California Foreclosure Timeline
Below you will see a realistic timeline from when a loan goes into default through the sale of the property as an REO. However, it may be prolonged if the buyer opts to try a short sale or mortgage modification.
If the Promissory Note is not paid, the borrower is in default and the Lender can take steps to sell the property to collect what is due. The sale is called a foreclosure. Foreclosure can be accomplished judically, using the court system, which is expensive and time consuming. The preferred foreclosure method is non-judical Power of Sale Provision, which allows a Trustee’s Sale. The foreclosure process from default to Trustee Sale can vary in length, but usually take from 6 month to 18 months.
Explanation of Non-Judicial (non-recourse) vs. Judical Foreclosure (recourse):
In a Judicial foreclosure the lender files a court action to foreclose. Again, this is very rarely done due to the expense to the lender. In California, the type of loan determines the foreclosure recourse.
Non-recourse loans are:
- Owner occupied
- Residential properties
- The money borrowed was used to purchase the home
- The lender can only use the proceeds from the sale of the property to pay off the loan. The lender has no legal right to persue a judgement against the borrower to collect the “deficiency”.
Recourse loans are:
- Non-owner occupied
- Investment properties
- A non-recourse loan can become a recourse loan by a refinance. A used home equity line of credit is an example of a recourse loan, unless used to improve the property.
- If the proceeds from the sale of the property are insufficient to fully pay the debt, the lender may pursue the borrower for the “deficiency” balance.