Foreclosures 101: California Foreclosure Procedure

By
Real Estate Agent with Exit Realty Results

I'm getting alot of buyers inquiring about presale forclosures with an excited interest.  It's kinda like meeting a new guy/girl and you just like EVERYTHING about them!  But we all know only fools rush in, and momma always told you find out what you want to know about folks before you start making commitments!

Even more so with dealing with presales/foreclosures. I did some research for all the new "foreclosure lovers" out there, so you know what you're really dealing with when you decide to make that special commitment to invest in this particular market.  There will be other articles to follow, so make sure you add this blog to your favorites!  

Let's start with the basics: 

california state sealCalifornia Foreclosure Procedure:

Judicial Foreclosure Available: Yes

Non-judicial Foreclosure Available: Yes

Non-judicial Sale Typically, a title insurance company is named as the trustee to arrange the sale of the real estate.

California is famous for its one-action rule, in which a lender must carefully elect one action to take against the borrower if the borrower defaults. If the lender forecloses the deed of trust out of court, the lender has chosen one action and may not bring a lawsuit to recover a deficiency, which would be a second action. If the lender chooses to sue the borrower and obtain both a foreclosure order, and if the proceeds of the judicial sale of the real estate are not sufficient to repay the loan balance, then a deficiency for the balance. Such a suit is permitted as the lender's one action.

California lenders rarely elect judicial foreclosures.

 

Preliminary Notice: Non-judicial:

Notice of Sale

The notice of sale must contain the name, street address and phone number of the trustee conducting the sale and the original trustor, along with a statement warning borrowers that their property is about to be lost at a public foreclosure sale and to contact a lawyer for an explanation.

The notice must give the street address. If no street address exists, the notice must state the address of the beneficiary from whom a set of directions to the property may be obtained I they are requested in writing within ten days from the first publications of the foreclosure notice.

 

Advertising

A copy of the notice of sale must be posted in a conspicuous place on the property to be sold at least 20 days before the sale. If access to the property is restricted by means of a central guard gate, then the notice must be posted on the guard gate. A copy of the notice must be posted at one public place in the city where the property is to be sold (or judicial district in rural areas) at least 20 days before the sale.

 

Recording

A notice of trustee sale must be recorded at least 14 days before the sale.

Mailing

A notice of trustee sale must be mailed by certified mail, return receipt requested, 20 days before the foreclosure sale to the borrower, to anyone who requests notice or recorded a request and to the trustors, beneficiaries or parties at interest.

SaleProcedures: Non-judicial:

Time

All sales under a power of sale in a deed o f trust will be made between the hours of 9:00 a.m. and 5:00 p.m. on any business day, Monday through Friday, at the time specified in the notice of trustee sale.

Place

The sale shall commence at the location specified in the notice of sale.

Manner

The sale must be made a public auction to the highest bidder. The trustee has the right to require every bidder to show evidence of ability to pay the full bid in cash, cashier's check or certain bank checks. Each bid is by law an irrevocable offer to purchase. However, a higher bid cancels an earlier bid. It is unlawful and a criminal offense (a fine of $10,000 or up to one year in jail) to offer anyone consideration not to bid, or to fix or restrain the bidding process in any manner.

Postponement

Sales may be postponed by announcement at the time and location specified for the intended sale. The borrower may postpone the sale in order to obtain cash, provided the written request for postponement identifies source from which the funds are to be obtained, and the postponement is only for one business day. The borrower may obtain one such postponement.

Reinstatement

Debtors may reinstate up to five (5) days before non-judicial foreclosure sale. The sooner a homeowner consults with the Lender, the greater the chances for this option. This allows the homeowner to restore their credit standing to a reasonably acceptable condition.

Junior

Junior lien holders may no longer redeem, so they may try to protect themselves by (1) advancing funds to bring the senior loan payments current, then foreclosing for the sums advanced; (2) bidding at the foreclosure sale so the price will be sufficient to pay off the senor and the junior liens; or (3) acquire the property by bidding at the foreclosure. If the debtor has a right to redeem and does so, the junior who purchased the home must be reimbursed. Junior liens do not reattach the property if a borrower redeems a senior lien whose foreclosure extinguished the junior. This helps borrowers by encouraging the junior to bid up to the property to fair market value at the foreclosure sale, or else lose out, giving borrowers closer to fair value at sale.

Deficiency

Lenders may not seek a deficiency judgment if (1) the foreclosure is non-judicial or if (2) foreclosure is on a purchase money obligation. The same rules do not apply to guarantee or later lien holders. The lenders may seize alternative collateral. If the lender forecloses by filing a lawsuit, then the lender can obtain both a foreclosure sale order and a judgment against the borrower for a deficiency after the court-ordered sale, but only for the difference between the judgment and the fair value of the security.

Redemption

A borrower's right to redemption is terminated when a deficiency judgment is waived or prohibited. When redemption is permitted, after judicial foreclosure, only the borrower can now redeem and junior lien holders or "redemptionors" may not. When the lender is permitted to seek a deficiency, elects to pursue a deficiency and forecloses judicially, the borrower may redeem 12 months after sale, but a full credit bid by the lender cuts it to 3 months.

 

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Anonymous
Jenn

Can you tell me if a borrower has (2) properties, residing in one and renting the other and is starting to default on the primary residence due to loss of income/increase in rate, how it affects the rental property owned?  Neither of the properties are tied to one another and have compeltely different lenders.  Can they take your other property from you?  Thank you!

Oct 02, 2007 11:21 AM #17
Anonymous
Bill

I got a sale date and filed chapter 13 to stop the sale while I try to make payment plans with the court trustee. My question is what happens if your case gets dismissed by the BK court for not appearing or some other reason does the foreclosure process start over again with 90 days-30 dyas and sale or does the sale proceed where it left off? Someone told me that once chapter 13 is filed the bank has to restart the NOD process all over gain if for some reason your case is dismissed by the BK court is this true?

 Thanks,

Bill

Nov 27, 2007 10:22 AM #18
Anonymous
MC

I have a first time homebuyers loan that restricts me from selling my home to anyone except for those in a predtermined wage range.  Additionally i can only sell my home for the purchase price plus the increase of the median income for the county in which I live.  The last 4 years are as follows 0% increase, 0% increase 1% increase and lets just say 3% for this year (yes I am optomistic).  I am going to go into forclosure though I could sell my home for a profit (without the restrictions) as the value is 50k greater(in todays market) than the purchase price. The first time homebuyers loan restricts me to an amount that would leave me in debt. 

The program which was supposed to help me tied my hands so firmly that I cannot even swim.  If the bank forcloses what is the worst that can happen? With the exception of bad credit...yeah my late payments to everyone has pretty much done that...

Dec 17, 2007 07:11 AM #19
Anonymous
MARISCA HARDY

I refinanced my house 1 1/2 years ago and took all of my equity (200K) and bought a 3 unit income property.  Both loans are on negative amortization and now after only 1 1/2 years, the loan amount  for both properties are higher that the appraised value and I can no longer keep up with the monthly payments on both - a total of $ 9600 per month. I only get $ 3900 for rent.  I am seriously considering going into foreclosure or doing the "deed-in-lieu" for the house and keep the income property.  If I chose to just have the house foreclosed, will my income property get affected in any way. Do you think it will be better for me to get both properties foreclosed or go into "deed-in-lieu"?  Appreciate all your feedback.

Thanks

Marisca Hardy - LONG BEACH, CA

Feb 12, 2008 01:55 AM #20
Anonymous
Moktan

Currently I live in a condo which we bought  in 2005. Since then paid all the mortgages and HOA on time. Now my financial situation has been changed, I could not afford to live there. Obiviously the property price declined over the years, therfore I can not sale it on that price which I owe to bank. Can you suggest which is the best way to get rid of it. "Deed-in-liue" or forecloser which will be the better option. Please advise.

Jul 29, 2008 03:22 PM #21
Anonymous
pati

If I hold the senior loan and the junior loan is forclosing and my loan is

is being paid every month what will happen to my loan if they go to auction

who will be responsible for paying the loan off?

Aug 23, 2008 01:39 PM #22
Anonymous
Ruthie

Hi am just wondering if its true that all the occupants in a home can get an eviction on their credit report? Im asking because my fiance and I (recent college grads) are living with my father and mother. The house is under my fathers name and he has had a drastic income loss since the summer of 2006. On top of that hes lost his restaurant and two homes. My fiance and I were trying to help him out financially but, it has been really hard to accomplish this. I was severly injured after a semi rear ended my toyota celica on the 60fwy/215fwy in sothern california, leaving me unable to work up until now. My fiance has been a true angel because before my accident we were trying to find a new home to live in, our real estate agent is setting us up in a rental home in the mean time while the counter offer on a house we bided on gets accepted, and we enter into escrow... then she said 45 days from that we should be in the house.... sighh... any way I am just wondering if its true that ALL the occupants in a home can get an eviction on their credit report? Thank you for your help.

Aug 27, 2008 07:19 AM #23
Anonymous
CarsonHomeowner

Great tips.  Funny how lots of foreclosure assistance places are cropping up.  Here is one I actually found helpful, this article at least.  It really goes through the options well.  Hope it helps y'all.

http://www.socalforeclosurehelp.com/foreclosure-help-article-facing-foreclosure.html

Sep 06, 2008 05:16 AM #24
Anonymous
paweks

I have 2 houses in foreclosure in los angeles ca. What happens after tha? Can the bank garnesed my paycheck?

 

Jan 15, 2009 02:07 PM #25
Anonymous
ln

I have an Arm loan & asked the bank for loan modification, they told me I need to be in default to be qualified for modification. I am really having hard time so I can't pay anymore. My loan modification is now in process buy I want to know if they did not approved my loan, can I short sale the house or does it go diretly to foreclosure. Pls. advise !!!!

LN

Jul 13, 2009 04:11 PM #26
Anonymous
Anonymous

Hi LN!

I'm just seeing you question today.

Let me ask my broker & I'll get right back to you.

You can email me at: tcondelee@gmail.com

I dont mean to pry, but if you don't mind, could you leave me your email so I can send you the information?

Or, I could just post it up here, but I'm not sure if you want me to discuss to much of your personal buisness on this board. It's up to you.

 

Just here to help!

 

Jul 22, 2009 03:38 PM #27
Anonymous
cam

we have been struggling for 4 years now.  After being creative and stretching every penny into quarters it is obvious we cannot keep afloat any longer.  Unfortunately we bought at the peak of the market and cant even think of getting our mortgage amount in a sale.  Market value is under by 200K.  We've tried to modify - denied. 

Please can you tell me what is the timeline for foreclosure?  from the notice of default - how many days until we are out?  i've read some other places about 90 days, and then a 30 days and 20 days and ....UG!  How many is it all together?  do i add those up or are they all part of the 90? 

This is emotionally difficult so it feels extra confusing.

 

Aug 24, 2009 04:13 AM #28
Anonymous
toya

@ cam: in CA, the total timeline for foreclosure is 120 days

have you considered a loan modification? that new MHA program that Obama passed may be an excellent option.

My husband does these all day  where he works @ B of A. Really helping a lot of save their loan & ultimately their homes for going into foreclosure.

They do it by your income. If you qualify, you just have to make 3 consistant payments, I believe they calculate by 31% of your income (don't quote me, lemme verify from my husband).

IF you do that, after the 3 months, they drastically lower your int. rate, bringing your note lower than the 3 payments you made, making it easier 4 you to maintain your payments.

I'll get more info from him, from his job & create another blog about this.

Lots of ppl are saving their homes this way too!

Aug 24, 2009 04:30 AM #29
Anonymous
cam

toya,

thank you for the concise response. 

We have considered modification.  Our Credit Union is less flexible and said no.  but thanks. 

My husband was in mortgage for 16 years before getting laid off thereby beginning this financial crisis.  Unfortunately we bought right at the peak of the market just in time to make 50% of his income.  Its amazing we've lasted this long. 

So if i understand this correctly - from the letter of default we have 120 days - right?  Is that firm because of procedures or just a guideline?

Aug 24, 2009 06:24 AM #30
Anonymous
Mike

The normal foreclosure times do not apply in the current situation where there is a lot of foreclosures happening and the lenders are not able to keep up. I had stopped paying in 2008 because I could not afford to and am still waiting for my lender to complete the foreclosure process after 13 months. I have still not received any notice of trustee sale. All that I got from the lender is a letter stating they are initiating foreclosure proceedings against me. The first one dated march 2009 and the next one (identical to the first) dated August 2009. Still no sale of the actual sale happening.

Sep 15, 2009 11:50 AM #31
Anonymous
Lori

My home is going into foreclosure and we have moved out and the yard is not being maintained.  The city called me today to tell me that the city has a code that states yard maintenance is required by law.  I have never heard of this before.  Can the city fine me or what?  I feel like I am being harrassed.  Can they do anything to me?

Jun 09, 2010 03:54 PM #32
Anonymous
Anthony

What happens when a homeowner leaves the property after notice because he doesn't know any better thinking there was a sale but it turns out there was not.  Real estate agent changed the locks and now he's locked out of his house with no sale no nothing.  Can he simply have the locks changed and move back in?

Feb 19, 2011 12:55 AM #33
Rainer
334,174
Paul Gapski
Berkshire Hathaway / Prudential Ca Realty - El Cajon, CA
619-504-8999,#1 Resource SD Relo
 

yes they look so nice but Foreclosures are such tough on to stomach.

Nov 01, 2011 03:40 AM #34
Anonymous
Anonymous

i have a question. if the house is fore closed, what happens to the person thats lives in the house?

Nov 07, 2011 11:32 AM #35
Anonymous
Trustee Sales.

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Jun 05, 2012 11:57 PM #36
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