September 24th, 2010 6:47 PM by Dave Gubler
Many of my clients are unclear regarding how the foreclosure process works in California. If you are experiencing mortgage hardship you should make yourself very familiar with the stages of foreclosure in California. With few exceptions a short sale is a superior alternative to foreclosure and I advise all struggling homeowners to be familiar with the basics of the short sale processs and the benefits of short sale. Many will be eligible for the government sponsored HAFA short sale; of those who are not, most if not all, will still benefit with a short sale vs foreclosure.
The following time-line applies to non-judicial California Foreclosures under a Deed of Trust. (non-judicial foreclosure is used far more commonly in California than a Judicial Foreclosure and California is a "one-action" state)
Foreclosures begin when the Trustor (borrower) stops making the monthly payments to the Beneficiary (Lender), the first missed payment (30+ days) is technical default, but in practice , most Beneficiaries do not begin the process until the third payment (90+ days) is missed. If the Beneficiary cannot resolve the defaulted payment amount with the Trustor through Forbearance or other Loss Mitigation measures, the Beneficiary will instruct the Trustee to begin Foreclosure proceedings.
•1. Notice of Default: Foreclosure proceedings start with a Notice of Default (NOD). The lender (or trustee for the lender) files a Notice of Default with the county, after the propert owner (trustor) fails to make loan payment(s). This is done to give constructive notice to the public which is required by law. The owner may be delinquent anywhere from 15 days to 12 months or more. After the recording of the Notice of Default the borrower and junior lien holders (2nd mortgage, etc.) are given proper notification and the borrower has at least 90 days to bring their account current with lender. This time period is also referred to as the Reinstatement Period.
•2. Notice of Trustee Sale: If the borrower does not reinstate their account (or obtain some other form of loan workout such as a loan modification) the lender can authorize and instruct the Trustee to record the Notice of Trustee Sale (NOS). A notice of trustee sale must be mailed by certified mail to the borrower, return receipt requested, 20 days before the foreclosure sale. The Notice of Trustee Sale is recorded at the County Recorder's office in the County where the property is located at least 14 days before the sale. It contains the date, time, and place where the auction (trustee sale) will take place. This notice has to be published in a adjudicated newspaper in the city where the property is located. The NOS is posted on the property as a requirement of law. If access to the property is restricted by means of a central guard gate then the notice must be posted on the guard gate. Additionally the NOS must be posted at on public place in the city where the property is to be sold at least 20 days prior to the sale. The borrower may reinstate the loan (bring it current) up to 5 days prior to the trustee sale.
Day 1: Notice of Default recorded with County Recorder.
Within 10 Business Days: Trustee mails Notice of Default to borrower(s) with the recording date.
After 3 Months: Set sales date, time and location unless a bankruptcy has been filed, or other event (loan modification) occurs that holds the timeline.
20 Days Prior to Sale Date: Public Notice of Sale.
14 Days Prior to Sale Date: Notice of Sale must be submitted to recorder's office.
5 Days Prior to Sale Date: Borrower's right to reinstate expires.
Sale Date: The property is sold to the highest bidder or reverts back to the lender (beneficiary).