The laws governing mortgages and foreclosures can vary greatly from state to state. Foreclosure rates in California are very high, but the state‘s laws are generally pretty favorable towards borrowers throughout the process.

California is both a deed-of-trust and two-party mortgage state, meaning that either mortgage arrangement is legal. Deed of trust loans require a third party's participation and a deed of trust, which establishes the third party as a trustee and specifies the terms under which the property is to be foreclosed. The trustee keeps possession of the deed to the property until the loan is paid in full, and if the borrower defaults the trustee is responsible for handling the foreclosure process. Traditional two-party mortgage arrangements are also allowed under state law, but are less common. In a two-party mortgage, a lender must sue the borrower successfully to recover the property upon default.

One of the most beneficial aspects of California foreclosure homes is that licensed title companies act as the third party as opposed to bank-appointed trustees. Another beneficial aspect of California mortgage law is that third-party foreclosure sales are subject to something called the one-action rule. This rule bars the recovery of a deficiency judgment, which would usually allow the lender to recoup further money from a from a mortgagor who has defaulted after the property has been sold.

California foreclosure statistics for 2009 went up even more than in most other states . There were 1,081,842 homes foreclosed upon last year, and California ranked fourth in the country in foreclosure rate (about 11 percent.) The worst county in California by far is Los Angeles, which averages almost twice as many foreclosures as any other in the state.