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Judicial foreclosure available: Yes
Non-Judicial foreclosure available: Yes
Non-judicial Sale Typically, a title insurance company
is named as the trustee to arrange the sale of the real estate.
California is famous for its one-action rule, in which a
lender must carefully elect one action to take against the borrower if the
borrower defaults. If the lender forecloses the deed of trust out of court, the
lender has chosen one action and may not bring a lawsuit to recover a
deficiency, which would be a second action. If the lender chooses to sue the
borrower and obtain both a foreclosure order, and if the proceeds of the
judicial sale of the real estate are not sufficient to repay the loan balance,
then a deficiency for the balance. Such a suit is permitted as the
lender’s one action.
California lenders rarely elect judicial
foreclosures.
Preliminary Notice: Non-judicial
Notice of Sale
The notice of sale must contain the name, street address
and phone number of the trustee conducting the sale and the original trustor,
along with a statement warning borrowers that their property is about to be
lost at a public foreclosure sale and to contact a lawyer for an
explanation.
The notice must give the street address. If no street
address exists, the notice must state the address of the beneficiary from whom
a set of directions to the property may be obtained I they are requested in
writing within ten days from the first publications of the foreclosure
notice.
Advertising
A copy of the notice of sale must be posted in a
conspicuous place on the property to be sold at least 20 days before the sale.
If access to the property is restricted by means of a central guard gate, then
the notice must be posted on the guard gate. A copy of the notice must be
posted at one public place in the city where the property is to be sold (or
judicial district in rural areas) at least 20 days before the sale.
Recording
A notice of trustee sale must be recorded at least 14
days before the sale.
Mailing
A notice of trustee sale must be mailed by certified
mail, return receipt requested, 20 days before the foreclosure sale to the
borrower, to anyone who requests notice or recorded a request and to the
trustors, beneficiaries or parties at interest.
Sale Procedures: Non-judicial
Time
All sales under a power of sale in a deed o f trust will
be made between the hours of 9:00 a.m. and 5:00 p.m. on any business day,
Monday through Friday, at the time specified in the notice of trustee sale.
Place
The sale shall commence at the location specified in the
notice of sale.
Manner
The sale must be made a public auction to the highest
bidder. The trustee has the right to require every bidder to show evidence of
ability to pay the full bid in cash, cashier’s check or certain bank
checks. Each bid is by law an irrevocable offer to purchase. However, a higher
bid cancels an earlier bid. It is unlawful and a criminal offense (a fine of
$10,000 or up to one year in jail) to offer anyone consideration not to bid, or
to fix or restrain the bidding process in any manner.
Postponement
Sales may be postponed by announcement at the time and
location specified for the intended sale. The borrower may postpone the sale in
order to obtain cash, provided the written request for postponement identifies
source from which the funds are to be obtained, and the postponement is only
for one business day. The borrower may obtain one such postponement.
Reinstatement
Debtors may reinstate up to five days before
non-judicial foreclosure sale.
Junior
Junior lien holders may no longer redeem, so they may
try to protect themselves by (1) advancing funds to bring the senior loan
payments current, then foreclosing for the sums advanced; (2) bidding at the
foreclosure sale so the price will be sufficient to pay off the senor and the
junior liens; or (3) acquire the property by bidding at the foreclosure. If the
debtor has a right to redeem and does so, the junior who purchased the home
must be reimbursed. Junior liens do not reattach the property if a borrower
redeems a senior lien whose foreclosure extinguished the junior. This helps
borrowers by encouraging the junior to bid up to the property to fair market
value at the foreclosure sale, or else lose out, giving borrowers closer to
fair value at sale.
Deficiency
Lenders may not seek a deficiency judgment if (1) the
foreclosure is non-judicial or if (2) foreclosure is on a purchase money
obligation. The same rules do not apply to guarantee or later lien holders. The
lenders may seize alternative collateral. If the lender forecloses by filing a
lawsuit, then the lender can obtain both a foreclosure sale order and a
judgment against the borrower for a deficiency after the court-ordered sale,
but only for the difference between the judgment and the fair value of the
security.
Redemption
A borrower’s right to redemption is terminated when
a deficiency judgment is waived or prohibited. When redemption is permitted,
after judicial foreclosure, only the borrower can now redeem and junior lien
holders or "redemptionors" may not. When the lender is permitted to seek a
deficiency, elects to pursue a deficiency and forecloses judicially, the
borrower may redeem 12 months after sale, but a full credit bid by the lender
cuts it to 3 months. |
