Home Foreclosure Help

General Forclosure Information

Foreclosure is the legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owner's failure to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, it is typically said that "the lender has foreclosed its mortgage or lien."

The process of foreclosure is lengthy and the timeframes for when the lending institution begins the process vary from state to state. Other factors, such as the increasing availability of personal loans for owners facing foreclosure, present homeowners with foreclosure avoidance options. The increase in the number of foreclosures in the United States has led to more loan listings which are designed to forestall or prevent foreclosure.

In the United States, there are two types of foreclosure in most common law states. Using a "deed in lieu of foreclosure," or "strict foreclosure", the bank claims the title and possession of the property back in full satisfaction of a debt, usually on contract. In the proceeding simply known as foreclosure (or, perhaps, distinguished as "judicial foreclosure"), the property is exposed to auction by the county sheriff or some other officer of the court. Many states require this latter sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the immovable property (this also discourages strategic foreclosure). In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders typically bid in the amount of the owed debt at the sale, and if no other buyers step forward the lender receives title to the immovable property in return.

Other states have adopted non-judicial foreclosure procedures, in which the mortgagee, or more commonly the mortgagee's attorney or designated agent, gives the debtor a notice of default and the mortgagee's intent to sell the immovable property in a form prescribed by state statute. This type of foreclosure is commonly referred to as "statutory" or "non-judicial" foreclosure, as opposed to "judicial". With this "power-of-sale" type of foreclosure, if the debtor fails to cure the default, or use other lawful means (such as filing for bankruptcy which provides a temporary automatic stay to the foreclosure proceeding) to stop the sale, the mortgagee or its representative will conduct a public auction in a similar manner as the sheriff's auction described above. The highest bidder at the auction becomes the owner of the immovable property free and clear of any interest of the former owner but the property may be encumbered by any liens superior to the mortgage being foreclosed (e.g. a senior mortgage, unpaid property taxes etc). Further legal action, such as an eviction may be necessary to obtain possession of the premises.

If you'd like to sell your home, click here to get a free market analysis for your home from a licensed real estate professional: Home Seller Assistant
If you have equity and want to refinance to stop foreclosure, click here: Home Loan Assistants

California Specific Foreclosure Points

Judicial foreclosure in California is rarely used, and only in the absence of a power of sale clause in the loan document or when the lender is seeking a court order for a deficiency judgment. The lender must sue the borrower to obtain a decree of foreclosure and order of sale. The court may also order that the borrower has up to one year to redeem the property.
Non-judicial foreclosure is the most common form of foreclosure in California. This process is used when there is a power of sale clause authorizing the lender, in the event of default, to sell the property to satisfy the loan balance. If the power of sale clause includes the time, place and terms of sale, then that procedure must be followed. If not, the process is as follows:
A Notice of Default is recorded with the county in which the property is located when a borrower fails to make a loan payment. A copy of this Notice is sent by certified mail to the borrower within 10 business days of recording. The borrower has 90 days from the date of recordation to cure the default.
If the borrower fails to cure the default, a Notice of Sale is recorded. This Notice states that the lender or trustee will sell the property at auction in 21 days. This Notice is also sent certified mail to the borrower. It is also published weekly in a newspaper of general circulation in the county for three consecutive weeks prior to the sale date. The notice is also posted on the property, as well as in a public place, usually at the county courthouse.
The Trustee Sale Auction is held as a public auction at the time and place designated in the Notice of Sale, and conducted by the lender's representative. The successful bidder must pay immediately with cash or cashier's checks in the full amount of the bid. The successful bidder receives a trustee's deed on completion of the sale. The lender usually bids in the amount of the balance due plus costs. If no one else bids, the property reverts to the lender.
The borrower has no right of redemption, and deficiency judgments are not allowed in non-judicial foreclosure.