California Foreclosure Law

California State Foreclosure Law dictates that lenders may avail of the Judicial and Non-Judicial processes to foreclose deeds of trust or mortgages in default. The typical time of process last about 120 days and the deeds of trust and mortgages are the security instruments used.  Deficiency Judgments and the Right of Redemption depend upon the process employed.

Judicial Foreclosure is used when no power of sale exists in the security instruments.  Petitioners must file a lawsuit in order to obtain a court order to foreclose.  It has been a general practice that when the court declares a foreclosure, the property will be auctioned off and will subsequently be awarded to the highest bidder.  When this type of process is used, the lenders may petition for a deficiency judgment, and under certain circumstances, the borrower will have a maximum of one year to redeem the property.  On the other hand, Non-Judicial Foreclosure is used when a power of sale clause is expressed in the security instruments.  “Power of Sale” is the process wherein the borrower agrees to sell the property in dispute to settle the remaining balance from a loan in case of default.  Its most obvious difference from the judicial foreclosure is that it doesn’t need any court order to auction off the property as it is already stated in the security instruments.  The lender or their duly designated representative, commonly referred to as the “trustee,” may execute the “power of sale”.

Power of Sale Foreclosure Guidelines

Should the security instruments contain a power of sale clause, the terms specified therein should be strictly followed.  Otherwise, the non-judicial foreclosure should be carried out according to the process specified as follows:

1. A notice of sale must be: a) recorded in the county where the property is located at least fourteen (14) days before the selling date; b) sent by certified/registered mail, return receipt requested, to the borrower at least twenty (20) days before the selling date; c) posted on the property itself at least twenty (20) days before the selling date; and d) 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.

2. The borrower is given up to five days before the foreclosure sale to settle the default and stop the process.

3. The auction may be held on any business day between 9:00 a.m. and 5:00 p.m. and must take place at the location specified in the notice of sale. The trustee may require proof of the bidders’ capability to pay according to their bid. The auction is open to the public, in which the highest bidder earns the right to the property.  If necessary, the sale may be postponed by announcement during the auction itself.

Lenders cannot petition for a deficiency judgment after a non-judicial foreclosure sale and the borrower has no right of redemption.

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