California Foreclosure Laws
Judicial Foreclosure Available: Yes
Non-Judicial Foreclosure Available: Yes
Security Instruments: Deed of Trust, Mortgage
Right of Redemption Period: Judicial Foreclosure Only – 12 Months
Deficiency Judgments Allowed: Judicial Foreclosure Only
Time Frame: 4-7 Months; Typically 120 Days
Public Notice: Notice of Default
California is a title theory state, which means that a property title remains in trust until full payment on the loan occurs. Although both judicial and non-judicial foreclosure can be used in California, the main choice is non-judicial. Judicial foreclosures rarely take place in California and are only used either in the absence of a power of sale clause or when the lender seeks a court order for a deficiency judgment.
Unlike other states where trustees are appointed by lenders, title companies serve as the primary managers of a foreclosure sale in California. The state also has a requirement called the one-action rule, which requires that lenders only pursue legal action once on the defaulted loan. Action may be on the note or a foreclosure of the property, but may not be both. If a lender chooses to proceed with foreclosure and the property is sold for less than the amount owed, deficiency is prohibited.
Types of Foreclosures Allowed in California
California statute allows for judicial foreclosures on defaulted property. This type of foreclosure, also known as foreclosure by judicial sale, involves selling the defaulted property under court supervision. In order for a judicial foreclosure to be possible, no power of sale clause may be present in the loan documents.
Once a property is foreclosed by the court, it will be auctioned off to the highest bidder. A lender may seek a deficiency judgment and the borrower may be granted one (1) year to redeem the property once sold.
The state of California’s main method of foreclosure is non-judicial foreclosure, which is also known as foreclosure by power of sale. In order for non-judicial foreclosures in California to be possible, the loan documents must contain a power of sale clause. The purpose of the clause is to authorize the lender to sell the property in the event of default to be able to recover what is owed on the property.
The difference between non-judicial foreclosures and judicial foreclosures is that non-judicial foreclosures allow for the property to be sold without court supervision. This type of foreclosure process is usually much faster and less expensive than a judicial foreclosure.
A non-judicial foreclosure may be processed in two ways. If the power of sale clause states a specific time, place, and outlines terms of sale, then the lender must follow the procedure that is stated. If there is no specification, then the following requirements must be met:
1. First, a trustee must wait a period of thirty (30) days after contact is made with the borrower before filing a notice of default and may not move forward with foreclosure for a minimum of sixty (60) days.
2. The mortgagor must be notified that they have a right to request a meeting within fourteen (14) days and must also be provided with the toll-free number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency.
3. The notice of sale must be recorded at least fourteen (14) days before the sale and must be mailed by certified, return receipt requested mail to the mortgagor at least twenty (20) days prior to the sale and must be posted in a public place in the county where the property will be sold. The notice must contain details regarding the time and place for the sale as well as the property address, trustee’s name and phone number and statement that the defaulted property will be sold at auction.
4. The borrower will have until five (5) days before the sale to stop the process by satisfying the loan.
5. The foreclosure sale must take place on a business day between 9 a.m. and 5 p.m. at the location specified in the notice of sale. Anyone can bid at the foreclosure sale and the property will go to the highest bidder. The borrower is allowed to postpone the sale for one (1) day. Lenders may not seek a deficiency judgment after a non-judicial foreclosure sale. The mortgagor does not have a right of redemption with this type of foreclosure.
Working with a Foreclosure Lawyer in California
Due to the country’s current economic situation, many mortgagors have found it difficult to keep up with payments on their loans. Although receiving a notice of default can be frightening, borrowers in California have a right to seek legal help. If you are in danger of losing your home, speak to a foreclosure lawyer in California right away.
Foreclosure attorneys do their best to ensure that your home is not reposed. Your paralegal will speak to your lender to come up with alternative plans that do not involve foreclosure, such as mortgage modification, short sale or a temporary halt in payments, that will work for both of you. Rest assured that when you work with a leading foreclosure attorney in California, your case will end with the best possible outcome.
Turn to a top team of California foreclosure lawyers today to fight for your rights as a homeowner and get started on your case.