- Although lenders in California can choose to go to court for foreclosure authorization, they generally choose not to because avoiding court is less costly and time-consuming. If a borrower in California fails to make mortgage payments as contracted, the lender records a Notice of Default (NOD) with the county tax recorder. At least 20 days before a scheduled sale of the property, the lender must notify the owner. Prior to 2009, the minimum period of time between the filing of the NOD and the sale was 60 days. However, in February of 2009 the California Foreclosure Prevention Act took effect, which added another 90 days to this period of time unless approved for an exemption by the state. The additional time was intended to allow the borrower and lender to come to agreement over a loan modification, however, the modification itself is not required.
- During the Great Depression, a time during which many homes were lost through foreclosure, the California legislature passed a bill that would prevent lenders from going after borrowers for the balance of any mortgage debt if the lenders foreclosed and the property did not resell for the full amount of the debt. This provision was worded, however, in a way that only applied to loans that were expressly used to purchase the property. Many foreclosed loans today arose out of refinancing after purchase, so they are not covered by the 1930s legislation. Although the process varies depending on whether a judicial or non-judicial foreclosure was undertaken and whether the lender was involved in the foreclosure (as in the case when a first mortgage holder forecloses but the second lien holder doesn't), lenders can go to court on a refinanced loan and seek a deficiency judgment or a lawsuit on an unsecured promissory note -- a judgment for the difference between the loan balance and the amount of money repaid on the loan through sale after foreclosure.
- In some states, borrowers may redeem -- or get their homes back -- even after foreclosure, if they are able to repay the lender the full loan balance plus penalties and fees. In California, the law provides a one-year post-foreclosure redemption period if, and only if, a judicial foreclosure process is used. The only redemption period in California applicable in the more common non-judicial foreclosures is really a reinstatement rather than a redemption period that occurs between the filing of the NOD and up to five days before the sale.
- A lender can evict a former owner with a three-day notice followed by an unlawful detainer action in court after foreclosure. In 2008, California passed Senate Bill 1137, which required a 60-day notice for lenders to evict residential rental tenants subsequent to a foreclosure. This law was superseded by the national Tenants at Foreclosure Act in 2009, which requires a 90-day notice.
- Advertisement -
- Advertisement -