What Happens If You Let Your House Go Into Foreclosure in California?

Falling behind on your mortgage is stressful, and if things spiral far enough, foreclosure becomes a very real possibility. But what does foreclosure actually mean for California homeowners — and what really happens if you let your house go through the process?

Unfortunately, the consequences can be long-lasting, both financially and emotionally. Let’s break it down step by step so you know exactly what to expect — and what you can do to avoid the worst-case scenario.

The Foreclosure Process in California

California uses a non-judicial foreclosure process, which means lenders don’t need to go through the court system to repossess your home. This process can move quickly compared to other states.

Here’s what usually happens:

1. Missed Payments Begin – After 90 days of missed mortgage payments, most lenders will start formal foreclosure proceedings.
2. Notice of Default (NOD) – This is a public document filed with the county, alerting you that the foreclosure timeline has officially started. You typically have 90 days to “cure” the default by catching up on payments.
3. Notice of Trustee’s Sale (NTS) – If you don’t cure the default, the lender issues this notice, setting an auction date at least 20 days out.
4. Foreclosure Auction – Your home is sold at auction to the highest bidder, or it reverts to the bank if no one bids.
5. Eviction – If you’re still living in the home, the bank (or new owner) will start eviction proceedings.

Example: A homeowner in Riverside fell behind after losing her job. She ignored letters from her lender, hoping to “catch up later.” Within 120 days, she received a Notice of Trustee’s Sale. The house was auctioned just three weeks later, and she was forced to leave with little time to plan.

Credit Damage from Foreclosure

One of the biggest consequences of foreclosure is the impact on your credit.

• Foreclosure can drop your credit score by 100–160 points depending on where you started.
• It stays on your credit report for seven years under the Fair Credit Reporting Act.
• This makes it difficult to qualify for new credit cards, car loans, or even rental housing.

Example: A seller in Pomona had a 690 credit score before foreclosure. After the process, her score plummeted to 530, and she was denied for a rental apartment. She had to move in with family while working to rebuild her credit.

According to Experian, most people see their credit improve gradually after foreclosure, but it often takes 3–5 years before they can qualify for a conventional mortgage again.

Can the Bank Come After You for the Balance?

Many homeowners worry about being chased for unpaid mortgage debt. In California, the rules are more favorable to borrowers than in many other states, thanks to anti-deficiency laws.

• If your home was your primary residence and you had a standard purchase loan, the lender generally cannot pursue you for any balance remaining after foreclosure.
• However, if you refinanced, took out a second mortgage, or had a HELOC, you could still be responsible for that debt.

Example: A seller in Fresno lost her house to foreclosure. Her first mortgage was wiped out, but the bank holding her second mortgage sued her for the $40,000 balance.

Tax Consequences After Foreclosure

Another shock for many families is the tax bill. The IRS may treat forgiven mortgage debt as taxable income.

• Example: If you owed $350,000 on your home and it sold for $300,000 at auction, the $50,000 forgiven could be considered income.
• There are exceptions, such as insolvency or relief under the Mortgage Forgiveness Debt Relief Act when extended.

You can learn more directly from the IRS website.

Eviction and Losing Your Home

If the property is sold at auction and you’re still living there, you’ll eventually face eviction.

• Typically, the new owner (or bank) will give you a 3-day notice to quit.
• If you don’t leave, they file an unlawful detainer lawsuit.
• Once approved, the sheriff posts a notice giving you 5 days to move out.

Example: A Los Angeles family stayed in their foreclosed home after the auction, hoping to negotiate with the bank. Instead, they received a sheriff’s lockout notice giving them just 5 days to vacate. They had to leave in a rush, without time to properly pack.

Foreclosed homes often sit empty for months before being resold, which increases the risk of vandalism or squatters. If you’re dealing with a property that’s no longer occupied, check out our post on how to secure a vacant property in California for practical tips..

Emotional Toll of Foreclosure

The numbers only tell part of the story. Foreclosure is devastating for many families:

• Uprooting children from schools
• Losing a home filled with memories
• Strained relationships between spouses or heirs
• Stress and embarrassment of neighbors knowing the home was foreclosed

Example: In Lancaster, a seller we spoke with said foreclosure was “the most stressful event of my life” — even worse than her divorce. She described the constant anxiety of waiting for notices and not knowing when the knock at the door would come.

Long-Term Consequences

Even after the foreclosure is behind you, the effects linger:

• Difficulty buying again – FHA requires a 3-year waiting period after foreclosure; conventional loans require up to 7 years.
• Trouble renting – Landlords often check credit, and a foreclosure makes you look like a risk.
• Job impacts – Some employers in finance or government run credit checks, and a foreclosure could limit opportunities.

Alternatives to Foreclosure

The good news is foreclosure isn’t inevitable. Before letting it happen, homeowners should explore alternatives:

1. Loan Modification – Lenders may adjust your payment terms.
2. Forbearance – Temporary pause on payments (especially common during COVID-19).
3. Short Sale – Selling the home for less than owed, with lender approval.
4. Deed in Lieu of Foreclosure – Voluntarily transferring the property back to the lender.
5. Sell to a Cash Buyer – Often the fastest option, helping you avoid foreclosure entirely.

We cover these in more detail in our Guide to Stopping Foreclosure in California.

Final Thoughts

Letting your house go into foreclosure in California has serious consequences: ruined credit, possible tax bills, eviction, and years of financial recovery.

But here’s the key: the earlier you act, the more options you have. Selling before foreclosure can protect your credit, preserve your dignity, and even leave you with cash in hand.

If you’re exploring your options, our 2025 Guide to Stopping Foreclosure in California breaks down proven strategies to help homeowners take action before it’s too late.

At Mrs. Property Solutions, we’ve helped many California homeowners stop foreclosure by buying their homes quickly for cash. If you’re facing foreclosure, reach out today — before the auction date is set.