In Cox v. Helenius, 103 Wn.2d 383,*,693 P.2d 683 (1985), in which the trustee knew that the right to foreclose was disputed and that the attorney for the trustor had failed to restrain the sale, the court held that the trustee should have either informed the attorney for the trustor that she had failed to properly restrain the sale or delayed foreclosure. As a result of the trustee’s failure to do so, the sale was held void.

Trustees are not permitted to “chill the bidding” by making statements which would discourage bidding, for example, a statement that it is unlikely that the sale will be held because the debtor intends to reinstate[17].  If a trustee does engage in “chilled bidding”, the sale is subject to being set aside[18].

2.         Strict Construction of the Deed of Trust Statute

The nonjudicial foreclosure process is intended to be inexpensive and efficient while providing an adequate opportunity for preventing wrongful foreclosures and promoting the stability of land titles[19].  However, statutes allowing foreclosure under a power of sale contained within the trust deed or mortgage are usually strictly construed.  Id. at 509.

Recent decisions have moved away from the strict construction ruling, holding that some technical violations of statutes governing nonjudicial foreclosures will not serve as grounds for setting aside sale when the error was non-prejudicial and correctable.  See Koegal, supra at 113.  An example of a non-prejudicial and correctable error is noncompliance with the requirement that the trustee record the notice of sale 90-days prior to the actual sale when actual notice of the sale was given to the debtors 90-days prior to the sale and the lack of recording caused no harm.  Steward, supra at 515. Further, inconsequential defects often involve minor discrepancies regarding the notice of sale. In Bailey v. Pioneer Federal Savings and Loan Association, 210 Va. 558, 172 S.E.2d 730 (1970), where the first of four published notices omitted the place of the sale, the court held that since there was “substantial compliance” with the requirements specified by the deed of trust and since the parties were not affected in a “material way,” the sale was valid[20].  In another case, where the notice of sale was sent by regular rather than by statutorily required certified or registered mail and the mortgagor had actual notice of the sale for more than the statutory period prior to the sale, the sale was deemed valid[21]. Clearly a grantor must show some prejudice.


1.         Statutory Presumptions

The Washington Deed of Trust Act contains statutory presumptions in connection with a trustee’s sale that are similar to those found in most other states. [22] RCW 61.24.040(7) provides, in part:

. . . the [trustee’s] deed shall recite the facts showing that the sale was conducted in compliance with all of the requirements of this chapter and of the deed of trust, which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbran­cers for value.


Such provisions are designed to protect bona fide purchasers and to assure that the title passed through a trustee’s sale will be readily insurable.  However, although the required recitals are described as “conclusive” in favor of bona fide purchasers and encumbrancers for value, there is extensive case law setting forth the basis for rebutting these presumptions. They also don’t apply to a dispute between the grantor and grantee.  See, generally, Nelson & Whitman, Real Estate Finance Law, (2d ed. 1985) § 7.21 ff. Some states employ other means of stabilizing titles, such as title insurance. Yet another means of stabilizing titles is to include a provision in the deed of trust that in the event of a trustee’s sale, the recital will be conclusive proof of the facts.  See, Johnson v. Johnson, 25 Wn. 2d 797 (1946); Glidden v. Municipal Authority, 111 Wn. 2d 341 (1988), modified By Glidden v. Municipal Authority, 764 P.2d 647 (1988).

2.         The Bona Fide Purchaser

The law is well settled that a bona fide purchaser, in order to achieve that status, must have purchased the property “for value.” See RCW 61.24.040(7).

The general rule is set forth in Phillips v. Latham, 523 S.W.2d 19, 24 (Tex. 1975):

[The purchaser] cannot claim to be a good-faith purchaser for value because the jury found . . . that the sale price of $691.43 was grossly inadequate.  These findings are not attacked for lack of evidence.  Although good faith does not necessarily require payment of the full value of the property, a purchaser who pays a grossly inadequate price cannot be considered a good-faith purchaser for value.


Further, if a lis pendens has been recorded, it “will cause the purchaser to take subject to the plaintiff’s claims.” Bernhardt, California Mortgage & Deed of Trust Practice (2d Edition 1990). A purchaser will not then constitute a bona fide purchaser able to utilize the presumptions of regularity in recitals of the trustee’s deed. See CC § 2924.  The beneficiary of a deed of trust is not a bona fide purchaser.  See Johnson, supra.


Setting aside a trustee’s sale is largely a matter for the trial court’s discretion.  Crummer v. Whitehead, 230 Cal. App. 2d 264, 40 Cal. Rptr. 826 (1964); Brown v. Busch, 152 Ca. App. 2d 200, 313 P.2d 19 (1957). After a trustee’s sale has taken place, a trustor or junior lienor may bring an action in equity to set aside the sale. See Crummer v. Whitehead, 230 Cal. App. 2d 264, 40 Cal. Rptr. 826 (1964); see also Note, “Court Actions Contesting The Nonjudicial Foreclosure of Deeds of Trust In Washington,” 59 Wash.L.Rev. 323 (1984)[23].

An action may be brought to set aside a trustee’s sale under circumstances where the trustee’s sale is void.  Cox v. Helenius, 103 Wn.2d 383, 693 P.2d 683 (1985).  In those circumstances where the defect in the trustee’s sale procedure does not render the trustee’s sale void, the court will probably apply equitable principles in deciding what relief, if any, is available to the parties.  A general discussion of equitable principles in contexts other than trustee’s sale can be found in Eastlake Community Council v. Roanoake Associates, 82 Wn.2d 475, 513 P.2d 36 (1973) and Arnold v. Melani, 75 Wn.2d 143, 437 P.2d 908 (1968).  Although it is preferable to raise any defenses to the obligations secured by the deed of trust or other defects in the nonjudicial foreclo­sure process prior to the trustee’s sale, a trustee’s sale can presumably be set aside if there was a good reason for not restraining it.  Possible reasons could include those described below.

1.         Breach of the Trustee’s Duty

a.  Inadequate Sale Price

The general rule on using inadequate sale price to set aside a deed of trust sale is stated in Nelson & Whitman, supra, § 7.21:

All jurisdictions adhere to the recognized rule that mere inadequacy of the foreclosure sale price will not invalidate a sale, absent fraud, unfairness, or other irregularity. Stating the rule in a slightly different manner, courts sometimes say that inadequacy of the sale price is an insufficient ground unless it is so gross as to shock the conscience of the court, warranting an inference of fraud or imposition[24].


In Cox v. Helenius, supra, at p. 388, the court indicated that the inadequate sale price coupled with the trustee’s actions, would have resulted in a void sale, even if not restrained.

Generally, unless the sale price is grossly inadequate, other irregularities or unfairness must exist.  However, consider­able authority exists to support setting aside a sale when, coupled with an inadequate sale price, there is any other reason warranting equitable relief.  Nelson & Whitman, Real Estate Finance Law, supra.

b.         Hostility or Indifference to Rights of Debtor.


In Dingus, supra, at 289, it is stated:


In an action to set aside a foreclosure sale under a deed of trust, evidence showing that the trustee was hostile and wholly indifferent to any right of the mortgagor warrants setting aside the sale.  Lunsford v. Davis, 254 S.W. 878 (Mo. 1923).


CF. Cox v. Helenius, supra.


c.  Other Trustee Misconduct

Other trustee misconduct that would give rise to grounds for setting aside a trustees sale could include “chilled bidding” where the trustee acts in a manner that discourages other parties from bidding on the property[25].  Actions by the trustee which lull the debtor into inaction may also give rise to grounds for avoiding the sale[26].  Particular note should also be made of the discussion in Cox v. Helenius, supra, at p.390 in which trustees who serve a dual role as trustee and attorney for the beneficiary are directed to transfer one role to another person where an actual conflict of interest arises.

2.         Absence of Other Foreclosure Requisites

RCW 61.24.030 sets forth the requisites to non-judicial foreclosure.  Failure to meet these requisites may render the trustee’s sale void.  In Cox v. Helenius, 103 Wn.2d 383, 693 P.2d 683 (1985), the court concluded that a trustee’s sale was void under circumstances where the borrower had filed an action contesting the obligation and that action was pending at the time of the trustee’s sale.  The action was filed after service of the notice of default but before service of the notice of foreclosure and trustee’s sale.

The decision in Cox was based on language in the Deed of Trust Act that made it a requisite to foreclosure that “no action is pending on an obligation secured by the deed of trust.”  That part of the Cox decision was legislative overruled by Chapter 193, Law of 1985, Reg. Sess., which amended RCW 61.24.030(4) to read as follows:

That no action commenced by the beneficiary of the deed of trust is now pending to seek satisfaction of an obligation secured by the deed of trust in any court by reason of the grantor’s default on the obligation secured;


As a result of the amendment, pendency of an action on the obligation brought by the grantor does not render a subsequent trustee’s sale void.  Only pending actions commenced by the beneficiary to seek satisfaction of the obligation secured by the deed of trust operate as a bar to nonjudicial foreclosure.  The trustee must be properly appointed and be appointed before the trustee has authority to act.  When an eager trustee “jumps the gun” the actions are equally void.


1.         Confirmation of Sale Price.

Many states (but not Washington) require confirmation that the nonjudicial sale resulted in a fair value to the debtor. Below is listed the states that have adopted fair market value statutes[27]. Fair market value statutes are usually used to limit deficiency judgments to the difference between the fair market value and the debt. Failure to confirm the sale within the statutory period is usually a bar to a deficiency. For example, in Georgia the court must be petitioned for a confirmation of the sale if a deficiency judgment is sought.

2.         Redemption in Nonjudicial Foreclosures.

Approximately one-half of the states allow for redemption after foreclosure, although not Washington. Some states allow redemption after a nonjudicial sale. See Minnesota Statutes Annotated § 580 et seq.  Generally, the grantor can remain in possession during the redemption period, rent the property (retaining the rents) and/or sell the property (or sell the redemption rights).



In Washington, RCW 61.24.060 specifies that the purchaser at a trustee’s sale is entitled to possession of the property on the 20th day following the sale.  If the grantor or person claiming through the grantor refuses to vacate the property, the purchaser is entitled to bring an action to recover possession of the property pursuant to the unlawful detainer statute, RCW 59.12.  Ordinarily, parties in possession will not be allowed to raise  some defenses in the unlawful detainer action that could have been raised prior to the trustee’s sale[28].  In most states defenses in an eviction action are severely limited.  Despite these early cases restricting defenses in unlawful detainer, e.g. Peoples National Bank v. Ostander, 6 Wn. App. 28 (1971), a more recent case, Cox v. Helenius, 103 Wash. 2d 208 (1985), allowed defenses to be raised that the sale was void because of defects in the foreclosure process itself.  In fact, Cox v. Helenius was initially a unlawful detainer action in the King County Superior Court.  In Savings Bank of Puget Sound v. Mink, 49 Wn. App. 204 (1987), Division One of the Court of Appeals, held that a number of defenses raised by the appellant (Truth-in-Lending violations, infliction of emotional distress, defamation, slander, etc.) were not properly assertable in an unlawful detainer action but ruled that:

However, in Cox v. Helenius, supra, the Supreme Court recognized that there may be circumstances surrounding the foreclosure process that will void the sale and thus destroy any right to possession in the purchaser at the sale.

In Cox, the Court recognized two bases for post sale relief: defects in the foreclosure process itself, i.e., failure to observe the statutory prescriptions and the existence of an actual conflict of interest on the part of the trustee…


B.      The Deed of Trust Act must be construed strictly against lenders and in favor of borrowers.


Washington law is similarly clear that the Deed of Trust Act, being non-judicial in nature and without the scrutiny by courts until the unlawful detainer stage, is strictly construed against lenders and in favor of borrowers.  Queen City Savings and Loan v. Mannhalt, 111

In order to avoid the jurisdictional and other problems that arise when trying to litigate claims in the unlawful detainer action, it is recommended that a separate action be filed to set aside the trustee’s sale and that the two actions be consolidated.


There is a damage claim for the tort of wrongful foreclosure.  The claim may also exist as a breach of contract claim.  See, Theis v. Federal Finance Co., 4 Wn. App. 146 (1971); Cox v. Helenius, supra.



The same range of defenses is generally available to the borrower in both nonjudicial and judicial foreclosures.  Defenses may include fraud or misrepre­sentation, violations of Truth-in-Lending, violations of usury statutes, violations of other consumer protection acts, or failure to comply with applicable regulations when the government is the lender, insurer, or guarantor.  Other defenses, however, are unique to judicial foreclosures and must be raised affirmatively. Most rights are set forth in statutes and they must be asserted in compliance with the particular requirements of the law.  The judicial foreclosure statutes are set forth below[29].


If the plaintiff’s complaint seeks possession of the property at the sheriff’s sale and the homeowner wishes to remain on the premises during the redemption period, then the homeowner should plead the existence of homestead rights in the answer so as not to waive them.  State, ex rel., O’Brien v. Superior Court, 173 Wash. 679, 24 P.2d 117 (1933); State, ex rel., White v. Douglas, 6 Wn.2d 356, 107 P.2d 593 (1940).


Some states authorize the court to establish an upset price (or minimum bid amount) in a foreclosure sale.  In Washington, RCW 61.12.060 authorizes the court where a deficiency is sought, in ordering a sheriff’s sale, to take judicial notice of economic conditions and, after a proper hearing, fix a minimum or upset price for which the mortgaged premises must be sold before the sale will be confirmed.  If a depressed real estate market justifies seeking an upset price, then the mortgagor should request in the answer that one be set.  See, McClure v. Delguzzi, 53 Wn. App. 404 (1989).  Some states give this power to the courts with any sale without reference to any other valuation method.  See e.g. Kan. Stat. §60-2415(b) (1988); Mich. Comp. Laws Ann. §600.3155 (1919).  The court has great discretion in arriving at and setting an upset price if the statute fails to specify the method to be used in calculating the price.  There is always the danger that in the absence of statutory standards, the power to set the upset price will be abused[30].


A deficiency judgment results when the amount for which the property is sold at the sheriff’s sale is less than the amount of the judgment entered in the foreclosure action.  A deficiency judgment in connection with a foreclosure is enforceable like any other money judgment.  If the mortgage or other instrument contains an express agreement for the payment of money, then the lender may seek a deficiency judgment.  See RCW 61.12.070.  In Thompson v. Smith, 58 Wn. App. 361 (1990), Division I, held the acceptance of a deed in lieu of foreclosure triggers the anti-deficiency provisions of the Deed of Trust Act, 61.24.100. The procedural requirements for obtaining a deficiency judgment vary, but must be strictly adhered to or the right will be lost. In general, an action must be brought within a statutorily set amount of time following the foreclosure sale. For example, California Civ. Proc. Code § 726 (Supp. 1984) (three months); N.Y. Real Prop. Acts. Law § 1371 (2) (McKinney 1979) (ninety days); and Pennsylvania Stat. Ann. tit. 12, section 2621.7 (1967) (six months). Many states also have time limits for the completion of the execution of a deficiency. Maryland Rules, Rule W75 (b)(3) (1984) (three years); and Ohio Rev. Code Ann. § 2329.08 (Anderson 1981) (two years on land with dwelling for two families or less or used as a farm dwelling). Some states have longer redemption periods when a deficiency is sought. e.g. Wisconsin (6-12 months); Washington (8-12 months).


Approximately one-half of the states have statutes that give a borrower the right to redeem the property after the foreclosure sale. This right has specific statutory time limits. The time period for redemption varies from thirty days to three years after the foreclosure sale.  Strict compliance with the statutory requirements is mandatory.

Under Washington law, if the lender seeks a deficiency judgment or if the mortgage does not contain a clause that the property is not for agricultural purposes, then the redemption period is one year from the date of the sheriff’s sale.  See RCW 6.23.020.

If the lender does not seek a deficiency judgment and the mortgage contains a clause that the property is not being used for agricultural purposes, than the redemption period is eight months.  Id.

There is no statutory redemption period if there is a structure on the land and the court finds that the property has been abandoned for six months prior to the decree of foreclosure.  See RCW 61.12.093.  This section is not applicable to property that is used primarily for agricultural purposes.  RCW 61.12.095.

The purchaser at the sheriff’s sale, or the purchaser’s assignee, must send notice to the judgment debtor every two months that the redemption period is expiring.  Failure to give any of the notices in the manner and containing the information required by statute will operate to extend the redemption period.  RCW 6.23.080.

Any party seeking to redeem must give the sheriff at least five days written notice of the intention to apply to the sheriff for that purpose.  RCW 6.23.080(1). The amount necessary to redeem is the amount of the bid at the sheriff’s sale, interest thereon at the rate provided in the judgment to the time of redemption, any assessment or taxes which the purchaser has paid after circumstanc­es, other sums that were paid on prior liens or obligations.  RCW 6.23.020.

Redemption rights are freely alienable and a property owner can sell the homestead during the redemption period free of judgment liens.  Great Northwest Federal Savings and Loan Associa­tion v. T.B. and R.F. Jones, Inc., 23 Wn. App. 55, 596 P.2d 1059 (1979). This is an important right and is often overlooked.  For example, in VA loans the sale price is very low because the VA deducts its anticipated costs of holding and resale.  Therefore, the property can be redeemed for that amount.  There, lenders routinely advise debtors to move out at the beginning of the period, which they do not legally have to do.

The debtor can sometimes rent the property and the rents retained during the redemption period.


If the homeowner exercises his redemption rights and there is a purchaser in possession, then the homeowner can apply for a writ of assistance to secure possession of the property anytime before the expira­tion of the redemption period.  If the homeowner has no right to claim a homestead or is not occupying the property as a homestead during redemption period, then the lender can apply for a writ of assistance at the time of the foreclosure decree to obtain possession of the property.  A writ of assistance is similar to a writ of restitution and is executed by the sheriff.  The purchaser at the sheriff’s sale normally has no right to possession until after receipt of a sheriff’s deed[31].


A foreclosure can be vacated under rules allowing vacating judgments, e.g. F.R.Civ.P 60(b); See also Godsden & Farba, Under What Circumstances Can a Foreclosure Sale be Set Aside Under New York Law, New York State Bar Journal (May 1993).



Bankruptcy has a significant impact on real estate foreclosures and is beyond the scope of this outline. Under section 362 (a) of the Bankruptcy Code, filing any of the three types of bankruptcy stays all foreclosure proceedings. See 11 U.S.C.A. § 362 (a)(4); Murphy, The Automatic Stay in Bankruptcy, 34 Clev.St.L.Rev. 597 (1986).  A stay has been held to apply to a possessory interest after foreclosure to allow a challenge to the validity of the foreclosure in an adversary action in bankruptcy court.  In re Campos, No. 93-04719 (W.D. WN-B.Ct, Order of July 9, 1993).  The stay applies to both judicial and nonjudicial foreclosures and it also applies whether or not the foreclosure was begun before the bankruptcy. See 11 U.S.C.A. § 362 (a). The only notable exception to the automatic stay is for foreclosures brought by the Secretary of HUD on federally insured mortgages for real estate involving five or more units. See 11 U.S.C.A. § 362 (b)(8).

A trustee in a bankruptcy may also undo a foreclosure as a fraudulent transfer if a creditor gets a windfall.  See II U.S.C. §547 and §548, within 90 days or within one year if an “insider” forecloses[32].

A portion of the equity under state or federal law may be protected from creditors, although not from secured creditors.


A deed is sometimes given by a mortgagor in lieu of foreclosure and in satisfaction of a mortgage debt. Such a workout “is subject to close scrutiny in an effort to determine whether it was voluntarily entered into on the part of the mortgagor under conditions free of undue influence, oppression, unfairness or unconscientious advantage. Further the burden of proving the fairness rests with the mortgagee.” Robar v. Ellingson, 301 N.W.2d 653, 657-658 (N.D.1981) (insufficient threshold evidence of oppression or unfairness to trigger mortgagee’s burden of proof). Courts also tend to find the deed in lieu of foreclosure to be another mortgage transaction in the form of an absolute deed. Peugh v. Davis, 96 U.S. (6 Otto) 332, 24 L.Ed. 775 (1877). See also, Noelker v. Wehmeyer, 392 S.W.2d 409 (Mo.App.1965). When a mortgagee takes a deed in lieu there is the possibility that the conveyance will be avoided under bankruptcy laws. It should be noted that if other liens have been created against a property after the time of the original mortgage, the deed in lieu will not cut off those liens. See Note, 31 Mo.L.Rev. 312, 314 (1966).  A deed in lieu should contain a comprehensive agreement regarding any deficiency claims, etc.


It is possible to use theories of lender liability to assist in successfully negotiating a workout, or an avoidance of foreclosure.  This principally occurs in commercial foreclosures but there are some strategies that apply to the residential setting.  This may involve persuading the lender that failing to reach a workout agreement may result in a claim against the lender, absolving the borrower from liability on the loan and/or granting an affirmative judgment against the lender.  Some of the useful theories of lender liability are breach of agreement to lend, breach of loan agreement, failure to renew term note/wrongful termination, promissory estoppel, lender interference, and negligent loan management. Some of the common law defenses for a borrower are fraud, duress, usury and negligence. Further, because banks are so closely regulated, a borrower should also explore statutory violations.  For a detailed treatment of workouts, see Dunaway, supra, (Vol. 1, Chapter 4B)[33].


Generally, mobile homes are repossessed under Article 9-503 of the Uniform Commercial Code, and are beyond the scope of this outline.  Many states limit deficiencies in purchase money security agreements and/or allow reinstatement.  There are many abuses in the sales of mobile homes and the various consumer protection laws (and usury laws) provide a fertile source of potential defenses.  See generally, Unfair and Deceptive Practices, National Consumer Law Center (2nd ed.), paragraph 5.4.8.


Although beyond the scope of this outline, there are tax consequences when property is foreclosed, particularly in commercial transactions.

First, a foreclosure or deed in lieu of foreclosure is treated as a sale or exchange.  Treas. Rep. 1-001-2; Rev. Ruling 73-36, 1973-1 CB 372.  The amount realized (gained) is the greater of the sales proceeds or the debt satisfied.  Parker v. Delaney, 186 F.2d 455 (1st Cir. 1950).  When debt is cancelled (such as by an anti-deficiency statute), a gain may be generated.  IRS Code §61(a).

Second, when home equity debt plus purchase debts exceeds the value of the property, a taxable gain can be generated.  Finally, if the debtor is “insolvent” when the foreclosure occurs, §108(a)(1)(A) of the IRS Code excludes income (gain) to the extent the debtor is insolvent.  This is complicated and a tax expert should be consulted to analyze any potential tax bite upon foreclosure. See generally, Dunaway, supra, for a detailed analysis of the tax consequences of foreclosure.




There are a variety of federal home ownership programs that may provide special protections for homeowners who are faced with the prospect of foreclosure.  These protections generally apply regardless of whether the security divide used is a mortgage or deed of trust.  The programs range from home loans insured by the Department of Housing and Urban Development (HUD) or guaranteed by the Veteran’s Administration (VA) to programs such as the Farmer’s Home Administration (FmHA) home ownership program where the government acts as a direct lender.  The procedures which must be followed by loan servicers and applicable governmental agencies are described below.  Also, Fannie Mae published in 1997 a Foreclosure Manual for loan services, which outlines various workouts and other loss mitigation procedures.

When the government controls the loan (or the lender) its actions are subject to the protection of the due process provision of the Fifth Amendment to the U.S. Constitution[34].  This calls into question the use of nonjudicial foreclosure as there is no opportunity to be heard and notice is usually deficient or, at best, minimal.


1.         Applicability

Homeowners who have a HUD insured mortgage or deed of trust may be eligible for relief through the HUD foreclosure prevention program.  HUD regulations also require that lenders meet certain servicing responsibilities before proceeding with foreclosure.  Regulations for loss mitigation are found at 24 C.F.R. Sec. 203.605.

2.         Procedure when the Homeowner is in Default

a.  Delinquency Required for Foreclosure.

The servicer shall not turn the action over for foreclo­sure until at least three full monthly payments are unpaid after application of any partial payments.  24 C.F.R. Sec. 203.  The servicer is required to send a HUD brochure on avoiding foreclosure to the borrower informing them of their right to seek various alternatives to foreclosure.

The servicer must allow reinstatement even after foreclosure has been started if the homeowner tenders all amounts to bring the account current, including costs and attorney fees.  24 C.F.R. Sec. 203.

b.  Forbearance Relief.

The homeowner may be eligible for special forbearance relief if it is found that the default was due to circumstances beyond the homeowners’ control.  24 C.F.R. Sec. 203.  The homeowner and the lender are authorized to enter into a forbearance agreement providing for:

i.          Increase, reduction, or suspension of regular payments for a specified period;


ii.          Resumption of regular payments after expiration of the forbearance period;


iii.         Arrangements for payment of the delin­quent amount before the maturity date of the mortgage or at a subsequent date.


Suspension or reduction or payments shall not exceed 18 months under these special forbearance relief provisions.

c.  Recasting of Mortgage.

HUD has the authority to approve a recasting agreement to extend the term of the mortgage and reduce the monthly payments.  24 C.F.R. Sec. 203.

HUD’s actions may be declared unlawful and set aside if the court finds it to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.  See Federal National Mortgage Association v. Rathgens, 595 F. Supp. 552 (S.D. Ohio 1984); Butler v. Secretary of Housing and Urban Development, 595 F. Supp. 1041 (E.D. Pa. 1984).  See, generally, Ferrell v. Pierce, 560 F. Supp. 1344 (N.D. Ill. 1983).

In Brown v. Kemp, 714 F. Supp. 445 (W.D. Wash. 1989)       the court found HUD’s decision for an assignment program application to be informal agency action and thus reviewable under the “arbitrary” and “capricious” standard.

Failure to follow servicing requirements or comply with the HUD assignment regulations or handbook provisions may also constitute an equitable defense to foreclosure[35].



1.         Applicability

Homeowners who have a VA guaranteed mortgage or deed of trust may be eligible for relief through a VA recommended forbearance program or “refunding” of the loan.  Regulations promulgated at 38 C.F.R. Sec. 36.4300, et seq., and VA servicing handbooks establish a policy of forbearance when a loan is in default.  The VA is reluctant to enforce these regulations against lenders.

2.         Forbearance Relief

Lenders are officially encouraged to grant forbearance relief for mortgagors who default on their loans due to circumstances beyond their control.  Lender’s Handbook, VA Pamphlet No. 26-7 (Revised) and VA Manual 26-3.  These rights should be pursued with the lender immediately.

3.         Refunding Loans

The Veteran’s Administration is authorized to “refund” loans when borrowers meet certain criteria.  Refunding the loan is when the VA pays the lender in full and takes an assignment of the loan and security in cases where the loan is in default.  The VA then owns the loan and the veteran makes payments to the VA directly.  Although 38 C.F.R. Sec. 36.4318 authorize refunding, the regulations are much more vague than those promulgated in connection with the HUD assignment program.

4.         Judicial Review

The VA decision to deny assignment of a VA loan is committed to agency discretion within the meaning of the federal Administra­tive Procedures Act, 5 U.S.C. Sec. 701(a)(2), and is not review­able.  Rank v. Nimmo, 677 F.2d 692 (9th Cir. 1982).

The courts have ruled that a borrower has no express or implied right of action in federal court to enforce duties, which VA or lenders might have under VA publications with respect to forbearance assistance.  See, Rank v. Nimmo, supra; Gatter v. Nimmo, 672 P.2d 343 (3rd Cir. 1982); Simpson v. Clelend, 640 F.2d 1354 (D.C. Cir. 1981).  But, see, Union National Bank v. Cobbs, 567 A.2d 719 (1989) (failure to follow VA Handbook an equitable defense).

Failure to follow VA publications, however, may be an equitable defense to foreclosure under state law.  See, Simpson v. Cleland, supra.

5.         Waiver of Debt/Release of Liability

Federal statutes, VA regulations and guidelines require the VA to waive a deficiency (or indemnity) debt, after a foreclosure, when equity and good conscience require it.  38 C.F.R. §1.965(a)(3).  The VA is reluctant to follow its own regulations and must be pressed.  The Court of Veterans Appeals (CVA) reverses over 50% of denial of waivers – an astonishing measure of the VA’s failure to follow clear federal law!  See The Veterans Advocate, Vol. 5, No. 10, P. 93 (June 1994).  The VA urged its regional offices to avoid CVA rulings until forced to retract this directive.  See The Veterans Advocate, supra.  The VA also ignores the six-year statute of limitations when demanding payment.  28 U.S.C. 2415.

Secondly, the VA can determine that the claimed debt is invalid, such as when the veteran is eligible for a retroactive release of liability.  This occurs when the VA would have released the veterans when the property was sold to a qualifying purchaser who assumes the debt.  38 U.S.C. 3713(b); Travelstead v. Derwinski, 978 F.2d 1244 (Fed. Cir. 1992).

The VA has the burden to determine whether the veteran should be released.

6.         Deficiency Judgments and VA Loans

It is the policy of VA to order an appraisal prior to a judicial or nonjudicial foreclosure sale and to instruct the lender to bid the amount of the appraisal at the sale.  This “appraisal” is always below fair market value and includes the VA’s anticipated costs of holding and liquidating the property.  38 U.S.C. 3732(c); 38 C.F.R. §36.4320.  Ordinarily, on pre-1989 laws, VA will not waive its right to seek a deficiency judgment in a judicial foreclosure and will reserve its right to seek a deficien­cy against a borrower, even in the case of a nonjudicial foreclo­sure of a deed of trust, notwithstanding the anti-deficiency language of RCW 61.24.100.  On loans made after 1989 changes in the VA program, deficiencies are not sought.

Although, United States v. Shimer, 367 U.S. 374 (1960) appears to authorize this VA deficiency policy, the Washington non-judicial deed of trust foreclosure procedure which retains judicial foreclosure and preservation of the right to seek a deficiency judgment as an option, seems to make United States v. Shimer, distinguishable.

In United States v. Vallejo, 660 F. Supp. 535 (1987), the court held that the VA must follow Washington foreclosure law, including the anti-deficiency provisions of the Deed of Trust Act as the “federal common law”.  This ruling was subsequently followed in a class action, Whitehead v. Derwinski, 904 F.2d 1362 (9th Cir. 1990), wherein the VA has been permanently enjoined from collecting $63 million in claims and ordered to repay millions in illegally collected deficiencies.  This issue of the application of various state laws as to federally insured loans is not clear, as the Ninth Circuit overruled Whitehead in Carter v. Derwinski, 987 F.2d 611 (9th Cir. – en banc – 1993).  Subsequent decisions still create doubt as to whether United States v. Shimer, supra, is still good law[36].

At the very least, if the lender is instructed by the VA to preserve the right to seek a deficiency against the borrower, then the lender should be required to foreclose the deed of trust judicially as a mortgage.


1.         Applicability

The Rural Housing Service (RHS) formerly, the Farmer’s Home Administration, is authorized to grant interest credit and provide moratorium relief for homeowners who fall behind on their loan payments due to circumstances beyond their control.  Regulations for moratorium relief and interest credit are found at 7 C.F.R. Sec. 3550 et seq and must be complied with prior to foreclosure.  United States v. Rodriguez, 453 F. Supp. 21 (E.D. Wn. 1978).  See, 42 U.S.C. §1472.  All servicing of RHS loans is handled at the Centralized Servicing Center in St. Louis, MO (phone: 1-800-793-8861).

2.         Interest Credit

If a homeowner falls behind on his RHS loan because of circumstances beyond his or her control, then RHS has the authority to accept principal only and waive the interest payments.  Although RHS is supposed to use this remedy before considering moratorium relief, it rarely does.

3.         Moratorium Relief

If a homeowner falls behind in loan payments because of circumstances beyond his or her control, RHS may suspend payments or reduce payments for six months.  Moratorium relief may be extended for additional six-month segments up to a total of three years[37].

Once a homeowner has been granted moratorium relief, RHS cannot grant it again for five years.  If a homeowner cannot resume payments in three years from when moratorium relief began, then it will begin foreclosure proceedings.

After moratorium relief has been extended, the homeowner can make additional partial payments to catch up the delinquent amount or, the loan can be reamortized.  RHS will restructure the loan, 7 U.S.C. 2001.

4.         Waiver of Redemption and Homestead Rights

Form mortgages used by RHS purported to waive the homeowner’s redemption rights and homestead rights in the event of foreclosure.  It is questionable whether such a waiver is enforceable[38].

5.         Homestead Protection

See, 7 U.S.C. 2000.

6.         Lease/Buy-Back

See, 7 U.S.C. 1985 (e).


The following treatises are excellent sources of basic information about all aspects of the foreclosure process.  Dunaway, The Law of Distressed Property (4 volumes – Clark Boardman Co. 1994 and suppls.; Nelson & Whitman, Real Estate Finance Law (West 3rd Ed. 1994); Bernhardt, California Mortgages and Deed of Trust Practice, (3rd ed. 2000 University of Calif.), Repossessions and Foreclosures (4th ed. 2000) National Consumer Law Center.  See also, Fuchs, Defending Non-Judicial Residential Foreclosures, Texas Bar J (November 1984).



Jurisdiction Customary Security Agreement Customary Foreclosure Procedure
  Alabama Mortgage Nonjudicial
  Alaska Deed of Trust Nonjudicial
  Arizona Deed of Trust Nonjudicial
  Arkansas Mortgage Judicial
  California Deed of Trust Nonjudicial
  Colorado Deed of Trust (Semi-judicial) Public Trustee’s Sale
  Connecticut Mortgage Judicial-Strict Foreclosure
  Delaware Mortgage Judicial
  Dis. of Col. Deed of Trust Nonjudicial
  Florida Mortgage Judicial
  Georgia Security Deed Nonjudicial
  Hawaii Mortgage Judicial
  Idaho Mortgage Judicial & Nonjudicial
  Illinois Mtg. & D.T. Judicial
  Indiana Mortgage Judicial
  Iowa Mortgage Judicial
  Kansas Mortgage Judicial
  Kentucky Mortgage Judicial
  Louisiana Mortgage Judicial
  Maine Mortgage Judicial (Nonjudicial for Corporate Borrower)
  Maryland Deed of Trust Nonjudicial
  Massachusetts Mortgage Nonjudicial
  Michigan Mortgage Nonjudicial
  Minnesota Mortgage Nonjudicial
  Mississippi Deed of Trust Nonjudicial
  Missouri Deed of Trust Nonjudicial
  Montana Instlmnt. Contract Nonjudicial
  Nebraska Deed of Trust Mortgage Judicial & Nonjudicial
  Nevada Deed of Trust Nonjudicial
  New Hampshire Mortgage Nonjudicial
  New Jersey Mortgage Judicial
  New Mexico Mortgage Judicial
  New York Mortgage Judicial
  North Carolina Deed of Trust Judicial
  North Dakota Mortgage Judicial
  Ohio Mortgage Judicial
  Oklahoma Mortgage Judicial
  Oregon Deed of Trust Nonjudicial
  Pennsylvania Mortgage Judicial
  Puerto Rico Mortgage Judicial
  Rhode Island Mortgage Nonjudicial
  South Carolina Mortgage Judicial
  South Dakota Mortgage Judicial & Nonjudicial
  Tennessee Deed of Trust Nonjudicial
  Texas Deed of Trust Nonjudicial
  Utah Deed of Trust Nonjudicial
  Vermont Mortgage Strict Foreclosure
  Virgin Islands Mortgage Judicial
  Virginia Deed of Trust Nonjudicial
  Washington Deed of Trust Nonjudicial
  West Virginia Deed of Trust Nonjudicial
  Wisconsin Mortgage Judicial
  Wyoming Mtg. & Installment Contracts Judicial


[2] Alabama:  Ala. Code §§35-10-1 to 35-10-10; [foreclosure after 12/1988 §§35-10-11 to 35-10-16]


Alaska:  Alaska Stat. §§34.20.090 to 34.20.100 (1991).

Arizona:  Ariz. Rev. Stat. Ann. §§33-807 to 33-814 (West 1991).

Arkansas:  Ark. Code Ann. §§18-50-108; 18-50-116 (1987).

California:  Cal. Civ. Code §§2924 to 2924(h) West 1992).

D.C.:  D.C. Code Ann. §§45-715 to 45-718 (1991).

Georgia:  Ga. Code Ann. §§9-13-141; 44-14-162.4; 44-14-48; 44-14-180 to 187 (Harrison 1991).

Idaho:  Idaho Code §§6-101; 104; 45-1502 to 45-1506 (1991).

Iowa:  Iowa Code Ann. §654.18 (West 1992).

Maine:  Me. Rev. Stat. Ann. tit. 14, §§7-105; 7-202 (1988).

Massachusetts:  Mass. Gen. Laws Ann. ch. 183, §§19, 21; ch. 244, §§11-15 (West 1992).

Michigan:  Mich. Comp. Laws Ann. §§451-401 et seq.; 600.2431; 600.3201 et seq.; 600.3170 (West 1992).

Minnesota:  Minn. Stat. Ann. §§580.01 to 580.30; 582.01 et seq. (West 1992).

Mississippi:  Miss. Code Ann. §§11-5-111; 15-1-23; 89-1-55 (1972).

Missouri:  Mo. Ann. Stat. §§442.290to 443.325 (Vernon 1992).

Montana:  Mont. Code Ann. §§25-13-802; 71-1-111; 71-1-223 to 232, 71-1-311 to 317 (1991).

Nebraska: Neb. Rev. Stat. §§76-1001 to 1018 (1981).

Nevada:  Nev. Rev. Stat. §§107.020; 107.025; 107.080 to 107.100; 40.050; 40.453 (Michie 1991).

New Hampshire:  N.H. Rev. Stat. Ann. §§479:22 to 479:27 (1991).

New York:  N.Y. Real Prop. Acts §§1401 to 1461 (McKinney 1992).

North Dakota:  N.D. Cent. Code §35-22-01 (1992).

Oklahoma:  Okla. Stat. Ann. tit. 46, §§40 to 49 (West 1992).

Oregon:  Or. Rev. Stat. §§86.705 to 86.795 (1989).

Rhode Island:  R.I. Gen. Laws §§34-11-22; 34-20-4; 34-23-3; 34-27-1 (1984).

South Dakota:  S.D. Codified Laws Ann. §§21-48-1 to 21-48-26; 21-48A-1 to 21-48A-5 (1992).

Tennessee:  Tenn. Code Ann. §§35-5-101 to 35-5-112 (1991).  See, Note, Power of Sale Foreclosures in

Tennessee, 8 Mem. St. U.L. Rev. 871 (1978).

Texas:  Tex. Prop. Code Ann. §§51-002; 51.003; 51.005 (West 1992).

Utah:  Utah Code Ann. §§57-1-23 to 57-1-34 (1986).

Vermont:  Vt. Stat. Ann. tit. 12, §§4531a to 4533 (1991).

Virginia:  Va. Code Ann. §§55-59.1 to 55-59.4; 55-61 to 55-66.7 (Michie 1991).

Washington:  Wash. Rev. Code Ann. §§61.24.010 to 61.24.130 (West 1992).

West Virginia:  W. Va. Code §§38-1-3 to 38-1-12 (1991).

Wyoming:  Wyo. Stat. §§34-4-101 to 34-4-113 (1991).


[3] See Charmicor, Inc. v. Deaner, 572 F.2d 694 (9th Cir.1978); Northrip v. Federal National Mortgage Association, 527 F.2d 23 (6th Cir.1975); Barrera v. Security Building & Investment Corp., 519 F.2d 1166 (5th Cir. 1975); Bryant v. Jefferson Federal Savings & Loan Association, 509 F.2d 511 (D.C. Cir.1974); Lawson v. Smith, 402 F.Supp. 851 (N.D.Cal.1975); Global Industries, Inc. v. Harris, 376 F.Supp. 1379 (N.D.Ga.1974); Homestead Savings v. Darmiento, 230 Cal.App.3d 424, 281 Cal.Rptr. 367 (1991); Leininger v. Merchants & Farmers Bank, macon, 481 So.2d 1086 (Miss.1986); Wright v. Associates Financial Services Co. of Oregon, Inc., 59 Or.App.688, 651 P.2d 945 (1983), certiorari denied 464 U.S. 834, 104 S.Ct. 117, 78 L.Ed.2d 116 (1983); Kennebec Inc. v. Bank of the West, 88 Wash.2d 718, 565 P.2d 812 (1977); Dennison v. Jack, 172 W.Va. 147, 304 S.E.2d 300 (1983).

[4] Island Financial, Inc. v. Ballman, 92 Md.App. 125, 607 A.2d 76 (1992); Turner v. Blackburn, 389 F.Supp. 1250 (W.D.N.C.1975); Vail v. Derwinski, 946 F.2d 589 (8th Cir.1991), amended by 956 F.2d 812 (8th Cir.1992) and Boley v. Brown, 10 F.3d 218 (4th Cir.1993) which held that the VA’s control over the foreclosure process in VA guaranteed loan foreclosures constitutes sufficient governmental action to trigger due process protections. Accord, U.S. v. Whitney, 602 F. Supp. 722 (W.D. N.Y. 1985); U.S. v. Murdoch, 627 F. Supp. 272 (N.D. Ind. 1986).  See Also Leen, Galbraith & Gant, Due Process and Deeds of Trust – Strange Bedfellows, 48 Wash.L.Rev. 763 (1973).

[5] See, e.g., Reiserer v. Foothill Thrift and Loan, 208 Cal.App.3d 1082, 256 Cal.Rptr. 508 (1989) (unpublished opinion); Metropolitan Life Insurance Company v. La Mansion Hotels & Resorts, Ltd., 762 S.W.2d 646 (Tex.App.1988); Bekins Bar V Ranch v. Huth, 664 P.2d 455 (Utah 1983); National Life Insurance Co. v. Cady, 227 Ga. 475, 181 S.E.2d 382 (1971); Peoples National Bank v. Ostrander, 6 Wn.App. 28, 491 P.2d 1058 (1971). See, generally, note, Court Actions Contesting The Nonjudicial Foreclosure of Deeds of Trust in Washington, 59 Wash.L.Rev. 323 (1984); Restraining Orders in Non-Judicial Deed of Trust Foreclosures, Property Law Reporter, June 1987 (Vol. 3 Nos. 4 & 5).

[6] Putnam Sand & Gravel Co. v. Albers, 14 CA3d 722, 92 CR 636 (1971).


[7] Avco Financial Services Loan, Inc. v. Hale, 36 Ohio App.3d 65, 520 N.E.2d 1378 (1987); Land Associates, Inc. v. Becker, 294 Or. 308, 656 P.2d 927 (1982), appeal after remand 74 Or.App. 444, 703 P.2d 1004 (1985).

[8] See Hummell v. Republic Federal Savings & Loan, 133 Cal.App.3d 49, 183 Cal.Rptr. 708 (4th Dist.1982); Broad & Locust Associates v. Locust-Broad Realty Co., 318 Pa.Super. 38, 464 A.2d 506 (1983); Strangis v. Metropolitan Bank, 385 N.W.2d 47 (Minn.App.1986); Franklin Savings Association v. Reese, 756 S.W.2d 14 (Tex.App.1988); Koegal v. Prudential Mutual Savings, Inc., 51 Wn.App. 108 (1988).


[9] See Ginther-Davis Center, Limited v. Houston National Bank, 600 S.W.2d 856 (Tex.Civ.App. 1980), error refused n.r.e.; see also Tiffany, Real Property, § 1549 (3d Ed. 1939) for a list of cases; Thompson, Real Property § 5179 (1957). Cf. Grella v. Berry, 647 S.W.2d 15 (Tex.App.1982).

[10] See Glines v. Theo R. Appel Realty Co., 201 Mo.App.596, 213 S.W. 498 (1919).


[11] Koegel v. Prudential Mutual Savings, Inc., 51 Wn. App. 108, 114 (1988); Steward v. Good, 51 Wn. App. 509, 515 (1988).


[12] Carlson v. Gibraltar Savings, 50 Wn. App. 424, 429 (1988).

[13] Baxter & Dunaway, The Law of Distressed Real Estate (Clark Boardman Company, Ltd., November 1990). See Spires v. Edgar, 513 S.W.2d 372 (Mo.1974).

[14] See also McHugh v. Church, 583 P.2d 210, 214 (Alaska 1978).


[15] See Cox v. Helenius, supra, at p. 389; Allard v. Pacific National Bank, 99 Wn. 2d 394, 405, 663 P.2d 104 (1983), modified by 99 Wn.2d 394, 773 P.2d 145 (1989). superseded by RCW 11.100.140 as stated in Conran v. Seafirst Bank, 1998 Wn.App. Lexis 156.. See also National Life Insurance Company v. Silverman, 454 F.2d 899, 915 (D.C. Cir. 1971), in which the court stated that the same good faith is required of trustees under a deed of trust of real estate as is required of other fiduciaries.


[16] See Smith v. Credico Industrial Loan Company, 234 Va. 514, 362 S.E.2d 735 (1987); Whitlow v. Mountain Trust Bank, 215 Va. 149, 207 S.E.2d 837 (1974).


[17] See, Nelson & Whitman, supra, Section 7.21; Dingus, Mortgages-Redemption After Foreclosure Sale in Missouri, 25 Mo.L.REV. 261, 284 (1960).


[18] Biddle v. National Old Line Ins. Co., 513 S.W.2d 135 (Tex.Civ.App.1974), error refused n.r.e.; Sullivan v. Federal Farm Mortgage Corp., 62 Ga.App.402, 8 S.E.2d 126 (1940).


[19] Queen City Savings v. Manhalt, 111 Wn.2d 503 (1988).


[20] See also Tarleton v. Griffin Federal Savings Bank, 202 Ga.App. 454, 415 S.E.2d 4 (1992); Concepts, Inc. v. First Security Realty Services, Inc., 743 P.2d 1158 (Utah 1987).


[21] Macon-Atlanta State Bank v. Gall, 666 S.W.2d 934 (Mo.App.1984). For a complete list of defects considered “insubstantial”, see Graham v. Oliver, 659 S.W.2d 601, 604 (Mo.App.1983).

[22] See also Cal. Civ. Code § 2924 (West 1981); Utah Code Ann.1953, 57-1-28; West’s Colo.Rev.Stat. Ann. §38-39-115; Or.Rev.Stat. 86.780; So.Dak.Compiled Laws 21-48-23.


[23] Attempting to Set Aside Deed of Trust Foreclosure Because of Trustee’s Fiduciary Breach, 53 Missouri L. Rev. 151 (1988).


[24] See also Dingus, Mortgages – Redemption After Foreclosure Sale in Missouri, 25 Mo.L.REV. 261, 262 (1960); California Mortgage and Deed of Trust Practice, Section 6.60 (University of California 1979).


[25] Nelson & Whitman, supra, Section 7.21. Dingus, supra, at p. 274; see also Biddle v. National Old Line Insurance Co., 513 S.W.2d 135 (Tex.Civ.App. 1974).


[26] Dingus, supra, at pp. 272-73; Cox v. Helenius, supra, at p. 389.

[27] Arizona:  Ariz. Rev. Stat. Ann. §33-814(A) (1989).

California:  Cal. Civ. Code §580a (1989); Id. §726 (1989); Kirkpatrick v. Stelling, 36 Cal. App.2d 658, 98

P.2d 566, appeal dismissed, 311 U.S. 607 (1940); Risenfeld, California Legislation Curbing Deficiency

Judgments, 48 Calif. L. rev. 705 (1960).  See infra, California jurisdictional summary in Part 1.

Georgia:  Ga. Code Ann. §§44-14-161, -162 (1989).

Idaho:  Idaho Code §§6-108, 45-1512 (1988).

Michigan:  Mich. Comp. Laws Ann. §§600.3170, .3280 (1989).

Nebraska: Neb. Rev. Stat. §76-1013 (1989).

Nevada:  Nev. Rev. Stat. §40.457 (1988).

New Jersey:  N.J. Stat. Ann. §2A:50-3 (1989).

New York:  N.Y. Real Prop. Acts Law §1371 (McKinney 1979 and Supp. 1990).

North Carolina:  N.C. Gen. Stat. §45-21.36 (1988).

North Dakota:  N.D. Cent. Code §32-19-06 (Supp. 1989).

Oklahoma:  Okla. Stat. tit. 12, §686 (1990).

Pennsylvania:  Pa. Stat. Ann. tit. 12 §§2621.1, .6 (Purdon 1967).

South Dakota:  S.D. Comp. Laws Ann. §§21-47-16, -48-14 (1989).

Utah:  Utah Code Ann. §57-1-32 (1989).

Washington:  Wash. Rev. Code Ann. §61.12.060 (1989).

Wisconsin:  Wis. Stat. §846.165 (1988).

[28] People’s National Bank v. Ostrander, 6 Wn. App. 28, 491 P.2d 1058 (1970).  See, however, Crummer v. Whitehead, 230 Cal. App. 2d 264 (1964)  contra declined to follow by Eardley v. Greenberg, 160 Az.518, 774 P.2d 822 (Az.App. Div. 1 1989); MCA, Inc., v. Universal Diversified Enterprises Corp., 27 Cal. App. 3d 170 (1972).  contra declined to follow by Eardley v. Greenberg, 160 Az.518, 774 P.2d 822 (Az.App. Div. 1 1989)  But in a bankruptcy proceeding, defenses may be raised after the sale if the debtor is in possession.


[29] Alabama:  Ala. Code §§6-9-140 to 150; 164; 35-10-2 to 35-10-12; (1977).

Alaska:  Alaska Stat. §§90.45.170 to .220 (1991).

Arizona:  Ariz. Rev. Stat. Ann. §§33-721 to 33-728 (1991).

Arkansas:  Ark. Code Ann. §§18-49-103 to 106 (1987).

California:  Cal. Civ. proc. §§725a to 730.5 (West 1991).

Colorado:  Colo. Rev. Stat. Ann. §§38-38-101 to 38-38-111 (West 1991).

Connecticut:  Conn. Gen. Stat. Ann. §§49-24 to 49-31 (West 1991).

Delaware:  Del. Code Ann. tit. 10 §§5061 to 5067 (1991).

D.C.:  D.C. Code Ann. §45-716 (1981).

Florida:  Fla. Stat. Ann. §702.01 (West 1992).

Georgia:  Ga. Code Ann. §§9-13-140; 44-14-48 to 44-14-49; 44-14-184; 187; 189 (1991).

Hawaii:  Haw. Rev. Stat. §§667-1 to 667-7 (1991)

Idaho:  Idaho Code §§6-101 to 6-103; 45-1502 to 45-1503 (1991).

Illinois:  Ill. Ann. Stat. Ch. 10, para. 15-1404; 15-1501 to 15-1512 (Smith-Hurd 1987).

Indiana:  Ind. Code Ann. §32-8-11-3 (Burns 1980)

Iowa:  Iowa Code Ann. §654.18 (West 1992).

Kansas:  Kan. Stat. Ann. §60-2410 (1990).

Kentucky:  Ky. Rev. Stat. Ann. §§381.190; 426.525 (Michie 1991).

Louisiana:  La. Code Civ. Proc. Ann. art. 2631 (West 1992).

Maine:  Me. Rev. Stat. Ann. tit. 14, §§6321 to 6325 (West 1991).

Maryland:  Md. Real Prop. Code Ann. §7-202 (1988).

Massachusetts:  Mass. Gen. Laws Ann. ch. 244, §1 (West 1992).

Michigan:  Mich. Comp. Laws Ann. §§600.3101 to 600.3130 (West 1992).

Minnesota:  Minn. Stat. Ann. §§581.01 to 581.12 (1992).

Mississippi:  Miss. Code Ann. §§89-1-53; 89-1-55 (1972).

Missouri:  Mo. Ann. Stat. §§443.190 (Vernon 1992).

Montana:  Mont. Code Ann. §§71-1-222; 232; 311; 25-13-802 (1991).

Nebraska: Neb. Rev. Stat. §§25-2137 to 25-2147 (1991).

Nevada:  Nev. Rev. Ann. Stat. §§40.430; 40.435 (Michie 1991).

New Hampshire:  N.H. Rev. Stat. Ann. §§479:19 to 479:27 (1991).

New Jersey:  N.J. Stat. Ann. §2A:50-2 (West 1991).

New Mexico:  N.M. Stat. Ann. §§39-5-1 to 39-5-23; 48-7-7 (1991).

New York:  N.Y. Real Prop. Acts Law §§1321; 1325 to 1355 (McKinney 1992).

North Carolina:  N.C. Gen. Stat. §§45-21.16; 45-21.17; 45-38 (1991).

North Dakota:  N.D. Cent. Code §32-19-01 to 32-19-40 (1992).

Ohio:  Ohio Rev. Code Ann. §2323.07 (Anderson 1984).

Oklahoma:  Okla. Stat. Ann. tit. 12, §686 (West 1992).

Oregon:  Or. Rev. Stat. §§88.010 et seq. (1989).

Pennsylvania:  Pa. Stat. Ann. tit. 21, §§274; 715; Pa. Rules Civ. Proc. Rules 1141 to 1150; 3180 to 3183;

3232; 3244; 3256; 3257.

Rhode Island:  R.I. Gen. Laws §34-27-1 (1984).

South Carolina:  S.C. Code Ann. §§15-7-10; 29-3-650 (Law Co-op 1990).

South Dakota:  S.D. Codified Laws Ann. §§21-47-1 to 25; 21-48A-4 (1991).

Tennessee:  Tenn. Code Ann. §21-1-803 (1991).

Texas:  Tex. Prop. Code Ann. §§51-002; 51.004; 51.005 (West 1992).

Utah:  Utah Code Ann. §§78-37-1 to 78-37-9 (1986).

Vermont:  Vt. Stat. Ann. tit. 12, §4528 (1991).

Virgin Islands:  V.I. Code Ann. tit. 28, §531 to 535 (1991).

Virginia:  Va. Code Ann. §§55-59.4; 55-61 (Michie 1981).

Washington:  Wash. Rev. Code Ann. §§61.12.040; 61.12.060 (West 1992).

West Virginia:  W. Va. Code §§55-12-1 to 55-12-8 (1991).

Wisconsin:  Wis. Stat. Ann. §§846.01 to 846.25 (West 1991 (Repealed).

Wyoming:  Wyo. Stat. §§1-18-101 to 1-18-112 (199).

[30] See Michigan Trust Co. v. Dutmers, 265 Mich. 651, 252 N.W. 478 (1933).

[31] Norlin v. Montgomery, 59 Wn.2d 268, 357 P.2d 621 (1961).  The mortgagee’s right to posses­sion of the property is not lost through default or abandonment. overruled on other grounds.  Howard v. Edgren, 62 Wn.2d 884, 385 P.2d 41 (1963).


[32] See Durrett v. Washington National Ins., 621 F.2d 201 (5th Cir. 1980); cf. In re Madrid, 725 F.2d 1197 (9th Cir. 1984).  Compare state fraudulent conveyances statutes, e.g, RCW 19.40.031.


[33] See also, Penthouse International v. Dominion Fed. S&L, 665 F. Supp. 301 (S.D. N.Y. 1987, rev. 855 F.2d 963 (2nd Cir. 1988); Joques v. First National, 515 A.2d 756 (Md. 1976); KMC v. Irving Trust, 757 F.2d 752 (6th Cir. 1985); Douglas-Hamilton, Creditor Libilities Resulting From Improper Interference with Financially Troubled Debtor, 31 Bus. Law J. 343 (1975).


[34] See Vail v. Brown, 946 F.2d 589 (8th Cir. 1991); Johnson v. U.S. Dept. of Agriculture, 734 F.2d 774 (11th Cir. 1984); United States v. Murdoch, 627 F. Supp. 272 (N.D. Ind. 1985); Boley v. Brown, 10 F.3d 218 (4th Cir. 1993).

[35] See, Bankers Life Company v. Denton, 120 Ill. App. 3d 676, 458 N.E.2d 203 (1983); Brown v. Lynn, 385 F. Supp. 986 (N.D. Ill. 1974); GNMA v. Screen, 379 N.Y.S.2d 327 (1976); Cross v. FNMA, 359 So.2d 464 (1978); FNMA v. Ricks, 372 N.Y.S.2d 485 (1975); contra, Robert v. Cameron Brown Co., 556 F.2d 356 (5th Cir. 1977); Hernandez v. Prudential Mortgage Corporation, 553 F.2d 241 (1st Cir. 1977).

[36] See, United States v. Yazell, 382 U.S. 341 (1966); United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979); United States v. Ellis. 714 F.2d 953 (9th Cir. 1983); United States v. Haddon Haciendas Co., 541 F.2d 777 (9th Cir. 1976).

[37] See generally, Note, Agricultural Law:  FmHA Farm Foreclosures, An Analysis of Deferral Relief, 23 Washburn L.J. 287 (Winter 1984); Newborne, Defenses to a FmHA Foreclosure, 15 NYU Review of Law and Social Change, 313 (1987).

[38] See, United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979); United States v. Haddon Haciendas, 541 F.2d 777 (9th Cir. 1976); United States v. MacKenzie, 510 F.2d 39 (9th Cir. 1975); United States v. Stadium Apts., Inc., 425 F.2d 358 (9th Cir.), (1970), cert. den. 400 U.S. 926, 91 S. Ct. 187 (1970); Phillips v. Blaser, 13 Wn.2d 439, 125 P.2d 291 (1942).


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