How to Foreclose in California
Holding a mortgage note in California can put you at risk of having the borrower default on the payments. If this happens, you need to know what the California statute on foreclosure requires and allows. The Civil Code lets you enter either a judicial or non-judicial repossession of the property. A judicial foreclosure takes more time, requires a court action and is not common in California. However, if you take this route, you can attempt to collect any unpaid balance of the loan that was not satisfied by the sale of the property. Even so, the popularity of non-judicial foreclosures rule the landscape in California's deed of trust sales.
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Things You'll Need
- Mortgage note
- Notice of Default
- Trustee's Sale Guarantee Report
- Notice of Sale
Instructions
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1
Check your loan documents on the property in default to ensure that you included "power of sale" clause, which allows you, the trustee, to perform a non-judicial foreclosure and eventually sell the property to satisfy the loan.
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2
File a Notice of Default with the County Recorder's office. This is the public notice required by the Civil Code. Mail a certified copy to the borrower within 10 business days.
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3
Mail a certified copy of the Notice of Default within 30 days to the lender in second place to the first mortgage and to all other junior lien holders.
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4
Order a Trustee's Sale Guarantee Report from the title company, which acts as the trustee in charge of the sale of foreclosed property located in California. Some other states allow the lender to choose its own trustee.
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5
Wait 90 days to give the borrower an opportunity to bring the account current.
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Publish the Notice of Sale at least 20 days before the auction is to take place, if the borrower has not paid the money owed up to that point. Mail a copy to the borrower and other creditors on the title. Also, post the sale notice on the property. The borrower has up to five days before the sale to make the mortgage account current.
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7
Record the Notice of Sale with the county at least 14 days before the sale of the property takes place. Include your name as the beneficiary and the information regarding foreclosure of the property.
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8
Postpone the sale of the property for up to one year if the borrower files for bankruptcy, agrees to a forbearance plan that will pay you the balance owed up to that date over a period of time, or for any reason that you, as the lender, see fit to postpone.
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Sell the property at an auction at least 21 days after the Notice of Sale is filed. It may be sold for the full amount of the debt plus penalties, interest and fees that accumulated during the foreclosure process. If the property is not sold at auction, it reverts back to you in a Trustee's Deed, at which time you may choose to list the house and sell it on the open market to regain any or all of your investment.
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