California Foreclosure Timeline
I am often asked by homeowners considering a short sale what the timeline is for the foreclosure process in California. The following is the special foreclosure timeline for loans originated between 2003 & 2007 on owner occupied residences. This timeline does not apply to borrowers who have filed for bankruptcy. The difference between this timeline, and the traditional foreclosure timeline, is the extra time between the filing of the NOD and the Notice of Trustee Sale or NOTS. Traditionally, lenders could file a foreclosure sale date within 25 days of a NOD. This special timeline extends the period between the NOD and the NOTS.
Keep in mind that lenders often take longer than the timeframes below to foreclose, primarily because they typically prefer to workout a short sale with the borrower rather than foreclose. With that said, I highly recommend all borrowers be proactive and not allow their home to get to the 11th hour in the foreclosure process.
Once a NOTS (Notice of Trustee Sale) or foreclosure sale date, has been filed, while we can often successfully get the sale date postponed, there are no guarantees, and lenders sometimes either elect to foreclose or foreclose by mistake, simply because the left hand very often does not know what the right hand is doing at most of the nation’s major lending institutions.
Generally, lenders will file a NOD 90-120 days after a borrower stops making payments, and file a NOTS 90-120 days after the NOD, making the whole process take about 6-7 months start to finish. Many lenders extend this period dramatically when a seller is doing a short sale.
Finally, many people are under the mistaken impression that they can stay in their homes for months and even years without making payments and not get foreclosed on. While this was true in many instances in 2009, this was due to the 4 concurrent foreclosure moratoriums that were in effect in California. As of September 2009, those moratoriums have ended and lenders are now foreclosing at a brisk pace on borrowers who are simply not making payments and not pursuing any other avenues to avoid foreclosure.
Again, a short sale is almost always a better alternative to foreclosure.
As of September 8, 2008, California has a special foreclosure timeline for loans originated between 2003 and 2007, inclusive, which are secured by owner-occupied residences. The special foreclosure timeline will remain in effect until January 1, 2013. (Cal. Civ. Code § 2923.5.)
FORECLOSURE TIMELINE FOR OWNER-OCCUPIED REAL PROPERTY LOANS (made from 2003 to 2007)
A lender may initiate the foreclosure process when a borrower defaults on a loan, such as by missing a mortgage payment. However, a slight delay may not justify acceleration and foreclosure by the lender. Hence, in practice, lenders generally wait a few months after a missed payment before starting the foreclosure process. Generally the following process begins once a borrower is 2-3 months behind on their payments.
Day 1: Lender Contacts Borrower
For owner-occupied loans from 2003 to 2007, a lender initiating the foreclosure process must generally contact the borrower by phone or in person to assess the borrower’s financial situation and explore options for avoiding foreclosure. During the conversation, the lender must inform the borrower of the right to meet with the lender within 14 days. The lender must also give the borrower the toll-free number for finding a HUD-certified housing counseling agency.
Day 31: Filing of Notice of Default (minimum of 90 days after borrower stops making payments)
For owner-occupied loans from 2003 to 2007, the lender may file a notice of default 30 days after contacting the borrower to explore options for avoiding foreclosure. The notice of default must be filed in the county where the property is located and a copy must be mailed within 10 business days after recordation to the borrower and all other persons who have requested such notice. The notice of default informs the borrower of the default. It must also include the lender’s declaration that it has contacted the borrower to explore options for avoiding foreclosure, tried with due diligence to contact the borrower, or the borrower has surrendered the property.
Day 121: Filing of Notice of Trustee’s Sale (minimum of 90 days after NOD is filed)
Three months after the filing of the notice of default, the lender may record a notice of trustee’s sale setting forth the date, time, and place of the upcoming trustee’s sale. Because of the gravity of a notice of trustee’s sale, it must be widely disseminated. The notice of trustee’s sale must be recorded, posted, mailed to the borrower and others, as well as published once a week for three consecutive weeks in a newspaper of general circulation.
Day 145: Deadline to Cure Default
Up to five business days before the trustee’s sale, the borrower may reinstate the loan by curing the default or paying the missed payments plus allowable costs. After the reinstatement period expires, the borrower still has the right to redeem the property by paying the entire debt, plus interest and costs (not just the arrearage), before the bidding begins at the trustee’s sale.
Day 152: Trustee’s Sale
Although California law allows a trustee’s sale to take place 20 days after the posting of the notice of trustee’s sale, lenders customarily wait at least 31 days instead to help protect against federal tax liens. At the trustee’s sale, the property is sold through a public auction to the highest bidder. Title is transferred to the successful bidder by trustee’s deed. The lender can also elect to take the property back as an REO (which stands for Real Estate Owned by the bank). They do this by purposely starting the bidding above market value. In this case, the property will eventually go on the market as a bank owned foreclosure.
Source – California Association of Realtors
Finally, it is often possible to get a foreclosure sale date postponed as long as an offer has been submitted to the bank and the borrower is moving forward with the short sale process. If you have currently have a NOD or NOTS filed on your property, you still have time to do a short sale, but you need to move quickly. A realtor experienced in short sales can generate an offer quickly and get it submitted to your lender and postpone the sale date.