As with many states, California foreclosure laws permit both nonjudicial and judicial foreclosures. Most California foreclosures take upward of 200 days or more to complete. California is considered to be a primarily nonjudicial (out-of-court) foreclosure state. California’s foreclosure timeline can be extended in a number of ways. The two most used are by real estate investors working with homeowners to buy the home out of foreclosure during the pre-foreclosure period or by homeowners themselves usually through bankruptcy, but as of 2020 through many of the moratoriums imposed as a result of the COVID-19 Pandemic.
As in many other states, federal law discourages the initiation of foreclosure proceedings until the borrower has fallen 120 days past due on their mortgage loan payments. California is no exception to this trend.
In California, once the 120-day mark is reached, the delinquent loan is considered officially in default. The lender must file a Notice of Default (NOD) with the court and notify the homeowner within 10 days. This notice must contain certain information, including:
- Options for getting out of default
- The homeowner’s ongoing obligations which is usually property insurance and property taxes
Once the owner of a California foreclosure receives the Notice of Default, they have three months more to bring the loan current. Note that the homeowner is required to become totally current. If only a partial payment is made, the loan remains officially in default. The lender may not set a date for foreclosure auction until three months have passed from the date at which the Notice of Default was issued. After the window has passed the homeowner will receive a Notice of Trustee Sale via certified mail and, upon receipt, the lender is allowed schedule the auction. A California foreclosure property cannot be sold until at least 20 days have passed from the time the homeowner received the Notice of Trustee sale.
During pre-foreclosure, California homeowners may pursue a variety of loss-mitigation opportunities, foreclosure alternatives, and foreclosure mediation strategies. Moreover, California foreclosure laws require that foreclosing servicers contact homeowners in default by phone or in person 30 days before recording the notice of default.
California Judicial and Non-Judical Foreclosures
Judicial foreclosures generally occur in situations where the lender plans to sue for a deficiency judgment. In the case of judicial foreclosure in California, the borrower has up to one year to redeem the property after the property has been sold at a foreclosure auction if there was a deficiency, which means the property was sold for less than was owed, after the auction. In order to do this, the borrower must pay off all monies owed including penalties and fines. For a year afterward, a former homeowner can redeem the property by paying the deficiency to the lender as well as the cost of the home at auction to whomever was the buyer of California foreclosure. If there was not a deficiency, then the homeowner has only three months in which to redeem the property. That said, if the lender waives the right to a deficiency judgment after a judicial foreclosure, the former homeowner cannot repurchase the property regardless.
In a nonjudicial foreclosure, the borrower can pay off the default and applicable costs of foreclosure in order to stop the foreclosure up to five days prior to the foreclosure sale. California Foreclosure sales may be held any time between 9am and 5pm on any business day.
The trustee’s sale is a public auction and the property is sold to the highest bidder. The trustee may require bidders to pay the full bid amount in cash or cashier’s check at time of sale. Anyone may bid at the sale, including the homeowner, lender and any junior lien holders. A trustee’s sale may be postponed by announcement at the sale, and there are many ways that it can be postponed. If a sale is postponed more than three times, a new notice of sale must be issued.
After the sale is complete, the trustee transfers ownership to the winning bidder.
The borrower has no right of redemption after the sale.