Foreclosure Process & Solutions (California)

Terms & Definition

During current world events, many communities and families have been directly impacted by Covid-19. According to realtytrac.com, they have reported that nearly 1 of every 9700 Californians are experiencing a foreclosure as of June 2020. With the job market decreasing and the economy forecast being unpredictable, it wouldn't be surprising if that statistic continues to climb. However, there is still hope! As concerning as all this might be, there is still a way out. Everyday, the housing marking still remains hot and the prices of homes are still going up. Which is why in this blog, me and my team have a dedication during these trying times, to spread awareness of the foreclosure process and some strategies on how to recover/avoid it.

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• Foreclosure: a legal proceeding that bars or extinguishes a mortgagor's right of redeeming a mortgaged estate
• Pre-Foreclosure: the process that leads up to a foreclosure
• Power-of-Sale Clause: is a clause written into a mortgage note authorizing the borrower to sell the property in the event of default in order to repay the mortgage debt

Payment Defaulted

When a homeowner misses a payment on their mortgage, it is said that the homeowner has defaulted (or failed to fulfill) on their payment. The lender will send a notice of missing payments explaining that borrower is behind on payments. On the second missed payment, the lender will then send a demand letter, demanding the payments that are owed. If this continues to third missed payment, the lien holder will have to decide one of several options to collect what was owed to them, such as:

• Judicial - filing a lawsuit
• Nonjudicial / power-of-sale
• Renegotiate the terms / Refinance

The most common route that conventional lien holders will take is the power-of-sale. The power-of-sale clause allows the lien holder to sell the property to payoff what the borrower owed to them.

Notice of Default (NOD) & Notice of Trustee's Sales

To initiate the pre-foreclosure, the lien holder is required to send the borrower a Notice of Default (NOD) after 90 days of no payment. This gives the borrower time to settle any outstanding payments. If the borrower fails to catch up with the payments, then the borrower will receive a Notice of Trustee's Sale. The notice informs the borrower that the lien holder will sell their property at a auction in 21 days. In the letter, the borrower will find the date, time, and location of the auction.

Trustee's Sale & REO

The borrower's property will put in auction and will be sold at the highest bidder. ​If the property does not sell at the auction, the lien holder will then acquire title to the property. The lien holder will then attempt to list the property with a Real Estate Broker / Agent in hopes of selling it. When the bank owns the property, it is referred to as a ROE (Real Estate Owned) or banked owned. 

Eviction & Foreclosed

During the whole process up in till the sale of the property, the defaulted borrower may stay in the property. Once sold, the borrower will receive an eviction notice to leave the property. The borrower will have several days to move any personal belongings out of the home. Once done, the local sheriff will typically visit the property to remove any remaining belongings or the borrower if they have not left already. After all is said and done, the property will be considered foreclosed and the new owner will receive title.

Solutions

Good news is that there is a way to avoid a foreclosure, and the key remains to preventing it from happening at all. Option one (ideally) is the borrower should always prioritize paying off all outstanding payments and keeping the loan current. But realistically, the borrower wouldn't have defaulted if they had the means to do so in the first place. So then option two will be simply beating the banks in selling the property. It is important to understand that, selling your property is always, always, always better then taking a foreclosure because:

• You will avoid bankruptcy (saving your credit)
• You will have the opportunity to walk away with some cash
• Its quick and easy!

However, timing is everything. The reason being is that you only have 90 days after receiving a Notice of Default to sell the property. That is why it is imperative to partner up with a Realtor because it allows the property to stand out, especially in this saturated market. Realtors will have access to a large amount of marketing tools to help your home sell faster. Because once those 90 days are up, there will be no way out but taking the foreclosure.

If you are in need of a realtor, me and my team can help! We specialize in helping people in pre-foreclosures, because we know how scary it can be. Your friend the realtor, Sofyan Karim, can be reached at anytime to help you find your next real estate solution.

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