As a homeowner in California, understanding the foreclosure process can be vital to protect your homeownership. Unfortunately, life can be unpredictable, and unexpected financial setbacks can cause homeowners to fall behind on their mortgage payments. When that happens, the bank or lender can initiate the foreclosure process to recover the outstanding balance on the loan.
Stone & Sallus can help you learn about the California foreclosure process and what you can do to protect your home. We will guide you and show you your options to avoid foreclosure and the legal protections available to homeowners.
What is Foreclosure?
Foreclosure is a legal process that enables lenders to repossess and sell a property in the event of a borrower’s default on their mortgage payments. Understanding the foreclosure process is crucial for both homeowners and potential buyers to make informed decisions.
Types of Foreclosures in California: Judicial and Non-Judicial
In California, there are two types of foreclosures: judicial and non-judicial.
In a judicial foreclosure, the lender must file a lawsuit in court and prove that the borrower is in default before they can take possession of the property. The court will then issue a judgment of foreclosure, and the property will be sold at a public auction to pay off the debt. Judicial foreclosures are rare and occur only when a lender initiates a lawsuit against the borrower.
The more common type of foreclosure in California is non-judicial. A non-judicial foreclosure is initiated by the lender when the borrower is in default. Non-judicial foreclosures do not require court intervention and are faster and less expensive than judicial foreclosures.
California Foreclosure Process Timeline
The timeline for the foreclosure process in California can vary, but it can take as little as 110 days or as long as a year, depending on the type of foreclosure and the borrower’s response to the process.
In a non-judicial foreclosure, the lender must give the borrower a notice of default (NOD) after the borrower has missed three consecutive mortgage payments. The NOD is a written notice that informs the borrower that they are in default and have 90 days to cure the default by paying the overdue amount. If the borrower fails to cure the default within 90 days, the lender will issue a notice of sale (NOS).
The NOS must be published in a newspaper of general circulation for three consecutive weeks and posted on the property for at least 20 days before the sale date. The sale date must be at least 21 days after the first date of publication.
Steps in the California Foreclosure Process
The process typically begins with a notice of default, which is sent to the homeowner when they have missed several mortgage payments. After that, the lender will send a notice of sale, which sets a date for the trustee’s sale.
1. Missed Payments: The process begins when a homeowner misses one or more mortgage payments. After a grace period, the lender sends a notice to inform the borrower that they are in default, giving them time to rectify the situation.
2. Notice of Default: If the borrower fails to catch up on missed payments, the lender issues a formal Notice of Default (NOD). This public document alerts the homeowner and the public that the foreclosure process has begun, giving the homeowner a final chance to make payments before legal action proceeds.
3. Pre-Foreclosure Period: During this time, the homeowner may attempt to resolve the debt by catching up on payments, selling the property, or negotiating a loan modification. Lenders often allow a period of up to three months for the borrower to avoid foreclosure through these means.
4. Foreclosure Sale: If the borrower does not remedy the default, the lender will schedule a foreclosure sale or auction. The property is sold to the highest bidder, often the lender itself, who then becomes the legal owner unless a third party purchases the home.
5. Post-Foreclosure (Eviction): After the sale, if the borrower is still occupying the property, they may be evicted. At this stage, the new owner or the lender (if they acquired the property at auction) takes possession, and the borrower may face legal proceedings if they do not vacate the home.
Options to Avoid Foreclosure in California
If you are struggling to make your mortgage payments, there are several options available to help you avoid foreclosure. One option is a loan modification, which involves changing the terms of your loan to make the payments more affordable. To qualify for a loan modification, you typically need to demonstrate that you are experiencing a financial hardship that makes it difficult to keep up with your current payments.
Another option is a short sale, which involves selling the property for less than what is owed on the mortgage. The lender agrees to accept the proceeds of the sale as full payment for the outstanding balance on the loan. To qualify for a short sale, you typically need to demonstrate that you are experiencing financial hardship and that the value of your home has declined.
A deed in lieu of foreclosure is another option, which involves giving the property back to the lender to avoid foreclosure. To qualify for a deed in lieu of foreclosure, you typically need to demonstrate that you are experiencing a financial hardship and that the property has no other liens or encumbrances.
Legal Protections for Homeowners in California
California law provides several legal protections for homeowners facing foreclosure. For example, homeowners have the right to reinstate the loan by bringing their payments up to date at any point during the foreclosure process. They also have the right to redeem the property by paying off the outstanding balance on the loan before the trustee’s sale.
California law also protects homeowners from predatory lending practices, such as charging excessive fees or interest rates. If you believe that you have been a victim of predatory lending, you may be able to file a lawsuit against the lender to seek damages.
Do I Need An Attorney?
If you are facing foreclosure in California, hiring an attorney can be an effective way to protect your homeownership. A real estate attorney can help you understand your legal rights and options and guide you through the foreclosure process.
Some of the benefits of hiring an attorney for foreclosure cases include:
- Legal expertise: Real estate attorneys have a deep understanding of California foreclosure law and can advise you on your legal rights and options.
- Negotiation skills: An attorney can negotiate with your lender on your behalf to help you avoid foreclosure or find a solution that is in your best interest.
- Court representation: If your case goes to court, an attorney can represent you and present your case to the judge.
- Protection of your rights: An attorney can help protect your rights throughout the foreclosure process and ensure that your lender is not engaging in illegal or predatory practices.
- Time and stress savings: By handling the legal aspects of your foreclosure case, an attorney can save you time and reduce the stress and anxiety associated with the process.
Navigating the California foreclosure process can be a daunting and stressful experience, but it is essential for homeowners to understand their rights and options to protect their homeownership. From exploring options to avoid foreclosure, such as loan modifications and short sales, to understanding legal protections, including the right to reinstate the loan and protections against predatory lending, homeowners have resources available to help them navigate the process. Additionally, hiring an experienced attorney, such as Stone & Sallus, can provide invaluable legal expertise, negotiation skills, and protection of your rights throughout the foreclosure process. If you are facing foreclosure in California, don’t hesitate to seek help and resources to ensure the best possible outcome for your situation. Contact Stone & Sallus for guidance and support.
