 California Mortgage Loan Modification Guidelines
When you develop a definite plan of action with well-timed, well-informed
steps, you can stop the foreclosure process and save your home. We have
outlined the foreclose process for the state of California.
Judicial Foreclosure Available: Yes
Non-judicial Foreclosure Available: Yes
Non-judicial Sale
Typically, a title insurance company is named as the trustee to arrange
the sale of the real estate.
California is famous for its one-action rule, in which a lender must carefully
elect one action to take against the borrower if the borrower defaults.
If the lender forecloses the deed of trust out of court, the lender has
chosen one action and may not bring a lawsuit to recover a deficiency,
which would be a second action. If the lender chooses to sue the borrower
and obtain both a foreclosure order, and if the proceeds of the judicial
sale of the real estate are not sufficient to repay the loan balance, then
a deficiency for the balance. Such a suit is permitted as the lender's
one action.
California lenders rarely elect judicial foreclosures.
Preliminary Notice: Non-judicial
Notice of Sale
The notice of sale must contain the name, street address and phone number
of the trustee conducting the sale and the original trustor, along with
a statement warning borrowers that their property is about to be lost at
a public foreclosure sale and to contact a lawyer for an explanation.
The notice must give the street address. If no street address exists,
the notice must state the address of the beneficiary from whom a set of
directions to the property may be obtained if they are requested in writing
within ten days from the first publications of the foreclosure notice.
Advertising
A copy of the notice of sale must be posted in a conspicuous place on
the property to be sold at least 20 days before the sale. If access to
the property is restricted by means of a central guard gate, then the notice
must be posted on the guard gate. A copy of the notice must be posted at
one public place in the city where the property is to be sold (or judicial
district in rural areas) at least 20 days before the sale.
Recording
A notice of trustee sale must be recorded at least 14 days before the
sale.
Mailing
A notice of trustee sale must be mailed by certified mail, return receipt
requested, 20 days before the foreclosure sale to the borrower, to anyone
who requests notice or recorded a request and to the trustors, beneficiaries
or parties at interest.
Sale Procedures: Non-judicial
Time
All sales under a power of sale in a deed of trust will be made between
the hours of 9:00 a.m. and 5:00 p.m. on any business day, Monday through
Friday, at the time specified in the notice of trustee sale.
Place
The sale shall commence at the location specified in the notice of sale.
Manner
The sale must be made a public auction to the highest bidder. The trustee
has the right to require every bidder to show evidence of ability to pay
the full bid in cash, cashier's check or certain bank checks. Each bid
is by law an irrevocable offer to purchase. However, a higher bid cancels
an earlier bid. It is unlawful and a criminal offense (a fine of $10,000
or up to one year in jail) to offer anyone consideration not to bid, or
to fix or restrain the bidding process in any manner.
Postponement
Sales may be postponed by announcement at the time and location specified
for the intended sale. The borrower may postpone the sale in order to obtain
cash, provided the written request for postponement identifies source from
which the funds are to be obtained, and the postponement is only for one
business day. The borrower may obtain one such postponement.
Reinstatement
Debtors may reinstate up to five days before non-judicial foreclosure
sale.
Junior
Junior lien holders may no longer redeem, so they may try to protect themselves
by (1) advancing funds to bring the senior loan payments current, then
foreclosing for the sums advanced; (2) bidding at the foreclosure sale
so the price will be sufficient to pay off the senior and the junior liens;
or (3) acquire the property by bidding at the foreclosure. If the debtor
has a right to redeem and does so, the junior who purchased the home must
be reimbursed. Junior liens do not reattach the property if a borrower
redeems a senior lien whose foreclosure extinguished the junior. This helps
borrowers by encouraging the junior to bid up to the property to fair market
value at the foreclosure sale, or else lose out, giving borrowers closer
to fair value at sale.
Deficiency
Lenders may not seek a deficiency judgment if (1) the foreclosure is non-judicial
or if (2) foreclosure is on a purchase money obligation. The same rules
do not apply to guarantee or later lien holders. The lenders may seize
alternative collateral. If the lender forecloses by filing a lawsuit, then
the lender can obtain both a foreclosure sale order and a judgment against
the borrower for a deficiency after the court-ordered sale, but only for
the difference between the judgment and the fair value of the security.
Redemption
A borrower's right to redemption is terminated when a deficiency judgment
is waived or prohibited. When redemption is permitted, after judicial foreclosure,
only the borrower can now redeem and junior lien holders or "redemptionors" may
not. When the lender is permitted to seek a deficiency, elects to pursue
a deficiency and forecloses judicially, the borrower may redeem 12 months
after sale, but a full credit bid by the lender cuts it to 3 months.
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