Foreclosure Laws in California (CA)Topic: Foreclosure
California follows both judicial in-court and non judicial or out of court ways of moving ahead with foreclosure. As in all states where both methods of foreclosure are used, the deciding factor as to which way will be chosen, is whether or not the mortgage or deed of trust has a power of sale clause in it. The power of sale clause allows the bank to pursue the foreclosure process without going before a judge to proceed. This obviously saves the bank both time and money. So, in most cases this is the process that will be pursued or followed. Most mortgages or deeds of trust constructed these days do contain a power of sale clause because this protects the bank. So, out of court foreclosure is the most common method. In the absence of a power of sale clause, judicial or in court foreclosure must be used.
In court foreclosure begins with the bank filing a lawsuit against the homeowner who has not been able to keep current on their payments. The purpose of this lawsuit is to get a court order to foreclose. At this point, both judicial and non judicial processes work the same way. The home will be scheduled for a trustee's sale or auction. When judicial foreclosure is followed the bank does receive the bank does receive the right to seek deficiency judgment against the former home owner, after the sale has take place. This means that if the bank feels that it did not receive enough money from the sale of the house, they can still seek additional money from the person who lost the house. The amount of money that they can seek is enough to make up the difference between what they received from the sale and what was owed on the loan. The only way that this course of action makes any sense to the lending institution, is if the person who lost the house at auction has any other assets to try to take. When a person loses their house this way, it is almost always the case that they have depleted from their life, anything else of value in the attempt to save the home from foreclosure. The banks realize that pursuing such a person for money they don't have is like trying to pull water from an empty well. It is therefore a waste of their time and resources to attempt such an action. If they find that the former home owner does have other property or financial resources, they will very likely continue to such for that deficiency judgment. So you are only safe if you are broke.
In out of court foreclosure, no lawsuit needs to be filed to begin. The bank can start foreclosure without judge's consent. If the power of sale clause contains language that details the time, place and terms of a foreclosure sale, then these instructions must be followed. Most power of sale clauses are not so complete however and most out of court foreclosures follow the usual process outlined below. First, a notice of sale must be recorded in the county where the home is located, no less than fourteen days before the scheduled sale. Further this same notice of sale must be mailed to the homeowner. This letter must be sent certified return receipt mailed to the homeowner. Also, this letter must be sent to the home owner no less than twenty days before the scheduled sale date. This same twenty days before the sale time frame applies to the requirement of posting a public notice of the sale on the building itself and one other public place in the county where the home is to be sold. The notice of sale needs to contain both the time and place the sale will be held. It must also list the trustee's name (the banks lawyer), his address and phone number. It must also contain the owner address of the home going up for sale at the auction and statement that is going to be sold at auction. The homeowner has all the way up until 5 days before the scheduled trustee's sale or auction to stop the sale. To stop the sale, the home owner must cure the default. That means they must find a way to come up with enough money to pay all back and current payments and pay all late fees-attorney fees and interest. If this does not occur, the trustee's sale will be held during normal business hours during the work week. That is 9:00 am to 5:00 pm Monday through Friday pacific standard time. The auction will take place at the location designated in the notice of sale. The sale will be an auction.
The home will be awarded to the highest bidder at the sale. The trustee or attorney will require proof the winning bidder's ability to pay the winning bid price. It will be up to the lawyer, what proof, if any, they will demand. Postponement of the trustee's sale can occur at the banks discretion. The announcement of that postponement will be made at the scheduled trustee's sale. So it could come as quite a surprise to anyone who shoed up to the sale, hoping to bid on the property.
California does not allow the person who loses their house to such a sale any right of redemption. This means there is virtually no chance that the former owner of the house could regain possession of it later. A right of redemption which is allowed in some states is a time period following the trustee's sale during which the person who lost the home could pay the amount of the highest bid at auction plus fees and interest and once again gain ownership of the home. This is not an option in California.
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