What Happens in a Foreclosure in California?
Foreclosure is never a fun time for anyone, but if you're going through it, you need to understand the process. California's foreclosure process takes some time to complete and you may still be able to save your home. Contesting a foreclosure can buy you some time to come up with the money you owe, but understand that the lender will still be working to get its money.
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Legal Process
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California is a state that allows both judicial and nonjudicial processes to foreclose, with the latter being more common. This means that no legal action has to be taken to begin the process. A designee for the mortgage company, usually someone from the title company, initiates the sale process and will usually auction the home to the highest bidder (otherwise, the bank will hold the property and list it for sale). A deficiency judgment cannot be rendered against the homeowner in this scenario. If the process is judicial, it goes through the courts and the homeowner may have to pay the difference between the loan balance and what the home sells for. Judicial foreclosure is rarely used in California.
Redemption Period
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A notice of default is recorded after the homeowner has been in default for awhile. In California, this could take as long as six months after the first missed payment. After this notice is filed, the foreclosure is stalled for about two months. This period is known as the redemption period, since the homeowner can still make arrangements with the mortgage company to make up the missed payments.
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Notice of Sale
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The homeowner must be notified at least 20 days before the foreclosure auction. This allows him to pay the default amount before the sale, if possible. All money owed must be paid at least five days before the auction. Any information about the property, the loan and the sale must be published at least two weeks before the auction takes place.
Foreclosure Sale
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If the homeowner has not brought the loan current by five days prior to the auction, the sale will go forward. These are held during normal business hours at the location listed in the publication. The home will be sold to the highest bidder.
Right of Redemption
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After the home has been sold at auction, the original homeowner has the right to buy back the property by paying the full amount of what is owed. There are different regulations and time tables for this depending upon how much the buyer paid at auction. Full details are provided in California Civil Code, Section 2924.
Power of Sale
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The deed to the home must contain a clause known as "power of sale" to avoid judicial foreclosure. If it does not, the lender can take the homeowner to court and a judgment can be issued against the owner. The home is sold at auction and a lis pendens is filed, announcing that the home is being foreclosed. The owner may owe a substantial amount of money if she still had a large loan balance (deficiency judgment).
Contesting a Foreclosure
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In California, an uncontested foreclosure will usually take at least four months to initiate. If a borrower contests the foreclosure, it can take much longer and perhaps be completely called off. A homeowner can negotiate with the lender to try to keep the property, or the borrower can file for bankruptcy, in which case the foreclosure is stalled until a judgment is made. Borrowers can often keep their homes even if they file bankruptcy.
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