Foreclosure Process

[Moe Bedard]

The foreclosure process varies in every state and it's imperative that homeowners understand this process. One thing is for sure, time is NOT on your side. But, an educated consumer is always an informed consumer who can make a "good" decision based on facts. Learn everything you can because this will affect you in every which way and it is something that should not be taken lightly.

The first thing you will need to do is understand the foreclosure timeline.



Day 1 - Borrower misses first payment by a day. No penalties assessed at this time

Day 16-30 - A late charge is assessed to the borrower’s payment.
The lender or mortgage servicer will attempt to make contact with the borrower for an explanation.

Source Mortgage News Daily:

Mortgage notes usually carry a grace period, 15 days is typical but some are as short as 10 days. Many people "play the float" that is, delay through most of the grace period before making payment, and no one, including the lender thinks very much about it.

On day 16, however, a late fee is assessed. At this point there are no ramifications beyond that late fee and maybe a "friendly reminder" call from the lender's customer service department. The late payment probably won't even show up on the borrower's credit report. On Day 30 that changes. At that point the borrower is in default and things quickly turn serious and the foreclosure process speeds up.

Starting on day 16, additional debt is incurred in the form of the mortgage late fee - usually a percentage of the principal balance; three percent is typical which, on a $300,000 mortgage is plus or minus a $100 penalty and, if the next payment and the next are also missed, the cost of bringing the mortgage current grows pretty fast.

Past day 30, some lenders will allow a borrower to make a partial payment of the past due amount; others will insist that everything be brought current; lenders may even return a check if it does not cover both the current and the past due payments and maybe the late charges as well.

Day 45-60 - The servicer sends "demand" or "breach" letter to the borrower stating the mortgage terms that have been.
The borrower is given only 30 days to resolve the delinquent amount.

By day 45 the phone calls from the mortgage collectors will be coming pretty regularly. Most states have rules regarding collection activities and telephone calls including their frequency during this phase of the foreclosure process, content (no threats are permitted), and timing (early morning and late night calls are generally off limits,) but the calls, within legal boundaries, will be unremitting and the tone can vary from "gee, we just want to help" to aggressively demanding.

Source Bank Rate:

Alternative treatments

During these few months of the foreclosure process, the servicer will offer the borrower two primary options to cure the mortgage -- a repayment plan and a loan modification. With a repayment plan, the company agrees to tack, say, half the amount of the first missed payment onto each of the next subsequent two payments. These plans provide some breathing room for borrowers with short-term financial problems, such as expensive car repairs that make it too difficult to pay the mortgage for one month.

Day 90-105 -The servicer refers the loan to its loss mitigation department / foreclosure department and retains an attorney or other firm to handle the foreclosure proceedings. Depending on the state where the home is located, the servicer's representative may record a notice of default at the local courthouse and it will be published in the local newspaper

About 60 to 90 days after the initial missed payment the lender will send a notice of default, usually by Certified Mail, giving the borrower a finite period in which to cure the situation by paying all past due amounts, and by now collection costs are probably being added to the late fees. Once that remedial period passes, the collection department will refer the loan to the lender's legal department which will, after another period of time, send the documents to a local attorney to begin foreclosure proceedings. By this time serious legal fees are accruing.

The foreclosure process continues.

Bank Rate:

In a more serious case, the customer may have already missed two or three payments and owes a couple thousand dollars in lender legal fees. The servicer will still try to arrange a repayment schedule. But the borrower will likely have to pay a third to a half of the delinquent amount upfront, and then pay off a portion of the remaining balance each month for a year or more.
"In a repayment plan, the borrower agrees to do a payment and a half, a payment and a quarter, etc., for whatever number of months is needed to make that loan current," says Fannie Mae's Smith.

Loan modifications go a step further and they're designed for customers that can't afford repayment plans. In a modification, the servicer actually halts the forelcosure process and adjusts the terms of the loan to make it affordable. It may lengthen the amortization schedule or lower the interest rate to cut the monthly payments, or roll the past due amount into the loan and re-amortize the new balance so the borrower can pay the additional debt back over time.

If the customer has a more serious financial problem, such as a longer-term job loss followed by rehire at another company that pays much less, alternatives still exist. The servicer may agree to help the borrower get rid of the house via a pre-foreclosure sale. In more dire circumstances, the servicer will agree to a "short sale." In such sales, the lender lets the borrower sell the house for less than the outstanding loan amount, takes the proceeds and forgives any remaining overage. Banks are willing to do so because they often lose less on these deals than they do in foreclosures.

Day 150-415 – A notice of trustee Sale is filed and the home is scheduled to be soldat foreclosure sale or auction. This time range varies due to individual state laws and requirements.

States with judicial foreclosures / where foreclosures are done via the court system, can sometimes extend this period to a year or more.

A foreclosure is a legal event and there are benchmarks that must be met. Once the case is turned over to attorneys, the impending foreclosure must be advertised, usually in both the local papers and in the largest and closest metropolitan daily. The entire process can take a very long time from initial default to the actual public auction of the property. If a member of the military is an owner of the property, there are additional safeguards required by federal and in some cases state laws From the beginning of the process, however, the meter is running. The longer the foreclosure takes, the greater the debt that accrues and the larger the liability the homeowner has, something that will become critical down the road.

The law in most states gives the homeowner every opportunity to stop the process leading to foreclosure, right up to the minute that the auctioneer's gavel comes down and sometimes even beyond. In some states there is a period after the foreclosure during which the homeowner can redeem the property (right of redemption.).

Redemption Rights: The rights of redemption, as specified in Internal Revenue Code Section 6337, are quoted as follows:

• Sec. 6337. Redemption of Property. (a) Before Sale. - Any person whose property has been levied upon shall have the right to pay the amount due, together with the expenses of the proceeding, if any, to the Secretary at any time prior to the sale thereof, and upon such payment the Secretary shall restore such property to him, and all further proceedings in connection with the levy on such property shall cease from the time of such payment.
  (b) Redemption of Real Estate After Sale.
• • (1) Period. - The owners of any real property sold as provided in Section 6335, their heirs, executors, or administrators, or any person having any interest therein, or a lien thereon, or any person in their behalf, shall be permitted to redeem the property sold, or any particular tract of such property at any time within 180 days after the sale thereof. (2) Price. - Such property or tract of property shall be permitted to be redeemed upon payment to the purchaser, or in case he cannot be found in the county in which the property to be redeemed is situated, then to the Secretary, for the use of the purchaser, his heirs, or assigns, the amount paid by such purchaser and interest thereon at the rate of 20 percent per annum.

It is important to know this because less than ethical lenders and servicing companies will tell borrowers that, once default has occurred, the acceleration clause of the mortgage is invoked and the entire mortgage balance is due and payable - in other words, if a borrower misses his $1,200 payment for several months and now owes $3,600 plus late fees and legal expenses, he must come up with the entire $150,000 mortgage balance in order to stop the foreclosure. This may be technically true but it is rarely invoked in practice.

Nonjudicial foreclosure states can foreclose in as little as two months.

Day 150-415 – Some states offer what is called a redemption period after the foreclosure sale in order to give the borrower time to purchase the property if they have the ability. However, most will be forced out of their home by the local sheriff’s department.

The actual foreclosure auction might be conducted in the front yard of the subject property or "by public outcry" on the front steps of the county courthouse. Either way it is pretty frightening for the homeowner involved. There are lots of ways, however, to put a halt to the process and to save one's home. We will explore this at another time.

From Realty Trac

Foreclosure Process Overview

What is Foreclosure?


Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:

1. The borrower/owner reinstates the loan by paying off the default amount to during a grace period determined by state law. This grace period is also known as pre-foreclosure.
2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These are also known as bank-owned or REO properties (Real Estate Owned by the lender).

Following the same logic, customers should try to negotiate the best deal they can get without feeling guilty. Someone whose property has fallen in value below the mortgage amount because of a neighborhood decline, for example, should consider pushing for a short sale or short refinance rather than a repayment plan. That way, the borrower doesn't pay more money than necessary. Nevertheless, the best way for consumers to get out of foreclosure without racking up extensive legal bills and ruining their credit histories is to start working on a solution before their problems get out of hand.

"In no case should people take the step that is most often taken in this situation," Brenner says. "That is to stick your head in the sand and ignore it."

Hardship Letter Countrywide Home Loans Loan Modification Services FHA Secure

[Moe Bedard]

Example Timeline

1/2/2008 - January payment becomes past due.
2/2/2008 - February payment becomes past due - account is now due for 2 payments.
3/2/2008 - March payment becomes past due - account is now due for 3 payments.
3/5/2008 - Lender sends the Notice of Intent to Foreclose (Act 6 Notice) to the mortgagor. If applicable, the lender will also send an Act 91 Notice that makes the mortgagor aware of the Homeowners’ Emergency Mortgage Assistance Program.
4/8/2008 - Act 6 and Act 91 Notices have expired - Lender refers account to Foreclosure attorney.
5/8/2008 - Foreclosure attorney begins the legal process by filing a "Complaint" at the county courthouse.
6/23/2008 - Mortgagor does not respond to the complaint - a "Default Judgement" is entered.
6/25/2008 - Sheriff’s office schedules a "Sheriff Sale" date.
7/25/2008 - Notice of "Sheriff Sale" is sent to each mortgagor on the loan.
8/25/2008 - "Sheriff Sale" is held.
8/27/2008 - Sheriff prepares and records a deed conveying title to the purchaser. If a third party does not purchase the property, the deed will convey title back to the lender.
8/27/2008 - Eviction process begins if the mortgagor still resides in the property.

source http://www.phfa.org/consumers/homeow...ttimeline.aspx

[kedubob]

The notes say there is a default judgement if owner does not respond, how does one respond to the legal action?

[Mary Salzer]

You should at least hire an attorney for a period of 2 hours and get the information on how that should be handled and then proceed with either legal assistance or on your own if you feel that you are able. Even with appearance in the matter there can still be default depending on the state and the state statutes on Foreclosure....that is in the decision of the courts on that matter as to how they will allow the decision to come down on that matter.

[jorgerodr]

Hello,

I have a townhouse rented in Florida that I no longer could afford. How long will I be able to collect rent until the banks takes it back since there is a big backlog of foreclosure. I am thinking at least 12 months

Thanks,

[Moe Bedard]

jorgrodr,


That is a question that can't be answered here...........nobody can semise how long the process will take..........

Florida Foreclosure Law

[money94]

Is there anyway to speed up the process as the mortgage holder? I had the forclosure process started once, was able to make restution and get the loan re-instated. Then not less than a month after that lost my job. I have recently found another job in another state making less money and there is no way to make the payments and rent in our new location. We tried to sell the property but found there are liens against it.

Thanks in advance for any help.

[BrianF]

This is a silly question....When you receive an initial notice for foreclosure, is it coming from the lender themselves or is it from the Sheriff or attorney?

I just want to know what to expect, in case it happens....

[money94]

the first notices usually come from the lender themselves. At first it's the persuade you to pay up.

[925girl]

If the lender cannot tell me, and my settlement papers do not have it checked AND HUD has no record how do I find out if my loan was FHA insured?

[Moe Bedard]

If HUD doesn't have a record of it chances are it is not...........

1-800-CALL-FHA (225-5342)
1-800-569-4287.



try these numbers and see if they might be able to look also........

[925girl]

Thanks Cat! To be continued.....

[Bye Maricopa, AZ]

What is with the line "serious legal fees are accruing." Is that only a bad thing if you do not qualify for non-deficiency statute protection?

[mrehumhd]

My home was foreclosed on July 1, with the 1st mortgage company having the high bid. However, before the 10 days elapsed, an upset bid was received on July 8th from an individual. I received a letter from the trustees saying they were holding open the bidding process for another 10 days (July 18th) My realtor and I were trying to work out a short sale arrangement (long story here) with the 1st mortgage company who is the one who did the foreclosure. My question pertains to personal property items still in the house - the buyers had written into their contract - such as refrigerator, living room suite, etc. Some friends went to my house today to try to retrieve the personal property items, and they have all been removed from the premises, with No Trespassing Signs on all the doors. I am living/working in another state now - but they gave me little to no time to get the items out of the house once the short sale fell through - was/is this legal for them to do this if the bidding period is still open?

[grmeyer]

I live in AZ. I have walked away from my mortgage. I am not interested in any loan modification. A short sale or DIL is also not an option. My home is located in Pinal county where home prices have declined 80%. As a way to remove my name from the title, I would like to execute a Quit Claim Deed. The Deed of Trust lists following:
Trustee -> First American Title
Mortgage Electronic Registration Systems, Inc -> Lender's Successor and assignee
AHM Mortgage -> Lender

The questions I have are:
Who should I deed the title to?
Do I need to have an agreement with the lender to execute the Quit Claim Deed?
Will executing the Quit Clain Deed create any problems later during a forclosure?

The purpose in executing the QCD is to remove the obligations associated with being on the title: property taxes, HOA fees, liability, landscape maintenance.

[Lisann4bz]

I received a notice last week that mentioned acceleration. I am 6 months behind because I did a forebearance and then couldn't pay because again my husband was laid off. They told me that the 6 months had to be paid in full by by 9-15 or it will become necessary to accelerate the note and pursue remedies provided in the mortgage deed of trust. So are they saying they will come after me for the entire amount owed? It says they will proceed with acceleration. Did I just read above that if that occurs, I will not be able to get out of the foreclosure without paying the full amount owed of the house? My God, it just gets worse daily....

[grmeyer]

If you violated the terms of the forebearance, the lender probably has the option to accelerate the loan. If your circumstance has changed since the original forebearance agreement, why not approach the lender to discuss a new agreement, if you want to stay in the home. With lenders looking at so many loans in technical default, you may have a lot of options.

[Lisann4bz]

If you violated the terms of the forebearance, the lender probably has the option to accelerate the loan. If your circumstance has changed since the original forebearance agreement, why not approach the lender to discuss a new agreement, if you want to stay in the home. With lenders looking at so many loans in technical default, you may have a lot of options.

We are trying to do this and have been told that out income deficit ratio is too high for them to work with us on a new repayment plan. We are submitting financials again and hoping but truth be known, we DO have a low income at this point because my husband and I are both unemployed. I hope they can help but I am daily losing faith.

[mel239]

Im in OHIOhundreds of phone calls and faxes to everyone I could think of from the President to Citi and everyone in between-havent even had a trial period or an offer for a mod-havent paid in months-now I have income and I pass the NPV for less than a thousand a month including past due,taxes,insur, I can do that even though my house is 80,000 underwater-I want my home-nobody listens or calls-its like HAMP doesnt even exist.I had my second status conference with the courts lasted 5 minutes-magistrate said this could drag for a year then Im entitled to 3rd party mediation and then when a judgement comes in citis favor then I get an atty and present my evidence against citi not bargaining in good faith,predatory loan,and anything else we can think of-which in turn will drag on-GOOD Im looking for that cramdown to be approved then I can pay what the house is really worth and settle with my credit card companies--im not trying to screw anybody but if I dont get an offer or trial from citi im still not paying a cent and the magistrae said she sees it all the time--why throw good money after bad if you lose in the end?

[mel239]

And by the way-their atty didnt even care-he said keep working with them and continue it--he didnt care-he said he would provide me with theQWR I requested-told him thats down the road when I really need to fight

[overthere1]

Hi all-

Please assist as I am getting alot of mixed messages from various sources
regarding foreclosure.

My story: Have my mortgage with First Franklin/Home Loan Services-attempted a loan modification twice on my own to lower my $400,000 mortgage at 9.9% at 50 years. House is worth $410K.

I was denied the two times from FF due to the first denial based on not enough income and the 2nd denial that I had too many expenses.

I therefore was "counseled" by a mortgage broker to utilize the services of
a loan Modification company/las office in NY that specialiazes in foreclosres and loan mods that required a 1% of the loan ($4,000) upfront but fully refunded if my loan mod was denied through their attempts.

It has been 2 months since I sent them all required docs, and they said FF needed a copy of a tax return they had on file, but apparently needed another copy. That was 2 weeks ago, and my attempts to get any real timeline or outcome from the Mod company have been difficult to obtain.

I was also advised that the worse my case looks to FF, the better, so they suggested the following "we don't want to tell you whether or not to make your payments, but the further behind you are the better chance you will look as though a loan modification will assist you."

I now noticed (not through being served, but by the slew of bankruptcy and foreclosure marketing pieces I have been getting via mail) that I am now in default as of August 18, 2009. I also went to the county website and saw my address in default.

QUESTION: I cannot get a time deadline for this Modification company to say when they will have an answer. I am 4 months behind May, June, July,august 2009 and will be due for September tomorrow.

I am able to make 3 months full payment (approx $12,000) today with FF.
But, I would have to contact FF and get this approved-thereby possibly undermining the Modification attempts.

Would this even be an option with FF to get myself a repayment plan and out of foreclosure-or am I just in preforeclosure?????

I feel like I am in Limbo not sure what to do.

ANy advise appreciated-but no solicitations please.

[Moe Bedard]

It looks like you were "steered" by this broker into using this company and they are not doing their job too well. Hopefully, you have an attorney for that $4,000 and not just a broker because you need legal help here.

You need to place pressure on this firm to give you the answer or your money back. You have approx a few months left to deal with this so there is no extreme rush to fork over your $12k and yes, it "may" undermine things. It appears based on what you stated that you are officially in foreclosure. If you give them that $12k they may assume you are just fine and not offer you any help or a loan modification.

[tlbaker74]

What happens if your loan modification does not go through after the trial period, and your house was already in foreclosure? do they have to reinstate the foreclosure? or can they have you out in less than 30 days?

[Romelle]

my primary residence was modified by GMAC 1% 5yrs, 2nd property,with Downey Savings, the US BAnk took over,late for 6mos,tried to modify said they don't have programs for 2nd property, agreed on short sale, last minute the buyer backed out, presented another offer to US BAnk the next day,declined despite several appeal, proceeded with Trustee Sale, now the property in REO. Can the BAnk still go after us for the difference in NEvada? what can we do to protect our selves, we don't have any unsecured debts..pls advise.

[CoffeeJim]

Hello,
Currently, my parents who will be retiring shortly will soon be unable to keep up with their mortgage payments. With a first loan of approx, 400,000 and a second "interest" only loan of approx. 100,000 they are way under water as the approx home value is 350,000. Both loans were originated with CountryWide and are now held with Bank of America. I've briefly read a few entries and even talked with a loan modification company "Debt Advocacy Center". I'm not thrilled about forking over 4,000 to anyone I've never met and don't have a lot of information about. So, here I am looking for thoughts and advice. My first thought is that a loan modification really isn't going to provide much relief (The house is so much under water). They would probably default as their financial situation is only going to get worse. I don't believe they will be able to sustain payments for as long as it could take for the value of their property to exceed what they owe. My second thought is to try and arrange a short sale and lastly just walk away. Any thoughts would be greatly appreciated.

Thank you,
CoffeeJim