Understanding the Foreclosure Process in California

The number of foreclosures continues to grow in this country. There are some states where the rate is higher than the rest of the nation. Understanding the foreclosure process in California may not stop you from losing your home to the lenders, but it may provide a way to reduce the financial pain. The process follows a carefully defined path so that all the regulations are carefully addressed.

The first step in the path is the Notice of Default. This initial notice is recorded when the borrower has failed to fulfill the loan terms. Issuing the Notice of Default is the beginning of the foreclosure path. The borrower is said to be in pre-foreclosure status. This time period is one during which many people in pre-foreclosure are able to come up with the funds to correct the situation. When this occurs, the process doesn’t go any further.

Once the Notice of Default is filed, the lender must wait another 90 days. At that time, the Notice of Trustee Sale can be posted. This notice sets the auction date. There is still time for the homeowner to do something about the default.

The properties are designated as in a pre-foreclosure status from the time of the first default notice until the property is actually sold. During this entire time, the property could be purchased directly or through a realtor. The property could also be refinanced through the original lender or sometimes a new lender.

The next major milestone in the process of foreclosure is the auction sale. The minimum time between Notice of Trustees Sale recording and the date of the auction is twenty days. Auctions can be postponed for as long as a full year.

Postponement can be due to any of several reasons. The borrower and the lender can come to a mutual agreement to postpone or or forbear. Filing for bankruptcy is another cause to postpone the auction. If the homeowner files for bankruptcy, the sale may be postponed. The beneficiary may be willing to postpone an auction, usually to take advantage of a sale in escrow. A trustee can elect to postpone to get lender’s instructions or for similar reasons. In rare cases, the courts can postpone for such reasons as an allegation of fraud by a lender.

If the auction sale is not canceled or postponed, it is sold at auction. When the auction occurs, the property can be purchased by investors or other third party buyers. The trustee transfers the property to the winning bidder. If no bids are received, the property reverts to the banks. Again, there are opportunities for investors private buyers to obtain property.

The foreclosure process in California is very similar to those in other parts of the world. While it is a stressful and financially devastating event to many people who experience it, it can also be an opportunity to get out from under a underwater mortgage. In this instance, care must be taken to manage the process correctly at every step. If the home can be sold during pre-foreclosure, it is less of an impact on the credit report.

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