If a homeowner is unable to make their mortgage payments, the home is not immediately foreclosed upon. A series of steps must occur before the home is officially deemed foreclosed.
The first step is the recording of a Notice of Default which usually occurs 3 months prior to a formal filing of foreclosure. Some lenders allow some leeway time to the homeowner, allowing them to make partial payments and negotiate a short sale; others will stick to the 3 month rule.
After three consecutive months of default a formal foreclosure is recorded, known as a Notice of Trustee Sale. Be aware that an auction can take place in as little as 14 days after the notice is served and an attempt to sell the home is done on the Court House steps. The Lender generally sets the bid at the total of principal outstanding, arrears and fees. If there are no winning bids the home is then owned by the bank and referred to as Real Estate Owned (REO).
There are two types of foreclosures in California: Judicial Foreclosure and Non-Judicial Foreclosure with the latter the prefered method in California.
1.  “Judicial Foreclosure” also know as a  ”Foreclosure by Judicial Sale” allows for the sale of the property to be supervised by a court. It is very rarely used in California and actually requires the Lender to sue the owner in foreclosure and proceed with a foreclosure trial in a court of law. The outcome of the proceeding is that the proceeds of the sale are used to first pay off the 1st lien holder and then second pay all other lien holders.
2. “Non-Judicial Foreclosure”A “Foreclosure by Power of Sale” is often referred to as a “Trustee Sale” (conducted by a trustee appointed in the deed of trust). This type of foreclosure is a sale done without court supervision as the deed of trust (mortgage) contains a power of sale clause.  In this type of sale Lenders cannot collect a deficiency judgement against the borrower. It’s often the preferred method in California as it’s generally a much quicker timeline for completion.
Foreclosure sales are typically not held on the original sale date and can be postponed for up to 1 year. Postponement can occur for a number of reasons including the Lenders choice, a mutual desision between the Lender and the owner or the owner files for Bankruptcy. Many think that Bankruptcy stops the whole process, in most cases it only delays the proceedings.
See Also: What is a short sale
» Posted by Peter 
