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How are California Mortgages Foreclosed?
We have pulled from various sources in an attempt to give you a thorough explanation of the California Foreclosure Law. We cannot take any responsibilty for the correctness nor how updated the information below is today. We advise you to seek legal counsil for more current and updated information.
Nonjudicial Foreclosure: The primary method of foreclosure in California involves what is known as nonjudicial foreclosure. This type of foreclosure does not involve court action. When the deed of trust is initially signed, it will usually contain a provision called a power of sale clause, which upon default allows a trustee to sell the property in order to satisfy the underlying defaulted loan.
The trustee acts as a representative of the lender to effectuate the sale, which typically occurs in the form of an auction. Unlike many states where trustees are appointed by lenders, title companies primarily serve as trustees managing foreclosure sales in California. California has a requirement known as the one-action rule.
If a foreclosure is completed by nonjudicial means, a second action to recover a deficiency judgment is not permitted.
- Judicial Foreclosure: Using a judicial foreclosure, a lender may recover a deficiency judgment in certain circumstances. 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. But since this process takes longer than a nonjudicial foreclosure, it is rarely used.
- Nonjudicial Remedies: California nonjudicial remedies have stringent notice requirements and the mortgage documents are required to contain the power of sale language in order to use this type of foreclosure method. Judicial foreclosure are permitted in California and these usually occur when no power of sale language is included in the loan documents.
- California Foreclosure Timeline:
| Day 1-Day 90 |
Day 90-Day 120 |
Day 120-Day 141 |
| Redemption Period |
Publication Period |
Trustee's Sale |
| Lasts 90 days from the recordation of the Notice of Default |
Lasts 30 days from the end of Redemption |
Held 21 days after first publication |
Power of Sale Notice Requirements:
1. The redemption period: A notice of default is recorded after a default occurs in the county in which the property is located. This does not necessarily occur after one or more payments are not met but for logistical reasons may occur after a loan is in substantial default — sometimes six months or more past due.
2. The publication period: The foreclosure process does not move forward for a minimum of 60 days. A notice of sale containing the name and address of trustee, certain disclosures (including that the property is about to be lost to foreclosure sale), the name of the beneficiary, and other information must be recorded in the county in which the property is located at least 14 days before any foreclosure sale after that time period.
3. The borrower's Twenty (20) day notice: The borrower must receive a twenty (20) day notice before any foreclosure sale, further notice of the foreclosure must:
(a) be mailed to the defaulting borrower (and other creditors whose liens affect the property) and;
(b) be posted at the property being foreclosed upon and in a public place in the county where any sale would occur. The defaulting borrower may prevent the foreclosure sale by paying all arrearages up to five (5) days before the sale. The trustees’ foreclosure sale then occurs at the earliest twenty one (21) days after the first publication.
4. Foreclosure sales during business hours: Foreclosure sales must take place on any business day between the hours of 9AM and 5PM and must occur at the location referenced on the notice of sale. The trustee will auction the property to the highest bidder, including the lender. The borrower is permitted to postpone the sale for one (1) day.
5. Judicial foreclosure proceeding: In California, the lenders can also go to court in what is known as a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. If the deed of trust does not contain the power of sale language, the lender may seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in county court along with what is known a lis pendens.
A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon.
The legal instruments that establish a California mortgage:
The documents are known as:
1. The deed of trust
2. The Note.
3. The Security Agreement (only applicable with a commercial transaction).
Sometimes the mortgage document is combined with the security agreement. Alternatively, a mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.
How long does it take to foreclose a property in California?
Depending on the timing of the various required notices, it usually takes a minimum of 120 days to effectuate an uncontested nonjudicial foreclosure.
This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy.
Regulations for a nonjudicial foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines":
If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the nonjudicial power of sale foreclosure is carried out as follows:
A notice of sale must be:
1) Recorded in the county where the property is located at least fourteen (14) 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.
Furthermore the following minimum reqiurements will also be effective:
- 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 nonjudicial foreclosure sale and the borrower has no rights of redemption.
You can also find more information on CA foreclosure laws at:
More information on California foreclosure laws.
From http://www.foreclosure.com/statelaw_CA.html
Redemption Period:
Recording the NOD (Notice of Default) :
Once the Notice of Default records the foreclosure time frame begins. California foreclosure law states that within 10 business days a copy of the recorded Notice of Default is sent by certified and regular mail to the borrowers at all addresses provided and any recorded special requests. Within 30 days a copy of the Notice of Default is sent by certified and regular mail to new owners and all junior lien holders to the Deed of Trust being foreclosed. A Trustee's Sale Guarantee Report is ordered from the title company providing all title information. The foreclosure remains dormant for the next 60 days unless the borrower makes contact to cure.
Publication Period:
California foreclosure law states that the publication period begins once the redemption period has expired. A Notice of Trustee's Sale is prepared and published in an adjudicated paper of general circulation in the city in which the property is located. The Notice of Trustee's Sale is published one time per week for three weeks. The actual Sale is established by adding at least 20 days to the date that the Notice of Trustee's Sale was first published in the newspaper. The Notice of Trustee's Sale is posted on the property and in a public place. At least 14 days period to Sale date the Notice of Trustee's Sale must be recorded in the county in which the property is located.
Trustee's Sale:
California foreclosure law states that on the day that was established for sale of the property, and only after all publication period requirements have been met, the property is sold to the highest bidder for cash for the full amount of the debt plus foreclosure fee and expenses. If no one bids at the Trustee's Sale, the property automatically reverts back to the beneficiary for the debt. A Trustee's Deed Upon Sale is recorded in the county in which the property is located transferring title to the foreclosing beneficiary allowing the marketing of the property to recover their debt.
Business Hours:
All sales under a power of sale in a deed of trust will be made between the hours of 9:00 a.m. and 5:00 p.m. on any business day, Monday through Friday, at the time specified in the notice of trustee sale.
Highest Bidder:
The sale must be made a public auction to the highest bidder. The trustee has the right to require every bidder to show evidence of ability to pay the full bid in cash, cashiers check or certain bank checks. Each bid is by law an irrevocable offer to purchase. However, a higher bid cancels an earlier bid. It is unlawful and a criminal offense (a fine of $10,000 or up to one year in jail) to offer anyone consideration not to bid, or to fix or restrain the bidding process in any manner. Debtors may reinstate up to five days before nonjudicial foreclosure sale.
Junior Lien Holders:
Junior lien holders may no longer redeem, so they may try to protect themselves by:
(1) advancing funds to bring the senior loan payments current, then foreclosing for the sums advanced;
(2) bidding at the foreclosure sale so the price will be sufficient to pay off the senior and the junior liens; or
(3) acquire the property by bidding at the foreclosure. If the debtor has a right to redeem and does so, the junior who purchased the home must be reimbursed. Junior liens do not reattach the property if a borrower redeems a senior lien whose foreclosure extinguished the junior. This helps borrowers by encouraging the junior to bid up to the property to fair market value at the foreclosure sale, or else lose out, giving borrowers closer to fair value at sale.
Deficiency Judgment:
Lenders may not seek a deficiency judgment if:
(1) The foreclosure is nonjudicial or if
(2) Foreclosure is on a purchase money obligation.
(3) The same rules do not apply to guarantee or later lien holders. The lenders may seize alternative collateral.
(4) If the lender forecloses by filing a lawsuit, then the lender can obtain both a foreclosure sale order and a judgment against the borrower for a deficiency after the court-ordered sale, but only for the difference between the judgment and the fair value of the security.
VA Loans:
The following requiremnts aply to VA Loans
(1) An appraisal should be ordered through an authorized VA appraiser 60 days from the recording of the Notice of Default.
(2) A completed VA567 from should be sent to the local VA office with a copy of the Notice of Trustee's Sale and Trustee's Sale Guarantee once publication of the Notice of Trustee's Sale has begun.
(3)A Corporation Grant Deed should be prepared conveying title from the foreclosing beneficiary to the proper governmental agency.
FHA Loans:
Some additional rules aply to FHS Loans:
(1) A Notice to Occupant of Pending Acquisition should be mailed to mortgagee with a copy of the cover letter to the local FHA office.
(2) A Corporation Grant Deed should be prepared conveying title from the foreclosing beneficiary to the proper governmental agency.
(3) If the property is occupied, an eviction process must be started to convey the title to FHA unoccupied. Once eviction complete, record Corporation Grant Deed and issue title package to FHA for Title Approval Record Corporation Grant Deed and issue FHA 27011 Part A.
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