California’s AB 1957 Changes Foreclosure Auctions in 2027: What LA Owners and Investors Should Know

Starting January 1, 2027, California changes who can buy a home after a foreclosure auction. The new law, AB 1957, arrives as foreclosure filings climb for a second year and bank mortgage rates sit above 7%. Here is what changes, what stays the same, what it looks like in real life, and what Los Angeles homeowners, investors and borrowers should do now.

Three dates to watch

1. Oct 27–28Federal Reserve meeting. Markets give about a 15% chance of another hike. ^[16]
2. Nov 3California election day, including local Los Angeles measures that affect property sales.
3. Jan 1, 2027AB 1957 takes effect: the new post-auction bidding rules apply.

What AB 1957 changes

Since 2021, California has let certain buyers make a bid after a foreclosure auction on 1–4 unit homes, even if an investor already won the auction. This came from SB 1079, a law meant to keep more homes with the people who live in them. ^{[5] [8]}

AB 1957 rewrites parts of that process. It passed both houses without a single no vote, 39–0 in the Senate and 62–0 in the Assembly, and the governor signed it on September 18, 2026. ^{[1] [3]} It was backed by the trustees who run California foreclosure sales and by private mortgage lenders. ^{[3] [4]}

Who can still bid after the auction

Sources: Fortra Law's summary of the signed bill ^[2]; California Mortgage Association ^[4].

Law firms' summaries differ on some timing details, so check the final text of Chapter 279 with an attorney before you rely on exact days. ^[2]

Real cases: why the rules changed

AB 1957 did not come out of nowhere. Here are three recent Los Angeles cases that show what is at stake for owners and buyers.

The Senate's own analysis of the bill quotes its author: post-sale buyers were getting homes for "as little as one cent more than the winning bid." ^[23] The lesson for owners is the same in every case: the safest time to protect your equity is before the auction, not after it.

California foreclosure timeline, step by step

AB 1957 only changes the last step. Everything before the auction stays the same, and that is where owners have the most options.

1. Notice of default

   The lender records a notice of default. The owner can catch up on missed payments during this time.

   Day 0

2. At least 3 months

   California law requires at least three months before the next step. This is the best time to refinance or sell.

   ^[6]

3. Notice of trustee's sale

   The sale date is set and published at least 20 days ahead.

   ^[7]

4. Auction

   The property is sold to the highest bidder at the trustee's sale.

   Sale day

5. Post-sale bidding window

   For 1–4 unit homes, certain buyers can still bid after the auction: 15 days to bid or give notice, up to 45 days in total. AB 1957 narrows who those buyers are.

   ^[8]

What has not changed: your rights before the sale

• Catch up (reinstate). You can pay the missed amount, plus fees and costs, until five business days before the sale date, and the loan goes back to normal. ^[26]
• Pay off the loan (redeem). Paying off the whole loan, for example with a sale or a new loan, stops the foreclosure up to the sale. ^[27]
• Time. At least three months between the notice of default and the notice of sale, then at least 20 more days before the auction. ^{[6] [7]}
• If it is your own home (a first loan on an owner-occupied 1–4 unit home): the servicer must contact you at least 30 days before recording a default, cannot move ahead with a sale while a complete loan-modification application is pending, and cannot foreclose while you follow an approved plan. ^[28]
• Fire survivors. New laws signed September 17, 2026 (AB 1842 and AB 1847) extend mortgage forbearance for Eaton and Palisades fire survivors to 24 months and require servicers to offer to move paused payments to the end of the loan. ^[25]

What this looks like in real life

An example to show how the rules play out. The owner and numbers are made up; the steps, timelines and loan terms are real.

An owner in Sherman Oaks has a home worth about $1,400,000, close to the area's typical price. ^[11] They owe $520,000. After a job loss they fall six payments behind, and the lender records a notice of default. With late fees and costs, $560,000 is needed to clear the loan.

Example only, not a loan offer or commitment to lend. Rates and fees are subject to change without notice. Some restrictions may apply. Subject to credit approval.

Foreclosures are rising again

Foreclosure activity is still far below the 2009–2011 crisis, but it has been climbing. In August 2026, ATTOM counted 40,277 U.S. properties with a foreclosure filing, up 13% from a year earlier. Bank repossessions jumped 42%. ^[13] California recorded 21,543 filings in the first half of 2026, up 12.8%, and 2,565 new foreclosure starts in August alone. ^{[12] [13]} In the Los Angeles metro area, ATTOM counted 8,503 foreclosure starts in 2025. ^[29]

Where AB 1957 hits in Los Angeles

Under AB 1957, tenants can only use the post-sale window when the home is worth no more than the FHA loan limit, which is $1,249,125 in Los Angeles County for 2026. ^[9] So the same law plays out very differently across the city. ^{[11] [10]}

The rate backdrop: bank loans cost more

The Federal Reserve raised its target range to 3.75–4.00% on September 16. ^[14] Its next meeting is October 27–28, and futures markets put the odds of another hike at about 15%, down from more than 50% a month ago. ^{[15] [16]} The 10-year Treasury yield, which drives mortgage rates, was 5.10% on October 15. ^[17]

In early 2021 a bank mortgage cost about 6 points less than a 9% bridge loan. Today the gap is under 2 points, and it shrank week after week this fall:

How to stop a foreclosure in California

The most important date is the sale date. Until then, you have four main ways to stop a foreclosure in California:

• Catch up: pay the missed amount plus fees until five business days before the sale. ^[26]
• Ask your lender for help: a loan modification or repayment plan. On your own home, a complete application pauses the sale. ^[28]
• Sell the property before the sale date and keep the equity.
• Pay off the loan with a new one: a refinance, or a short-term foreclosure bailout loan if a bank can't move fast enough. ^[27]

Foreclosure bailout loans: how a bridge loan stops the sale

A foreclosure bailout loan is a short-term bridge loan that pays off the past-due loan in full, so the sale is cancelled. It is based mainly on the property's equity, not on a perfect credit score, which is why it can close in days instead of months. Then you sell or refinance on your own schedule. Try your own numbers:

We review loans based mainly on the property and its equity, and we can fund in as little as 7 business days. ^[33]

If you buy at foreclosure auctions

• Check the FHA limit first. On homes worth more than $1,249,125, tenant post-sale bids should not apply after January 1, so your auction win is more likely to stand. ^[9]
• Check the lien. AB 1957 limits the post-sale process to first-lien sales. ^[2]
• Plan your money for the waiting period. On homes that still qualify for post-sale bids, the sale is not final right away. Have funding that can wait without costly extensions.
• Line up rehab or hold financing early. A bridge loan closed against the property after the deed records lets you get your cash back out quickly.

Frequently asked questions