How Do I Stop a Foreclosure on the Last Day of the Foreclosure Sale Process?

Full question:

What set of forms are required to 'protest' or file a protest to halt recording of bank foreclosure sale on steps of county court house?

• Category: Real Property
• Subcategory: Foreclosure
• Date: 04/07/2025
• State: California

Answer:

Injunctive relief consists of a court order called an injunction, requiring an individual to do or not do a specific action. It must be proven that without the injunction, harm will occur which cannot be remedied by money damages. To issue a preliminary injunction, the courts typically require proof that

(1) the movant has a ‘strong’ likelihood of success on the merits;
(2) the movant would otherwise suffer irreparable injury;
(3) the issuance of a preliminary injunction wouldn't cause substantial harm to others; and
(4) the public interest would be served by issuance of a preliminary injunction.

In foreclosure lawsuits, the debtor typically asks the court for three things, in the following order:

-a temporary restraining order (which lasts for a certain number of days, typically under 2 weeks)

-a preliminary injunction (will last until the court decides the case), and

-a permanent injunction (which will be granted if you win your case).

Types of Foreclosure.

The mortgage holder can usually initiate foreclosure anytime after a default on the mortgage. Within the United States, there exist several types of foreclosure. Two are widely used, with the rest being possibilities only in a few states.

The most important type of foreclosure is foreclosure by judicial sale. This is available in every state and is the required method in many. It involves the sale of the mortgaged property done under the supervision of a court, with the proceeds going first to satisfy the mortgage, and then to satisfy other lien holders, and finally to the mortgagor. Because it is a legal action, all the proper parties must be notified of the foreclosure, and there will be both pleadings and some sort of judicial decision, usually after a short trial.

The second type of foreclosure, foreclosure by power of sale, involves the sale of the property by the mortgage holder not through the supervision of a court. Where it is available, foreclosure by power of sale is generally a more expedient way of foreclosing on a property than foreclosure by judicial sale. The majority of states allow this method of foreclosure, including New Hampshire. Again, proceeds from the sale go first to the mortgage holder, then to other lien holders, and finally to the mortgagor.

Other types of foreclosure are only available in limited places and are therefore considered minor methods of foreclosure. Strict foreclosure is one example. Under strict foreclosure, when a mortgagor defaults, a court orders the mortgagor to pay the mortgage within a certain period of time. If the mortgagor fails, the mortgage holder automatically gains title, with no obligation to sell the property. Strict foreclosure was the original method of foreclosure, but today it is only available in New Hampshire and Vermont.

Statutory Redemption.

Statutory redemption allows the mortgagor to redeem the mortgage even after foreclosure sale. About one-half the states have statutory redemption laws. Generally, these laws give anywhere from six months to a year for the mortgagor to redeem the mortgage by payment of the foreclosure sale price plus a statutory rate of interest to the sale purchaser. Junior lien holders also have a right to redeem under these statutes, in order of their priority, though not until the period for the mortgagor to redeem runs out. As a rule, the mortgagor can retain possession of their property during this statutory redemption period.

Federal Laws Affecting Foreclosure:

At least two federal laws clearly apply to foreclosure actions.

Bankruptcy.

The filing of any bankruptcy action automatically stays a foreclosure proceeding, regardless of type. At that point, whether the stay will be lifted depends on whether the mortgagor has equity in the mortgaged property. If the bankruptcy has been filed under a Chapter 11 petition, the bankruptcy court may "terminate, annul, modify or condition such stay" for cause, including the lack of adequate protection of an interest in property of the mortgage holder, or if the mortgagor does not have equity in the property and the property is not necessary for an effective reorganization.

If it has been filed as a straight bankruptcy petition, asking for discharge of all debts, the mortgage holder will be allowed to foreclose if the bankrupt debtor has no equity in the property. If there is equity in the property, the property can be sold by the bankruptcy court.

Servicemembers Civil Relief Act of 2003.

The Servicemembers Civil Relief Act of 2003, replacing the Soldiers and Sailors Relief Act of 1940, gives special protection to mortgagors on active duty in the armed forces for mortgage loans executed prior to when they went into service. The Act provides that a service person can apply to a court to set aside a default judgment leading to a foreclosure action. Because of this provision, a mortgage holder initiating a foreclosure action against a mortgagor who fails to answer the foreclosure complaint must file an affidavit with the court stating the mortgagor is not on active duty in the armed services.

If the mortgagor is in the armed services, the individual must be present or represented at the foreclosure hearing, meaning foreclosure by power of sale is not available. If a court finds that the mortgagor's ability to meet the terms of the mortgage has been affected by their service in the armed forces, they can stay the foreclosure action as long as the person is in the service.

For further discussion, please see:

http://www.realtytrac.com/foreclosure/stop-avoid/truth-about-bankruptcy-foreclosure.html
http://www.ehow.com/how_4836889_stall-foreclosure-proceedings.html