If you get a loan to buy a home in California, you will probably sign two documents: a promissory note and a deed of trust. The bill of exchange is the document containing your promise to repay the loan together with the payment terms. The deed of trust, which is very similar to a mortgage, is the document that gives the lender a collateral interest on the property and is likely to contain a sale clause. In the event of non-payment, the power of sale clause gives the lender the right to sell the house in a non-judicial manner in order to recover the money lent.
What is a default letter?
Many California trust deeds have a provision that requires the lender to send a default letter if you fall behind with your payments. This notification informs you that the loan is in default. If you do not resolve the default, the lender may expedite the loan (call it overdue) and proceed with the pre-hedge.
When does foreclosure start?
Federal law generally requires the servicer to wait until the loan is no more than 120 days past due before pre-coverage officially begins. However, in some cases, if you violate a two-for-sale clause or if the servicer enters a higher or lower lienholder’s foreclosure deed, the foreclosure may start sooner. (12 CFR § 1024.41).
California State Fence Laws
Again, most California foreclosures are without prejudice, so this article focuses on those proceedings. Lenders generally go to court only if they need the court to resolve title issues or if they intend to seek a default judgment.
Contract Requirements for Previous Fencing under California Law
In California, the pre-notified lender or lender must contact you in person (the borrower), or comply with legal requirements to attempt to contact you, 30 days before filing a notice of default. (The filing of the default notice officially starts the foreclosure process.) The purpose of the contact is to assess your financial situation and explore ways to avoid foreclosure, such as loan modification. (Civil Code. Cal. § 2923.5).
During the first contact, the administrator should inform you that you have the right to request a subsequent meeting, which can be called by telephone. If you request a meeting, the administrator must schedule it within 14 days. The servicer can assess your financial situation and discuss options for avoiding foreclosure during first contact rather than at a later meeting. The servicer must provide you with the United States Department of Housing and Urban Development (HUD) toll-free number so that you can find a HUD Certified Real Estate Advisor.
California custody notice
Under California law, you receive two separate foreclosure notices: a notice of default and a notice of sale.
To initiate a foreclosure, the lender or trustee submits a notice of default to the county registry office and sends you a copy within ten business days. The notice of default gives you three months to repay the loan (give current). (California Civil Code §§ 2924, 2924b).
Notice of sale
After three months, the lender or trustee issues and records a notice of sale and sends you a copy at least 20 days prior to the sale date. (California Civil Code §§ 2924, 2924b). While the notice of sale can be recorded up to five days before the end of the three months, the date of sale cannot be earlier than three months and 20 days from the date of posting the notice of default. (California Civil Code § 2924).
At least 20 days before the sale, the notice of sale must also include:
The Foreclosure Sale
The sale is an auction, which is open to all bidders. At the time of sale, the lender generally makes an offer on the property by means of a “credit offer” rather than a cash offer. With a credit offer, the lender obtains credit up to the amount of the borrower’s debt. Sometimes the lender offers the full amount of the debt; sometimes it offers less. The highest bidder for the sale is the new owner of the property.
The right to reform before a foreclosure sale in California
A “reversal” is when a borrower pays what is past due, plus fees and costs, to keep the loan going and stop foreclosure. Under California law, borrowers can pay off the loan at any time up to five business days before the property is scheduled to be sold. (Cal. Civ. Code § 2924c).
California deficiency judgments
Sometimes a foreclosure sale doesn’t generate enough cash to pay off the full amount owed on the loan. The difference between the selling price and the total debt is called the “deficit balance”. Many states allow the lender to obtain a personal judgment, known as a “deficit judgment,” for this amount against the borrower.
California law prohibits a lender from obtaining a default judgment after a non-judicial foreclosure. (Cal. Civ. Proc. § 580d). (For a summary of California’s defaulting lawsuits, see California deficiency laws post-foreclosure.)
No repayment term after non-judicial foreclosure in California
Some states have a law that allows home foreclosure time after the foreclosure sale to redeem the property. But in California, foreclosed homeowners do not receive a redemption period after a non-judicial foreclosure.
Eviction after non-judicial foreclosure in California
If you don’t transfer after the foreclosure sale, the new owner, usually the lender, must give you a three-day notice to quit (relocate) before filing a formal eviction action in court. However, it is generally best to vacate the property before the clearance begins.
Get help from a California foreclosure attorney
Foreclosure laws are complicated. Sometimes servicers and lenders make mistakes or forget steps. If you think your lender or lender failed to take the necessary action, made a mistake, or violated state or federal foreclosure laws, you may have protection that could apply. to think of an alternative.
Consider speaking with a local coverage attorney or legal aid office immediately to learn your rights. An attorney can also tell you about ways to avoid foreclosure. Similarly, a HUD-approved real estate consultant can provide helpful information (at no cost) about alternatives to foreclosure.
For information on foreclosure defense call us at (877) 399 2995. We offer litigation document review support, mortgage audit reports, securitization audit reports, affidavit of expert witness notarized, and more.