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No Tender is Required Pre-Foreclosure

Foreclosure Litigation and Real Estate Law by Peter N. Brewer, Esq.

In California, one of the biggest hurdles for borrowers who are challenging a foreclosure sale is the tender offer rule.  The rule requires that the borrower offer repayment of the entire amount owed prior to challenging the foreclosure.  However, in a recent appellate decision, Pfeifer v. Countrywide Home Loans, the First District Court of Appeals found that the tender offer rule did not apply because the foreclosure sale had not occurred.  In addition, the court found that a lender must comply with Federal Housing Administration (“FHA”) regulations prior to foreclosure on a FHA loan.

Facts of the Case

The Pfeifers, a son and mother, received a FHA loan in 2008.  As part of the loan, the lender, Countrywide, received a FHA California Deed of Trust that was secured against the Pfeifer’s residence in Hayward, California (Alameda County).  Unlike other deeds of trust, the FHA version specifically notes that some of the lender’s rights could be “limited by regulations issued by the Secretary” (of the Department of Housing and Urban Development).  Of importance in this case, the Federal regulations require that the lender have a face-to-face meeting with the borrowers prior to initiating the foreclosure process.

In 2009, the Pfeifers defaulted on their loan.  Countrywide initiated foreclosure proceedings.  Countrywide failed to have the statutorily required face-to-face consultation with the borrower prior to initiating the foreclosure process.  Accordingly, the Pfeifers filed suit to stop the sale and for violation of statutes.


The trial court dismissed the Pfeifers’ claim on the grounds that the Pfeifers failed to comply with the tender offer rule by offering to pay the outstanding loan amount.  Further, the trial court found that a borrower cannot maintain a suit against a lender for the lender’s failure to comply with FHA rules because the rules are for the benefit of the FHA and not the borrower.

On appeal, the appellate court reversed the lower court’s ruling and held that in situations where the foreclosure has not yet occurred, a tender is not required.  The Pfeifer Court noted that Countrywide failed to cite any cases where California courts had required a tender prior to a foreclosure.  Additionally, while violations of FHA rules do not give borrowers a right to sue the lender, the violations can be grounds to stop a foreclosure sale.  Although the State foreclosure statutes are comprehensive, the Court noted that additional requirements can be added as long as they do not frustrate the public policy behind the statutes.  Here, the FHA rules supplement, not contradict, the policy behind the statutes and therefore could be enforced by the borrower.


If a lender is dealing with a FHA loan there are substantially more rights of the borrower and requirements that must be complied with prior to foreclosure.  Although violating the FHA rules does not allow a borrower to sue for damages, the violations can be a basis to stop the foreclosure process and require the lender to start over.  Finally, if the foreclosure has not occurred, lenders need to be aware that borrowers have a greater likelihood of success challenging the trustee’s sale.

If you are dealing with a matter similar to the contents of this article and believe you need real estate legal representation, please contact Brewer Offord & Pedersen LLP at (650) 327-2900, or visit our website at

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