The non-judicial foreclosure process is used instead of filing a lawsuit in court to retrieve the amounts owed to a lender with a secured loan under a Deed of Trust. The process follows procedure as set forth in the Civil Code of California. Based on the code, there are specific time frames and the costs are limited by law. This makes the non-judicial foreclosure the best economical method for a lender.
1. Notice of Default / Reinstatement Period
Foreclosure proceedings start with a Notice of Default (NOD). The document is recorded at the request of the lender by the trustee and is recorded in the county in which the property is located. The recording of Notice of Default gives "Constructive Notice" to the public.
After the recording of the Notice of Default, in the state of California, the borrower and junior lien holders are given proper notification and the borrower has 90 days to bring their account current. This period is referred to as the Reinstatement Period. This time period may vary in other states where we practice.
2. Notice of Trustee Sale
If the borrower does not reinstate their account within the 90 day period, the lender will authorize and instruct the trustee to record the Notice of Trustee Sale (NOS). After 21 days from the recording of the NOS, a foreclosure sale can take place at public auction. The property may be sold to a third party bidder or revert back to the lender for a specified amount. Bidders are required to bring cashier's checks or money orders to the sale in an amount equal to or higher than the lenders opening bid. The auctioneer will qualify each bidder and the successful bidder will have to tender full payment at the sale.
The Notice of Trustee's Sale is recorded at the county Recorder's office in the county where the property is located. It contains the date, time and place where the auction will take place. This notice has to be published in a adjudicated newspaper in the city where the property is located. The NOS is also posted on the property as a requirement of law.
3. Disbursement of Funds
After the sale auction is completed and if the property sells to an outside third party bidder, all funds owed to the lender/beneficiary will be prepared for immediate payout . If the property reverts to the lender/beneficiary at the sale, a Trustee's Deed Upon Sale will be issued and the lender will have ownership to the property securing the debt.
This is a procedure created by the California state legislature and is contained in the Civil Code of California, Section 2924. The non-judicial foreclosure process is the most expedient and cost effective approach to avoid protracted and expensive litigation in the courts.