California is one of the many US states where the title of the property remains in trust until such time as the underlying loan has been completely paid for. This means they make use of a Deed of Trust, and in this instance a non-judicial foreclosure takes place. The process takes approximately 120 day if it is uncontested. The borrower has the right to contest the action, but must go to court for this.
Some times a Deed of Trust may also be referred to as a mortgage, but this is actually not the case, they are two different legal agreements. Because both these instruments of security are different, they require different processes when a foreclosure takes place and with a mortgage lien, a judicial foreclosure is necessary.
California is generally considered to be a consumer friendly state, but there are a very complicated set of rules governing foreclosures. A non-judicial foreclosure means that the courts are not involved in the process. The Deed of Trust has to contain a “Power of Sale” clause, which means in the case of a foreclosure, the lenders trustee is responsible for initiating the process.
This trustee is required to be a legal entity, and unlike most states, California does not allow deficiency judgments to take place in the case of a non-judicial foreclosure. This is known as the “one-action rule. A deficiency judgment is a second action.
In the case of a judicial foreclosure the lender may be able to recover more of the debt owed to them, including a deficiency judgment in some instances. But this process is extremely expensive and it takes a very long time to effect, so in the long run are not worth-while from a financial perspective. Rights of redemption are a statutory right of the property owner; however they are very complex in California.
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