Foreclosure laws in California are very complex. In most cases, you will benefit from consulting an attorney to fully understand your rights and responsibilities. In general, there are two types of foreclosure in California: judicial and non-judicial. In some cases, the difference between the amount owed and the foreclosure sale price is recoverable from the original property owner. in others cases, it is not. In rare cases, a property owner can re-acquire the property after the foreclosure sale.
Status of Title Before Full Repayment
California is a title theory state. In a title theory state, the actual title to a property is held in trust until the property has been paid in full. In most cases, a deed of trust will be used to secure the property. However, in some cases, a traditional mortgage secures the note on the property. The difference between the two documents is that the deed of trust defines who will hold the title until repayment is complete and allows for quicker, non-judicial foreclosure. A mortgage defines the terms of payments and places a lien on the property until the mortgage is paid in full.
Because California is a title theory state that primarily uses deeds of trust for property purchases, the majority of foreclosures in California are non-judicial foreclosures based on terms enumerated in the deed of trust, such as a power of sale clause. A power of sale clause allows a trustee to sell the property without intervention from a court in the event of default.
Right of Redemption
California has a complex system of determining the right of redemption. A right of redemption is the right of a property owner to reclaim a foreclosed property by paying all past balances and fees related to the foreclosure. For example, if a home was sold at a foreclosure sale for the full balance remaining on the note, the original homeowner has 90 days to pay the past due balance, accrued balances and fees associated with the sale of the home. However, if the home sells for less than the original balance remaining on the note, the original homeowner has one year. Right of redemption is generally only available in judicial foreclosures or by the owner in default filing for this right in a court case.
During a foreclosure, a property often sells for less than the amount remaining on the note. For example, if a home loan has a balance of $200,000 at the time of foreclosure, it may sell at auction for $150,000, leaving a deficiency of $50,000 on the original note. In California, homes that are sold using non-judicial foreclosure are not eligible for deficiency judgments. The original note holder cannot pursue the original homeowner for the difference between the foreclosure price and the final sale price. However, in some cases, foreclosures pursued through judicial means may have deficiency judgements attached.
Non-judicial foreclosures that are not contested by the property owner in default generally take around 120 days. If a property owner contests the foreclosure, it can take longer. In general, a property owner must contest the foreclosure in court. This can be done by seeking to delay the sale, stop the sale or by declaring bankruptcy. Judicial foreclosures can take differing amounts of time, usually longer than 120 days.