URGENT: Foreclosure Notice Changes: Here we go again?
(New Notice of Sale form as of April 1, 2012)

Phillip M. Adleson, Esq.

By Phillip M. Adleson, Esq. , Adleson, Hess & Kelly, UTA Corporate Counsel

Just as you got done implementing the changes to the "important notice" provisions of the notice of default ("NOD") from SB 1221 (effective 1-1-11), here comes SB 4 (2011) that, as of April 1, 2012, requires new disclosures to be included in notices of sale ("NOS") on real property containing one-to-four single-family residences. Hopefully you all attended the 2011 UTA conference in Las Vegas where these changes were discussed.

Changes to the NOS language effective April 1, 2012.

Under SB 4 (2011), which amended Civil Code § 2924f, on and after April 1, 2012, a NOS under a deed of trust or mortgage containing a power of sale that is secured by real property containing one-to-four single-family residences, shall contain substantially the following additional language:

"NOTICE TO POTENTIAL BIDDERS: If you are considering bidding on this property lien, you should understand that there are risks involved in bidding at a trustee auction. You will be bidding on a lien, not on the property itself. Placing the highest bid at a trustee auction does not automatically entitle you to free and clear ownership of the property. You should also be aware that the lien being auctioned off may be a junior lien. If you are the highest bidder at the auction, you are or may be responsible for paying off all liens senior to the lien being auctioned off, before you can receive clear title to the property. You are encouraged to investigate the existence, priority, and size of outstanding liens that may exist on this property by contacting the county recorder's office or a title insurance company, either of which may charge you a fee for this information. If you consult either of these resources, you should be aware that the same lender may hold more than one mortgage or deed of trust on the property.

NOTICE TO PROPERTY OWNER: The sale date shown on this notice of sale may be postponed one or more times by the mortgagee, beneficiary, trustee, or a court, pursuant to Section 2924g of the California Civil Code. The law requires that information about trustee sale postponements be made available to you and to the public, as a courtesy to those not present at the sale. If you wish to learn whether your sale date has been postponed, and, if applicable, the rescheduled time and date for the sale of this property, you may call [telephone number for information regarding the trustee's sale] or visit this Internet Web site [Internet Web site address for information regarding the sale of this property], using the file number assigned to this case [case file number]. Information about postponements that are very short in duration or that occur close in time to the scheduled sale may not immediately be reflected in the telephone information or on the Internet Web site. The best way to verify postponement information is to attend the scheduled sale."

Even though this new language is only required for deeds of trust secured by 1-4 single family residences, it is likely that most trustees will include this language in all NOS's for ease of use and to avoid making mistakes regarding when the new language must be included.

The amended version of Civil Code § 2924f also provides that "nothing in the wording of the notices . . . is intended to modify or create any substantive rights or obligations for any person providing, or specified in, either of the [new] required notices." (Civ. Code § 2924f(b)(2)(C).) In addition, "[f]ailure to comply with [the new notice language] shall not invalidate any sale that would otherwise be valid under Section 2924f." Information provided pursuant to the new notice (e.g., on postponements) does not constitute the public declaration required by subdivision (d) of Section 2924g." (Civil Code § 2924f(2)(D).)

Unfortunately, the statute is not clear as to whether the SB 4 changes apply to NOS's recorded, mailed, or posted on or before April 1, 2012. Therefore, out of abundance of caution and as a best practice, trustees should consider including the new SB 4 disclosures in all NOS's recorded, mailed and/or posted on or after April 1, 2012.

Last Year's Change to the NOD – Important Notice language.

Last year, SB 1221 amended Civil Code §§ 2924 and 2924c to allow the NOS to be recorded up to five days prior to the expiration of the three month period after the recording of the NOD. (Civil Code § 2924(a)(2)-(4).) Effective as of January 1, 2011, these amendments required the "important notice" in the NOD to be changed as follows [changes are highlighted, with inserts in italics and bold and deletions shown by strikeouts]:

"IMPORTANT NOTICE [14–point boldface type if printed or in capital letters if typed]

IF YOUR PROPERTY IS IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR PAYMENTS, IT MAY BE SOLD WITHOUT ANY COURT ACTION, [14–point boldface type if printed or in capital letters if typed] and you may have the legal right to bring your account in good standing by paying all of your past due payments plus permitted costs and expenses within the time permitted by law for reinstatement of your account, which is normally five business days prior to the date set for the sale of your property. No sale date may be set until three months approximately 90 days from the date this notice of default may be recorded (which date of recordation appears on this notice).
This amount is __________ as of __________ (Date) and will increase until your account becomes current.

While your property is in foreclosure, you still must pay other obligations (such as insurance and taxes) required by your note and deed of trust or mortgage. If you fail to make future payments on the loan, pay taxes on the property, provide insurance on the property, or pay other obligations as required in the note and deed of trust or mortgage, the beneficiary or mortgagee may insist that you do so in order to reinstate your account in good standing. In addition, the beneficiary or mortgagee may require as a condition to reinstatement that you provide reliable written evidence that you paid all senior liens, property taxes, and hazard insurance premiums.

Upon your written request, the beneficiary or mortgagee will give you a written itemization of the entire amount you must pay. You may not have to pay the entire unpaid portion of your account, even though full payment was demanded, but you must pay all amounts in default at the time payment is made. However, you and your beneficiary or mortgagee may mutually agree in writing prior to the time the notice of sale is posted (which may not be earlier than the end of the three months after this notice of default is recorded) to, among other things, (1) provide additional time in which to cure the default by transfer of the property or otherwise; or (2) establish a schedule of payments in order to cure your default; or both (1) and (2).

[. . . Balance of important notice was unchanged]."

In doing year-end form updates, each trustee may want to make sure that its NOD contains these changes to the “important notice” that became effective on January 1, 2011.

We assume everyone has implemented the 2011 changes to the NOD and will be prepared for the changes in the NOS that become effective on April 1, 2012.