We are still seeing the effects of the subprime meltdown ripple through the appellate courts. In the case of Taniguchi v. Restoration Homes, what appears on first blush to be a straight forward analysis that under California law borrowers can stop a foreclosure sale by reinstating the loan had a twist.

The Taniguchis own a home in San Mateo County and in 2006, they borrowed $510k. They missed 4 loan payments in 2013, and normally to cure the default with the lender, the borrowers would simply need to reinstate the 4 missed payments and late charges under the promissory note.  Here's the twist back in 2009, the Taniguchis entered into a loan modification that adjusted the principal amount, reduced the interest rate and monthly payments, and deferred until the maturity of the approximately $116k (including accrued and unpaid interest and principal, fees, and foreclosure expenses).

After the subprime meltdown, sweeping legislation was enacted in an effort to protect Californian homeowners. HBOR cases have since trickled in over the last seven years with a new one regarding fees for borrowers who successfully halt a foreclosure sale with a temporary restraining order.

1.  A Prevailing Borrower Is Entitled to Attorney’s Fees After Obtaining a Temporary Restraining Order.

After the Monterossa case in 2015 which held that HBOR provided for award of attorney fees and costs when a preliminary injunction issues, it was logical to then wonder if the same would apply after the borrower obtains a TRO. A TRO is an early court order, one that is obtained on a one day ex-parte notice. It is often difficult for a loan servicer or lender to mobilize in time to oppose a temporary restraining order.

Owners who take title via a foreclosure sale must perfect their title before beginning eviction proceedings. This may seem obvious, but the issue was unresolved in California until just a couple of weeks ago. 

What is perfection of title? In this case, it is the recording of the Trustee’s Deed. Just being the successful bidder at sale is not enough to run down the courthouse to file an unlawful detainer.

Why is this an issue? Because of the 15 day retroactive language in Civil Code Section 2924h(c) which states the trustee’s sale “shall be deemed perfected as of 8 a.m. on the actual date of the sale if the trustee’s deed is recorded within 15 calendar days after the sale…”