If you are facing foreclosure on a property in the State of California, the folks at JT Legal group offered us this nice breakdown of the process and steps you need to know specifically for California.
- What is Foreclosure?
When a homeowner cannot make a payment on a mortgage, the lender or the mortgage company initiates foreclosure against the property. A homeowner can fail to make mortgage payments for a variety of reasons: unemployment, inability to work due to a medical condition or injury, excessive debt or billing obligation, job transfer, or a divorce.
A foreclosure is the legal process that occurs when a buyer defaults on a loan and the lender “forecloses” (forces the sale of) the home to pay the outstanding loan. Typically, when a person buys a home, they borrow part of the purchase price from a bank or a mortgage company. The lender puts a lien on the property to secure payment for the loan. If the borrower or homeowner defaults on the loan or the mortgage payments (doesn’t pay), the lender can foreclose.
For more information about foreclosure laws:
Foreclosure process – Civil Code section 2924
Foreclosure consultants – Civil Code section 2945
- Types of Foreclosures in California
There are two types of foreclosures that lenders can utilize to foreclose on deeds of trust or mortgages in the State of California: judicial foreclosures and non-judicial foreclosures.
A nonjudicial foreclosure is the most common type of foreclosure in California. A lender utilizes a nonjudicial foreclosure when there is a power-of-sale clause. A power-of-sale clause is a clause written into a mortgage or the deed of trust authorizing the lender to sell the property in the event of default in order to repay the mortgage debt.
If a lender chooses to pursue the borrower via the nonjudicial foreclosure process, the lender gives up its right to collect a deficiency judgement against a borrower. A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying loan in full. However, most lenders prefer the non-judicial process because it cost less and is more time efficient. In California, deficiency judgements are exceedingly rare, and only possible after a judicial foreclosure.
A judicial foreclosure is when a lender files a lawsuit to get a court order to foreclose on the home. It is used when there is no power of sale clause. After the lender obtains a court order, the home will be auctioned off in a public auction. However, it is rare for a lender to utilize the judicial foreclosure option in California.
A lender can get a deficiency judgment against the homeowner but the homeowner retains the right of redemption. The right of redemption allows the homeowner to buy the home back from the successful bidder at the auction for up to one year after the sale. This process is longer and more costly than non-judicial foreclosure.
- Understanding The Foreclosure Process
The following is the foreclosure process for a nonjudicial foreclosure.
- The lender MUST contact the homeowner and anyone else on the mortgage loan to assess the homeowner’s financial situation and explore the different options to avoid foreclosure. It is important to note that the lender:
- Cannot start the foreclosure process for at least 30 days after contacting the homeowner to make an assessment;
- The lender must advise the homeowner that he or she may request another meeting to avoid foreclosure and it must be scheduled within fourteen days; and,
- The homeowner can allow a lawyer, a HUD-certified housing counseling agency, or another other advisor to speak on homeowner’s behalf. Additionally, the homeowner is not forced to accept the plan that the representative and the lender came up with during their discussions.
- If no plan could be worked out to avoid foreclosure, the lender records a Notice of Default in the county where the property is located. The lender will send the homeowner a copy of the Notice by certified mail within ten business days of recording the Notice of Default. At that point, the homeowner has 90 days to “cure” or pay the amount owed.
- If the homeowner fails to cure the default, a Notice of Sale is recorded at least ninety days after the Notice of Default is recorded. This Notice basically states that the lender will sell the home at an auction in twenty-one days.
- The Notice of Sale must meet the following requirements:
- Sent by certified mail;
- Be published weekly in a newspaper of general circulation in the county where the home is situated for 3 consecutive weeks before the sale date; and,
- State the date, time, and location of the foreclosure sale; the address of the property; the trustee’s name, address, and phone number and an accompanying statement that the property will be sold at a public auction.
- At the public auction, the successful bidder must pay the full amount of the bid immediately with cash or a cashier’s check. The successful bidder will receive the deed of trust. The lender typically bids at the auction for the amount of the balance plus the cost of the foreclosure. If no one else bids, the lender keeps the property.
- Stopping Foreclosure Sale in California
If the homeowner gets the money to pay the defaulted amount, he or she has five days before the foreclosure sale to cure the default payment and stop the process. This is referred to as the “reinstatement” of the loan. Additionally, during the twenty-one day period, any person, entity or institution, with an interest in the home has a right to redeem the home up until the nonjudicial foreclosure sale. However, they must pay the loan in full.
Finding a foreclosure defense law firm can help you keep your property from being sold in a public auction. Most law firms will provide a free consultation with an experienced foreclosure attorney who will review your case, discuss your options, and hopefully find the best solution for your unique situation.
- What Happens After Foreclosure?
After the property has been sold, the new owner must serve the homeowner with a three day written notice to “quit” or move out. If the homeowner refuses to move out or fails to move out within three days, the new owners can put the old homeowners through a formal eviction process. This is called “Unlawful Detainer,” and typically takes several weeks. The new homeowners will have to get a court order to get possession of the home.
- Rights of Tenants During Foreclosure
If the old homeowners were renting the home to tenants, the new homeowners must honor the existing lease; however, if the tenants have a month-to-month lease or if the owner/landlord also lives in the home that was foreclosed on, the new owner may evict the tenants and/or the former landlord or renew the existing lease. If the new owner elects to evict the tenants, he or she must give them ninety days notice before being the eviction process.
About Law Firm – JT Legal Group is one of California’s most experienced and prolific law firms in the areas of Foreclosure Defense and Probate. Our attorneys take pride in our extremely high success rate, meticulous work ethic, and passionate defense of our clients’ rights.
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The material provided in this article is for informational purposes only and should not be relied on to make any legal decisions without first consulting a licensed California attorney. The authors of this website are not licensed to practice law in California but the information was prepared and submitted by a licensed California law firm.