The California foreclosure process usually begins with a homeowner receiving a legal notice known as a Notice of Default. In most cases, this allows the homeowner ninety days to make his or her mortgage payments current. If the homeowner fails to take care of the delinquency, or other arrangements are not made, the property could very well be foreclosed upon. Once the Notice of Sale has been recorded in county records and copies sent to the homeowner, the homeowner’s rights become quite limited. The foreclosure sale will then most likely take place in a public forum, and the house will be sold to a buyer or transferred back to the lender. The entire process can be frustrating, financially devastating, even embarrassing.
Whether we serve as your agent or your substituted trustee, Royal Palm Foreclosure Services, Inc. (“RPFS”) is proud to be your partner. We help you by:
Performing our duties both effectively and accurately, ensuring that the communication flow is consistent; being available to you as your needs require; maintaining high standards and professionalism; keeping abreast of changing laws and informing you of the changes.
Since 2003, RPFS has been providing professional quality service to the lending, real estate and legal communities as well as individuals. In conjunction with the Law Office of Lazaro E. Fernandez, Inc., RPFS proceeds with its foreclosure. Should a bankruptcy arise, relief from stay, an objection to a plan confirmation or other legal remedies may be used to expedite the foreclosure process.
The discussion below will take you through the foreclosure process so that you will have a foundation of knowledge in this very specialized field. The information provided in the following pages covers the general spectrum of situations which might arise during a trustee’s sale proceeding.
What is a Foreclosure?
Foreclosure is a common term used to describe a trustee’s sale proceeding – the correct terminology to use when describing the procedure for enforcing a lender’s rights once an obligation secured by a deed of trust is in default.
An Overview of the Process
Let’s begin with a brief overview of the process, and go into the stages of process in greater detail.
- The note, deed of trust and default information are sent to RPFS
- The Notice of Default and other necessary documents are prepared and sent to the beneficiary for signature
- The signed documents are then returned to RPFS and recorded
- The Notice of Default is recorded and the Trustee’s Sale Guarantee is ordered from the title company
- The required 10-business day mailings are sent
- The Trustee’s Sale Guarantee is reviewed and the required one-month mailings are sent
- After the Notice of Default is recorded, the borrower, or a junior lien holder, may reinstate the obligation at any time up to five business days before the sale date, which still has not been set at this stage of the proceeding
- If, however, the loan has not been reinstated or paid off within three months from the date the Notice of Default recorded, the beneficiary (lender) may authorize the next step of the proceeding
- RPFS will prepare, record and arrange to post and publish the Notice of Trustee’s Sale
- The notice will be published once a week for three weeks in a newspaper of general circulation near the location of the property, with the sale normally being scheduled during the week after the third publication
- Copies of the Notice of Trustee’s Sale are sent to all entitled parties
- The borrower or junior lien holder still has the right to reinstate the obligation any time up to five business days before the now known sale date
- If the loan has not been reinstated prior to the five business-day period, the beneficiary can demand the entire unpaid obligation to be paid in full during the five-day period
- If the sale is postponed, the right to reinstate may be revived
- A public auction is conducted
After the Sale
- The Trustee’s Deed Upon Sale is prepared and recorded by RPFS
- The foreclosure file is closed
In order for RPFS to prepare the default forms for the beneficiary’s signature, all the pertinent documents, including an accurate statement of the account, must be provided.
Sometimes it is necessary for the beneficiary to advance funds to protect his/her security. These advances might be for delinquent real estate taxes, a fire insurance premium or payments to prior trust deed holders. Such payments should be paid directly to the creditor by the beneficiary. It is important that you advise our office of the amounts advanced and the dates the advances were made. If there are any changes during the course of the proceeding, it is the beneficiary’s responsibility to advise RPFS so that accurate records can be maintained.
Should the beneficiary have a collection agent, the service should be canceled and no further payments accepted. This will eliminate any confusion, which might invalidate the Notice of Default.
Because it is often necessary to contact the beneficiary by telephone, please be certain to provide both home, cellular and business telephone numbers. We also ask you provide us your e-mail address.
The California Civil Code requires that we send a copy of the Notice of Default and the Notice of Trustee’s Sale to the original trustor at his/her last known address if that address differs from the one shown on the deed of trust. Carefully review the deed of trust, and if the address is different, be sure to provide this information. Even if the original trustor is no longer the owner of the property, he/she is still entitled to receive notice pursuant to the provisions of the California Code. RPFS also needs the last known mailing address for all new record owners.
The Declaration of Default and the Notice of Default will be prepared for the beneficiary’s signature. In some instances, it may be necessary for the beneficiary to sign a Substitution of Trustee. This document must be acknowledged by a notary public.
A trustee’s sale proceeding officially commences when the Notice of Default records. This begins the three-calendar month pre-publication period. To expedite the preparation of the Notice of Default, the transmittal form seen below should be filled out and returned along with the required documents (transmittal forms are available for your use).
The pre-publication period beings once the Notice of Default has been recorded.
The California Civil Code requires that a copy of the Notice of Default be mailed within 10 business days of its recording to all persons who are entitled to the notice. This includes the original trustor at the address shown in the deed of trust, at his/her last known address and to any other persons or entities who have recorded a Request for Notice. The Civil Code also requires that a copy of the Notice of Default be mailed to certain entitled parties within one month of the notice’s recordation. All mailings to the trustors and new owners are to be sent by certified and first class mail.
A Trustee’s Sale Guarantee (TSG) will be ordered from a title company at the time the Notice of Default is recorded. When received, RPFS will examine the TSG and forward a copy to the beneficiary. The TSG provides the information needed to process trustee’s sale proceeding and guarantees the accuracy of that information to the trustee and beneficiary only.
The property owner, or a junior lien holder, may cure the default by paying all delinquent amounts, including the trustee’s fees and costs. This may be done at any time up to five business days before the scheduled sale date, although this date cannot be set until the proceeding reaches the publication period.
If the loan is all due and payable pursuant to the terms of the note, the property owner or junior lien holder may pay the loan in full up to the day of sale.
To Cure a Default
Most trustee’s sale proceedings are resolved during the three-month pre-publication period.
The borrower or any person with a subsequent interest in the property may pay the beneficiary or his authorized agent the amount necessary to cure the default. This amount will normally include delinquent payments, any advances and the trustee’s fee and costs. Always call prior to accepting any money, to verify the amount of the trustee’s fee and costs incurred to date. You must also notify us immediately upon receipt of payment. When the default has been cured, RPFS will prepare a Notice of Rescission to be signed by the beneficiary or their duly authorized agent. When recorded, this document cancels the effect of the Notice of Default.
THE CLIENT MUST:
- Contact to verify fees and costs
- Contact immediately upon reinstatement
RPFS WILL PREPARE:
- A rescission of the Notice of Default, if the default has been cured, or
- A Publication Letter, if the default has not been cured.
If the Default is not Cured: Proceeding with the Sale
If the default is not cured within the three-month pre-publication period, the next step is to prepare, post, record and publish the Notice of Trustee’s Sale.
The beneficiary authorizes publication by signing and returning an instruction form, which is referred to as a “Publication Letter.” This letter is prepared and sent by RPFS to the beneficiary one month prior to the end of the pre-publication period for completion and signature. An additional deposit may also be required at this time.
The Publication Letter’s Purposes:
- It advises RPFS of any changes that have occurred since the Notice of Default was recorded
- It authorizes RPFS to prepare the Notice of Trustee’s Sale and begin publication
- Prepare the Notice of Trustee’s Sale
- Arrange for publication
- Post all notices on the property and in a public place
- Mail copies of the Notice of Trustee’s Sale
- Record the Notice of Trustee’s Sale
- Prepare a Bid Authorization Letter for the beneficiary’s signature
After the Publication Letter is received by RPFS and the pre-publication period has expired, the Notice of Trustee’s Sale is prepared.
A copy of the notice is then sent to an adjudicated newspaper of general circulation to be published once a week for three weeks with the first ad running no later than 20 days before the sale. The notice is also posted on the property and in at least one public place in the city where the sale will take place. The original Notice of Trustee’s Sale must also be recorded at least 14 days prior to the scheduled sale date. A copy of the Notice of Trustee’s Sale is also mailed to all entitled parties.
At this point the trustee’s fee and costs will increase. It is important that you contact our office to verify the fees and costs before you quote the amount to cure the default or before you accept any money. The Notice of Sale will not be recorded unless all fees and costs are paid in full.
If the property owner wishes to reinstate the loan during the publication period, the beneficiary must allow him/her to do so up to five business days prior to the date of sale, unless the loan is all due and payable pursuant to the terms of the note.
The beneficiary will be asked to sign and return the Bid Authorization Letter, which instructs RPFS to make the opening bid on behalf of the beneficiary. This bid will usually be for the total amount of the debt secured by the deed of trust plus any advances, trustee’s fee and costs. This authorization must be received before the trustee’s sale takes place.
The beneficiary may instruct RPFS to bid a deficiency bid, which is less than the amount of the debt. In such a case, RPFS can represent the beneficiary only until the bidding reaches the total amount of the debt. If the beneficiary wishes to bid in excess of the total amount, it would then be necessary that he/she or a representative be present at the sale to participate in the bidding. Should you have any questions regarding the bidding process, please contact RPFS.
An item included within the authorization concerns the military status of the property owner. Due to the protection granted military personnel by the Servicemembers Civil Relief Act (SCRA), it is necessary to advise if the property owners are in the military service. RPFS seldom encounters situations where a property owner is entitled to protection under this act. However, if you are aware that any of the owners are in any branch of the military service, please notify RPFS immediately.
There are times when a beneficiary does not feel that he/she has enough information to determine the property owner’s military status. Sometimes it is necessary to hire an investigation agency to assist you. Please call if you need a reliable reference for this service.
THE CLIENT MUST COMPLETE AND RETURN:
- The Bid Authorization Letter
The Trustee’s Sale
The date of the trustee’s sale is established at the time the Notice of Trustee’s Sale is prepared. The exact date is determined by the qualified newspaper’s frequency of publication and by the county where the sale is to be conducted.
The trustee’s sale is a public auction sale and is open to all qualified bidders. Bids are made orally and each person wanting to bid must first qualify with the auctioneer by showing the amount and form of money intended to be used in the event of a successful bid. The Notice of Trustee’s Sale designates the type of funds required, and the trustee uses reasonable discretion as to the form of money accepted. The acceptance of the bid is not final until the total amount is paid to the auctioneer by the highest bidder. If the beneficiary is bidding, he/she does not need any money at the sale unless he/she wishes to bid more than the amount of the total debt, including the trustee’s fees and costs. If the lender plans to overbid, he/she must have enough money to pay the difference between the amount of their debt and the final bid. The sale is complete when the highest bid is received and the auctioneer accepts it, declaring the property sold.
There are various reasons why a trustee’s sale may be postponed. For example, a bankruptcy or other legal proceeding may prevent RPFS from conducting the sale on the scheduled date.
If there is a bankruptcy or litigation, it will be necessary for you to employ the services of an attorney. RPFS can assist you in these matters.
The beneficiary is entitled to three separate postponements for their own purpose. The beneficiary and the property owner can agree on postponements and postpone the sale as often as they wish. These mutual agreement postponements should be in writing. If there is a bankruptcy or legal proceeding, the sale can be postponed as many times as necessary to obtain an order from the court to allow the sale to take place. The sale may be postponed one time only for bankruptcy determination. If a sale is postponed for any reason, an announcement must be made at the sale location as to the reason for the postponement, as well as the time and place of the next sale date.
If the postponed sale date is for a period of time that exceeds five business days, the right of reinstatement is revived and continues until five business days prior to the postponed sale date.
After the Sale
A Trustee’s Deed Upon Sale is prepared RPFS after the sale is completed. This deed transfers title to the successful bidder.
The deed must be signed by the trustee, acknowledged by a notary public and recorded. After recording, the deed is forwarded to the purchaser of the property.
There is no right of redemption after a trustee’s sale, and the purchaser is entitled to immediate possession. The one exception, however, is the right of the federal government to redeem if a federal tax lien has been recorded against the property and is subsequent to the deed of trust being foreclosed. If you become the owner of the property after the sale, you may feel it necessary to purchase a policy of title insurance to insure you as the vested owner. This can be accomplished by contacting a title company.
The following definitions will be helpful to you in understanding the foreclosure process.
Assignment of Deed of Trust – A document that transfers the beneficial interest in a note and deed of trust.
Bankruptcy – A legal proceeding that allows a debtor to discharge certain debts or obligations without paying the full amount. It gives the debtor time to reorganize his/her financial affairs in order to repay his/her debts. A bankruptcy does not discharge obligations secured by a deed of trust.
Beneficiary – The lender or person to whom the obligation is owed.
Bid Authorization Letter – A form which, when signed by the beneficiary, authorizes the trustee to make the initial opening bid at the trustee’s sale.
Declaration of Default – A document instructing the trustee to prepare and record a Notice of Default, and, if necessary, to sell the trust property in order to satisfy the unpaid obligation.
Deed of Trust – A written document describing the real property being given as security for the repayment of an obligation.
Extension Agreement – An agreement that extends the due date of a loan.
Foreclosure – A popular term used to describe the procedure for enforcing a creditor’s rights when an obligation secured by a deed of trust is in default.
Full Reconveyance – A document prepared by the trustee when the obligation secured by a deed of trust is paid in full. When recorded, the reconveyance eliminates the lien from the title of the property.
Junior Lien – A legal claim upon real property that recorded subsequent to another legal claim upon the same property.
Notice of Default – A written document which gives notice of public record that a borrower has failed to perform his/her obligation. The trustee’s sale proceeding commences when this notice is recorded.
Notice of Trustee’s Sale – A document that is published, posted, mailed and recorded, setting forth the date, time and location of the trustee’s sale.
Postponement – A verbal announcement made at the time and location of the scheduled trustee’s sale, extending the sale to a future date and time.
Publication Letter – The letter that, when signed by the beneficiary, authorizes the trustee to prepare, publish and record the Notice of Trustee’s Sale.
Publication Period – The period beginning after the three-calendar month pre-publication period has expired and ending when the trustee’s sale has been conducted. During the publication period, the Notice of Trustee’s Sale is published, posted, mailed and recorded.
Rescission of a Notice of Default – After a default has been cured, this document, when signed by the lender and recorded by the trustee, will remove the effect of the previously recorded Notice of Default.
Reinstatement Period – The time period that commences when the Notice of Default records and ends five business days before the trustee’s sale. The default may be cured at any time during this period by paying all delinquent amounts, including the trustee’s fee and costs.
Servicemembers Civil Relief Act – An act passed by Congress for the financial protection of those individuals serving in the military.
Substitution of Trustee – A written document in which the beneficiary appoints a successor trustee to the trustee of record.
Trustee – The party who holds title to real property in trust for the benefit of another. The trustee’s most common functions are to process trustee’s sale proceedings and to issue full and partial reconveyances.
Trustor – The borrower/owner at the time the deed of trust is created.
Trustee’s Deed Upon Sale – A document signed by the trustee that transfers ownership of the real property to the purchaser at a trustee’s sale.
Trustee’s Sale – A public auction sale of the property described in a Notice of Trustee’s Sale, which was given as security for the repayment of an obligation.