How Does the Foreclosure Process Work in California?

The foreclosure process is the bank’s (or other financial institution) final effort to collect money owed to them.

What often results from the foreclosure process is a repossessed house, damaged credit, and displaced living.

Despite the gloomy impacts, understanding how the foreclosure process works in California is important because it will help you learn about property ownership, mortgages, and homeowner’s financial options.

So, let's dive in with first understanding, what is a foreclosure?

What is a Foreclosure?

Foreclosure happens when the property owner fails to make their mortgage payments to the lender and defaults on the terms of the mortgage loan. The lender then repossesses the property and tries to sell it in hopes of retrieving the amount of money that was owed by the borrower. This process functions similarly throughout the country, so it's not specific to California.

Overview of the California Foreclosure Timeline

Here's a quick overview of the foreclosure timeline:

In California, the foreclosure process typically begins when a borrower misses a mortgage payment. Under federal servicing rules, the lender may not record a Notice of Default (NOD) until the loan is about 120 days delinquent. After the NOD is recorded, the borrower has roughly 90 days (the statutory reinstatement period) to cure the default before a Notice of Trustee’s Sale is issued.

If the property isn’t sold at auction, it may be listed for sale by the lender. Throughout this period, the borrower can still avoid foreclosure by paying the overdue amount or negotiating alternatives such as a short sale. Starting in 2025, any borrower can trigger a mandatory 45‑day postponement by giving the trustee a signed MLS listing agreement at least five business days before the scheduled sale.

If the borrower later provides a bona‑fide purchase contract (also ≥ 5 business days before the postponed sale), the trustee must add another 45 days. The statute is not limited to owner‑occupants and can result in up to 90 days total delay.

Now, let's investigate each one of these steps in closer detail:

Taking Out Home Loans and Signing the Promissory Note

When someone wants to buy a home, they usually take out a mortgage loan from a lender to finance the purchase.

A mortgage loan is money lent to the borrower specifically for buying real property. Before any funds are disbursed at closing, the borrower signs a promissory note—a written promise to repay the loan under agreed‑upon terms (interest rate, payment schedule, maturity date).

The note is secured by a separate deed of trust (in California) or mortgage (in other states), which gives the lender the right to foreclose if the borrower defaults.

For example, the borrower might agree to pay $1,500 per month for 30 years on a fixed‑rate loan, or the payments could adjust over time under an adjustable‑rate mortgage (ARM).

Triggering Pre-Foreclosure: Failing to Pay Monthly Mortgage Payments

When a borrower misses a payment and the grace period lapses, the loan becomes delinquent.

Federal mortgage‑servicing rules require the servicer to (1) make live contact within 36 days and (2) mail a written loss‑mitigation letter within 45 days.

Foreclosure cannot legally start until the loan is more than 120 days past due.

After that waiting period—and only if the borrower has not reached a workout—the lender may record a Notice of Default (NOD), which publicly marks the start of pre‑foreclosure in California.

The NOD gives the homeowner roughly 90 days to bring the loan current before a Notice of Trustee’s Sale can be filed. Throughout delinquency and pre‑foreclosure, borrowers can still avert foreclosure by reinstating, modifying, or negotiating alternatives such as a short sale.

Receiving a NOD and the Borrower’s Financial Options

Once a mortgage is more than 120 days past due—and after the servicer has made good‑faith efforts to contact the homeowner for at least 30 days—the lender may record a Notice of Default (NOD) with the county recorder. Within 10 business days, the trustee mails a copy of the NOD to the borrower and other interested parties. The NOD launches California’s formal pre‑foreclosure period: the homeowner has about 90 days from the recording date to bring the loan current (reinstatement) before a Notice of Trustee’s Sale can be filed.

Why do borrowers fall behind?

Most defaults stem from temporary hardship—job loss, medical bills, divorce, or rising adjustable‑rate payments. If you receive an NOD, here are the main ways to halt the process:

Option 1: Reinstate or modify the loan.

Pay the past‑due amount (plus fees) or negotiate a loan‑modification or repayment plan with the servicer.

Option 2: Use your equity.

If you have positive equity, list and sell the home, use the proceeds to pay off the loan, and keep any remaining balance. Example: You owe $1 million and the property is worth $1.5 million—selling easily covers the debt.

Option 3: Short sale.

If the home is worth less than the loan balance (e.g., owe $1 million, value $800 k), request lender approval to sell for market value. Under California Code of Civil Procedure § 580e, any lienholder that signs the short‑sale agreement waives the deficiency; junior liens that don’t sign must still be paid in full or otherwise resolved before escrow can close.

Option 4: Deed in lieu of foreclosure.

With lender consent, voluntarily transfer the property to the lender to satisfy the debt and avoid the auction.

Receiving a Notice of Trustee’s Sale and House Repossession

If the borrower doesn’t cure the default within the 90‑day reinstatement window that follows the Notice of Default, the trustee records a Notice of Trustee’s Sale (NOS). The NOS sets an auction date no sooner than 21 days after recordation; in practice, sales are usually scheduled 25–45 days out and may be postponed—up to 90 additional days—if the borrower invokes the two AB 2424 postponements.

The right to auction the property comes from the deed of trust, which grants the trustee a “power of sale” if the promissory note isn’t repaid. Until the sale, the borrower still owns the home, but the lender holds a secured interest and can convert that interest into ownership at auction.

Last‑minute payment window: Under Civil Code § 2924c the borrower may reinstate the loan any time up to five business days before the sale; after that, payment is accepted only at the trustee’s discretion.

How a trustee sale works

The house is sold at an open, cash‑only auction run by the trustee, and the highest bidder receives title once the trustee’s deed is recorded. Former owners receive a 3‑day notice to quit, while tenants are protected by the federal Protecting Tenants at Foreclosure Act, which requires at least 90 days’ notice to vacate (or the remainder of a valid lease).

If no third‑party buyer bids at or above the lender’s opening bid, the lender takes the property back as real‑estate‑owned (REO) and may list it on the market later.

Amount of Foreclosures in California

California foreclosure snapshot (May 2025)

ATTOM counted 4,135 properties with a foreclosure filing statewide—about one in every 3,515 housing units. The highest county-level rates were in Lake, Plumas, and Shasta Counties.

Should You Take a Short Sale or Foreclosure on as a Real Estate Agent?

When it comes to handling short sales or foreclosures, real estate agents need to weigh the pros and cons carefully.

Short sales can be a valuable niche for agents willing to dive into the details. They often involve sellers eager to offload their properties quickly, which can mean a faster transaction for you.

Plus, with fewer agents willing to tackle the complexities of short sales, you might find yourself in a less‑crowded field. Success in short sales can also boost your reputation as a savvy negotiator, attracting more clients.

However, be prepared for a lengthy approval process—often 60 to 120 days—and potential roadblocks as you navigate lender approvals and complex paperwork.

‍Note: Under California Civil Code § 580e, only lienholders that sign the short‑sale agreement waive their right to a deficiency claim; junior liens that don’t consent may still pursue the borrower. It’s a challenging ride, but one that can pay off if you handle it right.

Foreclosures, on the other hand, offer a different set of opportunities and challenges. They provide a chance to work with banks and lenders, who might offer a steady stream of properties for sale.

Pricing is often more straightforward, as properties are typically sold at auction or listed at market value by the lender. But here’s the catch—foreclosures can come with their own set of headaches. Properties might be in rough shape due to neglect, and the foreclosure process can be slow and cumbersome, filled with legalities and strict deadlines.

Also keep in mind that SB 1079 gives eligible owner‑occupants and certain nonprofits up to 45 days after the auction to submit a higher bid, and if the lender ends up with the property, AB 2170’s “first‑look” rule (Civ. Code § 2924p) requires a 30‑day period during which only those same groups can buy the REO. This can affect how quickly a bank‑owned home re‑hits the open market.

Just remember, it’s all about balancing the potential rewards with the effort required.

Final Thoughts on the Californian Foreclosure Process

One of the most crucial aspects of the foreclosure process is time. It’s all about the timeframe. If the borrower is having any difficulty making the payments, the best thing to do is to contact the lender immediately.

Things get messy when the borrower procrastinates the issues. This isn’t a problem that goes away if the borrower ignores it. It has the potential to leave a devastating impact on the borrower’s life.