Foreclosure Process in California
Laws regarding foreclosure vary from state to state and are changing. California is a non-judicial foreclosure process state, and courts, lawyers and lawsuits, are usually not involved.
It’s important for property owners, buyers and sellers, to understand the foreclosure process and be aware of certain dates and milestones that may impact the purchase and sale of a property.
The California homebuying process normally involves the use of the deed of trust, which by its legal definition involves three parties: the trustor (borrower), the beneficiary (lender), and the trustee (neutral third party receiving the right to foreclose).
The deed of trust usually includes a power of sale clause that gives the trustee the legal right to enforce collection of the debt. Collection of the debt is ultimately enforced by beneficiary’s right to sell the house when the borrower fails to make their mortgage payments.
Defaulting on one’s loan causes start of foreclosure, the process by which the lender takes over the home in order to recover their principal investment.
After the property is either sold at auction or “repossessed” by the lender, it is sold and the former owner must vacate at the discretion of the new owner. When there is a power of sale clause in the deed of trust, the non-judicial process of foreclosure is used.
In a non-judicial foreclosure, the trustee must meet a few requirements before he or she sells the property.
In comparison to a judicial foreclosure, non-judicial foreclosure is quick, and the trustee is not required to get a court order to foreclose – court supervision is not required in order to sell the house, as is required in the judicial foreclosure process.
The alternative judicial process of foreclosure is used when a power of sale clause is not in the deed of trust.
Notice of Default
In California, the timeline of non-judicial foreclosure begins when the trustee files a Notice of Default. This notice is sent to the owner/trustor notifying him or her of their default of the loan and that intent of the lender to follow through on their right to collect on the debt.
Notice of default is recorded at the County Recorder’s Office of the appropriate county, is mailed to the address of notice as per the deed of trust. The recording of the Notice of Default can occur anywhere between a week to many months after one misses their first mortgage payment. In California, the Notice of Default is usually filed approximately 90 days after the first missed payment.
Notice of Trustee’s Sale
The step that follows next is the stage of the foreclosure process in which there is a filing of the Notice of Trustee’s Sale. No sooner than ninety (90) days after the trustee records the Notice of Default, the Trustee must publish a Notice of Trustee’s Sale in the local paper and simultaneously file that notice with the County Recorder’s Office. No sooner than twenty days (20) after the Notice of Trustee Sale is filed, the home may be sold at public auction for the amount of the debt plus foreclosure costs. If no one bids at the auction, the lender assumes ownership of the property, and may dispose of that property to recover their cash investment.
Each legal action in a foreclosure results in a filing and recording of documents, which become part of the title record for the property.
Some default filings have negative impact to a homeowner’s credit for a period of seven years. The earlier a property owner can address the situation, the better the overall result will be regardless of the outcome.
Source of some information is PropertyRadar.com.
By Harrison K. Long – Professional real estate representative, REALTOR and broker associate, HomeSmart Evergreen Realty – 949-701-2515 (phone) – ExploreProperties@gmail.com – CALBRE #01410855 – Now serving as an appointed director at the California Association of Realtors – also an attorney member of the California State Bar association #69137