What Is Pre-foreclosure?

The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the “pre-foreclosure” stage.

During this time, the lending source can charge you various fees, like late charges and inspection fees, lawyer fees and, in most cases, must inform you about ways to avoid foreclosure and send you a pre-foreclosure notice called a “breach letter.”

Fees the Servicer Can Charge During Pre-foreclosure

If you miss a payment, most loans include a grace period of ten or fifteen days, after which time the servicer will assess a late fee. Each month you miss a payment, the servicer will charge this fee. To find out your loan’s late charge amount and grace period, look at the promissory note you signed. You can also find this information on your monthly mortgage statement.

Also, most California deeds of trust allow the lender (or the current loan holder, referred to as the “lender” in this article) to take necessary steps to protect its interest in the property. Property inspections are performed to ensure that the home is occupied and appropriately maintained. Inspections, which are generally drive-by, are usually ordered automatically once the loan goes into default, a lawyer is assigned to your account and typically cost rise around $10,00.00 or $15,000.00.  This starts draining your equity in your home!

Other types of fees the servicer might charge include those for broker’s price opinions, which are like appraisals, and property preservation

Federal Mortgage Servicing Laws and Foreclosure Protections

Under federal mortgage servicing laws, the servicer must contact, or attempt to contact, you by phone to discuss loss mitigation options, like a loan modification, forbearance, or repayment plan, no later than 36 days after you miss a payment and again within 36 days after each following delinquency. (12 C.F.R. § 1024.39).

No later than 45 days after missing a payment, the servicer has to inform you in writing about loss mitigation options that might be available and appoint personnel to help you try to work out a way to avoid foreclosure. A few exceptions are in place for some of these requirements, though, like if you’ve filed bankruptcy or asked the servicer not to contact you pursuant to the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39, 12 C.F.R. § 1024.40).

Federal mortgage servicing laws also prohibit dual tracking (pursuing a foreclosure while a complete loss mitigation application is pending).

What Is a Breach Letter?

Many California deeds of trust have a provision that requires the lender to send a notice, commonly called a “breach letter,” informing you that the loan is in default before the lender can accelerate the loan. The breach letter gives you a chance to cure the default and avoid foreclosure.

When Can Foreclosure Start?

Under federal law, the servicer usually can’t officially begin a foreclosure until you’re more than 120 days past due on payments, subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners with ample opportunity to submit a loss mitigation application to the servicer.

What Is the Foreclosure Process in California?

If you default on your mortgage payments in California, the lender may foreclose using a judicial or non-judicial method.

How Judicial Foreclosures Work

A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. If you don’t respond with a written answer, the lender will automatically win the case.

But if you choose to defend the foreclosure lawsuit, the court will review the evidence and determine the winner. If the lender wins, the judge will enter a judgment and order your home sold at auction.

How Non-judicial Foreclosures Work

If the lender chooses a non-judicial foreclosure, it must complete the out-of-court procedures described in the state statutes. After completing the required steps, the lender can sell the home at a foreclosure sale.

Most lenders opt for the non-judicial process because it’s quicker and cheaper than litigation in court.

Which Is the Most Common Foreclosure Process in California?

Again, most residential foreclosures in California are non-judicial. Here’s how the process works.

Pre-foreclosure Borrower Outreach Requirements

California law requires that your servicer personally contact you, or meet specific requirements for trying to contact you, by phone or in person at least 30 days before recording a notice of default (see below). The purpose of the contact is to assess your financial situation and explore options to avoid foreclosure. (Cal. Civ. Code § 2923.5).

During the initial contact, the servicer must advise you that: you have the right to request a subsequent meeting, and if requested, the mortgage servicer will schedule the meeting, which can be over the phone, to occur within 14 days.

The assessment of your financial situation and discussion of options may occur during the first contact or subsequent meeting. Either way, the servicer must also provide you with the toll-free telephone number to find a HUD-certified housing counseling agency.

If the servicer isn’t able to get in contact with you, it can’t record the notice of default until 30 days after it has done all of the following:

Sent a first-class letter that includes the toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency.

Attempted to contact you by telephone at least three times at different hours and on different days at the primary telephone number on file. This requirement is deemed satisfied if the servicer determines that the primary telephone number and secondary telephone number or any other numbers on file have been disconnected.

Sent a certified letter two weeks after the telephone requirements are met that provides a way for you to contact it in a timely manner, including a toll-free telephone number that will provide access to a live representative during business hours.

Posted a prominent link on its website homepage with information about options to avoid foreclosure, financial documents borrowers should collect if they want to discuss such options, a toll-free telephone number to call to discuss alternatives to foreclosure, and the toll-free telephone number to find a HUD-certified housing counseling agency.

These outreach requirements are applicable to first lien mortgages or deeds of trust secured by owner-occupied residential real property containing no more than four dwelling units.

But the servicer doesn’t have to contact you—or attempt to contact you—to assess your financial situation and explore options to avoid foreclosure if you notify the servicer in writing to cease further communication with you.

Dual Tracking Isn’t Permitted Under California Law

California law bans dual tracking. If you submit a complete first lien loan modification application (assuming you didn’t previously apply for a modification or you’ve had a material change in your financial circumstances since your previous application) at least five business days before any scheduled foreclosure sale, the servicer can’t proceed by recording a notice of default or notice of sale, or conducting a trustee’s sale until:

it makes a written determination that you’re not eligible and the appeal period has expired you don’t accept an offer within 14 days, or you accept a written first lien loan modification, but default on or otherwise breach your obligations under the first lien loan modification. (Cal. Civ. Code § 2923.6).

The California Homeowner Bill of Rights

On September 14, 2018, Governor Brown signed a bill that permanently reinstated expired provisions of the Homeowner Bill of Rights (HBOR). To learn more about HBOR and how it protects homeowners in the foreclosure process, see California Foreclosure Protection: The Homeowner Bill of Rights.

Notice of Default

The non-judicial foreclosure process formally begins when the trustee records a notice of default at the county recorder’s office. The notice of default includes information like the nature of the breach and how to cure it.

Within ten business days of recording, the trustee mails a copy of the notice of default to the borrower and anyone requesting such notice. Within one month, the trustee mails a copy of the notice of default to any other interested parties, like the borrower’s successor in interest and junior mortgage holders, among others. (Cal. Civ. Code § 2924b).

The notice of default gives the borrower three months to cure the default. (Cal. Civ. Code § 2924).

Notice of Sale

If you don’t cure the default, a notice of sale will be recorded. It can be recorded up to five days before the end of the three-month period. The notice of sale will contain the time and place of the sale, along with other information, like the property address. The foreclosure sale date must be at least 20 days after the end of the three months. (Cal. Civ. Code § 2924).

The notice of sale will be: posted at the property and in a public place in the city where the property is to be sold at least 20 days before the sale date published once a week for three consecutive weeks, with the first publication occurring at least 20 days before the sale date, and mailed to the borrower, anyone who requested notice, and any successor in interest, among other parties, at least 20 days before the sale date. (Cal. Civ. Code § 2924b, § 2924f).

Form to Request Notice of Default and Notice of Sale

A form and instructions on how to fill out a request for notice are available from (Nolo): California Request for Notification of Notice of Default and Notice of Sale.

The Foreclosure Sale

The foreclosure sale must be held between 9:00 a.m. and 5:00 p.m. on any business day, Monday through Friday. (Cal. Civ. Code § 2924g). At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less.

In some states, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower. Deficiency judgments usually aren’t allowed in California (see below).

If the lender is the highest bidder, the property becomes “Real Estate Owned” (REO). But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what’s needed to pay off all the liens on your property—you’re entitled to that surplus money.

How Can I Stop a Foreclosure in California?

A few potential ways to stop a foreclosure include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. (Of course, if you’re able to work out a loss mitigation option, like a loan modification, that will also stop a foreclosure.)

Reinstating the Loan

Under California law, the borrower can reinstate at any time until five business days prior to the sale date in a non-judicial foreclosure. (Cal. Civ. Code § 2924c).

Redeeming the Property before the Sale

One way to stop a foreclosure is by “redeeming” the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale.

Some states also provide foreclosed borrowers with a redemption period after the foreclosure sale, during which they can buy back the home. However, California law doesn’t give borrowers a statutory right of redemption after a non-judicial foreclosure. Once your California home has been foreclosed, you can’t redeem it.

Filing for Bankruptcy

If you’re facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy. Once you file for bankruptcy, something called an “automatic stay” goes into effect. The stay functions as an injunction, which prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.

In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out about the options available to you, speak with a local bankruptcy attorney.

Foreclosure Protections and Military Service members

The Service members Civil Relief Act provides legal protections to military personnel who are in danger of foreclosure.

California Deficiency Judgment Laws

In a foreclosure, the borrower’s total mortgage debt sometimes exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a “deficiency.”

For example, say the total debt owed is $600,000, but the home sells for $550,000 at the foreclosure sale. The deficiency is $50,000. In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.

A deficiency judgment isn’t allowed following a non-judicial foreclosure in California. (Cal. Code Civ. Proc. § 580d). Because residential foreclosures are usually non-judicial, most Californians going through foreclosure don’t have to worry about being on the hook for a deficiency judgment.

How Long Do You Have to Move Out After Foreclosure in California?

If you don’t vacate the property following the foreclosure sale, the new owner will probably: offer you a cash-for-keys deal, or take steps to evict you.

The eviction process starts with a three-day notice to quit. If you still don’t leave after the three-day period expires (excluding Saturdays, Sundays, and other judicial holidays), the new owner will go through the court system to evict you and get possession of the property.

Where to Find Your State’s Statutes and More Foreclosure Resources

In this article, you’ll find details on foreclosure laws in California, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea.

How to Find Federal Foreclosure Laws

If you’re looking for federal laws, you might want to visit the Library of Congress’s legal research website, which provides links to federal regulations and federal statutes.

How to Find State Foreclosure Laws

To find California’s laws, search online for “California statutes” or “California laws.” Make sure you’re reading the most recent, official laws. Usually, the URL will end in “.gov” or the statutes will be on an official state legislature webpage.

More Foreclosure Resources

For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.

Although the programs under the Making Home Affordable (MHA) initiative have expired, the MHA website still contains useful information for homeowners facing foreclosure.

Getting Help

How courts and agencies interpret and apply laws can change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you’re facing a foreclosure. If you have questions about California’s foreclosure process or want to learn about potential defences to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.

It’s also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options. You can use the CFPB’s Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the Homeownership Preservation Foundation (HOPE) Hotline, which is open 24 hours a day, seven days a week, at 888-995-HOPE (4673).

We at Jenkins Real Estate Auctions LLC hope that you find this information of some help to you.  We always try our best, to help homeowners in any financial situation.

If you are facing financial challenges, then use this information to help you from having your home go into foreclosure.  Many homeowners are unfortunately unable to keep their home from going into foreclosure and if you find that you are running out of options… then the most important step would be to sell your home and take the equity from the home to clear up all of your current debt and take what monies you have left over to move on with your life. 

Going through foreclosure proceedings, will harm your credit and possible even keep you from renting an apartment, making it difficult to get fresh start with your life!

Contact us to learn about our new home selling program where you can sell your property at a (zero to 2%) fee.  Not at the (5 or 6%) fee other agents will want to charge them.  We are here to help you!

Certified Real Estate Auctioneer® Jenkins Real Estate Auctions LLC – A California Company – Entity No. 202358616912 Registered: State of California – Secretary of State Surety Bond Auctioneer/Auction Company – Bond# 387770D REO Agent – Distressed Property Expert Text (916) 588-0067