California Foreclosure Law

[Moe Bedard]

I have pulled from various sources to give you a thorough explanation California Foroeclosure Law.



From http://www.foreclosurelaw.org/Califo...losure_Law.htm


- Judicial Foreclosure Available: Yes

- Non-Judicial Foreclosure Available: Yes

- Primary Security Instruments: Deed of Trust, Mortgage

- Timeline: Typically 120 days

- Right of Redemption: Varies

- Deficiency Judgments Allowed: Varies

In California, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.

Judicial Foreclosure

The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off to the highest bidder.

Using this type of foreclosure process, lenders may seek a deficiency judgment and under certain circumstances, the borrower may have up to one (1) year to redeem the property.

Non-Judicial Foreclosure

The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines".

Power of Sale Foreclosure Guidelines

If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:

A notice of sale must be: 1) recorded in the county where the property is located at least fourteen (14) days prior to the sale; 2) mailed by certified, return receipt requested, to the borrower at least twenty (20) days before the sale; 3) posted on the property itself at least twenty (20) days before the sale; and 4) posted in one (1) public place in the county where the property is to be sold.

The notice of sale must contain the time and location of the foreclosure sale, as well as the property address, the trustee's name, address and phone number and a statement that the property will be sold at auction.

The borrower has up until five days before the foreclosure sale to cure the default and stop the process.
The sale may be held on any business day between the hours of 9:00 am and 5:00 pm and must take place at the location specified in the notice of sale. The trustee may require proof of the bidders ability to pay their full bid amount. Anyone may bid at the sale, which must be made at public auction to the highest bidder. If necessary, the sale may be postponed by announcement at the time and location of the original foreclosure sale.

Lenders may not seek a deficiency judgment after a non-judicial foreclosure sale and the borrower has no rights of redemption.

More information on California foreclosure laws.


From http://www.foreclosure.com/statelaw_CA.html

California Foreclosure Law is Non-Judicial.

Redemption Period

Once the Notice of Default records the foreclosure time frame begins. California foreclosure law states that within 10 business days a copy of the recorded Notice of Default is sent by certified and regular mail to the borrowers at all addresses provided and any recorded special requests. Within 30 days a copy of the Notice of Default is sent by certified and regular mail to new owners and all junior lien holders to the Deed of Trust being foreclosed. A Trustee's Sale Guarantee Report is ordered from the title company providing all title information. The foreclosure remains dormant for the next 60 days unless the borrower makes contact to cure.
Publication Period

California foreclosure law states that the publication period begins once the redemption period has expired. A Notice of Trustee's Sale is prepared and published in an adjudicated paper of general circulation in the city in which the property is located. The Notice of Trustee's Sale is published one time per week for three weeks. The actual Sale is established by adding at least 20 days to the date that the Notice of Trustee's Sale was first published in the newspaper. The Notice of Trustee's Sale is posted on the property and in a public place. At least 14 days period to Sale date the Notice of Trustee's Sale must be recorded in the county in which the property is located.
Trustee's Sale

California foreclosure law states that on the day that was established for sale of the property, and only after all publication period requirements have been met, the property is sold to the highest bidder for cash for the full amount of the debt plus foreclosure fee and expenses. If no one bids at the Trustee's Sale, the property automatically reverts back to the beneficiary for the debt. A Trustee's Deed Upon Sale is recorded in the county in which the property is located transferring title to the foreclosing beneficiary allowing the marketing of the property to recover their debt.

All sales under a power of sale in a deed of trust will be made between the hours of 9:00 a.m. and 5:00 p.m. on any business day, Monday through Friday, at the time specified in the notice of trustee sale. The sale must be made a public auction to the highest bidder. The trustee has the right to require every bidder to show evidence of ability to pay the full bid in cash, cashier�s check or certain bank checks. Each bid is by law an irrevocable offer to purchase. However, a higher bid cancels an earlier bid. It is unlawful and a criminal offense (a fine of $10,000 or up to one year in jail) to offer anyone consideration not to bid, or to fix or restrain the bidding process in any manner. Debtors may reinstate up to five days before non-judicial foreclosure sale.

Junior lien holders may no longer redeem, so they may try to protect themselves by (1) advancing funds to bring the senior loan payments current, then foreclosing for the sums advanced; (2) bidding at the foreclosure sale so the price will be sufficient to pay off the senior and the junior liens; or (3) acquire the property by bidding at the foreclosure. If the debtor has a right to redeem and does so, the junior who purchased the home must be reimbursed. Junior liens do not reattach the property if a borrower redeems a senior lien whose foreclosure extinguished the junior. This helps borrowers by encouraging the junior to bid up to the property to fair market value at the foreclosure sale, or else lose out, giving borrowers closer to fair value at sale.

Lenders may not seek a deficiency judgment if (1) the foreclosure is non-judicial or if (2) foreclosure is on a purchase money obligation. The same rules do not apply to guarantee or later lien holders. The lenders may seize alternative collateral. If the lender forecloses by filing a lawsuit, then the lender can obtain both a foreclosure sale order and a judgment against the borrower for a deficiency after the court-ordered sale, but only for the difference between the judgment and the fair value of the security.
VA Loans

An appraisal should be ordered through an authorized VA appraiser 60 days from the recording of the Notice of Default. A completed VA567 from should be sent to the local VA office with a copy of the Notice of Trustee's Sale and Trustee's Sale Guarantee once publication of the Notice of Trustee's Sale has begun. A Corporation Grant Deed should be prepared conveying title from the foreclosing beneficiary to the proper governmental agency.
FHA Loans

A Notice to Occupant of Pending Acquisition should be mailed to mortgagee with a copy of the cover letter to the local FHA office. A Corporation Grant Deed should be prepared conveying title from the foreclosing beneficiary to the proper governmental agency. If the property is occupied, an eviction process must be started to convey the title to FHA unoccupied. Once eviction complete, record Corporation Grant Deed and issue title package to FHA for Title Approval Record Corporation Grant Deed and issue FHA 27011 Part A.

http://www.foreclosureuniversity.com...california.php

How are California mortgages foreclosed?

The primary method of foreclosure in California involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action. When the deed of trust is initially signed, it will usually contain a provision called a power of sale clause, which upon default allows a trustee to sell the property in order to satisfy the underlying defaulted loan.

The trustee acts as a representative of the lender to effectuate the sale, which typically occurs in the form of an auction. Unlike many states where trustees are appointed by lenders, title companies primarily serve as trustees managing foreclosure sales in California. California has a requirement known as the one-action rule.

If a foreclosure is completed by non-judicial means, a second action to recover a deficiency judgment is not permitted. Using a judicial foreclosure, a lender may recover a deficiency judgment in certain circumstances. But since this process takes longer than non-judicial foreclosure, it is rarely used.

California non-judicial remedies have stringent notice requirements and the mortgage documents are required to contain thepower of sale language in order to use this type of foreclosure method. Judicial foreclosure are permitted in California and these usually occur when no power of sale language is included in the loan documents.

Power of Sale Notice Requirements:

1. A notice of default is recorded after a default occurs in the county in which the property is located. This does not necessarily occur after one or more payments are not met but for logistical reasons may occur after a loan is in substantial default — sometimes six months or more past due. This is known as the redemption period.

The foreclosure process does not move forward for a minimum of 60 days. A notice of sale containing the name and address of trustee, certain disclosures (including that the property is about to be lost to foreclosure sale), the name of thebeneficiary, and other information must be recorded in the county in which the property is located at least 14 days before any foreclosure sale after that time period. This is known as the publication period.

1. The borrower must receive a twenty (20) day notice before any foreclosure sale, further notice of the foreclosure must: (a) mailed to the defaulting borrower (and other creditors whose liens affect the property) and; (b) be posted at the property being foreclosed upon and in a public place in the county where any sale would occur. The defaulting borrower may prevent the foreclosure sale by paying all arrearages up to five (5) days before the sale. The trustees’ foreclosure sale then occurs at the earliest twenty one (21) days after the first publication.
2. Foreclosure sales must take place on any business day between the hours of 9AM and 5PM and must occur at the location referenced on thenotice of sale. The trustee will auction the property to the highest bidder, including the lender. The borrower is permitted to postpone the sale for one (1) day.

In California, the lenders can also go to court in what is known as a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. If the deed of trust does not contain the power of sale language, the lender may seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in county court along with what is known a lis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon.
top What are the legal instruments that establish a California mortgage?

The documents are known as the deed of trust,note, and in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement. Alternatively, a mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.
top How long does it take to foreclose a property in California?

Depending on the timing of the various required notices, it usually takes a minimum of 120 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy.

[DDDGG]

Is a Notice of Intent to Foreclose the same as a Notice of Default?

I rec'd first Notice of Intent to Foreclose when I was 2 months behind on my 2nd HELOC payments.

I recently rec'd another Intent to Foreclose as I am now 5 months behind on this 2nd HELOC, however, the form letter language is much stronger and text much lengthier. This old form letter (one of the signers doesn't even work there anymore) gives me 10 days to cure the default or they will accelerate the mortgage debt due immediately and foreclosure proceedings may be initiated.

Thanks & Regards

[JackDinLBC]

I was told over the phone with GMAC that my foreclosure date and auction is set for Nov. 7th. There is no posting for the sale at the property or in the local papers and I recieved no letter or cetified letter from the trustee about the auction. I know a notice of default was filed August 8. Somethings not right.

[JesseTNC]

Is it possible to get some updates to this?

For instance, info including the federal Mortgage Forgiveness Debt Relief Act and the related CA Senate Bill (SB 1055 approved in Sept. 2008) as well as the pending CA Assembly Bill (AB 111). Also, the pending moratorium on foreclosures in California.

My understanding is that as of January 1, 2009, CA Debtors are once again liable for taxes on discharged debts (the Federal act extended the date through 2012). However there's a bill in the Assembly at the moment to extend the CA dates through 2011, due for a hearing in early May 2009. Which is also the same time the Governator's 90-day moratorium on foreclosures comes into effect.

[miked2023]

Originally Posted by JesseTNC

Is it possible to get some updates to this?

For instance, info including the federal Mortgage Forgiveness Debt Relief Act and the related CA Senate Bill (SB 1055 approved in Sept. 2008) as well as the pending CA Assembly Bill (AB 111). Also, the pending moratorium on foreclosures in California.

My understanding is that as of January 1, 2009, CA Debtors are once again liable for taxes on discharged debts (the Federal act extended the date through 2012). However there's a bill in the Assembly at the moment to extend the CA dates through 2011, due for a hearing in early May 2009. Which is also the same time the Governator's 90-day moratorium on foreclosures comes into effect.

did you ever find out more about this?

[JesseTNC]

Originally Posted by miked2023

did you ever find out more about this?

Not really. However, I read somewhere else on these forums that AB 111 is dead, but there's a Senate Bill still in limbo (SB 97 - Calderon) that effectively accomplishes the same thing (extension of the debt forgiveness dates to conform with the Federal act). The current status of SB 97 is "referred to committee" as of May 14th. That's really what I (and probably many of you) are holding our breath about.

[tammi]

We are going through this right now, I have been in touch with a lawyer, you are liable for the difference of that balance owed and the sell amount, this is considered income. This is why we filed bankruptcy as soon as we thought we might lose our house. This way we dont have to pay any taxes on this amount.

he also said we should get a notice to vacate, it will have so many days, as soon as I get this he said to call and he can get added days even sometimes months added. It gives you time to move. Calif. is big on a notice to vacate in 3 days.

[caldwellb02]

Brown Alerts Homeowners that New Law Prohibits Up-front Fees for Foreclosure Relief Services

Sacramento - Attorney General Edmund G. Brown Jr. today issued a consumer alert warning California homeowners to avoid individuals and businesses that charge up up-front fees for foreclosure relief services in light of a just-enacted state law that makes this "abusive practice" subject to prosecution.

"Over the past two years, unscrupulous attorneys and real estate brokers have abused their trusted roles and exploited desperate homeowners seeking to avoid foreclosure," Brown said. "The loophole that allowed this abusive practice to continue has now been closed, and homeowners should avoid any person charging up-front fees for foreclosure relief services."

Earlier this week, Governor Schwarzenegger signed into law Senate Bill 94, which immediately makes it unlawful for any licensed attorney or real estate agent "who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower…to claim, demand, charge, collect, or receive any compensation until after the [attorney or agent] has fully performed each and every service the licensee contracted to perform or represented that he, she, or it would perform."

Until now, licensed attorneys and real estate brokers could charge advance fees under certain limited circumstances. Foreclosure scam artists often sought to exploit this exception. The new law closes this loophole.

Brown has made it a top priority to protect homeowners and combat loan modification fraud in California. In August, threatening possible criminal and civil prosecution, he ordered 386 mortgage foreclosure consultants to register with his office and post $100,000 bond. Brown also ordered more than two dozen foreclosure assistance companies to substantiate suspect claims made on the internet and in direct mail advertising.

This action followed a nationwide sweep in July that led to lawsuits against 21 individuals and 14 companies who ripped off thousands of homeowners seeking mortgage relief. In total, Brown has sought court orders to shut down more than 30 companies and has brought criminal charges and obtained lengthy prison sentences for dozens of deceptive loan modification consultants.

Loan modification consultants continue to exploit homeowners desperate for relief. This year, Brown's office has received more than 2,500 complaints against loan modification consultants and their businesses. This is a dramatic jump from 2008, when less than 200 complaints were filed.

As part of today's consumer alert, Brown offered the following tips to homeowners:

Don't pay up-front fees. Foreclosure consultants are prohibited by law from collecting money before services are performed.

Don't ignore letters from your lender or loan servicer. Responding to those letters is your best bet for saving your house.

Don't transfer title or sell your house to a "foreclosure rescuer." Beware! This is a scam to convince homeowners they can stay in the home as renters and buy their home back later. It might also be part of a fraudulent bankruptcy filing. Either way, a scammer can then evict the victim and take the home.

Don't pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants often keep the money for themselves.

Never sign any documents without reading them first. Many homeowners think that they are signing documents for a loan modification or for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them.

If someone demands an upfront fee for foreclosure assistance services, you can report them to the Attorney General's office at 1-800-952-5225, or file a complaint online at: www.ag.ca.gov/consumers/general.php

For more information on the Brown's action against loan modification fraud visit: http://ag.ca.gov/loanmod.

The text of Senate Bill 94 can be found at: http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_94_bill_20091011_chaptered.html

[lkszip]

Caldwell, thanks for the info. Very valuable.

[Elle Pace]

Tammi,
Besides the tax liability for the difference of the balance owed and the sell amount, can you bank also sue you for the lost? Would it be any difference if it is an investment property that has only one loan (no second or HELOC).

[tammi]

i am getting such different stories, that i dont know what to believe anymore, one attorney says your responsible for the difference then a Realtor says the law has changed. and that my attorney is wrong. so whos right? I do know attorneys arent always right. so here are some web sites that you might want to look at. they are the laws in calif.

Opinion re: Relief from Automatic Stay for Perfection by Prejudgment Attachment Creditor | United States Bankruptcy Court
http://www.cacb.uscourts.gov/
USBC Eastern District of California* (ASP)

[5284CA]

from another thread in here this is how you calculate if you might owe taxes:

What you still owe on your mortgage
- The purchase price of home + any improvements

This number if you bought 3-5 years ago should be a negative number meaning you do not owe any gains tax because you lost money on the purchase.

If however you had done 110% financing or something to that effect where you took out more than the purchase price of the home and did not use that money to improve the prperty than in essence you gained income and the portion of the loan that was above the purchase price of the home and not used for the home can be counted as income and you may be taxed on it.

[5284CA]

Moe I have a question...

I have 3 loans (all were taken as monies for purchase at the close of escrow) and I pay PMI as I still owe 84% of the mortgage

All loans have the power of sale clause so I am expect a non-judicial forclosure.

once a non-judicial forclosure goes through there will be no money to satisfy the the extend of the first loan, and any of the 2nd or 3rd loans.

As I understand things, since everything was purchase money , once the non-judicial forclosure by the first loan holder takes place...I am clear of any collection by the 2nd, 3rd, and PMI, correct?

[tammi]

does anyone know the California law on notice of sale. My understanding is we must receive the notice 20 days in advance.

we wrote one of those complaint letters to the attorney general for the bank. they sent it to the bank and the bank apologized for the mistreatment we felt we got from them. in the letter they told us the house was sold by the trustee and given back to the bank and it was turned over to a Realtor. we never got the trustee sale date notice.

do we have any recourse? I dont have any money to give to an attorney.

[Solange]

Hello Moe,

I have a question - I hope I am not out of context here, I did not know where to write it.

It concerns your last video on UStream. You were referring to a CA law firm helping clients with modification and other matters, which was in trouble with the ABA I believe.

I went to their website and I noted that they are trying to tackle the Goliaths of the banking industry. It is a dangerous (and courageous) attitude and although I can guess their motivation, it still would do many people a lot of good if they prevailed.

The fact that many of their attorneys are in trouble could be because of retaliation from the said entities feeling threatened.

I recently interviewed another website offering the same relief to homeowners but they said that they could work "in any state but CA, they wanted to stay in business"

My question for the United Law Group is: Could their present problem be due to their tenacity in overcoming the opposition rather than because they are disreputable?

Thank you in advance.
( I still believe in the tooth fairy too)