Cure the default (pay off what is behind), loan modification, government programs, bankruptcy, selling (short sale or equity sale), reverse mortgage, and hard money lenders. Every situation is different, so it’s best to call us at 619-841-1255 for a detailed plan.
Foreclosure officially starts with the recording of the Notice of Default (after at least 3 months of mortgage payments have been missed). 90 days later a Notice of Trustee Sale can be filed. Once recorded, there is a public auction scheduled to sell the property which can be 21 days later. This is explained in more detail in the Foreclosure Timeline.
Just because a homeowner is “working” on a loan modification does not mean the lender cannot pursue foreclosure. By law (Homeowner’s Bill of Rights) the lender should put foreclosure on hold while file for modification is reviewed (dual tracking). However, lenders may not “pause” foreclosure until they have a complete modification package, meaning all documents they have requested have been provided. Lastly, keep in mind that loan modifications are not guaranteed. It is at the discretion of the lender as to what terms they may offer or if they want to offer a modification at all.
While we have aided homeowners in the past with loan modifications, we have stepped away from doing so for one simple reason: we don’t believe we add any value by doing it directly. A loan modification involves getting together many personal financial documents, such as tax returns, bank statements, and pay stubs. Only the homeowner has access to those. This loan modification “package” is then submitted to the bank. It is reviewed and a decision is made based upon their guidelines. The bank does not make a decision on approval based upon who submits the package, but rather the contents of the package. We happily, though, provide advice and recommendations based on our years of working with foreclosures.
Refinancing is not generally an option for a homeowner in foreclosure because their credit is in poor condition and lenders will not lend to someone in that position. However, lending programs and requirements are always changing so it’s best to contact a loan officer or mortgage broker to see if any potential loans exist. There are also hard money lenders which will lend in certain circumstances, such as with non-owner occupied properties with sufficient equity. But expect any potential loans to come with high interest rates and usually short terms.
A Notice of Default (NOD) is a legal document filed at the county recorder’s office (usually by a law firm) that states the borrower in a mortgage is “in default” of their mortgage agreement and foreclosure proceedings have begun. Although typically filed by the first mortgage holder, an NOD can also be filed by a junior lien holder (like a 2nd mortgage or equity line of credit), or a Home Owners Association.
A Notice of Trustee Sale comes at the end of foreclosure. Once filed it means that a public auction to sell the house is now scheduled. This can be filed 90 days after the Notice of Default. An auction can be scheduled 21 days after the Notice of Trustee sale. The homeowner has up until 5 days before an auction to cure the default and become current.
There are options to both keep your home or sell your home and those options should be explored before allowing foreclosure to happen. A Notice of Default starts foreclosure. 90 days later a Notice of Trustee Sale can be filed. 21 days later an auction can be scheduled. Once an auction takes place there the property is sold and there is a new owner. The new owner or a representative will likely contact the occupants shortly after the auction to arrange a move out plan. They can issue a Notice to Quit which gives you three days to vacate. If occupants do not vacate the new owner can start eviction which could take 1-4 months to complete. Like the foreclosure, an eviction remains on one’s credit report for 7 years. This should be avoided at all costs!
When an auction takes place there are two outcomes, either the property will sell to a private party or if no one bids at auction the property will go back to the bank. After the auction the new owner or a representative will approach the occupants and arrange a move out timeline. If the occupants do not cooperate in moving out eviction will be started, which ends with a sheriff lockout.
When mortgage payments are missed they are normally reported to the credit bureaus which then brings downs the borrower’s credit score. A Notice of Default and Notice and Trustee Sale may also be reported to the bureaus further impacting one’s credit negatively. If the property forecloses that record will remain on one’s credit report for 7 years, and should be avoided. Like a bankruptcy, foreclosures are the worst “black marks” one can have on their credit.
It can certainly feel like some lenders don’t want to help, or are even actively working to foreclose on you. But it is not the business model of most banks to foreclose. They are in the business of lending money and getting paid back with interest. Therefore, most banks do offer loan modifications in order to keep borrowers as borrowers. To foreclose a bank must pay lawyers, holding costs, and risk owning the property if no one bids at auction (they don’t want to owe the property). Additionally, they face eviction if the occupants refuse to leave the home. There are a lot of incentives for banks to avoid foreclosure, so despite the frustration in dealing with call centers, bureaucracy, lost paperwork, etc, keep this big picture in mind.
A loan modification means the lender modifies, or changes the terms of your mortgage. They could change the interest rate, the term (loan length), and even the principal balance. Modifications are often done by homeowners who have fallen behind on their mortgage and are seeking “help” to stay in their homes. The default, or past due amount, will be dealt with in a loan modification, often adding it to the principal balance.
A loan deferment simply means deferring, allowing the borrower a waiting period before resuming payments. But, of course, if a deferment period of 6 months is allowed, without any other changes there will suddenly be a new balance of 6 extra months of mortgage payments due after the deferment period.
Loan forbearance is really this same thing as loan deferment; however, the lender many allow reduced payments to be made during the forbearance period.
A loan repayment program is term sometimes used for a loan modification. Homeowners who are struggling making payments should contact their lenders to see what options they offer. Regardless of the terminology, lenders offer assistance to borrowers to keep them as paying customers.
When we help people, with advice, consoling, loan modifications, etc, we do not and cannot charge a fee. All we ask for in return is to contact us in the future when you or a friend needs real estate help buying or selling a property. When we help someone buy or sell we then earn a real estate commission. On short sales, our fees are paid for by the bank.
We became licensed to sell real estate in 2008. And since 2013 we’ve focused on helping homeowners get out of foreclosure.
Certain types of liens, like HOA liens, may have to be cleared (paid) in order to get assistance like a loan modification. All liens and judgments must be cleared in order to sell a property. It is also true that liens may need to be cleared in order to get a loan modification approved. Liens attached to the property will disappear if the property forecloses; however, personal judgments and tax liabilities can remain with you.
Yes. Nothing changes to the ownership of a property in foreclosure and you can sell a property as long as you are the owner. But after a property forecloses ownership changes; therefore, you cannot sell if the home forecloses (trustee sale take place).
Equity can be thought of as the “profit” you have in your house that you would get if you sold. To determine that we simply take the fair market value (as determined by an appraisal or broker price opinion) and subtract the current total loan balance (including all liens and judgments). The remaining number is the equity. However, one must also account for the transactional cost in selling. These closing costs include fees for title, escrow and real estate commissions, estimated at 7% of the sales price. To find out the equity in your home just give us a call at 619-841-1255.
It is possible to buy a property after going through foreclosure, but it will take time to rebuild one’s credit to be able to do so. This will take a minimum of 18 months. Also, generally, the higher one’s credit score the lower the interest rate one can obtain.
A short sale is selling a property that has negative equity, or in other words, it is upside down or underwater. Because the bank (your mortgage lender) is taking a loss the transaction must be approved of by the bank. The process takes 4-8 months on average.
Although homeowners don’t make money from the sale in a short sale, relocation assistance from the lender is often available. Typical funds received are $3000-$10,000, although it is not guaranteed.
A few other points : Short sales also preserve the homeowners credit versus having a foreclosure on one’s credit report. Short sales do not cost the homeowner money to do. All fees and expenses are paid by either the bank or buyer. A licensed real estate agent orchestrates the transaction. And lastly, many homeowners live in their properties during the short sale, thus saving them money otherwise spent on the mortgage or rent.
Cash for keys, or relocation assistance, is offered by many lenders in short sales, and sometimes in deed in lieu of foreclosure (although deed in lieu is not very common). We apply for the funds during the short sale process and if approved, they are disbursed at the close of escrow. Typical funds are $3000-$10,000.
There are a few conditions that must be met with reverse mortgages: The owner must be at least 62 years old, they must reside in the property, and they must be current on their property taxes and home insurance. Additionally, there must be a significant amount of equity in the home, usually 50% or more. If one of those conditions is not met, the lender can file a Notice of Default and pursue foreclosure.