The Superior Court of Orange County has implemented a unique program aimed at helping defaulting borrowers and lenders reach a common ground in the foreclosure war. The goal of the program is to prevent foreclosure-related lawsuits from clogging the court docket and being drawned out in expensive and time-consuming litigation. Under the program, once a defaulting homeowner files a lawsuit and seeks a temporary restraining order, the case is automatically flagged and set for a special calendar. Under this calendar, the foreclosure proceedings are automatically stayed for 90 days while the parties work with one another toward a potential loan modification. This program, however, comes with several requirements:
1. The borrower is ordered by the court to continue to pay his or her mortgage during the 90-day stay;
2. The lawsuit will be automatically dismissed if a loan modification is approved by the lender defendant; and
3. If the court finds that the lender has made a good faith attempt to work with the borrower toward a solution, the court will find that the lender has satisfied the notice requirements of Civil Code Section 2923.5 (See my earlier post regarding these statutory requirements).
Following the 90-day stay, if the issues are not resolved, the parties will proceed to an early settlement conference. At this point, if the court finds that the lender has made a good faith effort during the 90-day stay, it is likely that the lender will be successful in asking the court to dismiss the action, unless the borrower’s lawsuit alleges other causes of action unrelated to the Section 2923.5 notice requirements.
This new program is beneficial for defaulting borrowers in that it provides more time for the borrowers to figure out their financial situation and to allow the parties to work with one another before they dive into the deep end of litigation. Modeled after a similar program in the Philadelphia courts, this unique approach allows borrowers to communicate their financial situation directly with the lender’s representatives instead of through telephone operators and pushes the lenders to carefully review the borrowers’ qualifications before rushing to foreclose on their home.
****The opinion above is not intended to be legal advice and absolutely does not create any attorney-client relationship between its author and the readers**
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