Foreclosure is the legal process by which a lender takes back ownership of a home or property for nonpayment of a home mortgage. A homeowner who fails to make payments on time and in full as specified by the home mortgage agreement could be subject to an action of foreclosure. Lenders must follow specific legal processes in order to foreclose on a home.
Non-Judicial Foreclosure
Non-judicial foreclosures occur when a court action is not required under state law. In states like California, where deeds of trust are used, the deeds and the mortgage loan documents generally contain language that gives the lender the ability to market the real estate in the event the mortgage payments cease. This is known as a”power to market” clause. The creditor must file a notice of default at the recorder’s office in the county where the land is situated 90 days prior to moving forward in the non-judicial foreclosure process, according to section 2924 of the California Civil Code. After 90 days, the creditor has to publish a notice of sale in newspapers or other public places in the property’s county for 14 days. This notice must have a statement of the goal to foreclosure, property address, and the name of the borrowers. The lender must send a note to the debtor along with other creditors that have an interest in the property, like another mortgage agent, at least 20 days before the date of the public auction. The proprietor could stop the foreclosure by paying all arrears up to five days ahead of the date of the auction and gets the right to postpone the sale for one day. There are no rights of redemption, or the right of the homeowner to purchase the property back from the Realtors, in non-judicial foreclosures in California.
Judicial Foreclosure
Judicial foreclosure is not uncommon in states where deeds of trust aren’t used, such as New York, but this kind of foreclosure is used in California when acts of trust do not contain power of sale clauses. This type of foreclosure requires the creditor go through legal proceedings in court. A creditor must file a notice of intent to foreclose to open a court proceeding. This document is Called a notice of pendency of action, or Lis Pendens, per section 872.250 of the California Code of Civil Procedure. Much like non-judicial event, the lender must notify all parties, publish a notice of sale, and adhere to the time frames for book and other matters about the foreclosure per section 2924 of the California Civil Code. The creditor must obtain a Judgment of Foreclosure and Sale, a court order signed by a judge that legally allows the foreclosure to proceed to a sale at auction. In a judicial foreclosure, the owner has the right to purchase back the land in the winning bidder for one year following the date of the sale.
HOA Liens
Liens of homeowner’s associations, or HOAs, could be foreclosed on by the institution. Homeowner’s institutions are corporations in proposed developments, like condominiums, to which every homeowner pays fees for solutions. In California, the HOA must file a lien for past due fees in the county recorder’s office where the land is situated. A copy of the lien document has to be mailed to the unit owner and other interested parties, like the mortgage creditor, within 10 days of the listing of the lien. Thirty days after the lien is recorded, the HOA can petition the court for a judicial foreclosure, or use an authorized deductions to get a non-judicial foreclosure. A trustee can only be used in the event the prosecution had been identified in the lien document, along with his name and address, per section 1367 of the California Civil Code. Homeowners are granted the right to redeem the land for 90 days following a non-judicial foreclosure by the HOA, per section 1367.4(c)(4) of the California Civil Code.