California Foreclosure Law

Non-Judicial Foreclosure 

This is the type of foreclosure process that is mostly practiced in California.  It is simpler and faster and is preferred by lenders because it bypasses the court system. Non-judicial foreclosure is used when there is a power of sale clause in the deed of trust or mortgage.  This is a clause that gives the lender pre-authorization to sell the property in the event of a default to pay off the loan.  The foreclosure is expedited by a trustee hired by the beneficiary or lender as their representative.

Judicial Foreclosure

Judicial foreclosure is also practiced in California although it is not widely used.  It is more time-consuming and more expensive for the lender because they have to file a lawsuit to obtain a court order to foreclose.

Security Instruments 

Deed of Trust and/or Mortgage

Timeline

Your lender files a Notice of Default to start the foreclosure.  You have 90 days to reinstate your loan and bring it current by paying all your missed payments including late fees and penalties.  If you fail to do so, your lender files a Notice of Trustee Sale with an auction sale scheduled 21 days after the Notice of Trustee Sale was filed.  So you have a total of about 111 days until the property is sold at auction.

Right of Redemption

Under judicial foreclosure law, California borrowers may have up to 1 year to redeem or purchase back their property.  However, if your property is sold at a trustee sale/auction under a non-judicial foreclosure with a power of sale, you have no rights to redeem or purchase back your property.

Deficiency Judgments

California Foreclosure Law may or may not allow deficiency judgments.  

• Deficiency Judgments Not Allowed - If the foreclosing lender is the original lender at the time of purchase, AND the loan is in first lien position, AND the property is your primary residence, the lender is NOT ALLOWED to sue for a deficiency judgment.  

• Deficiency Judgments Allowed - If the loan being foreclosed on is a junior lien position (ex: 2nd mortgage, home equity line of credit), the lender may be ALLOWED to sue you and collect a deficiency judgment.  A lender may also be allowed to collect a deficiency judgment if a judicial foreclosure is the process used.

For additional information on California and Federal Tax laws regarding mortgage debt relief and deficiency judgments, please go to:  

Power of Sale

If there is a power of sale clause within the mortgage or deed of trust, and time, place and terms of sale are detailed in the clause, then the power of sale procedure has to be followed.  If there is no power of sale clause, then the foreclosure procedures are as follows:

• According to California Foreclosure Law, the Trustee Sale Notice of Notice of Sale must be recorded at least 14 days before the scheduled sale date in the county where the property is located.

• The notice must be mailed at least 20 days before the trustee sale via certified mail to the borrower with return receipt.

• The notice must also be posted on the property at least 20 days before the trustee sale date.

• The notice must be published or posted in a public place in the county where the property is to be sold at auction.

• California Foreclosure Law states that you will have up until 5 days before the trustee sale/auction to reinstate the loan (cure the default) and the whole foreclosure process will be stopped.

• If you cannot cure the default, the sale will be held during any business day between 9 am to 5 pm at the location stated on the trustee sale notice.

• The trustee will ask for proof of funds to qualify the bidders to bid for the full amount with cash or cash equivalent.  Highest bidder wins.

Please note that changes in California Foreclosure law occur from time to time, so we highly recommend you consult with a foreclosure attorney for advise on your particular situation.  Please see disclaimer.

How Does Foreclosure Work

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