Guide to foreclosures
This guide has basic information about
- What a foreclosure is
- Foreclosure scams to watch out for and where to get help
- Your rights and what happens in a non-judicial foreclosure
- What rights a tenant has in a foreclosure
Foreclosure is a complicated area of law. If you need help or legal advice, contact a local housing legal aid agency or community-based nonprofit.
Foreclosure is a legal process that forces the sale of a home to cover a debt
Foreclosure is when a lender uses a legal process to force the sale of a property (like a home) to cover a debt. This can happen when someone takes out a mortgage to buy a home and then stops making payments (defaults on the mortgage). The company that owns the mortgage can force the sale of the property to cover the remaining debt amount.
A home can be foreclosed on for many kinds of debts, not just a mortgage. For example, Home Owner's Association (HOA) can foreclose in some cases for unpaid dues and assessments. Or, if there's a final court order (a judgment) that says the homeowner owes money to a person or company, that person or company may be able to foreclose to collect the money they're owed.
If a lending contract allows, a lender can foreclose without going to court
In California, lenders can foreclose either:
- Without going to court (non-judicial)
- By going to court (judicial)
Whether the lender does one or the other depends on if there's a power of sale clause in the mortgage (or deed of trust). A power of sale clause is a part of the contract that says if the person who takes out the loan stops making payments the lender can sell the property without going to court.
Most mortgages have a power of sale clause, so lenders can foreclose without going to court (non-judicial). These are the most common type of foreclosures in California.
1. In a judicial foreclosure, the borrower may still owe money after the sale of the home
In a non-judicial foreclosure, if the property that was sold was where someone lived most of the time (their primary residence), then the lender can only collect the money from the sale of the home to cover what they're owed. If the money from the sale doesn't cover what they're owed, the lender can't go to court to get an order to collect the rest of what they're owed (called a deficiency judgment). There are additional situations where money cannot be collected after a non-judicial foreclosure. In a judicial foreclosure, the lender can get a deficiency judgment to collect any money they're owed after the sale.
2. In a judicial foreclosure, the borrower has some time to buy back their home after its sold
In a judicial foreclosure, after the judge orders the sale of a home, it's usually auctioned off to the highest bidder. The homeowner has some time after the sale to buy the home back from the successful bidder (called the right of redemption). The amount of time depends on whether the sale satisfied the debt. If the sale satisfied the debt, the homeowner has 3 months. If it didn't, the homeowner has 1 year.
Beware of foreclosure scams
Fraudulent companies target homeowners behind on their mortgage payments
Fraudulent companies offer help, take your money, and then do nothing to help. Both licensed and unlicensed professionals commit these scams. Get tips on how to avoid scams and how to report them. Contact a trusted resource to make sure something is legitimate before you sign onto a scam.
Get free help from a trusted resource if you're facing foreclosure
- Legal help: Find out where to get free or low-cost legal help. There are also non-profit organizations, like the Housing and Economic Rights Advocates (HERA), that offer free legal information.
- Mortgage assistance: Talk to a Department of Housing and Urban Development (HUD) approved housing counseling agency and get more information about mortgage assistance options. Some counties have grant funds (money) to help you. A counseling agency should be able to help you find out about grants.
Information about the steps a lender must take to foreclosure without going to court and the rights of the borrowers.
Tenants' rights in a foreclosure
Information for tenants living in a home during a foreclosure.
Resources for homeowners and tenants
Where to get legal help and information about mortgage assistance.