In California there is a right to “Reinstate” defaulted real property loans.
Who has the right to reinstate the loan?
Under Civil Code Section 2924c(a)(1), the following parties have the right to reinstate a defaulted loan: The borrower, called the “trustor” (under a deed of trust) or the mortgagor (under a mortgage), or any successor in interest to the borrower; Either the lender or the borrower, under any junior deed of trust, mortgage or other lien against the property. In other words, any one who has a financial interest in the property, which might be wiped out by a foreclosure, has the right to reinstate. This includes the owner of the property, the borrower under the loan or anyone with an interest in a junior deed of trust, mortgage or other lien in the property.
What is the deadline to reinstate a defaulted loan?
How much may the lender charge to reinstate the loan?
(1) All of the amounts, which are set out in the Notice of Default, which may include all amounts in default of principal, interest, taxes, assessments, insurance premiums or advances made by the lender to pay senior liens and other amounts needed to protect its lien.
(2) All “recurring obligations” which means all monthly payments under the loan, which come due after the Notice of Default, plus all amounts due under senior liens, all taxes and insurance payments advanced by the lender after the Notice of Default.
(3) All “reasonable costs and expenses actually incurred” by the lender in enforcing the mortgage or deed of trust. These “reasonable costs” are limited to: “the costs incurred for recording, mailing, including certified and express mail charges, publishing, and posting notices required by Sections 2924 to 2924i, inclusive, postponement pursuant to Section 2924g not to exceed fifty dollars ($50) per postponement and a fee for a trustee’s sale guarantee.” Civil Code Section 2924c)(c). The lender is also permitted to charge trustee fees or attorney fees, but these are limited by Civil Code Section 2924c(d).
The lender may NOT demand that whole principal of the outstanding loan (the loan balance) be paid. In other words, the amount needed to reinstate must be calculated only the defaulted amounts, plus costs. It may not include the full, accelerated amount of the loan.
How can you find out how much is needed to reinstate the loan?
The lender is required by law to respond to such a request within twenty-one (21) days of receiving it. Please note, however, that such a demand for information can only be made for two months after the Notice of Default is recorded. If the Notice of Sale has been recorded, then the lender need not respond to the request for information.