(1) What is "foreclosure", exactly?
Foreclosure is the process by which a "mortgagee" (aka your lender) or other lienholder repossess your house in order to recover their investment. Foreclosures only usually occur after a "mortgagor" (aka a borrower) is behind on his or her payments.
(2) Are there different types of foreclosure?
Yes, in California there are generally two types of foreclosure: Judicial foreclosure and Non-Judicial foreclosure. A Judicial foreclosure is a foreclosure which is supervised by the court. A non-judicial foreclosure is a foreclosure which usually takes place under the contractual provisions of the loan and mortgage itself.
Typically in California most foreclosures are non-judicial foreclosures.
(3) What is the general process of a foreclosure?
STEP ONE: BORROWER FALLS BEHIND ON PAYMENTS
The number of payments that a borrower falls behind on before things start moving varies. Currently, some lenders are swamped with non-payment and they are not moving as quickly on starting foreclosure as they were even a couple of years ago.
STEP TWO: NOTICE OF DEFAULT IS RECORDED
Pursuant to California Civil Code 2924c.(a)(1) a notice of default is recorded with the county. Also, lenders will usually post a notice of default to the front of the home. Borrowers are usually aware that they have received a notice of default.
STEP THREE: AN AUCTION DATE IS SET
Pursuant to California Civil Code2924c, (b)(1) This notice of default starts the clock ticking!! An auction date for the sale of the home is usually set for 3 months after the date the notice is recorded.
Importantly, this notice period does not stop ticking because you file bankruptcy!!! If you file bankruptcy during this time, the lender will then have to go into court and ask permission to sell the home. This is a motion called a "motion for relief from automatic stay".
It is during this three month period that borrower can make up back payments and get the loan reinstated.
STEP FOUR: THE AUCTION OCCURS…EVENTUALLY!
The initial auction date can be just 14 days after the Notice of Trustee Sale is recorded. But sometimes auctions are delayed, and they can be postponed for up to 1 year. (California Civil Code 2924g (c)(1)) Sometimes the auctions are postponed by mutual agreement, other times they are postponed by bankruptcy, very often the bank is not ready to take over the property. Even a lawsuit alleging fraud can delay the sale.
STEP FIVE: THE TRUSTEE DEED IS RECORDED
The Trustee's Deed is recorded and transfers the property to the winning bidder. This could be the lender if no bid is higher than the lender's opening bid.
(4) How long does it take for a foreclosure to occur?
As you can see from above, a foreclosure can be a long, drawn out process. Particularly if the lender begins to delay the auction.
