Facing foreclosure can be a stressful and overwhelming experience for homeowners in California. Understanding the process, your rights, and available options can help you make informed decisions to potentially avoid losing your home. California has specific laws and procedures for foreclosures, which provide protections to homeowners, but it’s essential to act quickly when faced with foreclosure threats.
In this comprehensive guide, we’ll walk you through how foreclosure works in California, step-by-step, and offer some practical advice for navigating the situation.
What Is Foreclosure?
Foreclosure is the legal process that allows a lender to recover the balance of a loan from a borrower who has stopped making payments. When a homeowner defaults on their mortgage payments, the lender can initiate foreclosure proceedings to sell the property and use the proceeds to pay off the remaining loan balance.
In California, most foreclosures are non-judicial, meaning they don’t involve court action. However, some foreclosures can be judicial. Understanding which type of foreclosure process your lender is pursuing is crucial to managing your case.
Types of Foreclosure in California
California has two types of foreclosure: non-judicial foreclosure and judicial foreclosure. While non-judicial foreclosures are more common, it’s essential to understand both.
1. Non-Judicial Foreclosure
This is by far the most common type of foreclosure in California. The non-judicial process allows the lender to foreclose on a property without going through the court system. This process is typically faster and less expensive for the lender.
- Deed of Trust: In California, homeowners often sign a deed of trust when they take out a mortgage. The deed of trust involves three parties: the borrower (you), the lender (the mortgage company), and a third-party trustee. If you default on your payments, the lender can ask the trustee to begin the foreclosure process.
- Notice of Default (NOD): The non-judicial foreclosure process starts when the lender files a Notice of Default with the county recorder’s office. This document states that you’ve fallen behind on your mortgage payments and are in default.
- Notice of Sale (NOS): If you don’t bring the loan current (catch up on the missed payments) within 90 days of the NOD being filed, the lender will issue a Notice of Sale. This notice sets a date for the property to be sold at auction.
The non-judicial foreclosure process in California typically takes about 120 days from start to finish, although it can be faster or slower depending on the lender and specific circumstances.
2. Judicial Foreclosure
While rare in California, judicial foreclosure is an option for lenders. In a judicial foreclosure, the lender sues the homeowner in court to obtain the right to sell the home. This process can take longer because it involves the court system and gives the homeowner more opportunities to defend against the foreclosure.
In a judicial foreclosure, the lender may seek a deficiency judgment, meaning the homeowner may be responsible for any remaining debt after the property is sold. However, this is more common with investment properties and less likely for a primary residence due to California’s anti-deficiency laws.
Foreclosure Timeline in California
If you’ve missed mortgage payments and are facing foreclosure, understanding the timeline of events can help you take the right steps to avoid losing your home. Below is a general timeline for non-judicial foreclosures in California:
- Missed Payments: Foreclosure begins after you miss several mortgage payments. Most lenders initiate foreclosure after 90 days of non-payment, although it can happen sooner.
- Notice of Default (NOD): After about 90 days of missed payments, the lender files a Notice of Default. You’ll have 90 days to either catch up on your payments or work out an arrangement with the lender, such as a loan modification.
- Notice of Sale (NOS): If no arrangement is made, the lender will file a Notice of Sale, setting a date for the auction. The auction can be held as soon as 20 days after the NOS is filed.
- Trustee Sale: The property is auctioned to the highest bidder. If no one bids, the lender typically takes ownership of the home.
- Eviction: Once the foreclosure sale is complete, you may be given a notice to vacate. If you refuse to leave, the new owner can file for an eviction.
Homeowner Rights in California Foreclosures
California law provides several protections for homeowners during the foreclosure process. Knowing your rights is key to navigating this difficult situation:
- Right to Reinstate the Loan: You have the right to reinstate the loan by catching up on missed payments (plus late fees and legal fees) at any point before the foreclosure sale. This is often the best way to avoid foreclosure if you can secure the funds.
- Right of Redemption: In judicial foreclosures, homeowners have the right of redemption, which allows you to reclaim your home by paying off the entire mortgage balance within a certain period after the sale. This right does not apply to non-judicial foreclosures.
- Loan Modifications: California law requires lenders to consider alternatives to foreclosure, such as loan modifications. Before the foreclosure sale, your lender may offer options to modify your loan terms to make your payments more manageable.
- Mortgage Servicing Laws: California’s Homeowner Bill of Rights includes protections to prevent dual tracking, where lenders pursue foreclosure while negotiating loan modifications. You also have the right to know your options and receive timely communication from your lender.
Deficiency Judgments in California
Foreclosure is a challenging and emotional process, but understanding how it works in California and knowing your rights can empower you to take action. The California foreclosure process includes protections such as the right to reinstate your loan and potential alternatives like loan modifications or short sales. Acting quickly can often make the difference between keeping your home or facing the foreclosure auction.
If foreclosure is on the horizon and you’re unsure of the best course of action, consider consulting a financial advisor, foreclosure attorney, or real estate professional. In some situations, selling your house quickly to a cash buyer can provide a fast and stress-free solution to avoid foreclosure.
At Sell My Home For Cash Faster, we specialize in helping homeowners navigate tough situations by offering fast, cash-based sales. We buy houses in California and surrounding areas, allowing you to sell your home quickly and avoid the complications of foreclosure. Contact Sell My Home For Cash Faster today for a free consultation and a no-obligation cash offer on your home.