California Foreclosure Steps
Most lenders offering mortgage loans in California include a "power of sale" clause in their contract. The power of sale clause allows the lender to proceed with a nonjudicial foreclosure if the borrower defaults on the terms of the mortgage contract. A trustee typically handles nonjudicial foreclosures, and the process does not involve the court system. Lenders must follow certain steps when seeking a nonjudicial foreclosure, established in the California Civil Code.
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Notice of Default
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If a borrower took out a loan between January 2003 and December 2007, the lender must offer loan restructuring options to the borrower and allow 30 days to pass before proceeding with the foreclosure process. The first step in the foreclosure process requires the lender to file a "notice of default" with the county recorder's office, in the same county as the property location. The lender must also mail a copy of the notice of default (NOD) to the borrower. The NOD informs the borrower that the lender intends to foreclose on the property unless the borrower rectifies the default. The NOD gives the borrower 90 days to pay the funds owed, plus expenses incurred by the lender, such as filing and attorney fees.
Notice of Trustee's Sale
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Ninety days after filing a NOD, the lender can publish a "notice of trustee's sale" as the next step in the foreclosure process. The notice of trustee's sale (NOTS) must appear in a local newspaper in the same county as the property. The lender must also file the notice at the county recorder's office and mail a copy to the borrower. The lender must post a copy of the NOTS at the location of the property in foreclosure and in a public location within the same county. The borrower can rectify the default at any time, up to five days before the scheduled date of the sale.
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Foreclosure Sale
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The foreclosure sale can occur 20 days after the NOTS publication and must occur at the exact location, on the date and at the time listed in the publication. Foreclosure sales typically occur in the form of a public auction. Foreclosure sales often take place at the courthouse in the same county as the property and must occur during a business day, between 9 a.m. and 5 p.m. At the end of the auction, the highest bidder becomes the owner of the property. In the event nobody bids on the property, the lender becomes the owner.
Right of Redemption
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A "right of redemption" allows a borrower to repay the money owed a lender and reclaim a property even after a foreclosure sale. While California offers a right of redemption in certain foreclosure cases, the majority of mortgage contracts include clauses that waive a borrower's right of redemption. Mortgage contracts typically also waive the lender's right to sue the borrower for additional funds if the foreclosure sale fails to yield enough money to satisfy the debt, known as a deficiency judgment.
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