California Foreclosure Regulations
If you default on your mortgage loan in California, there are two ways in which the lender can foreclose, or take possession of your property. The mortgage and the deed of trust (title) are the primary means by which lenders secure their legal interest in your property. California foreclosure regulations allow a lender to execute a judicial or non-judicial foreclosure on the deed of trust or mortgage for your property.
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Function
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The foreclosure process allows a mortgage lender to legally take ownership of your property when you fail to make your mortgage payments. Once they take possession of the property, they can sell it and use the proceeds to satisfy your debt, including penalty fees.
Judicial Foreclosure
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Judicial foreclosures are rarely used by lenders in California. The time and expense involved present a less cost-effective method, since a judicial foreclosure involves the court system. The lender must sue you to take ownership of the property. With this type of foreclosure, the lender can also pursue a deficiency judgment against you to recover the difference between the total amount owed on the mortgage (including penalty fees) and the proceeds received from the foreclosure auction.
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Non-Judicial Foreclosure
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The customary method of foreclosure in California is the non-judicial foreclosure, also known as a foreclosure by power of sale. It is the preferred method due to the shorter time frame involved, but lenders give up their right to pursue a deficiency judgment. For the lender to execute a non-judicial foreclosure there must be a power of sale clause in your mortgage contract or deed of trust. Typically, the lender will appoint a representative known as the trustee to conduct the sale of the property.
Considerations
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With a judicial foreclosure, you may be able to redeem, or buy back the property from the winning auction bidder one year after the close of auction. In a non-judicial foreclosure, proceedings can be postponed for up to one year based on allowable reasons as set forth in the California Civil Code 2924 g(c)(1). Reasons may include bankruptcy, lender request, mutual agreement between you and the lender, the trustee's judgment or suspected lender fraud.
Notice of Sale
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If a non-judicial foreclosure is pursued through the power of sale clause, the specified terms of the sale must be followed by the lender. If there were no specified terms indicated, the lender must record a Notice of Sale at least 14 days prior to the sale, and the notice must be mailed to you by certified mail (with return receipt requested) at least 20 days prior to the sale. The Notice of Sale must be posted on your property at least 20 days prior to the sale, and it must be posted in one public location within the county where the property will be sold. The Notice of Sale must contain the property address, name, phone number and address of the trustee, declaration that the property will be sold at auction and the time and location for the sale. You will have up until five days before the auction to cure the default and stop the foreclosure.
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