California Foreclosure Laws and Process

Overview of the Foreclosure Process in California 

California primarily utilizes non-judicial foreclosures due to their efficiency and lower costs. The process takes about 117 days. The process duration places California among the states with the longest non-judicial foreclosure timelines. Among states that primarily use this method—including Alaska, Idaho, Massachusetts, Montana, and Rhode Island—California has the second longest foreclosure duration.

Pre-foreclosure Period

In California, federal law discourages the initiation of foreclosure proceedings until the borrower is 120 days past due on their mortgage loan payments. This period allows homeowners to explore loss-mitigation opportunities and foreclosure alternatives.

Notice and Sale Process

The notice and sale process in foreclosure proceedings is a critical phase that varies significantly between judicial and non-judicial foreclosure states. This process is designed to ensure that homeowners are adequately informed about the foreclosure and have the opportunity to take action to prevent the loss of their property. Below, we explore the general steps involved in both judicial and non-judicial foreclosure states, with specific examples to illustrate how these processes can differ based on state laws.

Non-Judicial Foreclosure Notice and Sale Process in California 

Since California is a non-judicial foreclosure state, the foreclosure process bypasses the court system. Instead of suing the borrower, the lender relied on the power of sale clause in the mortgage or deed of trust. This clause pre-authorizes the sale of the property to pay off the default loan balance in the event of the borrower’s default. Here’s a summary of how a lender may complete the non-judicial foreclosure process in California:

Notice of Default (NOD)

The lender or trustee initiates the process by recording a Notice of Default in the county where the property is located. This notice is also mailed to the borrower and any other affected parties. In California, once the borrower is 120 days past due, the lender must record a notice of default against the borrower. After the notice of default is recorded, the borrower has 90 days from the date of the recording to pay up all the sums due to the lender under the mortgage or deed of trust. 

Notice of Trustee’s Sale

After 90 days, if the default is not cured, the trustee then issues a Notice of Trustee’s Sale, specifying the date, time, and place of the foreclosure auction. This notice must be posted on the property, published in local newspapers, and sometimes mailed to interested parties. In California, the property cannot be sold until at least 20 days have passed from the time the homeowner received the Notice of Trustee Sale.

Foreclosure Auction

The sale is conducted as a public auction, where the property is sold to the highest bidder. The trustee may require bidders to pay the full bid amount in cash or cashier’s check. The winning bidder receives a trustee’s deed upon sale, transferring ownership of the property.

Judicial Foreclosure Notice and Sale Process

Judicial foreclosures involve the court system and begin with the lender filing a lawsuit against the borrower. The process includes:

• Filing of Complaint and Service of Summons: The lender files a complaint in court and serves a summons to the borrower, detailing the debt and the lender’s intent to recover the property.
• Court Judgment: If the borrower does not respond or cannot cure the default, the court will issue a judgment of foreclosure, authorizing the sale of the property.
• Notice of Sale: The court orders the sale of the property, and a notice of sale is published in local newspapers, specifying the time, date, and location of the auction. This notice period varies by state.
• Foreclosure Auction: Similar to non-judicial foreclosures, the property is sold at a public auction to the highest bidder. The court supervises the auction, and the winning bidder usually must pay in cash or cashier’s check.
• Confirmation of Sale: In some states, the sale may be subject to court confirmation. If confirmed, the winning bidder receives a sheriff’s deed or similar document, transferring ownership.

Borrower Rights and Protections

Borrowers have several rights and protections, including the right to be informed of the foreclosure proceedings through proper notices and the opportunity to contest the foreclosure in judicial states. California has enacted laws like the California Homeowner Bill of Rights, which prohibits dual-tracking and guarantees struggling homeowners a single point of contact with their lenders.

Redemption and Deficiency Judgments

Redemption periods and deficiency judgments also vary by state. In judicial foreclosure states, borrowers may have the opportunity to redeem their property by paying off the full amount owed. However, deficiency judgments, where borrowers are liable for the difference between the sale price and the mortgage balance, are allowed in many states but with specific limitations.

Avoiding Foreclosure by Selling Your Mortgage Note

California homeowners can avoid foreclosure by selling their mortgage notes to a reliable buyer. This can quickly ease financial stress and skip the long foreclosure process. It’s a good way to avoid problems like credit damage and losing your home. This option helps homeowners pay off their mortgage and maintain financial stability without going through the difficulties of foreclosure.

Comparative Insights

The foreclosure process, costs, and timelines vary widely across states. For instance, non-judicial foreclosures in California can take around 117 days with costs ranging from $2,000 to $5,000. This is relatively efficient and cost-effective compared to judicial foreclosures in states like New York, where the process can extend to 445 days with costs between $5,000 and $10,000.

Conclusion

California’s unique legal setup can mean longer waits in non-judicial foreclosure cases than in many other states. So, knowing the specifics can really help you navigate these tough waters. Once you understand protections and processes available in California, you’ll be able to find resolutions that are as smooth and fair as possible.