Process of Foreclosure & California Law
According to a report published by DQ News in October 2010, lenders recorded over 83,000 notices of default on California properties between July and September of 2010. That statistic signified an 18.9 percent increase in California foreclosure proceeding, compared to the previous quarter. California law requires lenders to follow strict foreclosure guidelines, a process that typically takes four to seven months to complete.
Other People Are Reading
-
Types of California Foreclosure
-
California law allows two types of foreclosures: judicial and nonjudicial. To obtain a judicial foreclosure, the lender must sue the borrower and initiate a court trial to retrieve the property. The majority of California foreclosures follow the nonjudicial process, which does not require the lender to sue the borrower and does not involve the court system. In order to proceed with a nonjudicial foreclosure, the loan agreement must include a "power of sale" clause, which the majority of contracts include.
Notice of Default
-
Lenders must follow the nonjudicial foreclosure process established by California Civil Code 2924. In the event a borrower defaults on a loan, the lender must first file a notice of default (NOD) at the recorder's office of the county where the property is located. The lender must send the notice to the borrower through certified mail, no later than 10 business days after recording the default. The borrower then has 90 days after the recording date to repay the lender and stop the foreclosure.
-
Notice of Sale
-
After the 90-day period, the lender can record a "notice of sale" at the county recorder's office. The notice must state that the lender intends to auction the property within a minimum of 21 days from the date of the notice. The law requires the lender to send a copy of the notice to the borrower via certified mail and publish the notice in a general circulation newspaper within the county where the property is located. The lender must publish the notice at least three times, each week prior to the sale. A lender must also post the notice at the location of the property and in a public location. The notice must detail the time and date of the intended sale.
Sale of Property
-
Sale of the property must take place on the exact date and time listed on the notice of sale. Sales are conducted as auctions, open to the public, and typically conducted by a representative of the lender. The party making the highest bid, which can include the lender, must pay for the property immediately, using a cashier's check or cash. At the close of the transaction, the new owner obtains a trustee's deed to the property.
Right of Redemption
-
California law includes a "right of redemption." This allows the borrower to reclaim the property within one year of the foreclosure sale by paying the lender in full for unpaid balances and foreclosure costs. Right of redemption rarely applies to California foreclosures because the majority of mortgage contracts include terms that waive the borrowers right to reclaim the property after a foreclosure sale.
-
References
- Photo Credit Jupiterimages/Comstock/Getty Images
