Foreclosure in California is a process that allows mortgage lenders to regain full ownership of property when borrowers default on loan payments. Before a lender can foreclose on property in California, they must follow certain rules and laws before forcing a person from their home. These steps of foreclosure protect borrowers from unfair lending practices and allow them to plan for any disputes with their lenders. The law understands that events may come up in a person’s life that prevents them from being able to make their mortgage payments on time. The steps of foreclosure in California give borrowers a grace period to make good on their debts before they must be forced to leave the home. While every person’s circumstances will be different, the following steps outline the general process of foreclosure in California, assuming that the foreclosure is handled outside of court. For more specific guidance, contact a real estate attorney in your area.
Step 1: Failure to make at least the minimum payments by the borrower. Failure to make payments on time triggers the initiation of the pre-foreclosure process. The metaphoric clock begins to tick the first day a payment is missed. If a person is not able to catch up with their debt within the grace period established in the original mortgage contract, the lender may file a notice of default with the county recorder. A copy of the notice of default is sent to the borrower.
Step 2: Filing of the notice of default. Once a notice of default is filed, the borrower has 90 days to settle their debt to the lender or negotiate some kind of modification to the original loan agreement. At the end of 90 days, the lender may schedule a sale of the property. The notice of the sale is filed with the county and a copy is posted on the property, at a public place, and usually in the classifieds section of the newspaper. The sale may not take place sooner than 20 days before the notice of sale is filed.
Step 3: The day of the sale. When the required time limits have expired, the lender is authorized to auction off the property to the highest bidder. Any person may bid at the auction, including the original borrower. If the sale of the property is postponed 3 times, the notice of sale must be filed again.
What is nice about the law is that it generally favors the little guy. If the lender fails to perform any of the required steps or fails to recognize the required waiting periods as prescribed by law, the entire process has to start all over again.
Keep in mind that the lender retains the right to extend waiting periods in most circumstances; the law only restricts lenders from reducing the waiting periods. An actual foreclosure may take anywhere from a few months to a few years, depending on the efforts of the borrower and the actions of the lender. A person has a chance to save their home up until the day of the public sale. If the home can’t be saved on the day of the public sale, all bets are off and the home becomes the property of somebody else.