Non-Judicial Foreclosure Process
The typical California deed of trust (called a "mortgage" in some other states) identifies three parties, the "beneficiary" (the lender), the "trustor" (the borrower), and the "trustee." Generally speaking, it is the trustee who processes the foreclosure,
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.
Lenders may use the non-judicial foreclosure process when there is a "power-of-sale" clause in the mortgage note or deed of trust, which gives the lender the right to sell the house and use the profits to pay off the balance of the mortgage in the event that the borrower defaults on the loan. As the name implies, a lender need not hold a court hearing in order to carry out the foreclosure process. However, there are strict laws governing the non-judicial foreclosure process, and lenders need to provide documentation of the ownership of the mortgage and the borrower’s failure to pay
The lender initiates the process by sending the borrower a Notice of Default, giving the borrower 90 days to cure the default. If the borrower does not, then the lender files a 21-day Notice of Trustee’s Sale. After 21 days, the house is then sold at auction. However, the borrower has until up to five days prior to the sale to cure the default to stop the sale.
Many lenders prefer to use non-judicial foreclosure because it is often faster and less expensive than judicial foreclosure. Non-judicial foreclosure has an expedited time compared to judicial foreclosure. Borrowers also have no right of redemption in non-judicial foreclosure, meaning they cannot buy the property back after the foreclosure sale like they can in a judicial foreclosure.
However, a lender gives up the right to obtain a deficiency judgment against the borrower to make up the difference between the amount owed on the mortgage and the proceeds from the sale of the real estate.