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California Non-Judicial Foreclosure Process: Step ONE

The non-judicial foreclosure (also known as a Trustee’s Sale) is a process initiated by the lender (called the “Beneficiary”) as a result of the failure of the borrower (called the “Trustor”) to do what they promised to do under the terms of a promissory note and an accompanying deed of trust. Usually, the failure by the Trustor is a monetary default—the Trustor failed to make one or more of the monthly installments of principal and interest due. In addition to a promise to pay the monthly installments when they become due, the trust deed typically contains numerous covenants (promises) by the Trustor such as the timely payment of property taxes. Once a default occurs, the Beneficiary can begin the process of either a judicial (court) foreclosure or, more commonly, the non -judicial foreclosure (provided that the Deed of Trust has within it a “power of sale” clause).

To start the non judicial foreclosure process, the Beneficiary obtains the services of a trustee (the “Trustee”) and notifies the Trustee that a default has occurred under the terms of the promissory note and the trust deed. The Beneficiary will also advise the Trustee as to (i) whether the default is monetary or non-monetary in nature (in the latter, the Beneficiary will give the specific reasons for the default), and (ii) the date of the default. Once that information is received, the Trustee will prepare a Notice of Default (“NOD”) which is required to be recorded in the County Recorder in the county where the property is located.

The NOD contains statutorily prescribed notices to the Trustor and, once recorded, officially starts the foreclosure process. At the time the NOD is recorded, the Trustee will usually order from a title company a Trustee Sale Guarantee (“TSG”). While not title insurance, the TSG lists all of the parties to whom the Trustee is required to send the NOD and gives to the Trustee and the Beneficiary any additional information about the condition of the Property (such as status of property taxes). The cost of the TSG is added to the amount owed by the Trustor to the Beneficiary. Once the title company records the NOD, it will then provide the recording information to the Trustee in the TSG.

 

For the next few stages of the California Non-Judicial Foreclosure Process stay tuned…..

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The complexities of the multitude of laws affecting the foreclosure process on both the state and federal levels can be daunting.

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