If you’re facing a foreclosure in California, it’s a good idea to learn as much as you can about the process. In this article, you can find out:
You’ll also get information about significant protections under federal law for homeowners in foreclosure, like the 120-day preforeclosure period.
Under federal law, in most cases, a loan servicer must wait until you're over 120 days' delinquent before officially starting the foreclosure process. (12 C.F.R. § 1024.41). During this time, you may submit an application to your servicer asking for an alternative to foreclosure. You might be able to stay in your home by working out a modification, for example, or give it up without going through a foreclosure in a short sale or deed in lieu of foreclosure.
Federal law also provides other protections to homeowners facing a foreclosure, both before and after foreclosure begins. For instance, after you fall behind in payments, the servicer has to try to contact you to talk about the situation no later than 36 days after the delinquency. The servicer must attempt to contact you again within 36 days after each subsequent delinquency, even if it previously talked to you. (12 C.F.R. § 1024.39). Also, dual tracking is prohibited.
The citations to California foreclosure statutes are:
In this article, you’ll find a summary of some of the key features of California’s foreclosure laws along with relevant citations to the statutes so you can read the laws yourself. Keep in mind that statutes change, so checking them is always a good idea. (If you need help finding the statutes, see Finding Your State’s Foreclosure Laws.)
How courts and agencies interpret and apply the law can also change. And some rules can even vary within a state. These are just some of the reasons to consider consulting an attorney if you’re facing a foreclosure.
California foreclosures are usually nonjudicial, which means they happen outside of court. Judicial foreclosures, which go through the court system, are also possible. But a bank usually chooses the judicial route only if it’s necessary for a court to resolve problems with the property’s title or if the bank is planning on seeking a deficiency judgment. (To learn more, see Nolo’s article Why Would a Lender Choose a Judicial Foreclosure Instead of a Nonjudicial Foreclosure?)
Because foreclosures in California are typically nonjudicial, this article focuses on that process.
In California, the foreclosing bank or servicer must personally contact the borrower—or satisfy the legal requirements for attempting to contact the borrower—30 days before recording a notice of default (the official start to the foreclosure process). The purpose of the contact is to assess the borrower's financial situation and explore ways to avoid foreclosure, like with a loan modification. (Cal. Civ. Code § 2923.5).
During the initial contact, the servicer has to tell you that you have the right to ask for a subsequent meeting, which can take place over the phone. If you request a meeting, the servicer has to schedule it to occur within 14 days. Though, the servicer may assess your financial situation and discuss foreclosure avoidance options during the first contact rather than at a later meeting. The servicer also has to give you the toll-free telephone number for the United States Department of Housing and Urban Development (HUD) so you can find a HUD-certified housing counselor.
Under California law, you’ll get two separate foreclosure notices: a notice of default and a notice of sale.
Notice of default. To start the foreclosure, the bank or trustee (the third party that manages nonjudicial foreclosures) records a notice of default in the county recorder’s office and mails a copy to the borrower within ten business days. The notice of default gives you three months to reinstate the loan (bring it current). (Cal. Civ. Code §§ 2924, 2924b).
Notice of sale. The bank or trustee then issues and records a notice of sale, and mails a copy to the borrower at least 20 days before the sale date. (Cal. Civ. Code §§ 2924, 2924b). While the notice of sale may be recorded up to five days before the lapse of the three-month period, the sale date can’t be earlier than three months and 20 days after the notice of default's recording date. (Cal. Civ. Code § 2924).
At least 20 days before the sale, the notice of sale must also be:
California foreclosure sales happen between the hours of 9 a.m. and 5 p.m. on business days, Monday through Friday. (Cal. Civ. Code § 2924g).
"Reinstating" is when the borrower catches up on the defaulted mortgage's missed payments, plus fees and costs, to stop a foreclosure. Under California law, borrowers may reinstate the loan at any time until five business days prior to the date set for the sale of the property. (Cal. Civ. Code § 2924c).
In some states, you can redeem your home within a specific amount of time after the foreclosure. In California, however, foreclosed homeowners don’t get the right to redeem the home following a nonjudicial foreclosure.
When the total mortgage debt exceeds the foreclosure sale price, the difference is called a "deficiency." Some states allow the foreclosing bank to seek a personal judgment, which is called a "deficiency judgment," against the borrower for this amount. Other states prohibit deficiency judgments with what are called anti-deficiency laws.
California has an anti-deficiency law that states a foreclosing bank can’t get a deficiency judgment after a nonjudicial foreclosure. (Cal. Code Civ. Proc. § 580d). (For a summary of the deficiency judgment laws in California, see California Laws on Post-Foreclosure Deficiency.)
If you want more information about foreclosure procedures in California or want to find out about potential defenses to a foreclosure, consider talking to a foreclosure lawyer. Also, consider making an appointment to speak to a HUD-approved housing counselor.