Residential Foreclosure Toolkit (CA)

Practical Law Toolkit w-037-4151 (Approx. 6 pages)

Residential Foreclosure Toolkit (CA)

by Practical Law Real Estate

Maintained • California

Resources to help lenders, borrowers, and their counsel understand all stages of the residential foreclosure process in California. This Toolkit contains links to guidance documents for use at all stages of a residential foreclosure.

The foreclosure of a loan secured by residential real property in California is often a complex and lengthy process combining litigation practice with real estate concepts and procedures. The California Homeowner Bill of Rights (CAHOBOR) provides protections and rights to borrowers with loans secured by owner-occupied real property (Cal. Civ. Code §§ 2923.4 to 2924.11). Effective August 31, 2020, CAHOBOR also provides protections and rights to borrowers with loans secured by real property occupied by a tenant where certain criteria are met (Cal. Civ. Code §2924.15(a)(2)).

In California, deeds of trust are the most common security instruments in loans secured by real property. Lenders rarely use mortgages.

Under California law, a lender may foreclose a loan secured by residential real property by either:

Non-judicial foreclosure. Foreclosure is authorized under a deed of trust or other contract containing a power of sale clause and is conducted at a public auction without judicial assistance. Non-judicial foreclosures are the most commonly used form of foreclosure in California and are governed by the California Civil Code (Cal. Civ. Code §§ 2923.3 to 2944.10).
Judicial foreclosure. Foreclosure of a mortgage or other contract without a power of sale by court order after a judgment in a lawsuit. Judicial foreclosure is rarely used with deeds of trust due to its lengthy nature and is governed by the California Code of Civil Procedure (Cal. Civ. Proc. Code §§ 725a to 730.5).

The general steps before commencing a judicial or non-judicial foreclosure of a residential mortgage in California include:

Obtaining and reviewing the mortgage, promissory note, and other loan documents.
Conducting a title search to:
- confirm the mortgage is recorded and whether any assignments are required; and
- identify and evaluate any liens and other encumbrances against the property.
Verifying and satisfying any property registration requirements with the municipality where the real property is located.
Complying with:
- relevant federal consumer protection laws, such as the Consumer Financial Protection Bureau's loss mitigation regulations (12 C.F.R. § 1024.41) and the Fair Debt Collection Practices Act (15 U.S.C. §§ 1692 to 1692p);
- the CAHOBOR's pre-foreclosure notice requirements; and
- any contractual pre-foreclosure notice requirements.

The general steps for a non-judicial foreclosure of a residential mortgage in California include:

Appointing a substitute trustee if the current trustee is unwilling or unable to conduct the sale.
Serving and recording a notice of default (Cal. Civ. Code § 2924(a)(1)).
Mailing, publishing, posting, and recording a notice of sale (Cal. Civ. Code §§ 2924(a)(3) and 2924f).
Ensuring that the trustee conducts the foreclosure sale by public auction at the time and location specified in the notice of sale (Cal. Civ. Code § 2924g).
If the property contains no more than four single-family residences and a prospective owner-occupant is not the winning bidder, within 48 hours after the trustee's sale, updating:
- the required information provided to eligible bidders on the internet website; and
- the telephone number listed in the notice of sale.
(Cal. Civ. Code § 2924m(e).)
In California, anti-deficiency legislation prohibits the lender from pursuing a deficiency judgment in a non-judicial foreclosure (Cal. Civ. Proc. Code § 580b).

The general steps for a judicial foreclosure of a residential mortgage in California include:

Preparing, filing, and serving a foreclosure complaint with all necessary attachments.
Recording and serving a notice of lis pendens.
Obtaining a foreclosure judgment, typically by filing:
- a motion for default judgment if the borrower fails to respond to the foreclosure complaint within 30 days of service; or
- a motion for summary judgment if the borrower files a response but does not dispute the material facts.
Obtaining a writ of sale directing the sheriff to levy on and sell the real property.
Arranging for a public sale of the property, including ensuring that the sheriff properly publishes, serves, and records the notice of sale.
Seeking a deficiency judgment if the sale proceeds are insufficient to satisfy the foreclosure judgment amount.

This Toolkit contains links to continuously maintained Practice Notes, Checklists, and Flowcharts to help counsel for borrowers and lenders manage the residential mortgage foreclosure process in California from the initial stages through the foreclosure sale, as well as post-foreclosure deficiency judgments (where applicable). For a collection of materials concerning commercial foreclosures in California, see Commercial Foreclosure Toolkit (CA).

Residential Foreclosure Toolkit (CA) | Practical Law