Each state has its own foreclosure laws that guide the mortgage and real estate industry. For purposes of getting an overview of the matter, it is vital to explore the general foreclosure process. Foreclosure, as defined by law, happens when the homeowner defaulted on paying periodic payments and cannot pay the said default payments resulting to the seizure of the property to satisfy the claim of the lender. In practice, the foreclosure process may take up to six months or a single year.
Stages of Foreclosure
With the HAMP, lenders can only start the foreclosure process after the property owner fails to make loan repayments for three to six months. It must be understood that all other alternatives must be exhausted first prior starting the foreclosure process.
After months of missed payments, the mortgage lender, usually the bank, issues a Notice of Default with the trustee at the County Recorder's Office. For borrowers, the NOD is the onset of the foreclosure process. It is recommended to seek assistance of a foreclosure lawyer when an NOD is issued. The notice gives the homeowner five days for the reinstatement period, by which arrangements and negotiations are made for the best deal of the borrower.
If the borrower fails to make the loan current by paying the defaulted payments of up to three months, the foreclosure date will be set. A Notice of Sale will be recorded at the County Recorder's Office. The borrower will receive a copy of the Notice of Sale, which will be posted also on the property. The Notice of Sale must also be published in local newspapers, for at least three weeks.
If the property is to be auctioned, a Trustee Sale is made. The Notice of Sale must bear the time and data of the auction sale. During the auction, the highest bidder will get the property. After the payment within 24 hours, the trustee's deed to the property will be transferred to the new owner of the house.
Foreclosure Auction
The foreclosure auction invites several people to bid over the property. An opening bid is made by the mortgage lender; the opening bid bears the mortgage loan balance with the interest, attorney fees, and other necessary additional fees associated with the property. It must be understood that the foreclosure auction makes the Trustee the lien owner of the property. When there is no highest bidder of the property, the foreclosure lawyer of the mortgage lender can purchase the property for the lender.
If the opening bid is not meet due to the lack of interested buyers, the property becomes under Real-Estate Owned or REO, by which the bank or the mortgage lender can sell the property to satisfy their claim. Most buyers choose to buy the property through the bank or under the REO to avoid liens and property taxes associated with the sale. Plus, buying from a bank gives you an opportunity to buy the property with a clean title.
