Are You in Danger of Foreclosure? |
Stages of Foreclosure in California
California has one of the highest foreclosure rates in the country, with nearly a quarter of a million properties sold through foreclosure in 2008.
Not surprisingly, California homeowners are now a prime target for companies promising help, but instead exploiting homeowners through overpromising, overcharging and sometimes running foreclosure scams.
Stage 1: When a Borrower Fails to Make Mortgage Payments
If you're having trouble making your mortgage payments, you should
contact your lender and a HUD-approved counselor before you default on your loan. If you're already in default, you still have time to work out a plan to catch up on your payments.
When a homeowner goes into default and the lender wants to begin foreclosure, California law first requires the lender to file a default notice. The lender will record the notice in the same county as the property, and mail a copy to you as the homeowner within 10 days.
A new law passed in 2008 gives some homeowners additional time. If you took out your loan between January 2003 and December 2007, your lender must contact you to try to work out a suitable financial plan at least 30 days before filing
the default notice.You'll also receive help in working with your lender.
If the lender tries but isn't able to reach you, it can proceed with the regular process.
All homeowners should make sure to read any letters from lenders, because they may include important information. You should also answer calls from your lender, because sometimes lenders give more time to homeowners it can reach.
If you're not able to make the required payments or work out other terms with your lender, it'll begin the foreclosure.
Stage 2: When a Lender Starts the Foreclosure Process
The lender starts the foreclosure proceeding by filing
the default notice. California allows lenders to use a non-judicial foreclosure process if the mortgage contains a "power of sale" clause. Those clauses allow the lender or a trustee to sell the property when the borrower defaults. Most foreclosures in California are non-judicial foreclosures.
If your mortgage contains a power of sale clause that details how a foreclosure sale will take place, the lender must follow those guidelines. If the power of sale clause doesn't outline the specifics of the foreclosure sale, the lender must follow the state rules.
Under those rules, the lender must publicly advertise the trustee's sale in a local newspaper for three consecutive weeks, beginning at least 20 days
before the sale. "Trustee's sale" is the common term used for a foreclosure sale. Usually a lender's representative, called a trustee, conducts the sale and all of the notice requirements leading up to the sale.
The lender must also:
mail a copy of the notice of sale to the borrower;
place a copy in a noticeable place on the property; and,
post a copy in a public place in the same county as the property.
Finally, the lender must record the notice of sale in the county recorder's office at least 14 days before the sale.
Is There a Reinstatement Period? You have a "redemption period" of 90 days following the default notice filing. That means you can use this period to make all delinquent payments to "cure the default," which would end the foreclosure. This is sometimes called a reinstatement period.
You can stop the sale if you bring your loan current five days before the sale. If you don't make all delinquent payments, the foreclosure sale will go forward.
Most foreclosures in California take about 120 days to complete.
Stage 3: Selling a House in Foreclosure
California requires the lender to wait 90 days after filing the default notice before setting a sale date.
California allows both judicial and non-judicial foreclosures. Most foreclosures in California are non-judicial foreclosures, but occasionally a lender will file a complaint in court to foreclose on a property.
The trustee must sell the property to the highest third-party bidder. If there aren't any bidders, the property will go to the lender.
What Is the Eviction Process? If you don't leave the property voluntarily after the foreclosure sale, the new owner will have to file a lawsuit called an "unlawful detainer" to evict any occupants of the property.
Eviction actions in California move quickly, and will usually be over within 30 to 40 days.
If you live in a city with rent control, you will be under their eviction regulations. You can usually find them on your city's website under "housing," "city attorney," or "city services."
Before filing the unlawful detainer, the new owner must give the occupants notice and
tell you to leave.
The new owner must wait for the time stated on the notice to expire before they can file the unlawful detainer in court.
Once the new owner files the unlawful detainer, you will have five days to provide your written response, called
an answer. The court will set a trial date within
20 days.
If the judge grants possession to the new owner, whether it is because you failed to show up for your court date or you lost your case, the new owner will get a "writ of possession" within
10 days.
The sheriff will then deliver the writ of possession to you, giving you five days to move. It usually takes two to three weeks before the sheriff gives you the writ of possession.
If you don't move within five days, the sheriff can lock you out of the house. You must get your belongings out of the property by then, or you risk losing them.
Stage 4: After a Foreclosure
California law prohibits a lender from taking more than one action against a borrower in a
foreclosure proceeding. This means that once a lender sells the property in a foreclosure sale, if the sale proceeds do not cover the balance of the loan, the lender can't take the borrower to court to redeem the remaining loan balance in what is referred to as a deficiency action.
In the rare case that a lender pursues a judicial foreclosure, the lender may bring a deficiency action at the same time and obtain a judgment against the borrower for the difference in the loan balance and the sale price of the property.
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