Private Lenders: Miss This One Step—and Your Foreclosure Could Be Blocked
California now requires a new declaration before recording a Notice of Default
What needs to be recorded with the Notice of Default under the new Civil Code § 2924.13?
With over 23 years in real estate litigation and foreclosure, recent updates to California foreclosure law have raised new questions from private money lenders—especially those who service their own business purpose loans.
Under Civil Code § 2924.13(c), before starting a nonjudicial foreclosure, a lender or trustee must now take two extra steps—or risk the sale being stopped.
Step 1: A Certification Under Penalty of Perjury
At the same time the Notice of Default is recorded, a certification must also be recorded. This document must state either:
No unlawful practices occurred during the life of the loan, or
If any did occur, they must be listed clearly in the certification
This applies to the six unlawful practices discussed in earlier posts—most of which are unlikely to affect private business-purpose lenders.
Step 2: Certified Mail to the Borrower
Simultaneously with the Notice of Default, two documents must be recorded and sent to the borrower by certified mail with return receipt:
A copy of the recorded certification
A notice advising the borrower of their right to petition the court if they believe the certification is false or misleading
Failure to complete both steps could give the borrower grounds to block the foreclosure.
Practical Takeaway for Private Lenders
Most business purpose lenders won’t run into problems if the loan has been serviced responsibly. However, now lenders must ensure the certification is properly executed and recorded, and that the borrower receives the required notice by certified mail with return receipt requested.
Failure to properly record and serve these documents may give the borrower grounds to challenge the foreclosure. For transactions with uncertain servicing history, legal counsel should confirm compliance before proceeding.
Follow for more as each section of California’s new foreclosure law is broken down in plain terms. For questions or a compliance review, reach out directly.