California Foreclosure Laws..Know Your Options

Here are a few bits of information on California's foreclosure laws.


Quick Facts

- Judicial Foreclosure Available: Yes

- Non-Judicial Foreclosure Available: Yes

- Primary Security Instruments: Deed of Trust, Mortgage

- Timeline: Typically 120 days

- Right of Redemption: Varies

- Deficiency Judgments Allowed: Varies

In California, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.

Judicial Foreclosure

The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off to the highest bidder.

Using this type of foreclosure process, lenders may seek a deficiency judgment and under certain circumstances, the borrower may have up to one (1) year to redeem the property.

Non-Judicial Foreclosure

The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines".

Power of Sale Foreclosure Guidelines

If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:

A notice of sale must be: 1) recorded in the county where the property is located at least fourteen (14) days prior to the sale; 2) mailed by certified, return receipt requested, to the borrower at least twenty (20) days before the sale; 3) posted on the property itself at least twenty (20) days before the sale; and 4) posted in one (1) public place in the county where the property is to be sold.

The notice of sale must contain the time and location of the foreclosure sale, as well as the property address, the trustee's name, address and phone number and a statement that the property will be sold at auction.

The borrower has up until five days before the foreclosure sale to cure the default and stop the process.

The sale may be held on any business day between the hours of 9:00 am and 5:00 pm and must take place at the location specified in the notice of sale. The trustee may require proof of the bidders ability to pay their full bid amount. Anyone may bid at the sale, which must be made at public auction to the highest bidder. If necessary, the sale may be postponed by announcement at the time and location of the original foreclosure sale.

Lenders may not seek a deficiency judgment after a non-judicial foreclosure sale and the borrower has no rights of redemption. It's up to each individual lender as to how they proceed.

If you find you are in pre-foreclosure and would like to know all your options, you can call me and receive a no cost/no obligation to you consultation. No need to feel embarrassed or ashamed, do something now so you can start fresh and let me remove this burden from you.

Deed for Lease - Fannie Mae Program

The Deed for Lease Program provides an option for qualifying homeowners who are facing foreclosure and are not eligible for modifications. The new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a stressful period, and helps to stabilize neighborhoods.

The program is designed for borrowers who don't qualify for or have not been able to sustain other loan-workout solutions, such as a modification. With Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any junior liens on the property. Tenants of borrowers in this case may also be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under this new program may be up to 12 months, with the possibility of a term renewal or month-to-month extensions after that period. A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.

For more information about the Deed for Lease Program, including details on program eligibility, check out - www.efanniemae.com.

So many options to choose from and difficult decisions to make. Always seek the advice of legal council and a professional tax preparer for your particular needs.

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