The Foreclosure Process in California
by Scot Campbell, Realtor 714-960-0700

If you were just served with a NOTICE OF DEFAULT or a NOTICE OF TRUSTEE'S SALE, obtain expert advice NOW.  Do Not Wait as time is your enemy.  

In California, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.  The Non-Judicial Foreclosure aka TRUSTEE'S SALE is by far the most common method used by lenders.

Judicial Foreclosure
The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off 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. Regulations for this type of foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines".
 

The Non-Judicial Foreclosure also known as a TRUSTEE'S SALE is the easy and preferred method of foreclosure in California. It's fast and inexpensive. In a Deed of Trust the borrower (Trustor) gives the Trustee (typically a title company) the right to sell the property if the Buyer defaults.

If the borrower is not making payments and the lender decides to foreclose, the first step is a Notice of Default. It states the amount in default. 90 days is given to cure the default by catching up on all late payments, penalties, and costs.

 

After the 90 days expires, the lender files a 21 day Notice of Trustee's Sale, at which time an auction is held, usually at Court, with limited publicity resulting in a greatly depressed price. After it is over, the former owner must be evicted if he refuses to leave.

 

The Borrower can still catch up on all late payments until 5 business days prior to the sale. Within the last 5 days, the only way to stop a sale is by payment in full of the entire balance.

 

Most lenders prefer NOT to foreclose. Banks are in the money business, not the real estate business. They try to avoid foreclosure, because it is bad for their books if their ratios of REO (real estate owned) and bad debts climb.

 

By State law there is never personal liability for a purchase mortgage for a personal residence. The owner can "walk away" from the property with immunity from personal liability regardless of the method of foreclosure.

Lenders may not seek a deficiency judgment after a non-judicial foreclosure sale and the borrower has no rights of redemption.

NOTE:  Above information is deemed reliable, but not guaranteed.  If you are in foreclosure seek EXPERT advice NOW.