Falling behind; loan modification attempts
When a mortgage payment is missed, the march toward foreclosure begins. California law requires the lender to make a good-faith effort to call or visit the borrower to discuss ways to avoid foreclosure, including free counseling and loan modification possibilities, at least 30 days before declaring default. In California and several other states, the foreclosure process unfolds largely outside a courtroom. Borrowers can find free counseling through the Department of Housing and Urban Development at http://www.hud.gov.
Default; more modification attempts
The lender notifies a third-party trustee of the default. The trustee files a notice of default. Now the foreclosure process officially has started. A California borrower has three months to: dispute the default claim; find the money for all past payments, plus late fees and interest; get the lender to agree to a "short sale," in which the house is sold for less than the amount owed; or win a mortgage modification.
Sale notice; more modification attempts
After three months, the trustee can schedule an auction by filing a notice of trustee sale with the county. The borrower has at least 20 days to get a mortgage modification, find the payment money, arrange a short sale or convince everyone that an error has occurred. If a borrower is being considered for the federal Home Affordable Modification Program, the foreclosure process stops. Bankruptcy may delay but won't stop the auction.