What to Expect After Foreclosure

Following foreclosure, the bank cannot simply take possession of an occupied property. If the homeowner does not voluntarily leave, an unlawful detainer action will be brought to forcibly evict the homeowner and any other occupants from the premises. Unlawful detainer proceedings are expedited, with the normal timelines in civil actions considerably shortened. A case is expected to be completed no more than 45 days from the filing of the complaint, but more commonly the case is resolved in even less time.

The following specifically addresses bank-owned properties. A separate discussion of issues common to investors or other 3rd party purchasers will be provided elsewhere. Although the same steps are required to obtain possession, it is more common for 3rd party purchasers to not adhere to requirements but conversely, often easier to obtain an eviction.

This summary does not apply to renters of foreclosed properties, who may have additional protection under state or federal law.

Cash for Keys Offer:

Prior to initiating an unlawful detainer action, and usually within days of a foreclosure, the bank, through its real estate agent assigned to market and sell the property, will most likely offer a modest sum of money to the homeowner on the condition that the homeowner agrees to voluntarily vacate the property within a set time. The amount of money offered and the timeline to vacate vary, but the reason for the cash offer is universal: it costs less money than bringing a legal action to evict the homeowner.

I'm not suggesting that all the real estate agents peddling cash for keys offers are slimeballs, but as a group they rank right up there with lawyers and used car salepersons. At a minimum, understand that the agent is motivated by compensation earned for selling you a product that really benefits the bank. Sound familiar? Many are as slick as the mortgage brokers that convince homeowners that predatory subprime loans were best option.

Observations:
  • Incredibly, homeowners sometimes learn for the first time that their home was foreclosured when the cash for keys offer is made. (I thought my bank was considering me for a loan modification!)
  • In the typical cash for keys agreement, the homeowner agrees to waive all claims against the bank.
  • The real estate agent often uses coersive measures to get a homeowner to accept the cash for keys offer. Ex: telling the homeowner that an unlawful detainer complaint has already been filed and that eviction is imminent; advising the homeowner that the offer expires within a very short period of time.
  • Contrary to what the agent says, the amount of money and date given to move may be negotiable. If cash for keys seems like an acceptable option, it doesn't hurt to ask for the money and time you need to relocate (within reason).

Trustee's Deed Upon Sale

At a foreclosure sale, title to property is conveyed to the new owner through a Trustees Deed Upon Sale. Title may be acquired by the bank (REO), or by a third-party (investor or other individual/entity). As with any conveyance of real property, the Trustees Deed must be recorded in the county records and title to the property is not "perfected" until the Trustees Deed is recorded. This simply means that the new owner has no right to demand that you vacate the premises until their ownership appears in the public records.

Note: if the Trustees Deed is recorded within 15 days of the foreclosure sale, the effective date of the Trustees Deed dates back to the date of the foreclosure sale. (The implications of the retroactive effective date is explained in the legal discussion.) In addition, there is no requirement that the former owner be provided with a copy of the Trustees Deed.

Three Day Notice to Quit

If a homeowner remains in their property following a foreclosure sale, a Three-Day Notice to Quit (Vacate) is first required to be served. The notice essentially demands that the homeowner vacate the premises within three days or the bank will file an unlawful detainer action to evict. Legal action cannot be taken unless the homeowner remains in the property after the three day period has expired.

Although California law requires that an attempt be made to personally serve the homeowner with the 3-Day Notice, it is standard practice for a process server to tape or leave the notice at the front door without making any attempt to personally serve. For example, the notice is posted without knocking or ringing the doorbell, sometimes when a homeowner is inside the premises.

The Three-Day Notice is typically brought shortly (usually within days) after a foreclosure sale. In addition to fulfilling a pre-requisite to filing an unlawful detainer complaint, prompt service of the required notice has an important legal ramification. If the bank eventually succeeds in the eviction, it is also entitled to a judgment for reasonable market rental value of the property during the time the homeowner remained in possession after expiration of the three-day notice.

If the unlawful detainer complaint is filed months after foreclosure, for for example, the homeowner may be on the hook for thousands of dollars in rental payments. Whether a hovel or mansion, it also appears to be standard practice for banks to claim rental damages in the amount of $1500 ($50 per day), without any attempt to determine the actual fair market rent for the particular property.

Additional Observations:
  • The 3-Day Notice is usually signed by an attorney at the law firm representing the bank, and in the majority of cases, the law firm is based in Southern California, regardless of the location of the property. An attorney from a local law firm will most likely make any necessary court appearances.
  • The 3-Day Notice typically does not identify the name of the bank who claims to be the owner, nor is a copy of the Trustee's Deed Upon Sale attached to the Notice.
  • The 3-Day Notice often combines the required notices for the homeowner, renters, and other occupants, and can be quite confusing.

Service of Summons & Unlawful Detainer Complaint

If a homeowner remains in their property more than three days after being served with the notice to vacate, the bank can initiate unlawful detainer (eviction) proceedings. Although a complaint can be filed anytime after the three-day period has lapsed, it is not uncommon for delays of weeks or even months before an unlawful detainer complaint is filed. Given the foreclosure crisis, law firms handling evictions on behalf of banks cannot keep up with the volume of evictions.

The homeowner is served with a copy of the Summons and Complaint that was filed with court in the county where the property is located. Referred to as "service of process," simply means that the court documents were delivered to the homeowner. There are three primary ways that a homeowner can be served:

Personal Service: The process servicer personally hands the Summons and Complaint to the defendant (homeowner). Even if the homowner refuses to accept the papers, the server simply needs to state that he/she is a process server and leave the papers as close to the homeowner as possible. In other words, a homeowner cannot avoid personal service by refusing to accept the legal documents. Personal service is the most common method as it speeds up the process by requiring a response from the homeowner within the shortest period of time. In addition, service by other methods cannot be utilized until at least 2-3 attempts have been made to personally serve the homeowner.

Substitute Service: The homeowner may also be served by substituted service, leaving the Summons and Complaint with an adult at the premises, then mailing a copy of the Summons and Complaint to the homeowner.

Nail and Mail: Service by posting the summons and complaint at the premises and sending a copy by mail is permitted by the court when the process server declares that previous attempts to personally serve the documents had been unsuccessful.

In California, a notice is mailed by the court clerk to defendants named in unlawful detainer actions. This notice advises homeowners that a complaint has been filed, and that for 60 days following the filing access to the court file is restricted to the parties and their attorneys, and the case is not accessible on the court's register. Quite often, the clerk's notice is received prior to service of the summons and complaint, and gives the heads up that the homeowner is about to be served.

The Summons

The Summons is a legal document that notifies the homeowner that an unlawful detainer lawsuit has been filed and warns that a default judgment will be granted unless an response is filed with the court within five days. Details of the case, including the plaintiff's name, case number, court's address, etc. are included on the summons.

The Unlawful Detainer Complaint

An unlawful detainer action is a civil lawsuit in which the bank (plaintiff) claims that the homeowner (defendant) continues to occupy the property without any legal right. The bank is suing for an court order to obtain possession of the property (by evicting the homeowner) and for a monetary judgment (market rent) during the time the homeowner unlawfully remained in the property (after expiration of 3-Day Notice).

The Complaint sets forth the allegations necessary for the bank to take possession of the property from the former homeowner: the bank purchased the property at a foreclosure sale that was conducted in compliance with California law, the bank's title to the property was perfected by recording the Trustee's Deed Upon Sale, the bank served the former homeowner with the required Three-Day Notice, but the homeowner refused to vacate and continues to occupy the premises.

The bank is also required to attach two documents to the complaint: the Trustee's Deed Upon Sale, and a declaration from the process server stating that the Three-Day Notice was served in accordance with the law.

To obtain a money judgment (damages) against the homeowner for the time in possession, the complaint must include an allegation of the fair market rental value of the property. This is usually expressed as an amount per day, and a judgment in favor of the bank will grant an amount of the daily rate times the number of days a homeowner remains in possession of the property after the Three-Day Notice expires.

A blank form, Answer to Unlawful Detainer Complaint, is also required to be included with the Summons and Complaint.

It is standard practice to include a blank form (CP10.5) Pre-Judgment Claim to Right of Possession with the Summons and Complaint that is served on the homeowner. This document is directed at any person(s) in addition to the former homeowners that the bank doesn't know about who may be living at the premises. Unless unknown occupants are served with the Summons and Complaint and given an opportunity to assert their legal right to remain in the property, they cannot be evicted even if the bank succeeds in obtaining a judgment against the former homeowners. Conversely, if properly served, any unknown occupant must file the Pre-judgment Claim within ten days, or they will also be evicted.

However, filing a response means that the occupants will be added as defendants to the action, will be required to file a response to the Summons and Complaint within five days after filing the Pre-judgment Claim, pay the court filing fees, and risk having an unlawful detainer judgment entered against them.

A big problem with the Pre-Judgment Claim to Right of Possession is that it is confusing and difficult to understand. Even an occupant with a legitimate claim, i.e. that the person has an oral or written rental agreement with the former homeowner, will likely not respond and have a default judgment entered against them without understanding their legal right to remain in the property.

The Answer or Other Response to the Complaint

If personally served with the Summons and Complaint, the homeowner has five days (not including the day papers were served) to answer the complaint or file a response. If substituted service or "nail and mail" was used, a response is due within 16 days of the mailing date. To calculate the deadline, weekends and holidays are counted. If the last day to respond falls on a weekend or holiday, however, the response is due on the next court day.

If the homeowner does not file a response within the deadline, a late response will be accepted by the court clerk if it is filed before the bank files a request for default judgment. If the bank beats the homeowner to the courthouse, a default judgment will be granted in favor of the bank and eviction will follow without further court action. Under limited circumstances, it is possible to have a default judgment set aside, a topic covered in the legal discussion.

The homeowner must either file an Answer to the complaint and/or file some other response by the deadline. An answer states the legal reasons why the bank is not entitled to possession of the property/why the homeowner should not be evicted. A homeowner can use pleading paper or Form UD-105 to file an answer. Although UD-105 is definitely geared toward landlord/tenant context rather than post-foreclosure evictions, most notably that none of the options under the Affirmative Defenses section (the legal basis for why the bank should not be allowed to evict) apply. Still, the "other" box (section 3j) can be checked, and the legal basis stated on Form MC-025 as an attachment. Despite the limitations, using Forms UD-105/MC-025 has several advantages. The Forms are readily available online in a .pdf fillable format, are fairly user-friendly, and can be used as a "checklist" of general information that should be included in an answer.

Prior to filing an Answer or other response, the bank must be served by mailing a copy of the papers to the attorney listed in both the Summons and in the Complaint. A defendant homeowner cannot serve the papers, but any individual over the age of 18 who is not a party to the case can serve the bank by dropping the paperwork into the mailbox. That person then signs a completed Form POS-30 (Proof of Service By First-Class Mail). The Answer/Response with the completed Form POS-30 can then be filed with the court.

A court fee is required to file an answer to the complaint. Assuming the Unlawful Detainer Complaint is brought as a limited civil case (under $10,000), the filing fee is $225, current as of February 2012. Each defendant is required to pay a filing fee, so husband and wife who are both named as defendants in the complaint, for example, must each pay the $225 fee even if filing a joint answer. A waiver of court fees can be requested by filing Form FW-001 and FW-003. An information sheet is also available as FW-001-INFO, although not particular useful in the unlawful detainer context.

A homeowner can list any number of affirmative defenses in the answer to the unlawful detainer complaint, and filing just about anything will prevent the bank from getting a default judgment. Many issues raised in a defense, however, are not legally permissable and will not even be considered by the court. This is discussed further in the legal section.

Instead of, or in addition to, an Answer, a homeowner can file a Motion to Quash (attack the validity of the service of process) or a Demurrer (challenge the complaint as legally defective), also covered more fully in the legal discussion. If a Motion to Quash or Demurrer is filed, the time to file an Answer is extended until the court rules on the motion or demurrer.

Setting The Trial Date

If an Answer is filed, either party can file Form UD-150 (Request/Counter-Request To Set Case For Trial-Unlawful Detainer). Unless the homeowner wants the case to be heard even quicker, it is usually makes sense to let the bank file the Request to Set Trial. It is safe to assume that the bank will not request a jury trial. An unlawful detainer case is given precedence over other cases, and in most circumstances the court must set a trial date within 20 days of the Request to Set Trial. The court clerk will send notice of the trial date to both parties.

The homeowner can exercise the right to have the case heard by a jury by promptly filing the same Form UD-150 as a Counter-Request after receiving the bank's request for a nonjury trial. Quite often, the initial trial date set by the court will need to be re-scheduled in order to accommodate a jury trial. If so, another notice with a new trial date will be sent to both parties by the court clerk.

In requesting a jury trial, the homeowner will need to pay a deposit of $150 for initial jury fees, and the losing party is required to pay all of the jury fees. The homeowner can request a waiver of the jury fees by filing Form FW-002 (Request to Waive Additional Court Fees).

Note: Many tenant advocates and self-help resources advise against requesting a jury trial when the defendant is not represented by an attorney. The increased complexity involved in presenting a case to a jury in combination with the additional costs, especially if the defendant loses, are cited as in support of the recommendation. In my opinion, this reasoning is not as persuasive in the context of a post-foreclosure eviction proceeding. First, it is incredibly difficult for a homeowner to prevail, even when represented by an attorney. Although it often depends on which county and what judge is hearing the case, a homeowner is simply not allowed to even present a defense and judgment for the bank is essentially rubberstamped. A jury of one's peers would presumably be more open-minded and fair? Second, the additional costs for a jury may be waived if the homeowner cannot afford to pay, and the initial jury deposit is refundable if the case is decided without a jury. Third, as explained below, in all liklihood the case will be decided prior to trial, with the homeowner not having the opportunity to present a case to the jury.

Unlawful Detainer Judgment

To Reiterate:

An unlawful detainer action is a civil lawsuit in which the bank (plaintiff) claims that the homeowner (defendant) continues to occupy the property without any legal right. The bank is suing for an court order to obtain possession of the property (by evicting the homeowner) and for a monetary judgment (market rent) during the time the homeowner unlawfully remained in the property (after expiration of 3-Day Notice and up until the homeowner vacates or is ejected by the sheriff).

If a homeowner vacates the property at any time prior to entry of judgment, the case cannot proceed in the unlawful detainer court and a unlawful detainer judgment will not be entered against you. The bank may still sue for rent and other expenses, but would need to bring a separate action, usually in small claims court. To protect your rights in this situation, and not having an unlawful judgment on your record for 7 years, it is important to let the bank/attorney/real estate agent and the court know that you have vacated and given up possession of the property.

A plaintiff in any civil action has the burden of proving its case; if each of the elements are not established by the evidence presented, the plaintiff loses. To obtain an eviction, the bank must prove that it 1) purchased the property at a foreclosure sale that was conducted in compliance with the law; 2) title to the property was perfected by recording the Trustee's Deed Upon Sale; 3) the former homeowner was served with proper notice to vacate; 4) the homeowner refused to vacate and continues to occupy the premises.

At the beginning of the foreclose crisis, with few homeowners contesting the ensuing evictions, banks and their law firms were accustomed to obtaining judgments by default. As more homeowners began answering unlawful detainer complaints and asserting affirmative defenses to eviction, more cases went to trial. Granted, in the vast majority of cases judgment was granted in favor of the bank, but at least the homeowner was afforded their proverbial "day in court."

This definitely cut into the eviction mill law firm's profits. By all accounts, these law firms are compensated on a fixed-rate per case basis. The less time and resources it takes to evict a homeowner,(default judgment) the more profitable the case. Conversely, the more time and resources it takes, (judgment after trial) the less profit made by the law firm. It should also be noted that these law firms are rated, ranked and recognized with prestigious awards based on how fast they can get a homeowner kicked out following foreclosure.

The bank soon adapted its legal strategy. In particular, when a homeowner files an answer to the unlawful detainer complaint, the bank will file a Motion for Summary Judgment in an attempt to get an eviction without the case going to trial. It has proven to be a very effective strategy. Because the motions are made using "canned" briefs (just need to fill in the case number, title, defendants into template) few resources are expended. More importantly, the banks usually win.

In legal parlance, the Motion for Summary judgment asserts that there are no triable issues of material fact, so the bank is entitled to judgment in its favor as a matter of law. It boils down to this argument: The bank has presented sufficient evidence to prove that it is entitled to possession of the property, and there is no evidence that the homeowner has or can present that would support the homeowner's defense that the bank is not legally entitled to evict. Therefore, there is no need to waste the court's resources by holding trial when the bank has already shown that the defense is without merit and the homeowner can't win.

To defeat the Motion for Summary Judgment and not have the case kicked out before trial, a homeowner needs to either: 1) demonstrate that the bank hasn't met its burden of proving all the elements necessary to establish its case, or 2) present admissible evidence to demonstrate that there is at least one triable issue of material fact, i.e., the homeowner has a legitimate defense to eviction, and has at least some evidence to back it up.

Clear as mud? An couple of examples may help to clarify somewhat, but it is important to keep in mind, and cannot be overemphasized, that the result depends on the particular facts and circumstances of each case. What may be a viable defense in one case will not work in another case because the facts do not exist to support the defense.

Example 1: Homeowner response to motion for summary judgment

Affirmative Defense: The bank has not established that it is entitled to possession of the property. The bank did not acquire legal title to my property because the trustee who conducted the sale was never properly substituted according to California statue.

Evidence: Certified copies of instruments from the county recorder's office, showing that the trustee who conducted the foreclosure sale is not the trustee named in the the Deed of Trust, and the lack of a recorded Substitution of Trustee.

Analysis: The legal theory is viable, because if the bank's title is defective, then the bank does not have the right to take possession of the property. The evidence is admissible, because publicly recorded documents are admissible and considered reliable.

Conclusion: Depends on the judge. In some courts, summary judgment will be denied and the case will proceed to trial. Other courts/counties interpret the law in such a way that it is virtually impossible to raise any defense.

Example 2: Homeowner response to motion for summary judgment

Affirmative Defense: The foreclosure was illegal because my loan was predatory; the bank can't produce the original promissory note and had no authority to foreclosure; and the Notice of Default was invalid because is was signed by a robosigner.

Evidence: A forensic mortgage loan audit; Article from the Harvard Law Review titled "Foreclosure Debacle," referencing a confidential source from YourBank who says YourBank cannot find 85% of the promissory notes; printout from website titled "Most Notorious Robosigners";

Analysis: The Defenses are not viable. Origination issues cannot be raised in unlawful detainer cases, and Californa law states that possession of original promissory note is not needed to foreclose. Although the Notice of Default challenges the legitimacy of the foreclosure proceedings, which can be raised in an lawful detainer, the argument fails to explain how robosigning in and of itself renders the Notice legally defective and then facing the hurdle of how a defective Notice of Default renders the foreclosure sale invalid. Even if all the theories were viable, however, none of the evidence is admissible. Just a few of the reasons: the loan audit is hearsay and unreliable, as opposed to an expert witness declaration made under oath; Law Review Article: sounds impressive and authoritative, but even if it was admissible (it's not), it doesn't prove anything because YourLoan may be one of the 15% of loans that YourBank can locate.

Conclusion: Summary Judgment granted in favor of bank, homeowner evicted.

More on summary judgment motions will be covered in the legal section, including examples of canned briefs, caselaw used by the banks, issues that can be considered, cases that can be cited by homeowners, etc.

Although a motion for summary judgment is allowed in unlawful detainer cases, in my opinion it should not be permitted. Unlawful detainer cases are "summary" proceedings, designed to move at a very quick pace. This maneuver further truncates the summary proceedings, making it extremely difficult to mount a defense. In an unlawful detainer, a homeowner is given as little as 5 days to respond to a motion for summary judgment, as compared to the 75-day notice required in other civil actions.

In addition to the extreme time constraints, just some of the other obstacles to responding effectively to a motion for summary judgment:

  • Procedurally it is a pain, although format requirements are relaxed somewhat
  • Gathering Evidence before obtaining discovery from bank
  • Admissibility of Evidence
  • Still have to draft the Points and Authorities, a legal brief demonstrating that California law supports your case
  • If no response, judgment granted to bank
  • Defeating a motion for summary judgment is a reason to celebrate, but the homeowner wins the case; the homeowner still has to present and prove their claim at trial.

Sheriff's 5-Day Notice to Vacate

If judgment is entered in favor of the bank, the bank is entitled to a Writ of Possession, a court order to enforce the judgment and authorize the county sheriff's department to phyically remove the homeowner from the premises. The Writ and sheriff's notice is posted at the premises, with a warning that if the homeowner does not vacate within five days, the sheriff will forceable remove the occupants.

The Five-Day Notice to Vacate may or may not follow immediately after judgment in the Unalawful detainer. Although obtaining a Writ of Possession involves simply filing out a form and obtaining the court's seal, attorneys don't always complete this step promptly. A homeowner can contact the court clerk's office to confirm whether a writ has been issued yet. Without it, the bank can't ask enlist the enforcement power of the sheriff.

The sheriff's office for each county usually has certain days of the week designated for evictions, sometimes one day for a particular area/city within the county. This information can be somewhat useful, if only to calculate the deadline for posting the 5-day notice for the next scheduled date for writ enforcement by the sheriff.

For example: Jim and Tammy Railroaded lost their unlawful detainer case when the judge refused to consider their evidence and granted the bank's motion for summary judgment. The Railroaded family has a house full of belongings, and has not been able to find a decent place to re-locate. Worse yet, they have no idea how much time they have to move. Under this incredible stress, they are considering leasing an over-priced house with a rodent infestation, and either renting a storage unit or selling all the items that won't fit in the woefully small rental.

On Thursday, February 9th, they find on the sheriff's website that the County of Foreclosure only does evictions in the City of Wrongful on Tuesdays. The Railroaded family now knows that the sheriff cannot evict them the following Tuesday, February 14th, because they did not receive sufficient notice. The earliest date for the sheriff to evict would be the following Tuesday, February 21st, provided that a 5-Day Notice was posted by the 16th. A small consolation for the Railroaded family, but knowing that the 5-day deadline is forestalled, they will use the additional time to find a better place.

If in doubt, a call to the sheriff's department can confirm whether your property is on the eviction list and the scheduled date. Example: A 5-Day Notice states that the Railroaded family must vacate the property by Monday, February 20th at 6 a.m. They contact the sheriff's department and confirm that the sheriff will actually come the following day.

Sheriff's Lock Out

If the property is not vacated within the 5 day period, the county sheriff will Execute the Writ, often referred to as the Lock Out Date. The sheriff will prearrange a time for the bank's real estate agent and locksmith to meet at the property. The locksmith is present to pick the lock if the sheriff is unable to gain access to the premises, and to change the locks after the occupants are removed. After ousting the occupants, the bank is given legal possession of the property.

Occupants will have no opportunity to gather belongings, other than to take personal items such as a jacket, purse or cell phone. There are procedures to obtain belongings after eviction, but the homeowner is at the mercy of the real estate agent who decides when to allow access to the property.

Preparing for Eviction Following Foreclosure:

  • Start preparing for the inevitable eviction following a foreclosure - Don't wait until you are served with an unlawful detainer complaint
  • If you are considering hiring an attorney to represent you - Don't wait until you are served with an unlawful detainer complaint
  • If you can't afford an attorney, considering finding one who can provide consultation or limited scope representation at an affordable cost
  • Other resources may be available, although often limited in scope. A court's self-help center can assist with filling out forms, but cannot provide legal advice. Community organizations may be able to help or even provide representation, but are understandably swamped with cases. There are many good resources for information on the unlawful detainer process, including those provided on the links page.
  • If you have a meritorious case against the bank for wrongful foreclosure, do not try to prove your case in the summary proceedings of the unlawful detainer court. If you file a lawsuit against the bank, it may be possible to stay the eviction (legally stop the eviction from moving forward) or consolidate the unlawful detainer action with your case against the bank.