The New California Foreclosure Time Line

Understanding the Foreclosure Timeline and what takes place during each portion of the cycle.

The following time-line is applicable for non-judicial California Foreclosures under a Deed of Trust. Foreclosures begin with the Trustor (borrower) not making the monthly payments to the Beneficiary (Lender), the first missed payment is technical default, but in practical terms, most Beneficiaries do not begin the process until the third payment is missed. If the Beneficiary cannot resolve the defaulted payment amount with the Trustor through Forbearance or other Loss Mitigation measures, the Beneficiary will instruct the Trustee (a holder of property on behalf of a beneficiary) to begin Foreclosure proceedings.

[Days 01 – 30] 30 Day Written Notice (BEFORE the Notice of Default is filed).

New Foreclosure Law – California SB 1137 became effective July 8^th, 2008. The provisions of the new law apply to loans secured by owner occupied residential real property and made between January 1, 2003 and December 31, 2007. These provisions will remain effective until January 1, 2013.

The requirements are extensive and the full act text should be consulted for details.

A Notice of Default (NOD) may not be filed by the trustee or lender until 30 days after contact is made in person or by telephone with a borrower to asses their financial situation and explore options to avoid foreclosure, or until 30 days after satisfying specified due diligence requirements.
During the initial contact the borrower must be advised of the right to request a subsequent meeting. If a meeting is requested then it must be scheduled within 14 days.
An assessment of the borrower’s financial situation and discussion of options may occur at the first contact or at the subsequent meeting, but in either case the borrower must be provided a toll-free number for HUD certified housing counseling agencies.
A NOD must include a declaration that the borrower has been contacted or due diligence has been used to try to contact the borrower or that the borrower has surrendered the property. Due diligence includes having a link to information on the options to avoid foreclosure on the web site of the beneficiary or their agent.
If a NOD was filed prior to the effective date of the new law, without a subsequent notice of rescission, then a new declaration must be included as part of the notice of sale. The declaration must state that the borrower either was contracted to assess their financial situation and explore options to avoid foreclosure or that no contact occurred; in which case the efforts made to contact the borrower must be listed.
A NOD may be filed when a borrower has not been contacted as required by the new law if the failure to contact the borrower occurred despite the due diligence of the lender or their agent. The actions that constitute due diligence are listed in the new law.
A new notice has been created by the law and must be posted and mailed at the same time a notice of sale is posted. The notice advises residents that the property may be sold and that their right to continue to reside in the property may be affected, along with certain other information.

[Days 31 – 120] Notice of Default (NOD) Filed.

Reinstatement Period (90 Days)

Notice of Default (NOD) is filed, signaling the start of the foreclosure timeline.
Borrowers (debtors) are sent a copy of the NOD by regular and certified mail within 10 business days of the NOD file date.
All junior lien holders are sent a copy of the NOD by regular and certified mail within 30 days of the NOD file date.
A Trustee’s Sale Guarantee Report (TSG) is ordered from a title company to provide pertinent title documentation.
The foreclosure process enters a dormant period for the next 60 days unless the loan is reinstated/cured by the borrower.
Special Note: debtors are able to reinstate their loan up to five days before a nonjudicial foreclosure sale.

[Days 121 – 211] Additional 90 days Notice of Trustee Sale before the sale

CALIFORNIA FORECLOSURE PREVENTION ACT (90 DAYS)

http://www.yourhome.ca.gov/forclosure_prevention_act.shtml

The new law took effect on May 21, 2009. The new law applies to owner-occupied homes where the first loan was recorded between January 1, 2003 and January 1, 2008, unless the loan is serviced by a financial institution that has a comprehensive loan modification program.

The new law extends the time period before the filing of a notice of sale by 90 days beyond the current three month period following the filing of a notice of default. The extended time period applies to owner-occupied homes where the first loan was recorded between January 1, 2003 and January 1, 2008.

A mortgage loan servicer may obtain a temporary or final order of exemption from the additional 90-day time period if the servicer has a comprehensive loan modification program. The notice of sale must include a declaration from the mortgage loan servicer as to whether an exemption was obtained and stating whether the new timeframe for giving notice of sale does not apply.

The following loans are exempted from the 90-day extension:

1. Loans made, purchased, serviced, or used as collateral by a California state or local housing finance agency.

2. Loans where the borrower has surrendered the property, contracted with an organization regarding how to extend the foreclosure process, or filed for bankruptcy and the case has not been closed or dismissed.

The provisions of this new law are repealed on January 1, 2011 unless the Legislature extends them.

Mortgage Loan Servicers/Lenders Who Have Been Granted An Exemption

List of Licensees That have received an exemption from Civil Code Section 2923.52(a) http://www.corp.ca.gov/FSD/CFP/pdf/ExemptList.pdf

[Days 90 – 111] or if applicable [Days 212 – 233] Notice of Sale (NOS) / Notice of Trustees Sale (NTS) Filed.

PUBLICATION PERIOD (21 DAYS)

90 days after the NOD was filed = starts the beginning of the publication period.
A Notice of Trustee’s Sale (NTS/NOS) is prepared and published in an adjudicated paper of general circulation in the county in which the property is located.
The NTS is published one time per week for three weeks. The Trustee’s Sale Date is established by adding 21 days to the date the NTS was first published.
25 days prior to sale date a copy of the NTS is sent to the IRS – only if there is an IRS lien against the property.
The NTS must be mailed certified, return receipt requested, to the borrower at least 20 days prior to sale.
The NTS is posted on the property at least 20 days prior to sale and posted in one public place in the county where the property is to be sold.
At least 14 days prior to the Sale date, the NTS must be recorded in the county in which the property is located; this is usually done at the County Recorder’s Office.
7 days before sale date. If court action, 7day rule may apply. 7-Day Postponement Rule – Trustee cannot sell for 7 days after expiration of court order.
5 business days before sale date, Expiration of borrower’s right to re-instate the loan

[Day 112] or if applicable [Day 234] Trustees Sale

Sale Date (1 Day)

The property is auctioned off to the highest bidder for the full amount of debt plus foreclosure fees and expenses. The full amount must be paid for in cash/cashier’s check. The Trustee can require bidders to show proof of funds as evidence to pay the full bid.
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.
If there are no bidders at the Trustee’s Sale the property will automatically revert back to the beneficiary. The property is now referred to as Real Estate Owned (REO).
Upon sale of the property, a Trustee’s Deed is recorded in the county where the property is located, transferring title to the new homeowner.
Special Note: debtors are able to reinstate their loan up to five days before a nonjudicial foreclosure sale.
All sales under a power of sale in a deed of 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’s Sale. Recently, due to the increase in foreclosures, Saturday dates may be added.

The sale is final upon the auctioneer saying “sold” and the sale is deemed perfected as of 8am on the day of sale provided the Trustee’s Deed Upon Sale is recorded within 15 days of the actual sale date.

Depending on the timing of the various required notices, it usually takes a minimum of 120 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the property is owner occupied and the first loan was recorded between January 1, 2003 and January 1, 2008, and/or the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy

Notes

Junior lienholders may try to protect themselves by (1) advancing funds to bring the senior loan payments current, then foreclosing for the sums advanced; (2) acquiring the property by bidding at the foreclosure.
Junior liens do not reattach to the property once it has been foreclosed upon. If the highest bid is not enough to cover the first mortgage payoff, then all junior liens will be wiped out completely. This helps borrowers by encouraging the junior lienholders to bid up to fair market value for the property at the foreclosure sale, or else lose out.
Lenders may not seek a deficiency judgment if (1) the foreclosure is nonjudicial or if (2) foreclosure is on a purchase money obligation.
The same rules do not apply to guarantee or later lienholders. 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.

DISCLAIMER: Presentation of this timeline is for general purposes only. No information on this page is to be viewed as legal advice or as an official description of judicial process. These descriptions are general and are displayed strictly as a service to consumers. They are not intended to be all-inclusive or to cover default situations in all states. Default procedures vary by state and change often. The information herein is not to be construed as up-to-date. Consumers are advised to seek professional legal counsel in any default proceeding.