Judicial Foreclosure is rare. Non-Judicial Foreclosure is prominent. Security Instruments are the Deed of Trust and Mortgage. There is a Right of Redemption in judicial foreclosure only. It usually takes 110-120 days or more for the non-judicial foreclosure process to be completed.
- Rent Skimming - Civil Code Section 890 et seq. -
Prohibition from collecting rent, and not paying on the deed of trust.
- Home Equity Purchasing - Civil Code Section 1695 et seq. -
Strict Prohibition from buying a home in foreclosure (when a Notice of Default has been filed) without first complying with laws including cancellation rights, forms, disclosures, equity purchase disclosures and contracts.
- Trustee's Sale Procedure - Code Section 2924 -
Regulates Trustee foreclosure procedures.
- Foreclosure Consultant - Civil Code Section 2945 et seq. -
Prohibition or restrictions on buyers' representatives of homes after a Notice of Default has been filed.
- Judicial foreclosure is rare in California. Most loan documents (Deed of Trust) have a power of sale clause. Judicial foreclosure is used by the lender or holder of rights (servicer, investor) when seeking a deficiency judgment in court by decree of foreclosure and order of sale. The borrower has a one year Right of Redemption.
- Non-judicial foreclosure is the most common foreclosure procedure used in California. Most loan documents (Deed of Trust) have a power of sale clause authorizing the lender to conduct a foreclosure auction to sell the defaulted borrower’s property. The proceeds obtained are used to pay the outstanding loan balance and associated costs. Any excess is due the borrower.
Procedures of Non-judicial Foreclosure Sales:
If the loan documents (Deed of Trust) have a power of sale clause containing express details of the sale with respect to time, place and terms of sale, then that those details govern the procedure.
A Notice of Default (NOD) is recorded in the county recorders office where the property is located. The Notice of Default (NOD) is served by certified mail to the borrower within 10 business days of recording. The borrower has 90 days from the date of recordation to cure the default.
If there is no cure of the default, a Notice of Foreclosure Sale (NFS) is recorded. This Notice of Foreclosure Sale (NFS) states that the lender or trustee will sell the property within 21 days. The Notice of Foreclosure Sale (NFS) is also sent certified mail to the defaulted borrower and published in a newspaper of general circulation in the county for three consecutive weeks prior to the slated sale date. The notice is also posted on the property, as well as in a public place, usually at the county courthouse.
The Trustee Sale Auction is a public auction at the time and place designated in the Notice of Foreclosure Sale (NFS). The sale is conducted by the lender's representative. Buying at the foreclosure sale requires bidding against other potential buyers usually causing the price to rise. At auction the minimum bid or price is set by the credit bid, the minimum amount due the lender on the loan with associated costs. This stage will require full payment in ‘cash’ or a ‘cashiers check’. Buyer beware, their may be liens or judgments against the property that the successful bidder will inherit.
KEY: Non-Judicial Foreclosure: If no one else bids, title goes to the lender, and the lender holds the property as real estate owned or an REO. The sale is FINAL with no Right of Redemption. Non-judicial Deficiency Judgments are not allowed.
After Sale or REO Stage: At the REO stage (real estate owned by bank) you are buying the property directly from the lender or its representative (an REO auction service). However, at this stage liens or judgments have already been eliminated by the foreclosure sale, unlike buying in the auction or pre-foreclosure stages.
Richard Ivar Rydstrom, Esq. email
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