Today the non-judicial foreclosure process is the preferred method of enforcing payment under a Deed of Trust.  California Civil Code sets out the procedure and specific time frames involved and limits the costs and fees a trustee or beneficiary may charge.

Notice of Default/Reinstatement Period

The foreclosure proceeding is commenced with the filing of the Notice of Default (NOD). This document is recorded in the County where the property is located and lists the reasons for default. At the same time the NOD  is recorded , the Title Company issues the Trustee’s Sale Guarantee (TSG), which is a special title policy issued to the Trustee and Beneficiary showing the current status of the security property as to existing lien holders, judgments, real estate taxes, etc. After recordation of the NOD, the borrower and any junior lien holders identified in the TSG are sent a copy of the NOD by regular mail and by certified mail. The borrower/trustor has 90 days to “cure”  the foreclosure or bring the account current. This period is referred to as the “Reinstatement Period”.

Notice of Trustee’s Sale

If the borrower does not reinstate their account within the 90 day period, the lender/beneficiary will instruct the trustee to proceed with the Trustee’s Sale by recording the Notice of Trustee’s Sale (NOS). The NOS will contain the date, time and location of the Trustee’s Sale. A copy of the NOS is also sent by regular and certified mail to the borrower/trustor and any junior lien holders. In addition to the required mailing, the security property is “posted” ( a copy of the NOS is attached to the security property) and a copy of the NOS is posted in a public place, usually the county courthouse. An additional legal requirement is that the NOS must be published in an adjudicated local newspaper for a minimum period of 3 weeks prior to the sale.

At the sale, the auctioneer will qualify each bidder to verify that they have cash or certified funds in an amount equal to or greater than the lender’s opening or minimum bid. Through the auctioneer, the lender/beneficiary tenders a credit bid equal to the total amount of their note including all accrued interest, advances and the costs of the sale  The sale is then “cried” and the auction is carried out and the property is sold to the highest bidder. If there are no bidders, the property reverts to the beneficiary. If he desires, the lender/beneficiary may bid over his credit bid to purchase the property, however any increase over the credit bid must be in cash or certified funds.

Disbursement of Funds/Trustee’s Deed

After the sale, if the property sold to an outside bidder, the trustee will prepare a Trustee’s Deed in the name of the bidder and disburse all funds due the beneficiary. The balance of the funds are disbursed to pay the costs of the foreclosure. Any funds remaining after these disbursements are remitted to the  lien holder next in line as to priority after the foreclosed deed of trust. If the property has reverted to the beneficiary, a Trustee’s Deed is issued to the beneficiary.