California’s Tender Rule in Foreclosure Suits: Any way around it?

In a nutshell, the “Tender Rule” holds that when a homeowner sues their lender for wrongful foreclosure, they must show that they are ready, willing and able to pay the full amount due on the loan.  Courts have felt that it’s wasteful to rule on wrongful foreclosure claims if the homeowner doesn’t have enough money to pay what is owed.

It’s no secret that banks have been performing some fraudulent foreclosures.  The National Mortgage Settlement and the California Homeowner Bill of Rights both address problems with “robo-signing” – the signing in masse of documents that aren’t totally accurate. (this sentence is mostly here in case you wanted to insert hyperlinks to the other posts)  An increase of fraudulent foreclosures naturally increases the number of homeowners seeking relief in courts.  Courts are questioning the tender rule and discussing whether or not it must be applied in every case.

Fortunately for borrowers, many cases have found exceptions to the tender rule and other reasons for which a homeowner need not show they are able to tender the whole amount due.  Besides posting bond, how can a homeowner carry on with a wrongful foreclosure suit without abiding strictly by the tender rule?

Homeowner can bring suit to prevent a future foreclosure sale.  A US District Court recently waived the tender rule in a case where homeowners were trying to prevent a foreclosure sale and noted that “unwinding” a foreclosure sale is entirely different than simply postponing it.

Homeowner can show that it would be inequitable to do so.  The tender rule was waived for a widow and her small home because she was not responsible for the debt acquired by her deceased husband for other property.  If it just seems unfair, the court may wave it.

Homeowner can attack the validity of the underlying debt.  Courts won’t enforce the tender rule if the borrower claims that the promissory note was fraudulent, since if they did enforce the tender rule it would be as if they upheld the promissory note that is in question.

Homeowner can claim that the note is not valid or the authority is questioned.  Tender was waived in a case in which a trustee transferred the note to a second trustee but then still proceeded with the foreclosure sale!

Homeowner can make a counterclaim against the beneficiary.  Providing tender isn’t required when the borrower is making a counter-claim or set-off against the lender and if the amount of the counter-claim is enough to offset the amount of the tender.

While it’s not always clear on whether courts will apply the tender rule, it seems that a homeowner’s chances of avoiding it are improving.  Courts and other authorities are becoming more aware of how banks have mistreated homeowners; if the situation is right, they may waive the tender rule and restore the homeowner’s rights.