California Foreclosure Process

In California, the foreclosure process is generally a non-judicial process through a trustee under a deed of trust, where the lender is precluded from pursuing a deficiency judgment against the borrower. The following are the steps in the foreclosure process ( See :SB 306
(eff. 1-1-10) for recent changes to notice requirements )

1) The lender files a notice of default with the County Recorders office, This begins a 90 day redemption period, during which the delinquent owner may reinstate the loan by the payment of all delinquent payments, interest and penalties. In addition, for owner occupied residential properties of one to 4 units lenders must wait an additional 30 days to begin the foreclosure process and must attempt to contact their borrowers to try and work out a solution for loans made between January 1, 2003 and December 31, 2007. See http://www.financialinstitutionlawblog.com/new-california-law-requires-additional-steps-for-foreclosures-new-california-law-requires-additional-steps-for-foreclosures.html for a complete discussion of this requirement as well as SB 306 . This law is effective through January 1, 2013.
2) Within 10 business days of recording the notice of default, the Notice of Default must be sent by certified and regular mail to the borrowers at all addresses provided and any recorded special requests.
3) Within 30 days a copy of the Notice of Default must be sent by certified and regular mail to new owners and all junior lien holders to the Deed of Trust being foreclosed.
4) Three months after recording the notice of default, the period known as the Publication Period begins.
5) A notice of Trustee's sale is published in a newspaper of general circulation in the city in which the property is located, and published one time a week for three weeks.The actual sales date is established by adding 20 days to the date that the notice of Trustee's sale was first published. The notice of Trustee's sale is posted at the property and in a public place and is mailed to the borrower.
6) At least 20 days prior to the date of sale, the notice of Trustee's sale must be recorded in the County Recorders office.
7) Until 5 days before the sale date, the borrower has the right to reinstate the loan by payment of all delinquent amounts and penalty fees
8) On the sale date, the property is sold to the highest bidder. Generally, the lender will bid their total loan amount plus fees and penalties. Buyers of property at the foreclosure sale must have a cashiers check for the full amount of the winning bid. A Trustee's Deed upon sale is then recorded in the County Recorders office.

The vast majority of California foreclosures are of the non-judicial variety. There is absolutely NO redemption period after the Trustee's sale, except for the exceptions listed below. A non-judicial foreclosing lender is also forbidden to seek a deficiency judgment against a debtor if proceeds from the sale are insufficient to cover the indebtedness and all associated costs.

In the event of a judicial foreclosure (often when foreclosing over a court-awarded judgment, almost never when foreclosing over a loan default), there is a redemption period of . . .

(a) Three months if the proceeds of the sale is of sufficient value to cover the indebtedness and all associated costs;
(b) One year if the sale proceeds are insufficient. .

Exception #1: If there is an IRS lien attached to the subject property, the IRS has an automatic 90 day right of redemption regardless of the kind of foreclosure (judicial or non-judicial).

Exception #2: New for 2006, it appears that homeowner associations that foreclose non-judicially for an amount equal to or exceeding $1800 will also create a 90-day right of redemption. (Associations may no longer foreclose for amounts less than $1800)

The above information is provided for educational purposes only and is not intended to be definitive legal advice as I am not an attorney. The specific facts of a case can have significant impact . Anyone going through a short sale or foreclosure should obtain legal counsel from a licensed real estate attorney.

For additonal information about Foreclosures, see Foreclosures & Short Sales on my website