The Typical California Foreclosure Time Line
The law that governs foreclosure in California was changed in June as lenders are now required to give the defaulting homeowners a 30 day notice before they can start enforcing a foreclosure. If the lender had not attempted to negotiate a solution to the defaulting account with the homeowner, then the lender must wait 90 days before the foreclosure process can be initiated.
The law, from the perspective of the homeowner, has a huge loophole. If the mortgage lender has a “comprehensive mortgage modification program” then the new ruling will not apply. This will allow many mortgage lenders to be exempt from the new ruling based on their modification program. In order for the new law to be effective, this loophole must be amended.
The new law has caused controversy amongst the community. Some individuals claim that it encourages negligence on the part of defaulting homeowners by allowing them to stay for an extra 90 days without paying the mortgage. Others attest that the new law gives the beleaguered homeowner time to search for alternatives to foreclosure.
If the foreclosure process is started, homeowners have up to five days before the sale to pay all outstanding costs (including legal costs and penalties accrued from the foreclosure), thereby regaining possession of their homes.
The original mortgage agreement must have a power of sale if the foreclosure is to be conducted through a non-judicial sale. If the power of sale is not present, the mortgage lender must file a lawsuit to get a court order sanctioning the foreclosure. Then the foreclosure must go through a judicial sale. In a judicial sale, the homeowner can reclaim the property within a period of 12 months after the sale was conducted. This stipulation has led many California mortgage lenders to include the power of sale in mortgage agreements in order to avoid the judicial sale process.
The foreclosure timeline in California can be summarized as follows:
- ·The lender files a notice to foreclose on a property with the county recorder. The same notice is sent to the homeowner within ten business days. A reminder is sent within the first month.
- ·After 90 days, a date is set for a Trustee sale.
- ·25 days before the sale, a notice is sent to the IRS and 14 days before the sale the notice of the Trustee sale is recorded.
- ·The homeowner has up to 5 days before the sale to reclaim the property by settling the outstanding mortgage, legal fees and penalties.
- ·Sale date: The home is sold via auction.
The law applies to homes whose mortgages were recorded between the 1st of January 2003 and the 1st of January 2008. The California Foreclosure Moratorium or California Foreclose Prevention Act was drafted with the aim of giving temporary reprieve to homeowners facing financial hardship. It is crucial to take advantage of this grace period by seeking the counsel of an experienced realtor and discovering all of your alternatives to foreclosure.