Foreclosure is the legal process a mortgage lender uses to take back and sell a home when the borrower stops making payments. It doesn’t happen overnight. Under federal rules, most mortgage servicers can’t begin the foreclosure process until you’re more than 120 days behind, and in California the nonjudicial process then takes at least several more months. That time gives you real options: a repayment plan, forbearance, a loan modification, selling the home, a short sale, or Chapter 13 bankruptcy.

The single most important step is to contact your servicer — and a free HUD-approved housing counselor — as soon as you know you’re in trouble. The earlier you act, the more options you keep.

Foreclosure takes months, and you have options at every stage.

Key takeaways

• Servicers generally can’t start foreclosure until you’re more than 120 days delinquent.
• A complete loss mitigation application submitted early gives you important protections.
• California uses mostly nonjudicial foreclosure, with specific notice periods and a right to reinstate before the sale.
• Options include repayment plans, forbearance, loan modifications, short sales, and deeds in lieu.
• A foreclosure stays on your credit report for seven years.
• Beware of foreclosure rescue scams that charge upfront fees.

What Foreclosure Actually Means

When you take out a mortgage, you sign two key documents: a promissory note, which is your promise to repay, and a deed of trust or mortgage, which uses the home as collateral. If you don’t repay as agreed, the lender can enforce that security interest by selling the home to recover what it’s owed.

There are two main types of foreclosure:

• Judicial foreclosure. The lender files a lawsuit and a court oversees the process. It tends to take longer.
• Nonjudicial foreclosure. The lender follows a process set by state law and the deed of trust, without going to court. This is the most common method in California.

Which process applies depends on your state and your loan documents.

How Foreclosure Usually Unfolds

The foreclosure timeline, from first missed payment to sale.

Missed payment and late fees

A payment is typically considered late after a grace period, often around 15 days, when late fees begin. Once you’re 30 days past due, the servicer can report the late payment to the credit bureaus.

Required outreach from your servicer

Federal mortgage servicing rules require servicers to try to contact delinquent borrowers early and to provide information about options to avoid foreclosure. You should be assigned personnel to help you with loss mitigation. Respond to these contacts — they’re your entry point to help.

The 120-day rule

Under federal rules, a servicer generally can’t make the first notice or filing required to start foreclosure until your loan is more than 120 days delinquent. This gives you time to apply for help.

Notice of default (California)

In a California nonjudicial foreclosure, the process formally begins when the trustee records a Notice of Default. Before recording it, the servicer generally must contact you to assess your financial situation and explore options.

Notice of trustee’s sale

After at least three months pass following the Notice of Default, the trustee can record a Notice of Trustee’s Sale, which must be given at least 20 days before the sale date.

The sale

The home is sold at a public auction to the highest bidder, or it reverts to the lender if no one bids enough. After the sale, the new owner can take steps to remove occupants.

Your right to reinstate and redeem

In California, you generally have the right to reinstate the loan — pay the past-due amount plus allowed fees and costs — until five business days before the sale. You can also pay off the entire loan before the sale. Once a nonjudicial sale is completed, there’s generally no right to redeem the home.

Your Rights Before Foreclosure

Federal loss mitigation protections

If you submit a complete loss mitigation application — the paperwork your servicer needs to evaluate you for alternatives — federal rules provide important protections:

• If your complete application is received before the servicer makes the first foreclosure notice or filing, it generally can’t start foreclosure until it has evaluated you and any appeal is resolved.
• If your complete application is received more than 37 days before a scheduled sale, the servicer must evaluate it and generally can’t proceed with the sale while the application is pending.
• The servicer must tell you in writing which options you qualify for and why you were denied for others.

The key word is complete. Submit everything the servicer asks for, keep copies, and follow up until the servicer confirms the application is complete.

California Homeowner Bill of Rights

California adds protections, including restrictions on “dual tracking” — pursuing foreclosure while a complete loan modification application is pending — and, for many borrowers, a single point of contact at the servicer. If a servicer violates these rules, you may be able to stop the sale or recover damages.

Your Options to Avoid Foreclosure

Six options, and when each one fits.

Repayment plan

You catch up by paying your regular payment plus part of the past-due amount each month until you’re current. This works best for a short-term setback when your income has recovered.

Forbearance

Your servicer temporarily pauses or reduces your payments. Forbearance doesn’t erase the missed amounts — you’ll need to repay them later through a lump sum, a repayment plan, a payment deferral, or a modification. Ask exactly how the skipped payments will be handled when forbearance ends.

Payment deferral

Missed payments are moved to the end of the loan, to be paid when you sell, refinance, or pay off the mortgage. Your regular monthly payment stays the same.

Loan modification

A modification permanently changes your loan terms — lowering the interest rate, extending the term, or adding past-due amounts to the balance — to make payments affordable. It’s usually the right choice when your income has dropped for the long term.

Refinancing

If you still have equity and reasonable credit, refinancing into a new loan might lower your payment. This is often difficult once you’re significantly behind.

Selling the home

If you have equity, selling before foreclosure lets you pay off the loan and keep the remaining proceeds, and avoids a foreclosure on your credit report.

Short sale

If you owe more than the home is worth, your lender may agree to let you sell for less than the loan balance. A short sale is still a negative mark, but it’s often viewed more favorably than a foreclosure and may shorten waiting periods for a future mortgage.

Deed in lieu of foreclosure

You voluntarily transfer ownership to the lender in exchange for release from the loan. Some programs include relocation assistance. Lenders usually require you to try selling first.

Chapter 13 bankruptcy

Filing for bankruptcy triggers an automatic stay that stops a foreclosure sale. Chapter 13 lets you catch up on mortgage arrears over three to five years while keeping your home, as long as you keep up with ongoing payments. It’s a significant step, so talk with a bankruptcy attorney.

Get Free Help From a Housing Counselor

HUD-approved housing counselors provide free help with foreclosure prevention. They can:

• Review your budget and your options
• Help you prepare a complete loss mitigation application
• Communicate with your servicer on your behalf
• Explain state programs and assistance

You never need to pay for foreclosure help from a housing counselor.

You can find one through the U.S. Department of Housing and Urban Development or the Consumer Financial Protection Bureau’s housing counselor lookup. California homeowners may also qualify for state programs that have helped with past-due mortgage payments — ask a counselor what’s currently available.

Beware of Foreclosure Rescue Scams

People facing foreclosure are prime targets for scams. In California, it’s illegal for anyone — including attorneys — to collect an upfront fee for loan modification or other mortgage relief services before completing the work.

Walk away if you see any of these.

Walk away from anyone who:

• Asks for fees before doing any work
• Guarantees they can stop the foreclosure
• Tells you to stop paying your mortgage or to pay them instead
• Asks you to sign over the deed to your home
• Tells you not to contact your servicer, a lawyer, or a housing counselor
• Pressures you to sign documents you don’t understand

You can do everything a paid “rescue” company does yourself, for free, with a HUD-approved counselor.

How Foreclosure Affects Your Credit

A foreclosure is one of the most serious negative items on a credit report. It stays for seven years, and it usually comes with a string of late payments leading up to it. The damage is greatest at first and fades over time as you add positive history.

Alternatives affect your credit differently:

• Repayment plans, forbearance, and modifications can limit damage, depending on how the account is reported. Ask your servicer before agreeing.
• Short sales and deeds in lieu are still negative, but may be treated more favorably by future mortgage lenders.
• Bankruptcy appears for seven to ten years depending on the chapter.

Check your credit reports at AnnualCreditReport.com during and after the process to make sure your account is reported accurately.

Deficiency Balances and Taxes

Deficiency balances

If a foreclosure sale brings in less than you owe, the difference is called a deficiency. California law generally protects borrowers from deficiency judgments after a nonjudicial foreclosure and on many purchase-money loans for owner-occupied homes. Rules differ in other states and for second mortgages, refinances, and judicial foreclosures, so get advice about your situation.

Taxes on forgiven mortgage debt

When a lender forgives part of a mortgage — through a short sale, a deed in lieu, or foreclosure — the forgiven amount can be treated as taxable income. Federal law has excluded forgiven debt on a primary residence in past years, but the rules have changed over time, and other exclusions such as insolvency may apply. Talk to a tax professional before finalizing any arrangement.

Buying Again After Foreclosure

Mortgage programs set waiting periods after a foreclosure. Typical guidelines have been about three years for FHA loans, two years for VA loans, and seven years for conventional loans, with shorter periods sometimes available for documented extenuating circumstances or after a short sale or deed in lieu. Confirm current rules with a lender. For more on qualifying later, see our guide on what credit score you need to buy a house.

Documents to Gather for a Loss Mitigation Application

A complete application is what unlocks your strongest protections, so gather these early:

• Your two most recent mortgage statements
• Recent pay stubs, or profit-and-loss statements if you’re self-employed
• Your last two years of tax returns
• Recent bank statements for all accounts
• Documentation of any other income, such as benefits, child support, or rental income
• A hardship letter explaining what happened, when, and whether it’s temporary
• Proof of the hardship, such as a termination letter or medical bills
• The servicer’s own application form, signed and dated

Make copies of everything, send documents in a way you can track, and write down when the servicer confirms your application is complete.

If a Sale Date Is Already Set

A scheduled sale date is serious, but it isn’t always final.

• Call your servicer immediately and ask whether a complete application can still be reviewed and whether the sale can be postponed.
• Contact a housing counselor or attorney today. Timing rules matter, and an attorney can tell you whether the servicer followed federal and California requirements.
• Ask about reinstatement. Request a written reinstatement quote showing exactly what it would cost to bring the loan current.
• Consider bankruptcy as an emergency option. Filing before the sale triggers the automatic stay, which stops the sale. Chapter 13 can then give you time to catch up.
• Understand “cash for keys.” If you can’t keep the home, a lender or new owner may offer money to move out by a certain date and leave the home in good condition. It can help cover moving costs, and it’s usually negotiable.

If You Rent a Home That’s Being Foreclosed

Tenants have their own protections. Under the federal Protecting Tenants at Foreclosure Act, tenants with a bona fide lease or month-to-month tenancy generally must receive at least 90 days’ notice before being required to move after a foreclosure sale, and tenants with a lease can often stay until it ends. California law provides additional notice requirements. Keep paying rent as required, keep records, and contact legal aid if you receive a notice to vacate.

A Step-by-Step Action Plan

• Call your servicer now. Ask about loss mitigation options and request an application.
• Contact a HUD-approved housing counselor for free help.
• Gather documents: pay stubs, tax returns, bank statements, a hardship letter, and your mortgage statements.
• Submit a complete loss mitigation application as early as possible and keep copies.
• Track every deadline in writing, including any sale date.
• Keep paying what you can if your servicer allows partial payments, and keep records.
• Talk to an attorney if a sale is scheduled or your servicer isn’t following the rules.

Planning Ahead if You Can’t Keep the Home

Sometimes the right decision is to let the home go on your own terms. If that’s where you’re heading, a little planning protects your family and your finances.

• Start looking for housing early. Landlords may check credit, so a housing search is often easier before a foreclosure is reported.
• Save what you can. If you’re not making mortgage payments while you negotiate a short sale or deed in lieu, set aside money for moving costs and deposits.
• Negotiate a move-out date. A short sale, deed in lieu, or cash-for-keys agreement can give you a predictable timeline.
• Keep other accounts current. Protecting your remaining payment history makes rebuilding faster.
• Keep records of everything. Written agreements about deficiency waivers and move-out terms matter for years.

Common Mistakes to Avoid

• Ignoring mail from your servicer. Letters often contain deadlines and application forms.
• Waiting until the sale is scheduled. Your strongest protections depend on applying early.
• Submitting incomplete applications. An incomplete application doesn’t trigger the same protections.
• Paying a rescue company. Upfront fees for loan modifications are illegal in California.
• Moving out too soon. Leaving doesn’t stop foreclosure and may cost you options such as cash for keys.
• Not checking tax consequences of a short sale or deed in lieu.

Frequently Asked Questions

How long does foreclosure take in California?

It varies, but a nonjudicial foreclosure generally can’t start until you’re more than 120 days behind, then requires at least three months after the Notice of Default before a Notice of Trustee’s Sale, which must be given at least 20 days before the sale. Many foreclosures take longer, especially when loss mitigation is under review.

Can I stop a foreclosure once it has started?

Often, yes. You can reinstate by paying the past-due amount before the deadline, qualify for a loan modification or other alternative, sell the home, or file for bankruptcy. The earlier you act, the more options you have.

Does forbearance hurt my credit?

It depends on how your servicer reports it. Ask before agreeing, and get the terms in writing. Forbearance also doesn’t erase missed payments — you’ll need to repay them later.

Is a short sale better than a foreclosure?

It’s still a negative mark, but it’s often viewed more favorably by future lenders and can shorten waiting periods for a new mortgage. It also lets you control the sale process.

Will I owe money after a foreclosure?

It depends on your state and your loan. California generally protects borrowers from deficiency judgments after a nonjudicial foreclosure and on many purchase-money loans for owner-occupied homes. Ask an attorney about your specific loan.

Do I need an attorney?

Not always. A HUD-approved housing counselor can help with most loss mitigation applications for free. An attorney is important if a sale is scheduled, your servicer isn’t following the rules, or you’re considering bankruptcy.

Can I stay in my home during the foreclosure process?

Generally, yes. You usually have the right to stay in the home until the sale is completed and the new owner follows the legal process to take possession. Staying lets you keep working on alternatives, but don’t ignore notices or deadlines while you do.

Will a loan modification lower my payment?

That’s usually the goal. A modification may reduce your interest rate, extend your loan term, or add past-due amounts to the balance to make payments affordable. Ask your servicer to show the new payment in writing before you accept, and ask how the modification will be reported to the credit bureaus.

Do I have to pay taxes if my lender forgives part of my mortgage?

Possibly. Forgiven mortgage debt can count as taxable income, although exclusions have applied to primary residences in past years and the insolvency exclusion may help. Ask a tax professional before finalizing a short sale, deed in lieu, or modification that reduces your balance.

The Bottom Line

Foreclosure is a process, not a single moment, and you have options at nearly every stage. Contact your servicer early, get free help from a HUD-approved housing counselor, submit a complete loss mitigation application, and avoid anyone who asks for money upfront. Even if keeping the home isn’t possible, a short sale or deed in lieu can soften the landing and help you move forward on a timeline you control.

If you’re a homeowner in California, remember that the state’s Homeowner Bill of Rights adds protections on top of federal rules — another reason to act early and keep copies of everything you send your servicer.

For a plan to rebuild once the dust settles, read our guide on how to fix your credit.

Rebuilding After a Foreclosure?

Strong Credit Report has helped consumers across California and nationwide since [year] with disputes, credit report corrections, and credit rebuilding. Your first consultation is free. If you’re facing a sale date, we’ll point you to a housing counselor or attorney first.

Schedule a free consultation or call 800-603-8045.

Strong Credit Report is a credit repair organization as defined under the Credit Repair Organizations Act. We do not provide foreclosure prevention or loan modification services. We cannot guarantee specific results or the removal of accurate information. This article is general information, not legal, tax, or financial advice.