In the United States, there are two types of foreclosures–judicial and non-judicial. In judicial foreclosure, a lender files a civil lawsuit against the debtor, and the entire procedure is handled in court. Judicial foreclosure is lawfully available in all states. But many states, including California, allow lenders to handle the foreclosure procedure non-judicially. Lenders include a”power of sale” clause in the mortgage or deed of trust which states that borrowers acknowledge that should they go into default, the lender has the ability to begin the foreclosure process outside of court. In California, judicial foreclosures are rare; most creditors use the non-judicial method.
Notice of Default
In California, as soon as you default on a mortgage payment and have been delinquent for 15 weeks, your lender has the legal right to begin the foreclosure procedure. Step one your lender or third party trustee takes is to file a Notice of Default with your county recorder’s office. The Notice of Default allows you, the public and any junior lien holders to be informed of the default. You own a reinstatement period of 90 days from the filing of this Notice of Default to make your loan current, or the foreclosure procedure continues.
Notice of Trustee Sale
In case you have not made your loan current within the 3 months of the Notice of Default being registered, the trustee elicits a Notice of Trustee Sale (NOS), stating the date, time and location in which the auction of your residence will take place. By California law, the trustee must do all of the following together with the NOS at least 20 days prior to the auction sale: mail a copy to you by certified mail with a return receipt requested; mail copies to all other interested parties; publish the NOS in the regional newspaper; article the NOS in your home (front entrance or gate); and post the NOS in at least one public place near where your house is situated. Additionally, the NOS has to be submitted at your county recorder’s office at least 14 days prior to the sale.
Auction
If after 21 days of this recording of the NOS you have not made your home loan current, the trustee may sell your home on behalf of the lender by auctioning it off to the highest bidder. In the auction, one of four things could happen: (1) The auction is canceled because you’ve brought the loan current or was able to refinance it; the trustee made a mistake; or you sold or property before the auction . (2) The auction is postponed by you, the lender or the trustee. If you file bankruptcy, then this may also delay the procedure. (3) A third party individual or business purchases your home (usually to get a bid greater than the lender ). (4) Your home is sold back to your lender because it makes a credit bid up to the amount it’s owed.
Trustee’s Deed
Your home is officially foreclosed after it’s offered at auction. The highest bidder (a third party or your lender) will receive ownership of your residence via a document called a Trustee’s Deed. This will lead to all junior lien holders to eliminate any secured interest they hold on your property, and you will lose the right to redeem your home. Furthermore, if you do not leave the house, typically within 72 hours, then the new owner may file an unlawful detainer lawsuit to get an eviction judgment in which a sheriff will physically remove you from the home. But if you’ve tenants living in your home, they are protected under President Obama’s Helping Families Save Their Homes Act. This law allows tenants to get at least 90 days or the rest of the rental after foreclosure to stay in the house till they have to move.
California Non-Judicial vs. Judicial Foreclosure Laws
In California non-judicial foreclosures the projected time period for the foreclosure procedure to be finished is about 111 days. Once a lender accomplishes a non-judicial foreclosure, it has the right to seek a deficiency judgment against you personally. (A deficiency judgment makes you legally responsible to pay the lender any gap between what the lender may sell your house to get and what you owe on your loan.) In California judicial foreclosures, the process is handled in court and does not necessarily occur in an expedited time period. Following the auction sale in juvenile foreclosures you’ve got the right to redeem your house within a single year, unless the lender makes a full credit bid; in this example, you will only have three months to redeem. In judicial foreclosures, the the lender is permitted to seek a deficiency judgment.