To understand the foreclosure process and the reasons behind it, you must first understand the definition of a mortgage. A mortgage is a type of loan where you borrow money from a bank or lender to buy a house or property. The bank agrees to lend you a certain amount of money for them to use as collateral until you can pay back the loan.
The process for foreclosure in California is complex. When you can pay back the loan, your collateral is returned to you and the mortgage is discharged. If you are not able to pay back the loan, then your property will be foreclosed on by your lenders.
What is a Foreclosure?
Many people in California buy homes, but not having enough money to buy a home, they take out a loan from a bank or mortgage company. But other times, when a homeowner takes out a loan from a lender after purchasing this property, that loan is called a “home equity loan.” “People sometimes refinance their mortgage and link it to their home equity loan.
In all of these situations, lenders have a possession lien against the home to secure repayment of the mortgage. Lenders usually have There will be a lien on the home if they provide the loan to the borrower. If the borrower fails to repay the loan, the lender can foreclose on the home to get his money back.
Types of Foreclosures
The lender can foreclose the borrower’s property when they fail to repay of mortgage or loan. This process can be done by nonjudicial (outside of court) foreclosure or a judicial (through the courts) foreclosure process. In California, the nonjudicial foreclosure process is used much more than a judicial foreclosure process.
Nonjudicial Foreclosure Process
Nonjudicial foreclosures are the most common type in California. The lenders secure repayment of the loan through a possession lien against the home. When a borrower fails to repay the loan (defaults on the payment), the lenders can foreclose the borrower’s property. That means it allows the lender to request the trust deed’s trustee to sell a borrower’s home to repay the loan when the borrower fails to make payments of the loan.
A lender that has been refused a mortgage payment can use the nonjudicial foreclosure process to take back the property. And against the borrower, a lender waives the right to make a deficiency judgment. This process is quicker and less expensive than the judicial foreclosure process, so most lenders use this process.
Judicial Freclosure Process
The judicial foreclosure process is used when the mortgage or deed of trust does not contain a power of sale clause. The court is ordered to auction the foreclosure with the highest bid. In California, this type of foreclosure process is not common.
One option of judicial foreclosure is the ability for the lender to receive a deficiency judgment against you. And against the borrower, a lender waives the right to make a deficiency judgment. The “right of redemption,” which lets the borrower or landlord buy back their house from the successful bidder in 1 year, is complicated and more expensive than a nonjudicial foreclosure.
Foreclosure Process in California
Nonjudicial foreclosures are handled without going to court. This article covers the main steps in this process.
1. The lender MUST call the borrower and anyone else on the mortgage loan to look for ways to prevent foreclosure. This process is called a “foreclosure avoidance assessment.”
• The foreclosure process cannot begin on your property until at least 30 days have passed after the lender has contacted you to do their appraisal.
• You can counsel the lender in your first meeting that you have the right to another meeting to avoid the foreclosure process. This meeting should be scheduled for within 14 days.
• To avoid foreclosure, get an attorney or HUD-certified housing counseling agency to talk with the lender on behalf of the homeowner. You do not have to accept any plan from your representative and the lender if you don’t want it.
2. You and your lender can work out a plan to avoid foreclosure if they haven’t already. Once the lender has contacted the borrower for a foreclosure avoidance assessment and received no response, 30 days after that contact, they will record a Notice of Default. This is the first step in a formal process that will lead to foreclosure. The foreclosure process begins when you will receive a copy of this notice by certified mail within 10 days of it being recorded in public records. You have 90 days to pay what you owe after filing the notice of default.
3. If you do not pay the loan amount on time, the property or company you owe money to. The lender sends a Notice of Sale (after the 90 days of Notice of Default is recorded). The trustee sends you a Notice of Sale that your home or property will sell at an auction in 21 days. Sale notice mandatory:
• You will receive a notice by certified mail.
• Before the auction of your property, your local area newspaper will publish your mortgaged home for 3 consecutive weeks.
• You will be stationed on your property, in public, and at your local courthouse.
• The foreclosing property moves to public sale and its information is revealed, including the date, time, place of the foreclosure sale, the property’s address, trustee’s name, address, phone number. You’ll also see a statement that the property will be sold at auction.
4. When the bidder is successful in the auction, they must pay the entire bid amount in cash or by cashier’s check. The successful bidder gets the trustee’s deed after the sale. The lender bids the homeowner’s dues and the cost of the foreclosure. If no one else bids at the auction, the lender will take authority over your home.
Note: Before beginning the foreclosure process, the lender sends you a letter demanding the loan amount, but this is not a notice of default.
