Signing the house over does not sign the mortgage over. The deed of trust follows the property, the note follows you, and a foreclosure that was already recorded keeps running against whoever holds title. In Southern California that mistake has a statute written around it, because enough Riverside, Orange, and San Diego County owners have been talked into a deed by someone who promised to "take over the payments." The table is what each kind of transfer actually does.
| What you sign | What it does to the loan | What it does to the foreclosure |
|---|---|---|
| A deed to an investor who "takes over payments" | Nothing. You still owe the note | Nothing. The sale proceeds against the property in the investor's name |
| A deed to a "foreclosure rescuer" with a rent-back and a promise to buy back | Nothing, and your equity has left with the deed | Nothing, and you can now be evicted by the new owner |
| A deed in lieu of foreclosure, accepted by the lender in writing | Satisfied, on the terms the lender agrees to | Ends; the lender takes the house instead of selling it |
| A sale that pays the loan in full through escrow | Paid off; the lien is released | Ends; the equity above the payoff is yours at closing |
Only the last two rows end the debt, and only the last one keeps the equity. The first two are what California's Home Equity Sales Contracts law, Civil Code 1695 and following, exists to slow down. It gives an owner in foreclosure a cancellation period, forbids the buyer from taking the deed before it ends, and requires the contract to say all of that in plain words.
The reason the law needs to exist is simple. A recorded Notice of Default is public, and the list of people who read it every week includes the ones the Attorney General's office describes below.
The five business days the law gives you back
Under Civil Code 1695.4 an equity seller, meaning an owner whose home is in foreclosure, may cancel a contract with an equity purchaser until midnight of the fifth business day after signing, or 8 a.m. on the day of the trustee's sale, whichever comes first. Cancellation is any written notice to the address in the contract; no form is required. Until that period has fully elapsed, section 1695.6 bars the purchaser from accepting or recording any deed, and from paying any consideration, and section 1695.3 requires the contract itself to carry the notice that the buyer "CANNOT ask you to sign or have you sign any deed or any other document" during it.
"Don't transfer your title or sell your house to a 'foreclosure rescuer.' Beware that this is a scam to convince homeowners they can stay in their home as renters and buy their home back later... once a scammer has the title to your home, they can evict you and keep the home for themselves."
Rob Bonta, California Attorney General, in Resources for Homeowners Facing Financial Hardship, March 2022
What a legitimate transfer looks like
Two transfers end a foreclosure honestly. A deed in lieu is a negotiated surrender: the lender agrees in writing to take the property and treat the debt as satisfied, and it is the lender's choice to accept. A sale that pays the loan in full needs no one's permission; escrow orders the payoff demand, the lender is paid at closing, and the lien is released. Both put the transfer through escrow and title, which is exactly what a rescue scheme avoids.
Legitimate transfer or a scheme: the tells
| Legitimate | A scheme |
|---|---|
| Closes through a licensed escrow and title company, with a recorded deed and a released lien | A notary at your kitchen table and a deed that goes straight to the recorder |
| Pays off the loan, or the lender signs a written deed in lieu | "We'll take over the payments" with no payoff and no lender involvement |
| A written contract with the price, the payment terms, the possession date, and your cancellation right stated (Civil Code 1695.3) | A promise you can rent the house back and buy it again later |
| Nothing signed and nothing paid until the five business days pass (Civil Code 1695.6) | Pressure to sign today, or an up-front fee for "help" |
| Your equity arrives as proceeds at closing | Your equity leaves with the deed |
The consultant version of the same trick
The person who does not ask for the deed may ask for a fee. California's foreclosure consultant law, Civil Code 2945.4, forbids anyone who offers to stop or postpone a foreclosure for compensation from collecting anything until every service is fully performed, from taking a power of attorney, and from acquiring any interest in the residence from the owner they contracted with. A "consultant" who wants money first, a signature on a power of attorney, or a piece of the house has told you what they are.
What a foreclosure consultant may not do, by section
| Prohibited | Civil Code 2945.4 |
|---|---|
| Claim, demand, charge, collect, or receive any compensation until after fully performing every service | Yes |
| Take any power of attorney from an owner for any purpose | Yes |
| Acquire any interest in a residence in foreclosure from an owner they contracted with | Yes |
| Take a wage assignment, lien, or other security to secure payment | Yes |
| Receive consideration from a third party in connection with the services without disclosing it | Yes |
| Arrange or assist with the release of surplus funds after a trustee's sale | Yes |
A HUD-approved housing counselor is free and is the first call the Attorney General's office recommends.
Keep the deed until escrow takes it
An owner in foreclosure with equity has one thing the people at the door want, and the law gives five business days to think about it. A real sale takes the deed only at the moment escrow pays the loan and hands over the rest. We buy houses as-is for cash across Southern California, from the Temecula Valley and Riverside County to Orange County and North County San Diego, through a licensed escrow, with a written contract that carries the cancellation notice the law requires. Get a no-obligation cash offer and compare it with any promise that starts with your signature.
Frequently Asked Questions
How do I check who holds title to my Riverside, Orange, or San Diego County house?
Search the official records of the county the property is in: the Riverside County Assessor-County Clerk-Recorder for Temecula and Murrieta, the Orange County Clerk-Recorder for Irvine and Huntington Beach, and the San Diego County Assessor/Recorder/County Clerk for Oceanside and Escondido. A deed you were talked into signing becomes public the day it is recorded, and Civil Code 1695.6 makes recording it before your cancellation period ends unlawful, so a recorded deed dated inside those five business days is itself evidence.
If I sign the house over, is the mortgage still mine?
Yes. A deed transfers the property; it does not transfer the promissory note. The lender's lien stays on the house and the debt stays in your name, and a foreclosure already under way proceeds against the property regardless of who now holds title. Only a payoff, or a deed in lieu the lender accepts in writing, ends the debt.
Can I cancel after I signed a contract with an investor?
If your home is in foreclosure, yes. Civil Code 1695.4 lets you cancel until midnight of the fifth business day after signing or 8 a.m. on the sale date, whichever is first, by written notice to the address in the contract. Until then the buyer may not take or record a deed or pay you anything under Civil Code 1695.6.
What is the difference between a deed in lieu and a rescue deal?
Who receives the deed and what they give for it. A deed in lieu goes to the lender, in exchange for the lender's written agreement that the debt is satisfied. A rescue deal sends the deed to a third party in exchange for a promise, and the Attorney General's office warns that once that party has title it can evict you and keep the home.
About Signing Over a Deed in Foreclosure
- Civil Code 1695.4, the equity seller's right to cancel
- Civil Code 1695.6, what the buyer may not do during the cancellation period
- Civil Code 2945.4, foreclosure consultant prohibitions
- California Attorney General, tips to avoid foreclosure scams
- CFPB, how to spot and avoid foreclosure relief scams
Sources: Civil Code 1695.3, 1695.4, 1695.6, 2945.4, California Department of Justice, March 2022, CFPB