Once a home has been sold at a trustee sale, there may seem that little can be done. However, because there is no automatic judicial review or supervision of a trustee sale, court action is required. Judicial review of a trustee sale entails bringing an action attacking the sale by either seeking to stop it or setting it aside after it has been completed. If the homeowner remains on the property after the sale is completed, the homeowner may get judicial review in the purchaser’s action to recover possession. The foreclosure sale may also be subject to later judicial review if the purchaser seeks judicial assistance to obtain possession of the property.
Before, seeking court action, an attorney should read the loan documents carefully for language containing a “prevailing party attorney clause.” If the loan documents do contain the clause, court action could expose the homeowner to a large attorney fee award.
The relief available through court action, depends on whether court action will be filed before or after the sale. If the court action is sought before the sale occurs, a temporary restraining order to preliminary injunction may be sought to enjoin the sale. The TRO and preliminary injunction may be based on a variety of reasons. An injunction is not available if the sale has already been concluded.
Waiting until the sale is completed is not a good idea because once a third party enters the picture, third party rights are created. Third party rights make everything more complicated.
It is best to attempt to halt the sale as early as possible. If the sale goes forward:
•1. the homeowner has no further opportunity to reinstate the loan;•2. the homeowner must deal with third party rights;•3. there exists a presumption about the validity of the sale;•4. court action exposes the homeowner to attorney fee liability. If court action is sought after the sale has been completed, it can be because of the bank’s failure to comply with the statutory requirement of a three month period between the notice of default and the notice of sale, followed by an additional 20-day period between the notice of sale and the actual trustee sale. This extended period also gives the homeowner time to stop the sale. Court action based on improper procedures in conducting the trustee sale are commonly used to set aside completed foreclosures. Other attacks on trustee sales are based on the argument that money damages are inadequate as a remedy for the loss of the property through foreclosure. In the end it is much better to prevent a trustee sale than to attempt court action after the sale is completed.
~Norma N. Nogueda, Esq.
Law Offices of Vincent W. Davis & Associates