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California is primarily a non-judicial (out-of-court) foreclosure state, although judicial (in-court) foreclosures are allowed. The non-judicial foreclosure process in California takes approximately four months to complete. Judicial foreclosures, on the other hand, are not common.
|Judicial||Non Judicial||Comment||Process Period||Publish Sale||Redemption Period||Sale/NTS|
|•||•||Judicial rarely||117 days||21 days||365 days*||Trustee|
* Judicial foreclosures only
Judicial foreclosures occur only in situations where the lender desires to sue for a deficiency judgment. Additionally, in the case of judicial foreclosure, the borrower has up to one year to redeem the property (pay off all monies owed including penalties and fines) after the property has been sold at a foreclosure auction. It is recommended that the borrower find a way to resolve the situation, or find some foreclosure assistance.
The great majority of foreclosures in California are handled out of court (non-judicially). The process begins when a lender files a Notice of Default (NOD) with the county recorder’s office identifying the amount of the borrower’s default and the date by which the borrower must pay off the amount owed. The NOD is mailed to the borrower and all other interested parties.
Up to five business days before the trustee sale, the borrower may pay off the default plus any applicable costs of foreclosure and stop foreclosure. Three months after the notice of default is filed, the lender can schedule a trustee’s sale of the property.
At least 20-days before the trustee’s sale, the notice of sale must be posted on the property and in one local public location. The notice is also published once a week for three weeks in a local newspaper, starting at least 20-days before the sale date. The notice is mailed to the borrower at least 20-days before the sale and to anyone who requests the notice. The notice must contain the date, time, and location of the sale, the property address, and the trustee’s contact information. In addition, the notice of sale must be recorded with the county recorder at least 14-days before the sale.
The trustee’s sale is a public auction and the property is sold to the winning bidder. The trustee may require bidders to pay the full bid amount in cash or cashier’s check. Anyone may bid at the sale, including the lender and any junior lien holders. A trustee’s sale may be postponed by announcement at the sale. 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 does not have the right to redeem the property after the sale.
Legislative and Legal Updates
On July 11, 2012, California Gov. Jerry Brown signed into law a major overhaul of foreclosure laws in the Golden State. Known as the California Homeowner Bill of Rights, the new law went into effect on Jan. 1, 2013.
The law prohibits “dual-tracking” the practice of negotiating with clients to modify a mortgage so that payments become more affordable while simultaneously pursuing foreclosure.
It also guarantees struggling homeowners a single point of contact at their lender with knowledge of their loan and direct access to decision makers, and imposes civil penalties on fraudulently signed mortgage documents.
The new laws also ban so-called robo-signing — the improper or faulty processing of foreclosure documents — and would allow state agencies and private citizens to sue financial institutions, under limited conditions, for economic compensation and for additional civil damages of up to $50,000 if lenders willfully, intentionally or recklessly violate the law. No lawsuit could go forward if the bank or servicer first fixes the problem with documentation or procedures, according to the bills.