Some homeowners with mortgages are underwater here at Orange County CA and are considering possible short sale - or doing a strategic default and walking away.
New California foreclosure laws informally named the "Homeowner Bill of Rights" went into effect on January 1, 2013.
These laws can be confusing and were intended by the legislature to restrict lenders from "dual tracking" and foreclosing on a home while a homeowner is waiting for lender decision on a loan modification application.
But a short sale is a different. In a short sale the non-judicial foreclosure process in California would be stopped only after all lien holders agree to short sale and the prospective buyer gets financing. That process can take a long time. A foreclosure could occur in California during time of the processing the short sale.
In a loan modification situation, if the borrower sends in a complete loan modification application, the foreclosure process should stop. If the lender rejects the application, the borrower has a 30-day period to appeal, and the property cannot be foreclosed during that time.
A non-judicial foreclosure in California is where the property is foreclosed through a trustee's auction sale rather than the lengthy judicial foreclosure process, which is required in some other states.
In a California short sale, all lenders must sign off, and law requires them to forgive any remaining balances after the sale. However, the California foreclosure can take place while owners are waiting for their proposed short sales to be approved by lenders and lienholders.
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