California Foreclosure Law

Developing a specific plan of action with well-timed, well-informed steps may save your home!  Below we have outlined the foreclosure process for the State of California.

Judicial  Foreclosure

California is known 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 a foreclosure order if the proceeds of the judicial sale of the real estate are not sufficient to repay the loan balance.  Such a suit is permitted as the lender’s using one action. California lenders rarely elect judicial foreclosures.

Non-judicial - Preliminary Notice:

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.

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 a public place in the city  (or judicial district in rural areas) where the property is to be sold 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 and/or parties at interest.

Sale Procedures: Non-judicial

Time & Place - The location and time of the Trustee Sale is clearly specified in the “Notice of Trustee Sale” and are normally scheduled Monday through Friday, between the hours of 9:00 a.m. and 5:00 p.m.

Manner - The sale must be made a public auction to the highest bidder and all bidders are required to provide evidence of the full bid in cash, a cashier’s check or certain bank checks. By law, an offer to purchase is irrevocable. However, when a higher bid is accepted by the lender, earlier bids are canceled.

Postponement - Subject to Lender’s approval, the borrower may postpone the sale in order to obtain cash, provided the written request for postponement clearly identifies their source funds. 

Reinstatement - Debtors may reinstate up to five days before non-judicial foreclosure sale.

Junior Liens (loans recorded against the property in Second position and thereafter) -  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 senior 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.

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. If the lender forecloses by filing a lawsuit, the lender can obtain both a foreclosure sale order and a judgment against for a deficiency against the borrower after the court-ordered sale. The amount of the deficiency is normally based on the difference between the judgment and the fair market value of the property.

Redemption - A borrower’s right to redemption is terminated when a deficiency judgment is waived or prohibited. If redemption is permitted after the judicial foreclosure, the borrower customarily has 12 months after the sale to redeem.

If  your behind on your monthly payments or foresee financial hardship in the near future don't walk away...

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