Behind on the mortgage in California? Here is how much time you actually have

People who fall behind on a mortgage usually think they have less time than they do, and then act as though they have more. Both mistakes are expensive. The California foreclosure process is slow, prescribed and public, and once you know the stages you can see exactly where you are and what is still available to you.

Almost all California home loans foreclose non-judicially, under the power of sale in the deed of trust. No lawsuit, no judge. That makes it faster than in many states, but it is still not fast.

Stage 1 — Missed payments, before anything is recorded

Federal servicing rules generally stop a servicer from making the first official foreclosure filing until you are more than 120 days delinquent. That is roughly four months of runway before the clock that matters starts.

What happens in this window is phone calls, letters and late fees. It feels like the worst part. It is not. It is also the period in which you have the most options and the least damage to your credit.

If you are going to apply for a loan modification, forbearance or repayment plan, this is when. And one thing worth knowing: under California’s Homeowner Bill of Rights, once you submit a complete loss-mitigation application, the servicer generally cannot record a Notice of Default or proceed to sale while it is pending. That is the “dual tracking” prohibition, and it has teeth. Get the application in and complete — incomplete applications do not trigger the protection.

Stage 2 — Notice of Default

The servicer records a Notice of Default with the county recorder and mails you a copy within ten business days. This is public record. It is also the moment your phone starts ringing, because the NOD list is scraped daily by every investor and “we buy houses” operation in the state, including, in fairness, ours.

From the date the NOD is recorded, you have a reinstatement period of at least three months. Reinstating means paying the arrears plus fees and costs — not the whole loan, just what you are behind. Your right to reinstate runs until five business days before the scheduled sale date, so it actually extends past the three months.

You can also still sell during this entire period, and a sale that pays the loan off in full ends the foreclosure. Nothing about a recorded NOD prevents you from selling your house.

Stage 3 — Notice of Trustee’s Sale

After the three months are up, the trustee can record a Notice of Trustee’s Sale. It sets the auction date, which must be at least twenty days out. The notice is posted on the property, mailed to you, published in a local newspaper and recorded.

So the arithmetic from Notice of Default to auction is a legal minimum of about 111 days — three months plus twenty days. In practice servicers frequently postpone, and the real span is often six months to a year from the first missed payment. But minimum is minimum, and you should plan against it rather than against the average.

Up to five business days before the sale you can reinstate. After that, and up until the auction itself, you can still pay off the loan in full — which includes paying it off out of the proceeds of a sale.

Stage 4 — The auction

The property is sold at a public trustee’s sale. And then a detail that surprises almost everybody: California has no right of redemption after a non-judicial trustee’s sale. In some states you can buy the property back for a period afterwards. Here, when the gavel falls, it is gone.

If the property sells for more than what was owed, the surplus belongs to you. It goes through the trustee, then to junior lienholders in order of priority, and whatever remains comes to the former owner. Surplus funds are also a magnet for people who will offer to “recover” them for you in exchange for a percentage of your own money. You can claim them yourself, and the trustee has to tell you how.

After the sale the new owner serves a three-day notice to quit and then files an unlawful detainer if you have not left. That adds a few more weeks, and it is not a pleasant few weeks.

What each stage costs you

The foreclosure itself is not the only cost. A completed foreclosure sits on your credit for seven years and will affect your ability to rent, not just to buy. Trustee’s fees, attorney costs and default interest are added to the reinstatement figure and grow every month, so the number needed to fix the problem climbs while you decide.

There is also a real difference in outcome between selling and being sold up. A sale that clears the debt leaves you with any equity above the payoff. A foreclosure at auction very often leaves less on the table, because the property sells fast to a bidder who prices in risk they cannot inspect for. If you have equity, letting it go to auction is usually the worst available outcome.

What you can actually do

• Talk to a HUD-approved housing counsellor. It is free, they are not selling you anything, and they know the servicer’s own programmes better than the servicer’s call centre does.
• Submit a complete loss-mitigation application if a modification is plausible. Complete is the operative word.
• Get a payoff demand and an honest value on the house. Those two numbers tell you whether you have equity, and everything else follows from that answer.
• Sell, if the numbers say sell. With equity, a normal listing may well net you more than we would — if there is enough time before the sale date, which there often is during the three-month period and rarely is in the last three weeks.
• Look at a short sale if you are underwater. It needs the lender’s approval and takes time, so it is a stage-two decision, not a stage-four one.

Where a cash buyer fits, and where it does not

We can close in about a week once title is clear, which is why people in the last month before a sale date call us. We work directly with the trustee and the servicer to get a payoff demand and have the foreclosure cancelled at closing.

But be honest with yourself about timing. If you are at day 30 of the reinstatement period with real equity and a house in decent shape, list it. You will very likely do better, and any buyer who tells you otherwise at that stage is looking after themselves rather than you. Our number is a good one when time has run short, when the house needs work you cannot fund, or when certainty is worth more to you than the last few percent. It is not a good one when you have four months and a tidy house.

If you want to know which of those situations you are in, call us and we will tell you plainly, even when the answer is that you should not sell to us. This is general information rather than legal advice — a housing counsellor or an attorney should look at your specific paperwork before you make a decision this size.