California Foreclosure Process - Understand the Lingo!

CALIFORNIA FORECLOSURE PROCESS (Non-Judicial)

You must know the lingo to understand the foreclosure process. Below are the most common words and/or topics in the foreclosure world. Understand them...

Delinquent: A loan is delinquent if the lender does not receive the payment on the due date

Default: A loan is considered to be in default when the payment is 30 or more days past due. Usually, the initial foreclosure action (notice of default) is started when a loan is 90-120 days delinquent.

SB 1137: For loans made between Jan 1, 2003 and Dec 31, 2007, or at least 30 days prior to filing the notice of default the lender or their representative must meet with the borrower in person or by phone in order to assess the borrower’s financial situation and discuss foreclosure options. During the initial contact the authorized agent must advise the borrower that he/she has the right to request a subsequent meeting. If the meeting is requested the authorized agent must schedule it within 14 days. The notification can be waived if the lender shows reasonable “due diligence” by following a number of prescribed steps and is still unable to contact the borrower. The lender has to send a first class letter that includes the toll free number available to borrowers to find a HUD certified counseling agency. After sending the letter, the lender attempts to contact the borrower by phone at least 3 times at 3 different hours and on different days.

California Civil Code Section – 2923.6: The legislatures has forced the servicers to maximize NET present value under their pooling and servicing agreements is owed to all parties in a loan pool, not to any particular parties, and that a servicer acts in the best interest of ALL parties. All offers must be reviewed. (C.C.S.-2923.6)

CA Foreclosure Prevention Act: Imposes a 90 day foreclosure moratorium (suspension) unless a lender offers a comprehensive loan modification program designed to keep people in their homes. This would extend the waiting period from 3 months to 6 months, unless lender is exempt. Effective May 22, 2009.

Reinstatement: During the time between the notice of default and notice of trustee’s sale, the homeowner may reinstate the mortgage by simply catching up the back payments plus the costs already incurred in the foreclosure proceedings. When the foreclosure proceedings are stopped by reinstatement, a rescission(cancelation) of notice of default is recorded by the trustee to clear the record of the notice of default.

Notice of Default: This begins the foreclosure process. The trustee for the lender will file a notice of default with the County Recorder’s Office identifying the default amount and the date the borrower must pay off the default. The notice is mailed to the borrower and other affected parties.

Notice of Trustee Sale: At least 3 months after the notice of default is recorded (or 6 months if lender is not exempt from 90 day moratorium) the trustee can arrange for the house to be sold at a trustee’s sale. At least 20 days before the trustee’s sale, the notice of sale must be posted on the property and in one local public location. The notice is also published once a week for three weeks in a local newspaper, starting at least 20 days before the sale date. The notice is mailed to the borrower or to anyone who requests the notice at least 20 days before the sale. The notice must contain the date, time and location of sale, property address and the trustee’s contact information. In addition, the notice of sale must be recorded with the county recorder at least 14 days before the sale.

The trustee may postpone the sale at any time until the date of sale at its discretion. The trustee need merely announce the postponement at the original time, date and place of the sale and give the new date and time (the place must be the same).

Up to 5 business days before the trustee’s sale, the borrower may pay off the default plus any applicable costs of foreclosure and stop the foreclosure process.

Trustee Sale: The trustee’s sale is a public auction and the property is sold to the winning bidder. The trustee will announce the amount of the opening bid, which is usually the value of the unpaid principal and interest on the trust deed being foreclosed, along with any advances and trustee’s fees paid. However, the opening bid is dictated by the lender. If there are bids over the opening bid, the successful bidder must pay immediately, either in cash, money order, certified or cashier check.

Anyone may bid at the sale, including the lender and any junior lien holders. If the lender is the purchaser, the balance due on its trust deed may offset against the bid price. A junior lien holder still has to produce the cash to pay the loan being foreclosed.

If the property sells for more than the amount of fees, and the principal and interest owed, then the proceeds of the sale are paid first to any junior lien holders. When these are satisfied, anything leftover goes to the homeowner. The trustee’s sale cuts off all rights of redemption in California.

Eviction: After the property goes through foreclosure, a new owner (even if it is the bank or mortgage lender) may decide to evict you. The previous owner of the home gets a 3-day notice to quitand a tenant of the previous owner gets a 60-day notice to quit.Often, the new owners serve 1 notice that includes both a 3-day notice (for previous owner) and a 60-day notice (for the tenant) not knowing who lives on the premises.

• IMPORTANT NOTE: Section 8 tenants - If the homeowner has a section 8 contract, they are entitled to a 90-day notice of termination instead of a 60 day notice, according to California Civil Code Section 1946.1. If the Section 8 contract is still within the initial contract period, the tenants cannot be evicted without “just cause”