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A Guide to Foreclosure Laws in California

Property owners, if you're behind in the monthly payments or considering the possibility of a strategic mortgage default, you should obtain a basic understanding of the non-judicial California mortgage foreclosure laws and learn what options you have. This guide to foreclosure laws in California will help educate you on your options and legal rights as a home owner when at risk for foreclosure.

The California Foreclosure Legal System

Due-process under the California mortgage foreclosure laws allows lenders to settle accounts when mortgages payments are not paid as agreed. This protects property owners (you) from lenders (your bank) who might unreasonably (unlawfully) take a property in the foreclosure process.  In California, there are two possible methods of foreclosing on a mortgage:

  1. Judicial Process: This California mortgage foreclosure law involves the filing of a lawsuit.  As a result, this method is generally more expensive for lenders and is rarely used.  This process is more likely to be used for non-residential properties, and where complex legal issues exist that need to be addressed by the court.
  2. Non-Judicial Process: California law also allows for the non-judicial foreclosure of mortgages.  The non-judicial California mortgage foreclosure law is used for the nearly all residential properties. This process is often administered directly by the loan servicing company, who serves as the “foreclosure trustee” during this process.

Learn more about the California foreclosure process, or continue reading for more California foreclosure laws.

California Foreclosure Law and Steps

The following processes or steps are defined under the California mortgage foreclosure laws:

  1. Pre-Notice of Default - Under the foreclosure law in California [Civil Code Section 2923.5], before lenders may begin the mortgage foreclosure process, they are required to attempt to contact the borrowers 3 times to determine if any alternatives to foreclosure exist.  This process must be completed 30 days prior to the filing of a "Notice of Default", effectively slowing-down the process. By requiring lenders to work with the borrowers, the California mortgage foreclosure laws better encourage alternatives to foreclosure, such as short sales.
  2. Notice of Default - This California mortgage foreclosure law specifies that the Notice of Default is recorded “in the office of the recorder of each county wherein the mortgaged or trust property or some part or parcel thereof is situated”. Additionally, the California mortgage foreclosure laws require that a copy of the Notice of Default is mailed or delivered to the property owner.
  3. Notice of Trustees Sale - Indicates the date and location of the auction. The California mortgage foreclosure laws also require that a copy of the “Notice of Trustees Sale" is published in a newspaper with a general circulation and that a copy is served to the property owner who is subject to foreclosure, as well as posted onto the property, usually on the front door or front gate.
  4. Postponement (optional) The California mortgage foreclosure laws (Civil Code section 2924g) allow the lender’s trustee to postpone the foreclosure auction for up to one year without having to restart the California non-judicial foreclosure process.
  5. Trustees Sale (Auction) - Foreclosure law in California allows an auction to occur in as little as 21 days after the recording of the Notice of Trustee Sale. The property is sold at an auction in a public location to the highest bidder. 
  6. Deed Transfer - Under California mortgage foreclosure laws(Civil Code 2924 h), after the Trustees Sale, the final step in the California foreclosure process is the transfer of the trustee’s deed. The trustee’s deed transfers property to the winning bidder. By default, this will be the lender if no bid higher than the lender's opening bid is received.

Be sure to explore your options fully before starting the California foreclosure process. Understanding foreclosure law in California can illustrate that modifying your loan or a short sale can often be a much better alternative. Find out what you can do to prevent foreclosure by exploring our free eBook on short sales in California or by contacting us for more information