Foreclosure occurs when a property owner is no longer able to make his or her mortgage payments. If this happens, the lender can foreclose on the property to reclaim some of its investment. Foreclosure is a long and complex process and may be different in each state.

If you are facing foreclosure, or if you think you may default on your mortgage, you need to know what to expect. The following are the steps to foreclosure in the state of California.

The Lender Must Contact the Borrower

In California, the lender is required to contact you directly, or make an attempt to contact you, at least 30 days prior to issuing a Notice of Default. The point is to look at your finances and determine if foreclosure is necessary. There may be ways to avoid foreclosure, which would be the ideal income for both you and the lender.

The contact will include your rights. This includes your right to ask for a meeting to discuss the foreclosure and how you may be able to avoid it.

The Lender Files a Notice of Default

A lender can file a Notice of Default after a mortgage holder defaults on his or her loan. The Notice of Default officially places the property into foreclosure. Once this happens, you can contact your lender to see if they are willing to work with you. You may be able to repay your loan, refinance your loan, or make other arrangements to bring your mortgage current.

You have a limited amount of time to bring your loan current, generally three months. You will be responsible for all late fees, missed payments, and other fees associated with the mortgage.

However, if you cannot or will not communicate with the lender, your property is officially available for sale to other buyers. The property can be purchased in a variety of ways, including short sales.

The Lender Sends a Notice of Trustee Sale and Auction

If you make no effort to reclaim your property, or if you are unable to do so, you will receive a Notice of Trustee Sale. This notice provides you with information about the auction process. The notice should be placed in three places, including on an obvious area on the property, in a public place, and in the newspaper.

After a period of time, you will receive an auction date for the property will then go to auction. The lender may delay the sale for a variety of reasons. Once the auction begins, it goes to the highest bidder.

The Property Owner Has the Right to Reinstate the Loan

In California, you have a right to reinstate the loan up to five business days prior to the sale date. This can only be done if you completely catch up on all your back payments, fees, insurance, and any additional fees associated with the property.

The Foreclosure Could Be Nonjudicial or Judicial

Most foreclosures in California are nonjudicial. This means the lender does not have to take the foreclosure to the court for finalization. You will not be responsible for anything pertaining to the home once it is sold, aside from some possible fees from the sale. If you had a second mortgage on the property, however, you may have to maintain responsibility for those payments.

A judicial foreclosure is more rate. If your property goes through a judicial foreclosure, you have to pay the difference between the amount you owe and the final sale price of the property at auction. This is referred to as a deficiency. You also have the right of redemption, which means you can buy your home from the purchaser at the auction.

However, if the bank waived deficiency and you do not have to pay that amount, you will not be able to purchase the property.

If you have any additional questions about foreclosures in California, please contact us at Blomberg, Benson & Garrett, Inc.