Maureen Megowan's Blog

head_left_image

California Foreclosure Process

In California, the foreclosure process is generally a non-judicial process through a trustee under a deed of trust, where the lender is precluded from pursuing a deficiency judgment against the borrower. The following are the steps in the foreclosure process ( See :SB 306
(eff. 1-1-10) for recent changes to notice requirements )



1) The lender files a notice of default with the County Recorders office, This begins a 90 day redemption period, during which the delinquent owner may reinstate the loan  by the payment of all delinquent payments, interest and penalties. In addition, for owner occupied residential properties of one to 4 units  lenders must wait an additional 30 days to begin the foreclosure process and must attempt to contact their borrowers to try and work out a solution for loans made between January 1, 2003 and December 31, 2007. See http://www.financialinstitutionlawblog.com/new-california-law-requires-additional-steps-for-foreclosures-new-california-law-requires-additional-steps-for-foreclosures.html for a complete discussion of this requirement as well as SB 306  . This law is effective through January 1, 2013.
2) Within 10 business days of recording the notice of default, the Notice of Default must be sent by certified and regular mail to the borrowers at all addresses provided and any recorded special requests.
3) Within 30 days a copy of the Notice of Default must be sent by certified and regular mail to new owners and all junior lien holders to the Deed of Trust being foreclosed.
4) Three months after recording the notice of default,  the period known as the Publication Period begins.
5) A notice of Trustee's sale is published in a newspaper of general circulation in the city in which the property is located, and published one time a week for three weeks.The actual sales date is established by adding 20 days to the date that the notice of Trustee's sale was first published. The notice of Trustee's sale is posted at the property and in a public place and is mailed to the borrower.
6) At least 20 days prior to the date of sale, the notice of Trustee's sale must be recorded in the County Recorders office.
7) Until 5 days before the sale date, the borrower has the right to reinstate the loan by payment of all delinquent amounts and penalty fees
8) On the sale date, the property is sold to the highest bidder. Generally, the lender will bid their total loan amount plus fees and penalties. Buyers of property at the foreclosure sale must have a cashiers check for the full amount of the winning bid. A Trustee's Deed upon sale is then recorded in the County Recorders office.

The vast majority of California  foreclosures are of the non-judicial variety. There is absolutely NO redemption period after the Trustee's sale, except for the exceptions listed below. A non-judicial foreclosing lender is also forbidden to seek a deficiency judgment against a debtor if proceeds from the sale are insufficient to cover the indebtedness and all associated costs.

In the event of a judicial foreclosure (often when foreclosing over a court-awarded judgment, almost never when foreclosing over a loan default), there is a redemption period of . . .

(a) Three months if the proceeds of the sale is of sufficient value to cover the indebtedness and all associated costs;
(b) One year if the sale proceeds are insufficient. .

Exception #1: If there is an IRS lien attached to the subject property, the IRS has an automatic 90 day right of redemption regardless of the kind of foreclosure (judicial or non-judicial).

Exception #2: New for 2006, it appears that homeowner associations that foreclose non-judicially for an amount equal to or exceeding $1800 will also create a 90-day right of redemption. (Associations may no longer foreclose for amounts less than $1800)

The above information is provided for educational purposes only and is not intended to be definitive legal advice as I am not an attorney. The specific facts of a case can have significant impact . Anyone going through a short sale or foreclosure should obtain legal counsel from a licensed real estate attorney.

For additonal information about Foreclosures, see Foreclosures & Short Sales on my website

For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.

Comment balloon 6 commentsMaureen Megowan • April 13 2010 11:47PM

Comments

Maureen, thanks for the update on the California process.

 

Posted by Bryan Watkins (LRA Real Estate Group) almost 9 years ago

Very well done.  That is the CA rules for non-judicial foreclosure.

Posted by Elite Home Sales Team, A Tenacious and Skilled Real Estate Team (Elite Home Sales Team OC) almost 9 years ago

Non-judicial foreclosure kicks lots of homeowners to the curb every day. The most successful auctions are a direct result of the process. With the notices they have the right to redeem the property prior to foreclosure and in some cases a statutory redemption period that gives them an additional year to redeem the property with court costs and attorney's fees, unless waived in the original deed of trust. It really depends on the wording of the deed in the final analysis.

Posted by David Saks almost 9 years ago

It is always interesting to know what the rules are in other parts of the country.  Thanks, Maureen.

Posted by Marcia Hawken, Naples Luxury Specialist (WILLIAM RAVEIS ) almost 9 years ago

This is a great post for those looking to see how long they have to bring their loan current if they find themselves in a bad situation. Great post Maureen

Posted by Christine Hynes, Orange County Senior Loan Consultant (American Capital Corporation) almost 9 years ago

Is there any regulation of how much in attorneys fees, and other foreclosure fees, can be attached to the foreclosure process? Is there any correlation to loan amount? I've had no luck in finding info on this so far. I'm trying to anticipate how much it will add to the loan payoff when there's been a notice of default recorded (California) Thanks.

Posted by Julia Huntsman, BPOR, CDPE, e-PRO, SFR, Broker (Huntsman Properties) over 8 years ago

This blog does not allow anonymous comments