DEFAULTS AND FORECLOSURES

When a property owner fails to make mortgage payments, or otherwise violates the loan agreement (by, for example, not maintaining insurance,) the loan is in default and the property may be foreclosed upon by the lender.

California foreclosure law is complex and technical. There are two types of foreclosure: the more common non-judicial foreclosure and the less common judicial foreclosure. There are a variety of alternatives to foreclosure, ranging from loan modifications or short sales to deeds in lieu of foreclosure or bankruptcy.

What happens if the property is sold in foreclosure, but the sale is for less than the debt? Can the lender pursue the borrower or guarantors for the difference between the value of the property and the debt? This is called a “deficiency.” California has a complex body of Ant-Deficiency Law which answers this question.

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