Stopping a Foreclosure Sale by Obtaining a Temporary Restraining Order and Preliminary Injunction

When a homeowner is facing foreclosure, he may not know what to do to stop the sale even if he believes that he has rights to keep his home.  In some states, foreclosures are done “judicially,” which means the foreclosing party must begin the process in court.  In California, however, homeowners are subject to nonjudicial foreclosures.  This means that the foreclosing party may start the foreclosure process outside of the courts.  Thus, if a homeowner wants to challenge the foreclosure, he would have to begin the judicial process and carry the burden of proof in court.

In these cases, the homeowner will ask the court to grant a temporary restraining order (or “TRO”), which will stop the foreclosure sale until a hearing in which the court may grant a preliminary injunction.  The time between the issuing of a TRO and the hearing is about two or three weeks.  If a preliminary injunction is granted at the hearing, the sale will be stopped until the time for a full hearing by the court as to whether or not the foreclosure should happen at all.  The time between the granting of a preliminary injunction and the full hearing is usually so long that homeowners have a high likelihood of keeping their home since banks will want to look into settlements or loan modifications at that point.

Federal rules and state rules regarding TROs and injunctions differ.  In a federal case, Alliance for the Wild Rockies v. Cottrell, the court issued a preliminary injunction to stop a timber salvage sale.  The court noted that there are “serious questions” that need to be examined to see in whose favor the scale tips.  The party requesting the injunction needs to show (1) a likelihood of irreparable harm; (2) a likelihood that the claim will be successful on its merits; (3) that the balance of hardships tips towards the requesting party; and (4) that the injunction is in the public interest.

In the California case of White v. Davis, the court stated that a party asking for injunction is ordinarily required to show that irreparable injury or interim harm will be suffered if an injunction is not granted.  The court also held that courts should examine (1) the likelihood of the plaintiff prevailing on the merits; and (2) the balance of harms from either granting or denying the injunction.  

Need for Proof and Posting Bond

A homeowner requesting an injunction must bring proof to show the facts upon which he bases his case.  This paperwork is important since there are generally no live witnesses.  Homeowners should have declarations and/or affidavits that show how the foreclosing party acted against the law or the mortgage and title documents.  A “declaration” is a written statement by a person alleging certain facts they believe are true, while an “affidavit” is basically a declaration with the addition of some sort of oath or affirmation of truth (sometimes signed by a notary public).

Homeowners may also be required to post a bond upon granting of the TRO so that the foreclosing party can recover any costs associated with the delay of the foreclosing sale.  However, there are circumstances under which a court will waive the requirement to post a bond, and the recently enacted California Homeowners Bill of Rights provides even further exceptions for that requirement.