top right real estate image

You are here: Home \ Foreclosure

Foreclosure

Foreclosures will peak in 2009 and property values will continue to fall. If you are somebody who is facing the possibility of having your home foreclosed on you may still have time to avoid it through a short sale.

Below are common foreclosure questions.

Foreclosure FAQs

How Fast Can A Foreclosure Occur, What’s The Timeline?

In California a foreclosure can be completed in less than six months from the time the loan becomes delinquent. The foreclosure process can take place two months after the loan becomes delinquent. The first step is to record the Notice of Default. Usually, the homeowner gets notification that a foreclosure has commenced through the Notice of Default.

Once the Notice of Default has been recorded, the foreclosure can be completed in less than four months.

In What Ways Can I Stop The Foreclosure?

The first way is to immediately bring the loan current. In order to do that you must pay all delinquent amounts as well as any costs and fees incurred by the mortgage company during the time they processed your file to foreclosure.

For many borrowers, the loan is unable to be paid up-t0-date. This forces them to look at other avenues for a solution. Know that, although you may be well into the foreclosure process, lenders are still willing to give you extra time to fix the situation if they have reason enough to think that you can do so. Remember the mortgage lender would prefer that you remedy the situation rather than them having to aquire your property through foreclosure.

Some things the lender may be receptive to include:

  1. Selling the property so you can save whatever equity you have in the home.
  2. If there isn’t any equity in the home, you can choose to do a Short Sale where you accept a discounted payoff as “full payment” on the loan (lender must approve).
  3. Getting into a forbearance agreement in which you agree to stay current on the loan and to schedule of repayment on any delinquent amounts.

What Are My Options To Avoid Foreclosure?

You do have choices to avoid Foreclosure. First thing you should do is inform your lender as soon as possible. Let them know that you intend to remedy the situation so that they will not have to obtain the property through foreclosure.

Some options you have include:

  • Do Nothing
  • Refinance
  • Sell The Property
  • Negotiate a Forbearance Agreement

If My Home Is Foreclosed, Can The Lender(s) Come After Me For The Loss?

For the lender that may have incurred any losses on your mortgage due to the foreclosure, a Judicial Foreclosure would be required to recover the losses. Although a lender can pursue a deficiency judgment through a Judicial Foreclosure on some mortgages, in California it rarely occurs.

Typically, the lender is satisfied with the proceeds obtained at the Trustee’s Sale or from a sale after acquiring the property at the Trustee’s Sale. Either way, this is further reason for a lender to work with a homeowner to avoid acquiring the property through foreclosure.

To Avoid Foreclosure Can I Just Deed My Property To Someone Else?

You can but when you deed your property to a third party it does not eliminate you are still obligated to pay the loan. So if the lender did eventually foreclose, it is your credit record that will be effected. The exception would be that when you deed the property to a third party you completely pay-off the loan.

If you were going to deed your property to someone else, without paying off the loan, be sure to consulted with an attorney.

What will happen with my credit with a foreclosure?

One of the most damaging things that could happen to your credit record would be to have a foreclosure. Having a foreclosure on your credit record will impact your ability to borrow money for years, even more so than if you had gone bankrupt!

Most people would agree that it is worth the time effort to find a solution to the problem before the foreclosure is done.

What’s a Notice of Default?

Notice of Default means your lender has begun the formal foreclosure process. This occurs once the borrower has been two months delinquent (In California).

During this time the borrower has over three months from the recording of the Notice of Default to find a solution to the problem or work something out with their lender.

When a Notice of Default has been recorded, it’s imperative that you act to avoid losing the property. You don’t want a foreclosure staining your record.

Is Using a Forbearance Agreement To Avoid foreclosure An Option I Can Use?

Yes, you should look at a Forbearance Agreement as an option to avoid Foreclosure.

FORBEARANCE AGREEMENT – An agreement between a mortgage company and a borrower in which the borrower promises to stay current on the mortgage going forward and agrees to a repayment plan for delinquent payments and costs and fees associated with the foreclosure action. A Forbearance Agreement is a tool that allows the borrower to keep the property.

The lender will expect you to show that the delinquency was due to circumstances out of your control (injury, illness, job loss) and that the financial difficulties have been corrected.

I Want to Avoid Foreclosure Scams, What Should I Watch-out For?

There are many unscrupulous people who are looking to take advantage of your temporary misfortune. They will try and convince you that they can provide a quick and easy solution to your mortgage problem.

Here are some examples of the scams you may come across:

  1. Sell quick or you will be ruined. If your home has equity, they will offer a small amount of money, in the hopes that you will take the bait and they reap the rewards.
  2. The “bailout”. Signing the deed to the property over to them and they will deal with everything. Here the investor tells the homeowner that he will be allowed to stay in the home and pay “rent” to the investor until they can cork out a solution. Once the deed is signed over the investor now has complete control over the property (while you still owe the loan). The problem here is that the investor usually never makes the mortgage payments and the homeowner gets hit with the Foreclosure.
  3. Working with your lender for a fee. Here someone says they will work as a consultant on your behalf, for a fee, to find a solution with your lender. Know that it’s almost always illegal for a person to collect a fee as payment for making arrangements with your lender (except if it’s a lawyer) in California (CA. Civil Code Sections 2945-2945.11).
    Remember, if your looking to make arrangements with your lender they are willing to work with you to make up past payments and for you to keep your property.

Does A Short Sale Stop A Foreclosure?

Lenders will normally work with a homeowner and delay the Foreclosure if necessary should they receive a legitimate Short Sale proposal. Yet, the Short Sale itself does not stop the Foreclosure. In order to better your chances of this you will want to submit a complete, well organized, Short Sale proposal.

Lenders would rather solve the problem than acquire a property from you.

My Lender Has Begun A Foreclosure, Am I Still Allowed To Sell My Property?

Yes. This is actually preferred by the lender.

Even if you have no equity in your property the lender wants to find a solution to the problem. They do not want the property on their books.

This is why lenders agree to Short Sales and accept discounted payoffs to satisfy the loan. In most Short Sale cases, the lender pays all the closing costs from title fees and escrow fees to the real estate commission and repairs if need be.

When My Lender Calls Should I Speak Them?

Yes. The best thing to do is not avoid the calls or any letters from the lender, especially if a foreclosure is pending. The key is to realize the lender does not want your property and would rather come fix the problem with you to avoid foreclosing.

When you do speak with the mortgage company, be honest about your circumstances. They may suggest options, so be open and listen to what they are saying. They are well aware that the best way to limit losses on a delingquent mortgage is to with with the homeowner.

Keep notes of all conversations you have with the mortgage company. Things such as the name of the representative you spoke with, dates and times of calls, and any details of the conversation.

To contact OCHomeHelp for a Confidential Consultation on your specific needs, click here.