The California Foreclosure Process: How Does it Work?
Although on a decline, foreclosures are still taking place all across California. In other words, homeowners across the state are still struggling to make payments and dreading the news that the bank has decided to foreclose. However, for many, the process of how foreclosures actually work is still a mystery. Here is a general timeline of the foreclosure process in the state of California.
*Please note that this is a general timeline – some banks and lenders follow either a tighter or more lengthy timeline.*
Day One – Missing a Payment(s)
The first step throughout the California foreclosure timeline is a missed payment. A missed payment can happen for a number of reasons. Perhaps you simply fell behind, or a family emergency had to take precedence. Maybe you lost your job or suffered a serious illness. If you only miss the one you may be able to make it up the next month, but it can be tough with the late fees and interest. It is because of these factors that it is easy to fall even further behind, which puts your home at risk. The exact point at which your loan is considered “in default” depends on the terms of your specific loan. For most mortgages, it happens when you’re 90 days late.
90 Days – Being Informed of Your Defaulted Loan
When your home loan is officially in default, (this is usually at the 90-day mark) the bank must file what is called a notice of default with the court. They have to let you know they’ve filed it within 10 days. It’s an official legal document informing you that you are in a state of default on your loan. It will include information about your options for getting out of default. For example, you can pay all the back payments, along with interest and fees, to get out of default. You’ll also need to keep up your insurance and property taxes. If you don’t have the cash to pay all that at once, unfortunately, the home will continue to be in default.
180-200 Days – Notice of Trustee Sale and Auction
After you’ve received a Notice of Default, you have 3 months in which to attempt catch up on your loan. That means paying all back payments, interest, fees, property taxes, and insurance. After 3 months, the bank can officially set a date for the auction of your home. You will be notified that this has happened through a Notice of Trustee Sale that is typically sent to you via certified mail.
At this point, the bank can set a date for the auction. It has to wait at least 20 days after the Notice of Trustee Sale is sent to you. The sale may be postponed by a court or by the bank for up to a year, after which point they’ll need to send you a new Notice of Trustee Sale in order to send the house to auction. This is a hard time for the homeowner because, at the auction, your home will be sold to the highest bidder.
In theory, it’s possible for a bank to complete a foreclosure sale in California in just 200 days from the date you first became delinquent. The reality is that those are just the legal minimum times and most foreclosures take much longer. In 2013 the state of California put together the Homeowner’s Bill of Rights which was designed to protect homeowners and ensure fair access to loss mitigation strategies such as loan modifications and refinancing. This bill stops banks from continuing the foreclosure process while a loan modification application is pending. Combined with the large backlog of foreclosures still clogging the banks’ systems, this law can help to stretch the foreclosure process out significantly.