2/10/2007

What Happens If You Are In Foreclosure?


Recently, California has experienced an increase in property owners who cannot seem to make payments. If you are one of those people who has received a Notice of Default from your lender, please read this.

You still have time to find solutions and avoid losing your property. Maybe your property isn't a mansion, but to you, it is. You should consult with your attorney for complete information on the foreclosure process, and your accountant for tax advice.

A non-judicial foreclosure under California Civil Code section 2924 allows lenders to foreclose upon real property without going to court. It takes approximately four months from start to finish. Once the sale auction is completed, it is final, but an IRS tax lien can cause a delay in the finality of the sale. The borrower must then vacate.

1. Your trust deed functions as the lender's security device for its loan. Lenders may hire a new trustee to replace the trustee named in the trust deed and then instruct the new trustee to issue a Notice of Default, and "NOD", in which you, the borrower, are warned to act or face the consequences. The NOD is recorded at the County recorder's office, and sends copies to the borrower and to any party who requested a Notice of Default form, to holders of junior trust deeds, to the borrower's successor in interest, and anyone else legally entitled, no later than one month following the recordation of the NOD.

2. You have the right to reinstate the loan by tendering to the lender or trustee your delinquent loan payments, plus the trustee's fees and costs. Upon receipt of that payment, the trustee is obligated to rescind the NOD, and the loan is reinstated to normal status, as long as it is reinstated until five business days before the scheduled foreclosure sale. Otherwise, the lender is not required to stop the sale, and the lender may demand the borrower pay-in-full the total outstanding principal balance and accrued interest on the loan, plus trustee's fees, right up until the moment before the sale is completed.

3. If three months pass following recordation and the borrower does not reinstate the loan, the trustee is instructed by the lender to set a time, date and place for the sale, usually three to four weeks from that time, hence, the total time of about four months.

4. The borrower will receive a Notice of Trustee's Sale, along with other entitled parties. The NOS must be mailed, posted in a public place, published in a newspaper of general circulation in your property city--all 20 days before the sale date-- and recorded at the County recorder at least 14 days prior to the sale date.

5. At the appointed time, the trustee conducts the sale at public auction.

You may have time to refinance (there are hard money lenders who will loan even though an NOD has been recorded) and even if at a higher rate, that is better than losing your home. When your situation has improved, you may be able to obtain a better loan. You may also contact your lender for arranging a "short sale". Lenders don't really want to take back properties, and are often willing to make an arrangement with the borrower who might otherwise be able to sell the property rather than going into foreclosure.

Above all, you should not ignore your situation, as difficult as it is at the time.

Please know that this is one of my most frequently read posts. Many people are facing this issue. If that could be you, or it is you, please know that (1) you may be able to refinance your way out of your situation, (2) you may be able to negotiate a short sale with your bank. If you need immediate loan qualification, or are considering negotiating a short sale, PLEASE CALL ME.
If you would like a market analysis of your property to try to sell it, please call me at 562-896-2609 or e-mail me ocean@surfside.net immediately.


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