By and large, foreclosure in California is a relatively swift process, which can take place in as little as 120 days. This is the case because most California foreclosures are “non-judicial,” meaning that a court does not oversee the foreclosure process.
Deeds of trust
Deeds of trust are common mortgage instruments in states like California that allow for non-judicial foreclosure. When you purchase your home, your deed is held by your bank until you have paid the outstanding balance of your note in full. In the event of a default, the bank has the right to sell the deed to the highest bidder at the courthouse steps. Now, it is important to understand that the process might not go literally as I’ve described above. The foreclosure sale isn’t likely to take place at the courthouse steps, and you are likely to have possession of your deed while you own your home. However, banks secured by deeds of trust are able to sell property at foreclosure relatively quickly. Once you have defaulted, the process can be initiated and finished in as little as 120 days.
SEE ALSO: Understanding California’s Bankruptcy Laws [1]
The bank is unlikely to initiate foreclosure after you miss one payment
While the bank has the right to begin foreclosure proceedings after you miss one payment, common sense prevents most lenders from doing so. Banks are smart enough to realize that missing one payment does not mean that a homeowner is going to miss additional payments. They realize that everyone is late on a bill from time to time and expect past-due amounts to be cured after a minor default. It is usually not until you are 3 to 6 months behind that the bank will initiate foreclosure proceedings.
Once the bank has begun with foreclosure, here is the timeline:
Although there may be phone calls and letters right away urging payment, the document which formally begins foreclosure proceedings in California is called a Notice of Default.
The Notice of Default is a publicly recorded document in the County records where your property is located. You will also receive a copy of the Notice of Default in the mail.
After the Notice of Default has been recorded, your bank must wait for 90 days. In theory, this waiting period gives you time to catch up on past due payments. Once the 90 day waiting period has closed, your bank will give you notice of the foreclosure sale. This document is called the Notice of Trustee sale. Although the dates can be extended, the initial auction date can then be as soon as 20 days from the time the notice of trustee sale is issued.
Practical considerations
While it is technically possible for a lender in California to foreclose within 120 days after filing a notice of default, it usually takes longer. This is the case because there is currently a backlog of foreclosures that are preventing banks from taking back homes as quickly as they would like. In certain cases, banks sit on homes and prefer not to foreclose [2] in anticipation of property values going up. Even in the faster non-judicial setting, the foreclosure process in California can take 8 to 9 months or longer.
Filing for bankruptcy to delay foreclosure
It should also be noted that filing for bankruptcy will immediately stop the foreclosure process. The minute a bankruptcy cases filed, an injunction known as the automatic stay takes effect. The automatic stay prevents all collection activity, including foreclosure. Although the automatic stay is a temporary solution, especially in the case of a chapter 7 bankruptcy, it will disrupt the foreclosure process and debtors have the option of filing as late as the day before the sale date.