Most people buy a home by borrowing part of the purchase price usually from a bank or a mortgage company. Other times, a homeowner borrows money against the equity in the property after the home is purchased, and this is called a “home equity loan.” Sometimes people refinance their mortgage loan and combine it with a home equity loan. In all these situations, the lender usually has a lien against the home to secure repayment of the loan. When a buyer fails to make the payments due on the loan (defaults on the loan) the lender can foreclose, which means that the lender can force a sale of the home to pay for the outstanding loan.
For more information about foreclosure laws:
The law on foreclosure is changing often. Make sure you read the most updated laws.
Find legal help with a foreclosure in your county.
In California, lenders can foreclose on deeds of trust or mortgages using a nonjudicial foreclosure process (outside of court) or a judicial foreclosure process (through the courts). The nonjudicial foreclosure process is used most commonly in our state.
When a lender uses the nonjudicial foreclosure process against a borrower who fails to pay on a mortgage for his or her primary residence, the lender gives up the right to collect a deficiency judgment against the borrower. But most lenders prefer this process anyway because it is much faster and less costly.
Judicial foreclosures are rare in California. A judicial foreclosure allows the lender to get a deficiency judgment against the borrower. BUT the homeowner has the “right of redemption,” which allows him or her to buy the home back from the successful bidder at the auction for 1 year after the sale. The process is longer and more costly than a nonjudicial foreclosure.
These are the main steps in a nonjudicial foreclosure, which apply to the majority of foreclosures in California.
The Notice of Sale must:
Note: Before the foreclosure process begins, the lender or loan servicer may send you letters (over the course of several months) demanding payment. Those letters are NOT notices of default.
You have up until 5 days before the foreclosure sale to cure the default and stop the process. This is called “reinstatement” of the loan. During the 21-day period after the Notice of Sale is recorded, any person or institution (like a bank) with an interest in your home has the right to redeem the home up until the nonjudicial foreclosure sale/auction. This means that they must pay the entire loan in full.
Whoever buys your home at the foreclosure sale/auction cannot just change the locks to the home. The new owner must serve you with a 3-day written notice to “quit” (move out) and, if you do NOT move out in the 3 days, go through the formal eviction process in court in order to get possession of the home. That process typically takes several weeks. Learn more about the eviction process.
If there are tenants in the house that was foreclosed on, the new owner must honor the existing lease. BUT when the tenants have a month-to-month lease or the owner/landlord also lives in the home that is being foreclosed on, the new owner can evict the tenants or former owner/landlord. In these cases, the new owner may either (1) offer the existing tenants a new lease or rental agreement or (2) begin eviction proceedings. If the new owner chooses to evict existing tenants (other than the former owner), the new owner must give the tenants at least 90 days’ notice before starting eviction proceedings.
Tenants in some California cities may still have a right to stay in their buildings. Cities with eviction or rent control laws prohibit new owners from using foreclosure as a reason for evicting tenants.
Note: If you are a tenant and want to find out if the place you rent is in foreclosure, you can record, in your county recorder’s office, a form called a Request for Notice, asking that you be notified of any foreclosure proceedings. This way you, as the tenant, will receive a copy of the Notice of Default and Notice of Sale and know the status of the foreclosure. You can buy a Request for Notice at stores that sell legal forms or get 1 from the customer service department of a title company.
Learn more details and read the federal law protecting tenants in foreclosures.
If you need additional information, talk to a lawyer. Click for help finding a lawyer.
ForeclosureInfoCA.org: A project of the Public Interest Clearinghouse and the State Bar of California, this site can direct you to legal assistance, advice on avoiding foreclosure, and information on buying a home.
A Guide to Mortgage Resources in California: This site, by the California Department of Consumer Affairs, provides information on buying and owning a home, as well as how to look for help with a current mortgage.
Housing and Economic Rights Advocates: Has consumer pamphlets, tips, and information to help you be better informed about foreclosure, preventing foreclosure, working with lenders, and other resources.
Tenants Together's Law & Resources: Information to help you know your rights, answers to frequently asked questions and resources to help you be better informed about foreclosure and your rights as a tenant in a foreclosure.
U.S. Department of Housing and Urban Development (HUD): The Department of Housing and Urban Development’s guide to avoiding foreclosure contains links that can help you find a local HUD-certified housing counselor, learn about refinancing options, and understand the steps homeowners can take to avoid foreclosure.