State Foreclosure Laws

Summary:

Judicial foreclosure in California is rarely used, and only in the absence of a power of sale clause in the loan document or when the lender is seeking a court order for a deficiency judgment. The lender must sue the borrower to obtain a decree of foreclosure and order of sale. The court may also order that the borrower has up to one year to redeem the property.

Non-judicial foreclosure is the most common form of foreclosure in California. This process is used when there is a power of sale clause authorizing the lender, in the event of default, to sell the property to satisfy the loan balance. If the power of sale clause includes the time, place and terms of sale, then that procedure must be followed. If not, the process is as follows:

A Notice of Default is recorded with the county in which the property is located when a borrower fails to make a loan payment. A copy of this Notice is sent by certified mail to the borrower within 10 business days of recording. The borrower has 90 days from the date of recordation to cure the default.

If the borrower fails to cure the default, a Notice of Sale is recorded. This Notice states that the lender or trustee will sell the property at auction in 21 days. This Notice is also sent certified mail to the borrower. It is also published weekly in a newspaper of general circulation in the county for three consecutive weeks prior to the sale date. The notice is also posted on the property, as well as in a public place, usually at the county courthouse.

The Trustee Sale Auction is held as a public auction at the time and place designated in the Notice of Sale, and conducted by the lender's representative. The successful bidder must pay immediately with cash or cashier's checks in the full amount of the bid. The successful bidder receives a trustee's deed on completion of the sale. The lender usually bids in the amount of the balance due plus costs. If no one else bids, the property reverts to the lender.

The borrower has no right of redemption, and deficiency judgments may be pursued in non-judicial foreclosure.

Links:

• Civil Code Section 890 et seq. - Rent Skimming
  Law which regulates owners from collecting rent, then not paying on their deed of trust.

• Civil Code Section 1695 et seq. - Home Equity Purchasing
  Law which regulates buyers of defaulted houses in California.
  Update: Court Strikes Down Surety Bond Requirement.

• Code Section 2924 - Trustee's Sale Procedure
  Law which regulates the Trustee and it's procedures when handling a foreclosure.

• Civil Code Section 2945 et seq. - Foreclosure Consultant
  Law which regulates the buyers' representatives of defaulted houses in California.
  
  
• California  Code of Civil Procedures