Claims of abuse blight California's foreclosure housing program

on May 24, 2026

When adopted on January 1, 2021 the stated purpose of Senate Bill 1079 was to address the “problem” of large investors buying and converting foreclosed properties to rentals, to the detriment of maintaining owner occupancy in residential neighborhoods.

SB1079 went into effect and sought to increase the supply of affordable housing by giving tenants, advocates and nonprofits up to 45 days after a foreclosure auction to outbid the winning bidder, even by just $1. The idea was to keep professional and institutional investors from flipping properties and driving up the cost of housing. SB 1079 was supposed to be a temporary fix that would expire after five years.

Since adoption, allegations of abuse and loopholes in California’s foreclosure auction laws have emerged. More particularly, certain investors and nonprofits exploit the system to acquire and flip distressed properties, often bypassing affordability requirements meant to address California housing problem.

The Blight - Loopholes and Exploitation

Many bidders used the law to acquire properties at below-market prices, then renovated and sold at significantly higher values, often without recording required affordability restrictions.

The attorney general’s database shows nearly 1,000 properties bought under this program. While most buyers in the attorney general’s database appear to meet their obligations, others appear to have shirked them by either by creating shell nonprofits to qualify as eligible bidders or failing to restrict the deeds and record those restrictions to make sure the homes remain affordable.Limited liability companies could be eligible bidders provided they are wholly owned by nonprofits whose primary activities are "the development and preservation of affordable rental or homeownership housing in California."

And nonprofits are required to publicly disclose their annual revenue and spending and comply with myriad state and federal tax laws unrelated to California affordable-housing rules.

Notably, Four Corners Housing LLC, linked to Mark Regan, bought and sold dozens of properties, often through nonprofit foundations that held minimal assets and revenue, indicating potential abuse of the legal framework

Some nonprofits, such as Vet Housing Initiative, purchased multiple homes but failed to comply with transparency and affordability recording requirements, leading to cease-and-desist orders and organizational shutdowns. Vet Housing Initiative (VHI) is a registered Southern California nonprofit based in Alta Loma, California, that provides housing, furniture, and support services for veterans.

As of August 2024, the veterans nonprofit is no longer permitted to do business in California because it failed to provide requested records to the attorney general.

“You are ordered to immediately cease and desist from all operations, including all solicitations for charitable purposes by any means,” the Attorney General’s Office said. “Violation of this order may subject you and your organization’s directors and officers to contempt sanctions and other remedies.”

The nonprofit’s last acquisition was in April 2024, Attorney General’s Office records show. Riverside County Assessor’s Office documents show that the two-bedroom, two-bath condominium in San Jacinto sold in March 2025 for $240,000.Americo Peralta the Vet Housing Initiative chief executive, said only two of the houses Vet Housing Initiative purchased have been successfully rented to low-income veterans.

“The rest are sitting vacant and need repairs,” he said. “They’re not doing anything, and that’s because of the cease-and-desist order and everything that comes along with it. At this point, I’m on the fence about seeing if we can get it going or if we should just file for bankruptcy.”

Foreclosures piling up

Lenders have been taking foreclosure actions against mortgage borrowers at a sharply growing pace in recent months — a trend analysts have blamed on the growing burden borrowers face from higher taxes, insurance premiums and homeowner association fees, among other costs.

The number of nationwide filings over the first quarter of 2026, which ended March 31, was just under 119,000 — up 6% over the last three months of 2025, and up more than 25% over the same period in 2025, the real estate data analyst Attom reported last month.

It was the highest number of foreclosure actions since the early months of the COVID-19 pandemic.

Regulatory and Enforcement Challenges

State agencies, including the attorney general and district attorney, have limited capacity to verify eligibility or pursue charges, despite awareness of fraud and abuse.

Enforcement actions have been limited; for example, a cease-and-desist order was issued to Vet Housing Initiative, which subsequently ceased operations.

The complexity of nonprofit and LLC structures, along with loopholes like reliance on affidavits rather than verification, complicates enforcement efforts.

The Road Ahead

AB 1957

Introduced by Assemblymember Blanca Pacheco, the bill refines the state's post-foreclosure home acquisition process. It revises bidding procedures for foreclosures on 1-to-4 residential units, focusing on modest valuations, strengthening documentary fraud deterrents, and updating the rules for priority and eligible bidders at trustee auctions. If passed, this bill would amend Sections 2924d, 2924h, and 2924m of the Civil Code, and amend Sections 50612 and 50720.2 of the Health and Safety Code, relating to mortgages.

This bill addresses widespread concerns about the alleged misuse of California’s post-foreclosure bidding framework enacted under SB 1079 (Skinner) Chap. 202, Stats. 2020, which was intended to allow tenants, affordable housing nonprofits, and public entities to acquire residential properties after foreclosure. 

While the law’s purpose was to prevent displacement and promote equitable housing opportunities, its implementation has been undermined by fraudulent actors exploiting loose eligibility requirements and procedural delays, ultimately suppressing competitive bidding and depriving borrowers of their remaining equity. 

This bill narrows the definition of “eligible property” to exclude uninhabitable, high-value, and junior lien properties; eliminates the categories of prospective owner-occupants and nonprofit corporations from the list of eligible post-sale bidders; and imposes enhanced documentation requirements on tenant buyers, including a recorded one-year occupancy covenant.

The amendments are intended to cover only residential real property comprised of one to four units; so larger residential buildings, vacant land and commercial properties containing no residential living units are outside the scope of the amendments. 

Opposition

The California Association of Realtors (CAR) opposes this bill unless it is amended to restore the “prospective owner occupant” as an eligible bidder. CAR argues that eliminating the prospective owner occupant from the definition of “eligible bidder” undermines the original purpose of SB 1079, which was to “expand homeownership opportunities and stabilize communities by prioritizing owner-occupant participation in the acquisition of foreclosed homes.” While CAR supports most other provisions of the bill seeking to address problems of fraud and other unintended consequences of SB 1079, it urges “that AB 1957 be amended to retain eligibility for prospective owner-occupant bidders in the post-foreclosure bidding process established under SB 1079.”

A Brief History

About SB 1079

Key Features

Eligible bidders include

Tenants: Individuals who occupy the property as their primary residence.

Nonprofits: Organizations focused on affordable housing.

Prospective Owner-Occupants: Individuals intending to live in the property.

Bidding Process

45-Day Window: After a foreclosure auction, eligible bidders have 45 days to outbid the winning bidder.

Minimum Bid Increase

Bidders can outbid the winning bid by as little as $1. The goals of SB 1079 was to prevent bulk purchases. The law sought to limit the ability of large corporations to buy multiple properties at once, which can lead to increased vacancy rates. And promote homeownership by prioritizing eligible bidders, the bill also encourages owner-occupancy and aims to reduce the number of vacant homes in California.

This legislation represented a significant shift in the foreclosure process, aiming to empower individuals and community organizations in the housing market.

Additional protections under SB 1079

SB 1079 provides additional protections which also extend beyond an auction and foreclosure sale.

Owners of vacant properties that were purchased at foreclosure sales are required to maintain acquired properties. Currently under California law, government entities may impose civil fines of $1,000 per day when an owner fails to maintain a purchased vacant property. Under SB 1079, the civil fine increases to $2,000 per day for the first 30 days the property is not properly maintained, and up to $5,000 per day thereafter.

SB 1079 is a necessary piece of the puzzle to prevent past mistakes from resurfacing. Big corporations will not be able to benefit from the foreclosure crisis and homeownership rates will not suffer like they did in 2008. While this looks good on paper, the full effect of SB 1079 remains to be seen.

Key Protections & Regulations Under AB 1837

California Assembly Bill or AB 1837, also known as the Homes in Community Hands Act is an anti-speculation law that closed loopholes in SB 1079. It strengthens foreclosure protections by preventing corporate investors from outbidding prospective homeowners and community organizations at foreclosure auctions. The law (along with AB 2170) extended these foreclosure-intervention protections—which give tenants, owner-occupants, and non-profits a 45-day window to match the highest bid—until January 1, 2031. AB 1837, amended Sections 2924f, 2924g, 2924h, and 2924m of the Civil Code, relating to real property.

Priority Bidding Window: Eligible buyers (such as prospective owner-occupants, local governments, and community land trusts) are granted a special period post-auction to match or exceed the highest bid to purchase the foreclosed property.

Entity Restraints & Affordability Covenants: To prevent corporate abuse, qualifying entity bidders must meet strict requirements. Properties acquired by these entities must be maintained as affordable housing for lower-income households for up to 30 years.

Strict Penalties and Oversight: AB 1837 authorizes the California Attorney General, city attorneys, and county counsels to legally prosecute and penalize investors or groups that file false affidavits or misuse the bidding process.

Renter Protections: The law heavily restricts evictions for tenants living in homes acquired through the foreclosure sale. Throughout California, renters are generally permitted to remain in the property for at least 90 days, or through the duration of their existing lease.