One element of foreclosure that many beleaguered homeowners may not understand is the California foreclosure right of redemption. In the midst of other pressures to maintain mortgage payments, catch up on late or missed mortgage payments, and to consider other alternatives to prevent foreclosure, they may not realize that redemption is another option for saving their home. Since California has more than 200,000 foreclosures a year, which is the most in the nation, many homeowners are looking for any alternative to foreclosure.
Foreclosure Laws in California
California is a title theory state, which means that the title to a person’s home is held in trust until the mortgage is paid in full. If, however, a homeowner defaults on their mortgage, the lender has the right to foreclose on that home and sell it in a foreclosure sale. That may occur immediately, after the first missed payment, although lenders often wait several months before beginning this expensive and time-consuming process. There are two common forms of foreclosure used in California:
- Non-judicial foreclosure, which most often occurs when a power of sale clause is contained in the mortgage agreement. It gives the lender the right to sell the property at auction, after proper notice and through a trustee, without going to court. In this form of foreclosure, the homeowner has until five days before the foreclosure sale to repair the default and catch up on their loan payments, late fees, and other costs.
- Judicial foreclosure is also allowed under California law, but it is generally only used when there is no power of sale clause in the mortgage. In this type of foreclosure, the lender must go to court to obtain a final judgment of foreclosure. The property can then be sold at auction.
California Redemption Laws
There are other protections for homeowners in default on their mortgages.
- When a power of sale clause exists and the lender has given notice of such foreclosure and sale, the borrower has until five days before the sale to bring the mortgage up to date.
- There is a statutory right of redemption in the state, as well, which allows the homeowner to redeem their home within one year after the foreclosure sale, with one exception. Otherwise, the borrower has the right to redeem when they make full payment of the remaining mortgage amount plus costs.
- The right of redemption period is only ninety days when the original lender has made a bid for the home at the full price of the mortgage.
- After a notice of default, California homeowners also have ninety days to cure the default and avoid the foreclosure
Deficiency judgments are generally not allowed in California when the most common form of foreclosure, the non-judicial foreclosure, is used because of the state’s one-action rule. There can only be one action against an individual for any one fault. If a non-judicial foreclosure is the one action, a deficiency judgment would be an illegal second action. If, however, a judicial foreclosure is ordered through the courts, the lender may petition for a notice of deficiency in that same action.
Getting Legal Help with Foreclosure and Redemption in California
If these rules for foreclosure and redemption seem complicated, they are. Homeowners in California can face losing their property if they do not know the laws governing foreclosure and the protections of redemption. They can avoid those kinds of errors by consulting a skilled foreclosure attorney in California to make sure they do not miss any appropriate statutes or opportunities to save their home.
