practical steps homeowners can take to avoid foreclosure, including contacting lenders early, exploring loan modification, and selling before default.
How to Avoid Foreclosure – Smart Strategies Every Homeowner Should Know

In a major shift toward homeowner protection, California enacted two powerful laws in 2025: Assembly Bill 2424 (AB 2424) and Assembly Bill 130 (AB 130). Together, they reshape the foreclosure landscape by offering expanded protections, strategic delays, and legal remedies for homeowners facing financial hardship, especially during emotionally charged transitions like probate, divorce, or distressed sales.

🔹 California’s 2025 Foreclosure Law Overhaul: What AB 2424 Means for Homeowners

Effective January 1, 2025, AB 2424 introduces critical safeguards to California’s nonjudicial foreclosure process, giving homeowners more time, transparency, and leverage to avoid losing their homes unnecessarily.

⏳ Extended Time to Sell Before Foreclosure

AB 2424 empowers homeowners to delay foreclosure if they’re actively trying to sell their property:

  • 45-Day Postponement: Submit a listing agreement with a licensed real estate broker at least five business days before the scheduled foreclosure sale.
  • Additional 45 Days: If the property enters escrow and a fully executed purchase agreement is submitted five business days before the rescheduled sale.
  • Total Potential Delay: Up to 90 days, allowing time to secure fair market value and preserve equity.

This is especially critical in estate sales, divorces, or unexpected financial setbacks where timing is everything.

📑 Mandatory Notification & Third-Party Support

AB 2424 strengthens communication between lenders and borrowers:

  • Borrowers may designate a family member, HUD-certified housing counselor, or attorney to receive foreclosure notices.
  • Lenders must inform borrowers of this option:
  • At loan origination
  • When a Notice of Default is recorded

This ensures someone knowledgeable is monitoring the process and can interve245b7bne early.

💰 Minimum Bid Requirements to Protect Equity

To prevent homes from being sold far below market value:

  • Trustees cannot sell a property at the initial auction for less than 67% of its fair market value.
  • Fair market value must be assessed within six months using:
    • A licensed broker’s opinion
    • A licensed appraiser’s report
    • An automated valuation model (AVM)
  • If no qualifying bid is received:
  • The sale must be postponed for at least 7 days
  • The property may then be sold to the highest bidder without the minimum bid requirement

This provision helps preserve homeowner equity and discourages predatory bidding.

🛑 Impact on Lenders and Trustees

AB 2424 increases accountability for lenders and trustees:

  • Trustees must track and honor postponement requests tied to listing and purchase agreements.
  • Lenders must provide clear information about foreclosure alternatives, including:
  • Loan modifications
  • Forbearance
  • Short sales

🔍 Why AB 2424 Matters

For homeowners, especially those navigating estate transitions, divorces, or sudden financial hardship, AB 2424 offers a lifeline. It shifts the balance of power slightly away from aggressive foreclosure timelines and toward preserving equity and dignity.

For real estate professionals, this law reinforces the importance of strategic listing timing, airtight documentation, and proactive communication with trustees. It also opens the door for advocacy — educating clients on their rights and helping them leverage every available protection.

Click here > Download our free Guide How Can You Avoid Foreclosure? Know your Options

🔹 AB 130: Zombie Second Mortgages & New Foreclosure Protections for Subordinate Liens

Signed into law on June 30, 2025, AB 130 adds Civil Code §2924.13, targeting foreclosure abuses tied to subordinate liens — including second mortgages, HELOCs, and junior deeds of trust. It was designed to stop the resurgence of “zombie” mortgages — long-dormant debts that suddenly reappear with foreclosure threats.

🧟 What Is a Zombie Mortgage?

A zombie mortgage is a second lien that was:

  • Charged off or written off years ago
  • Dormant with no communication from the servicer
  • Suddenly revived with threats of foreclosure

AB 130 now governs all subordinate liens, regardless of loan type or borrower intent, and applies to:

  • 1–4 unit homes
  • Apartment buildings (5+ units)
  • Mixed-use properties
  • Both consumer and business-purpose loans

🚫 What Servicers Can No Longer Do

Before initiating nonjudicial foreclosure, servicers must certify — under penalty of perjury — that they have not committed any of the following violations:

  1. No communication for 3+ years: No written contact about the loan.
  2. Missing transfer notices: Failure to provide required notices under RESPA or TILA.
  3. Foreclosure after discharge: Debt previously written off (e.g., via IRS Form 1099-C).
  4. Expired statute of limitations: Attempting foreclosure past the legal deadline.
  5. Missing periodic statements: Required statements not sent.

These rules apply even if violations occurred under a previous servicer, meaning current servicers must audit the entire loan history.

📝 Mandatory Certification & Notification

To legally foreclose, servicers must:

  • Record a certification with the Notice of Default confirming compliance or disclosing violations.
  • Send both documents to the borrower via certified mail with return receipt.

Failure to comply can result in the foreclosure being set aside by the court.

⚖️ Borrower Remedies & Legal Leverage

Borrowers now have powerful tools to fight unlawful foreclosure:

  • Petition the court to halt foreclosure.
  • Use violations as an affirmative defense in judicial foreclosure.
  • Seek equitable remedies, including:
  • Striking arrears
  • Requiring full compliance before foreclosure
  • Blocking the foreclosure entirely

Even after a sale, borrowers may petition to set it aside if:

  • No certification was recorded
  • The certification disclosed violations
  • The servicer misrepresented its compliance history

🔍 Why AB 130 Matters

For homeowners, AB 130 offers a legal shield against surprise foreclosure actions — especially valuable during estate transitions, divorce, or unexpected hardship.

For real estate professionals, this law reinforces the need for strategic listing, legal audits, and client education. It also empowers you to challenge servicer misconduct and protect your clients’ equity.

🧭 Strategic Takeaways for Homeowners & Real Estate Professionals

🏡 For Homeowners

  • Time is now on your side: AB 2424 gives you up to 90 days to sell your home before foreclosure — a lifeline for preserving equity.
  • You’re not alone: Designate a third-party advocate to receive foreclosure notices and help you navigate the process.
  • Know your leverage: Under AB 130, if your servicer failed to communicate, missed legal notices, or discharged your debt, you may be able to halt foreclosure entirely.
  • Fight back legally: Courts can strike arrears, bar foreclosure, or require corrected compliance — even after a sale.

🧠 For Real Estate Professionals

  • Timing is everything: Submit listing and purchase agreements early to trigger mandatory postponements under AB 2424.
  • Documentation matters: Ensure contracts are airtight, bona fide, and submitted properly to trustees.
  • Educate your clients: Many homeowners don’t know they can delay foreclosure or challenge servicer misconduct — your guidance is critical.
  • Audit servicer behavior: AB 130 requires servicers to certify compliance. If they can’t, your client may have grounds to stop the sale.
  • Advocate with confidence: These laws give you the legal framework to protect your clients’ interests and preserve their financial future.

SEE ALSO OUR –

Navigating Foreclosure: A Compassionate Guide to a Fresh Start with Less Consequence

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