Foreclosure, California Style

Now that you received the Notice of Default, you have started into the non-judicial foreclosure process. Most of you are learning about the foreclosure process for the first time – up close and personal. You need to know how the process works and how you’ll be treated. This article, taken from my recent book, The Notice of Default Handbook” will help you understand the timelines and all of your options at each phase.

When foreclosure ends in repossession of the property by the bank or sale at trustee auction, your credit report is stained by that “F” for 10 years. It’s truly the “F-word” on your credit report and should be avoided at all costs. No other stain on your credit report does as much damage for as long. Part of the reason for this is that it’s actually very easy to avoid. The process provides for your protection during a prolonged period during which you should be able to resolve things without letting the property go to auction.

California and thirty-three other states use a non-judicial foreclosure process. Trust Deeds are used instead of mortgages and real estate purchases involve three parties; the trustor (borrower), the beneficiary (lender), and the trustee (neutral third party receiving the right to foreclose). The Trust Deed includes a “power of sale” clause that gives the trustee the right to pursue collection of the debt; ultimately enforced by the beneficiary’s right to sell the house when you fail to make the agreed upon payments.

Defaults of as little as 30 days can initiate the process, although 90 days is typical, and longer as this housing slump has deepened. In California, the foreclosure timeline begins when the Trustee files the Notice of Default (NOD). You received it several days later.

Then, no sooner than ninety days later the Trustee publishes a Notice of Trustee Sale in the local paper and simultaneously files that notice with the County Recorder’s Office and sends you a personalized copy…taped to your front door!. No sooner than twenty days later your home may be sold at public auction for the amount of the debt plus foreclosure costs. If no one bids at the auction, the lender assumes ownership of your home as a “Real Estate Owned” asset or REO.

Many states give homeowners a redemption period…some up to several months… in which they can regain ownership by arranging for new financing. See Appendix A for State-by-State redemption periods. There is no redemption period in CA. So, this sale is final.

For an explanation of the Judicial Foreclosure Process, see Appendix B.

Eviction, Too!

But, foreclosure is only half the story. Once your home is either sold at auction or “taken back” by the lender, you must vacate at the discretion of the new owner. Many South Bay residents are choosing to push the legal process even further by staying in the home until they are actually evicted. Often, this is as much as 30-days after the home is sold at auction.

The eviction process typically goes like this:

You are formally notified that you must vacate by a certain date…usually three days after the notice. If you do not leave by that date the new owner must go to court to file an eviction complaint and then serves you with Unlawful Detainer Notice. You may “answer” the complaint with an appeal to the court but most do not. You likely don’t have grounds for contesting the eviction.

After the court hearing, at which you do not appear, the court orders an eviction judgment. This allows the sheriff to physically remove you from the premises if you do not leave voluntarily by a certain date…usually 4-5 days after the eviction judgment.

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