AB 1957: California Foreclosure Reform for Private Lenders - The Elite Officer

California lenders have spent the past several years navigating an unusual feature of the state's nonjudicial foreclosure process: in certain residential foreclosures, being the highest bidder at the trustee's sale did not necessarily mean the sale was over.

That uncertainty came from SB 1079, which created a post-sale bidding process for certain properties containing one to four residential units. The law was intended to give tenants, prospective owner-occupants, and qualifying community organizations additional opportunities to purchase foreclosed properties. In practice, however, it also created delays and uncertainty for lenders, trustees, and successful bidders waiting for a foreclosure sale to become final.

AB 1957, signed by Governor Gavin Newsom on September 18, 2026, significantly narrows that process. The new law takes effect January 1, 2027.

One of the most significant changes is that AB 1957 removes prospective owner-occupants from the definition of an eligible bidder.

Under the amended law, an eligible bidder is either an eligible tenant bidder or an eligible community bidder. Investors who do not fall within one of those categories will generally need to compete at the public trustee's sale rather than entering the process afterward as prospective owner-occupants.