California Foreclosure Law Summary
There are two types of foreclosure that are allowed in the state of California, Judicial Foreclosure and Non-Judicial Foreclosure.
Comparison
| |
Non Judicial
|
Judicial
|
Requires Court Trial
|
No
|
Yes
|
Expedited Time Frame
|
Yes - 111 days
|
No
|
Right of Redemption
|
No - Except HOA liens, which have 90 days |
Yes - 1 year |
Deficiency Judgment
|
No |
Yes - Except purchase money |
Judicial Foreclosure is very rare in California and requires the lender to sue the owner in foreclosure and proceed with a trial in a court of law. Appraisals and other items are required, and there is still an auction. The owner has the right of redemption allowing them to buy it back from the successful bidder at auction for 1 year after the sale. The advantage of judicial foreclosure for the lender is that they can receive a deficiency judgment against the borrower for the difference between the amount owed (including penalties, fees and costs), and the amount received at auction.
Non-Judicial Foreclosure is what most people are referring to when they talk about "foreclosure" in California. This type of foreclosure is sometimes also referred to as "Foreclosure by Power of Sale" as the deed of trust (mortgage) must contain a power of sale clause. It is also often referred to as a "Trustee Sale" as the sale is handled by the trustee appointed in the deed of trust. Although lenders give up their right to collect a deficiency judgment against the borrower, this tends to be the preferred process given the expedited time frame. Non-judicial foreclosure sales are typically not held on the original sale date and can be postponed for up to 1 year based on certain postponement reasons, listed below.
Non-Judicial Foreclosure Postponement Reasons
In California, foreclosure sales can be postponed for up to one year per CA Civil Code 2924 g (c) (2). The postponement reasons are outlined in 2924 g (c) (1), but the following names are commonly used at the foreclosure auctions.
1.Mutual Agreement. The most common postponement reason it simply indicates that the homeowner and the lender have agreed to postpone the sale. This may be the result of a simple call by the homeowner requesting a little more time, or a more formal agreement like forbearance. Many homeowners do not realize when they enter a forbearance agreement that the foreclosure process continues; and if they miss an agreed upon payment, the property can be sold on the next scheduled sale date with no further notice.
2.Bankruptcy. When a homeowner files for bankruptcy protection, it puts an automatic stay on all debt collection actions, including foreclosure. Note that bankruptcy does not stop foreclosure, as many believe. Instead, it simply delays the sale of the property until the homeowner resolves the debt, or in many cases, the lender gets approval from the bankruptcy court to continue the sale - an order granting motion for relief from stay. The bottom line is that a home is a secured debt, and the lender has the right to take the security (the home) if the homeowner lacks the ability to pay the debt as agreed. Bankruptcy is only an effective tool against foreclosure if the homeowner will have sufficient income to pay their home loan and make up past due amounts once the bankruptcy plan is completed.
3.Beneficiary's Request. A simple decision by the lender (beneficiary) to postpone the sale. Could be for any reason, including that they simply aren't prepared to take the property to sale, or because they have reason to believe they are about to be paid (a closed escrow for which they have not yet received payment, for example).
4.Trustee's Discretion. A simple decision by the trustee to postpone the sale. The most typical reason is that they are unable to reach the lender for sale instructions.
5.Operation of Law. Fairly rare, but used when a court orders the postponement of the sale. The most likely reasons for a court to make such an order would be in cases where there is a plausible allegation of fraud against the lender, or there are questions of material fact around the right of the lender to foreclose.
No matter what the postponement reason, a new notice of trustee sale must be posted and filed if the sale is postponed for more than 365 days.
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