Definition of Foreclosure
Foreclosure is a process, governed by California state law, by which a home is sold to satisfy an unpaid debt such as a home mortgage, a tax lien or other debt.
What Causes a Foreclosure
A foreclosure is initiated once a default occurs. A default can be triggered by a failure to make a payment on a deed of trust or mortgage, or, for example, can also happen if a property is sold without permission or if property taxes aren’t paid. The note and mortgage will stipulate what the lender considers a default.
California Foreclosure Process
The California foreclosure process typically takes about 200 days starting from the time that a homeowner misses their first payment to the point when the home is auctioned off in a foreclosure sale. Though this might seem like a lot of time, the four month process moves very quickly and a homeowner must act immediately in order to take advantage of as many options as possible to avoid foreclosure.
Foreclosures in California are typically non-judicial under power of sale in deed of trust. This means that the foreclosure process occurs without any court intervention, with requirements for the foreclosure process set by state statute. The lender will typically send a Notice of Intent to Accelerate after 60 days. Next, the lender will contact the homeowner 30 days before sending the first of two notices in the foreclosure process, a Notice of Default. The Notice of Default gives the homeowner a 90-day window until the lender takes the next step, which is a Notice of Sale, the second notice required by California law. The Notice of Sale then gives the homeowner 20 days before the foreclosure sale takes place.
A homeowner has a right to cure the default up to within 5 days before the sale. In a non-judicial foreclosure, commonplace in California, a lender is not able to seek a deficiency judgment*. (*A deficiency judgment allows a bank or lender to obtain a judgment lien against a homeowner when a foreclosure sale does not produce enough to cover the full amount due on a home loan.) Without a deficiency judgment a homeowner is not given a redemption period. What all this basically means is that not having a redemption period available after the foreclosure sale makes the foreclosure sale date the deadline for a California homeowner to rescue his home. (You can find more information pertaining to California foreclosure statutes, Cal. Civ. Code §§ 2924 to 2924l, on the California Legislative Information website, but the reading contains a lot of legalese, so be forewarned.)
After the trustee sale (a.k.a. foreclosure sale or foreclosure auction) occurs, one of two things can happen. The home can be successfully auctioned off to a new owner or the bank can retain the home as a real estate owned (REO) property. If the latter comes about, meaning that a home becomes a REO property, the bank can move forward and evict the homeowner immediately by doing a trash out whereby they have a foreclosure clean out crew come in and remove all of the homeowner’s possessions followed by a locksmith who would change the locks.
However, if the home is sold at auction, a homeowner may still remain in the home for some time while the legal eviction process churns on. After the foreclosure sale (auction) happens and the foreclosed homeowner has not yet moved out of the home, the new owner is required to produce a 3-Day Notice to Quit. Once the three days expire and a homeowner still has not moved, then the new owner is required to start the legal eviction process by filing an unlawful detainer, which basically means that the foreclosed homeowner has 30 days still before the sheriff will come out to force an eviction.
California Foreclosure Timeline
From the day that a homeowner first misses their mortgage payment, they have 200 days until a foreclosure sale, and 233 days total until a foreclosed homeowner is evicted.
Avoiding Foreclosure in California
Delaying or stopping a foreclosure may be possible if the foreclosure was based on false information (for example, the lender substantially overstated the amount you had to pay to reinstate your mortgage, depriving you of your reinstatement rights under California law). Other reasons why you might be able to prevent a foreclosure include:
- bringing a case to court that could delay or stop the foreclosure because
- a loan origination didn’t abide by fair lending practices or other required mortgage regulations according to federal and California law,
- failure by the foreclosing party to follow the requirements of a non-judicial foreclosure in California, for example, not properly serving the homeowner with a notice of default, or
- the party attempting to foreclose is not legally entitled to do so,
- you are able to short-sale the home, and
- you are able to qualify for a loan workout or bankruptcy protection.
This list is not all inclusive, there are other options and reasons why you may be entitled to preventing a foreclosure. We encourage you to ultimately seek professional help since these situations can be mentally and emotionally taxing on a homeowner, not to mention extremely time-sensitive. Start by educating yourself through the foreclosure prevention resources available on this website to help you understand what it is exactly that you are facing in a foreclosure, and in the end that will help you to make better decisions with how you will save your home.
Make sure you understand the tax implications and what the results may be if you pursue a foreclosure defense strategy or solution.