In California, mortgage lenders can foreclose on deeds of trusts or mortgages in default using either a judicial or non judicial foreclosure process.  When considering foreclosure prevention with a short sale or modification, it is important to understand California foreclosure laws.  The judicial process of home foreclosure begins with the mortgage lender filing a Notice of Default.  The lender files a lawsuit to get the local court force foreclose, is used when no power of sale is present in the mortgage or deed of trust. However, the State of California has made it clear that lenders and mortgage servicing companies must make every effort to provide a loan workout or mortgage modification prior to the pursuit of the foreclosure process. 

In most cases, if the loan modification process is unsuccessful and the local court concurs with the mortgage lender’s foreclosure request, your property will be auctioned off to the bidder who makes the best offer.   Using this type of foreclosure process, mortgage lenders may seek a deficiency judgment and under certain circumstances, the borrower may have up to one year to redeem the property.

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 note, in which the borrower has authorized the sale of property to pay off the balance on a mortgage in the event that the borrower defaults. In deeds of trust or a deed in lieu of foreclosure, where a power of sale exists, the power given to the mortgage lender to sell the property may be completed by the trustee.

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 defaulting homeowner has up until 5 days before the foreclosure sale to cure the default and stop the process.  Mortgage lenders may not seek a deficiency judgment after a non-judicial foreclosure sale and the borrower has no rights of redemption.