The Foreclosure Process
Posted on February 27, 2009
Filed Under Foreclosed Homes |
One of the realities of the real estate world is that when housing and economic activity declines, there are more homeowners who end up facing the foreclosure process. When appreciation is high for a sustained period, such as the Bay Area market from 2001-2005 people tend to be more aggressive and will go to great lengths to buy. In fact, lenders were going to great lengths to lend to those who maybe were not well qualified. In many of these cases, borrowers chose interest only loans with balloon payments and took out second, third and even fourth deeds of trust. Many of these buyers expected the market to continue the way it has, which would mean double digit appreciation for the foreseeable future. Of course we all witnessed the market come down in 2005, with appreciation coming to a halt in most areas, and prices even dipping in some other markets. The buyers who had adjustable rate loans with large balloon payments and/or interest rates that were set to reset after the first two or three years of the loan are the ones who are especially vulnerable. When the loan payments cannot be made, the foreclosure process looms on the horizon.
As a general rule, the lender would rather keep receiving the payments as opposed to taking the home and having to sell it. The lenders do not deal with selling real estate and will work with owners who are having payment problems. Sometimes the lender will restructure the payments for a certain period of time to allow the owner to get back on his/her feet. With this in mind, it’s always best to contact the lender before problems arise. There is a chance that something may be able to be done that can help the owner avoid foreclosure.
However when a homeowner has missed several payments and has not contacted the lender to make some type of arrangement, the lender may decide to begin the foreclosure process. The lender could be a bank, savings and loan or private party. The first step they will take is that the lender will request that the trustee (which is often a title company) file a notice of default with the county recorders office. A copy of the notice will also be delivered to the owner. If the default is due to a balloon payment not being made by the due date, the lender can require payment of the full balance of the loan as the only way to remedy the situation. If the payments are not met, the lender can direct the trustee to sell the property at a public sale. Before the public sale takes place, a notice of sale must be published in a local newspaper and posted in a public place for three consecutive weeks. Once the notice of sale has been recorded, the homeowner has up until 5 days before the published sale date to bring the loan to a current status. If the owner makes the necessary payment, the deed of trust will be reinstated and the monthly payments will continue as they did before. Even after the 5 days, it’s still possible for the owner to negotiate a postponement of the sale with the lender. However if there is no other agreement made, the property goes up for sale. At the sale, the buyers must pay the amount of their bid in cash, cashiers check or another form acceptable to the trustee.
With all the recent attention to foreclosures, many people have become interested in purchasing foreclosed homes. Any buyer interested in purchasing a foreclosed property needs to be aware of the risks involved. Foreclosed homes are very likely burdened with overdue taxes, liens and clouded titles. Any prospective buyer must do his/her homework and ask a local title company for all information concerning the outstanding liens and encumbrances. Another potential risk is that title insurance may or may not be available after a foreclosure sale, and if it is available then there could be exceptions included in the policy which will weaken the coverage.
Hamid Grinage
http://www.articlesbase.com/real-estate-articles/the-foreclosure-process-131066.html
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5 Responses to “The Foreclosure Process”
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FORECLOSURE PRoCESS?
My aunt's house is being foreclosed June 9, 2008. However, she found a buyer for her house. Will the foreclosure process be pushed back while her house is being bought? Or does she have to leave by June 9th?
Go to your aunt's mortgage company and let them know you have a buyer and are closing soon. The mortgage company would rather wait with a "short sale" or sale of property then to pay lawyers and take the chance of lower sale of the property. The mortgage compay might have to approve the amount that the home is selling for but they should work with you. Call them immediately!
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say no
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The simplest thing would be to have the new buyer close before June 9th. If that is not guaranteed, then she should contact the bank immediately. (Actually either way she should contact the bank immediately.) They will probably want to be provided the sales contract as proof that someone is purchasing the house, and they will probably want to get all of the buyer's information to determine for themselves that the buyer will be able to close (and get a mortgage if they are not paying cash).
The bank does not have to put the foreclosure on hold, but most these days will try to work with the person who is in default, assuming they have been cooperative as much as possible throughout the process.
Either way she won't have to actually leave on the 9th. Each state is a little different, and states have different timeframes for the span between auction and the eviction. Check with a local lawyer as to the legal timeframe in her state. She should also ask about if there is a redemption time in her state. In some states the person who had their house foreclosed on can get their house back (redeem) by paying what is owed. Realize they will also have to pay all of the legal costs, etc. that the bank had to lay out as well, but she should try and negotiate that aspect a bit.
Good luck!
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Real Estate Investor
Depending on the bank and the strength of the buyer and their offer, the bank MAY agree to postpone the foreclosure.
Your aunt would need to contact her bank IMMEDIATELY to see if this is possible and she will probably have to provide a copy of the offer and it would be subject to her bank's approval, if they are willing to review it.
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