Monday, December 20, 2010

Notice of Trustee Sale - time periods changing in California per SB 1221

A new change to the California Civil Code that has not gotten much publicity is going into effect on January 1, 2011. Did you hear of SB 1221? It was passed earlier this year and signed by Governor amends Sections 2924 and 2924c of the CA Civil Code, and changes some time periods in the foreclosure process.

There are a few steps in the process to foreclose on a property via a Trustee Sale in the state of California, which is how the vast majority (nearly 99.9%) of residential property is foreclosed. To simplify the foreclosure process, a mortgage lender can file a "Notice of Default" after a few missed mortgage payments. This is a formal notice that the loan is in default from the lender, that usually comes to the homeowner via certified mail and that gets recorded to the property with the county recorder's office. Under the current civil code, before a Notice of Trustee Sale can be filed (notice of the scheduling of a foreclosure sale on the courthouse steps), there is a 3-month/90-day waiting period to allow the homeowner to bring their payments current. The Trustee Sale can be scheduled for 20 days from the date of the Notice of Trustee Sale. The Trustee Sale itself is the final step in foreclosure, where the property is sold to a 3rd party via an auction or just taken back by the lender.

Under the this new legislation, lenders will be able to file a Notice of Trustee Sale up to 5 days before the lapse of the 3-month period, provided that the actual date of the Trustee Sale is no earlier than 3 months and 20 days after the filing of the Notice of Default.

Once a Notice of Trustee Sale is filed by the lender, it becomes markedly more difficult to postpone or delay foreclosure proceedings...while it's not impossible at that stage to postpone or delay foreclosure, if you are just starting the short sale process, timelines could become even more pinched if you are pushing the 3-month mark from the issuance of a Notice of Default.

So what does this mean?? Do NOT delay in starting the short sale process if you are considering that as an alternative to foreclosure...once the Trustee Sale wheels are set in motion, they are hard to stop.

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