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California Foreclosure
Laws
Foreclosures in California are
both Judicial (throygh Court) and Non-Judicial
(provate, out of Court). Almost all residential foreclosures in
California are non-judicial. The rare time that
a Judicial foreclosure is used by a lender is
usually when: (1) the property being foreclosed
upon has little value relative to the Deed of
Trust amount; (2) a Judicial foreclosure is
legally permitted (see below); and (3) the
debtor has other property/assets that make
seeking a deficiency balance judgment worth the
cost and effort.
Non-Judicial, out-of-court
foreclosures take a minimum of four months to complete.
The clock starts ticking from the time a Notice
of Default is recorded (See: Foreclosure
Timeline).
Q.
Are Judicial
Foreclosure Available in
California?
A. Yes (but
Judicial foreclosures are expensive and
time-consuming)
Q. Are
Non-Judicial Foreclosure Avalailable in
California?
A. Yes (and it is
the almost universally preferred form)
Q.
Is there a Right of
Redemption in California?
A. Generally
Not.
Q. Are Deficiency Judgements Allowed in
California?
A. For
Judicial Foreclosure: Yes. Exception: But NOT for
Purchase Money Deeds of
Trust
A. For
Non-Judicial Foreclosures: No
Judicial
Foreclosure
The judicial process of
foreclosure, which involves filing a lawsuit to
obtain a court order to foreclose, is used:
(1) when no power of sale is present in the
mortgage or deed of trust; or (2) when the
lender wants the possibility of recovering a
deficiency judgment personally against the
debtor. Generally, after the court declares
a foreclosure, the home will be auctioned off
"on the Court House steps" to the highest
bidder.
Using this type of foreclosure
process, lenders may seek a deficiency judgment
and under certain circumstances, the borrower
may have up to one (1) year to redeem the
property.
Non-Judicial
Foreclosure
The non-judicial process
of foreclosure is used when a power of sale
clause exists in a mortgage or deed of trust. A
"power of sale" clause is the clause in a deed
of trust or mortgage, in which the borrower
pre-authorizes the sale of property to pay off
the balance on a loan in the event of the their
default. In deeds of trust or mortgages where a
power of sale exists, the power given to the
lender to sell the property may be executed by
the lender or their representative, typically
referred to as the trustee.
Power of Sale Foreclosure
Guidelines
The non-judicial power of
sale foreclosure ("private foreclosure" is
carried out as follows:
A Notice of Sale must
be: 1) recorded in the county where the
property is located at least twenty-one (21) days
prior to the sale; 2) mailed by certified,
return receipt requested, to the borrower at
least twenty (20) days before the sale; 3)
posted on the property itself at least twenty
(20) days before the sale; and 4) posted in one
(1) public place in the county where the
property is to be sold. The Notice of Sale must
contain the time and location of the foreclosure
sale, as well as the property address, the
trustee's name, address and phone number and a
statement that the property will be sold at
auction.
The borrower has up until five
days before the foreclosure sale to cure the
default and stop the process. The sale may be
held on any business day between the hours of
9:00 am and 5:00 pm and must take place at the
location specified in the notice of sale. The
trustee may require proof of the bidders ability
to pay their full bid amount. Anyone may bid at
the sale, which must be made at public auction
to the highest bidder. If necessary, the sale
may be postponed by announcement at the time and
location of the original foreclosure sale.
Lenders may not seek a deficiency
judgment after a non-judicial foreclosure sale
and the borrower has no rights of redemption.
Stopping
Foreclosure:
Reinstatement: At least a minimum of 5 days prior to sale, pay the amount due, to stop the foreclosure
process
Repayment Plan: Ask the lender to
negotiate a repayment plan
Loan Restructuring: Ask the lender to
restructure the loan
Loan Refinance:
Refinance the debt with a different
lender
Sell: Sell the property before
the foreclosure is completed
Short Sale:
(when the property is worrth less than the
outstanding loan balance)
Deed-in-lieu of
Foreclosure: Give the lender a Grant Deed in
lieu of completing foreclosure
(Not recommended)
File Bankrutcy: An
automatic stay under Section 362 at least
temporarily stops foreclosure
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