California is a non-judicial foreclosure state. That means that it is not necessary to go to court in order to initiate a foreclosure under a trust deed, however a lender must follow certain rules before it can foreclose upon the property.
The foreclosure process begins when the borrower (Trustor) stops making the monthly payments to the lender (Beneficiary). After the first missed payment (30+ days) a borrower is technically considered to be in default, but many lenders do not begin the process until the third payment is delinquent (90+ days). If the borrower is unable to resolve the default payment amount with the lender (through loss mitigation programs such as loan modifications), the lender will instruct the Trustee (owner of the loan) to begin Foreclosure proceedings.
- Contact Borrower – Prior to initiating foreclosure proceedings the lender/beneficiary must contact the borrower to explore options to foreclosure, and to inform the borrower of her/his right to meet with the lender within 14 days. Some circumstances require a lender to offer a loan modification. The lender must then wait 30 days to file an NOD (there are some exceptions).
- Notice of Default-Once the borrower is delinquent all foreclosure proceedings begin with a Notice of Default (NOD), which the lender or trustee files with the county. As required by law, the NOD gives constructive notice to the public that there has been a default. Notice of default must be mailed to the borrower within 10 days after filing, and must contain the recording date.
- Reinstatement Period – After the NOD has been filed the borrower and any junior lien holders (e.g. second lien holders) are notified. There is a 90 day period in which the borrower can repay the full amount owed to reinstate the account.
- Notice of Trustee Sale: A lender or trustee can record a notice of sale (NOS) after 90 days if the borrower has not reinstated his/her account or received some other relief, such as a loan modification. The NOS must be mailed by certified mail to the borrower, with return receipt requested, 20 days prior to the foreclosure sale date. The NOS is recorded at the County Recorder’s office in the County where the property is located at least 14 days prior to the sale. It contains the date, time, and place where the trustee sale will take place. This notice has to be published in an approved newspaper in the city where the property is located, and also must be posted on the property. The NOS must also be posted in a public place in the city where the property is to be sold, at least 20 days before the sale. The borrower has 5 days prior to the trustee sale to reinstate the loan.
Brief Time Line:
Day 1: Lender/beneficiary must contact borrower.
Day 31: NOD recorded with County Recorder.
Within 10 Business Days: Trustee mails NOD to borrower(s), with recording date specified.
After 90 days: Sales date, time and location will be established, unless a bankruptcy has been filed, or another event interrupts the timeline (such as a loan modification or short sale)
20 Days Before Sale Date: Public Notice of Sale in city publication, city, and on property.
14 Days Before Sale Date: Notice of Sale must be submitted to county recorder’s office.
5 Days Before Sale Date: Borrower’s right to reinstate expires. Borrower still has the right to get the property back after this time and prior to the sale, but must pay the entire debt, plus interest and costs.
Sale Date: The property is sold to the highest bidder or reverts back to the lender (beneficiary), who then usually sells it on the open market.