With the increased amount of foreclosures on the market today, escrow officers are often asked about the foreclosure process. The first thing to know is the foreclosure terminology, which we discussed in a prior post. What is important for homebuyers and sellers to understand is that foreclosures happen to loans not properties therefore it is a process that is handled between the lender and the lender’s trustee company. In an effort to answer the many foreclosure questions that we get following is a simplified breakdown of the steps that lead to and complete the foreclosure process.
- The borrower fails to make more than one monthly mortgage payment
- The lender would have their trustee company prepare, record and send the borrower a Notice of Default (NOD)
- The borrower now has 90 days to bring the loan current (reinstatement period)
- If the borrower is still unable to bring the loan current the trustee company will set a sale date approx. 4 weeks out
- The trustee will prepare, record and send to the lender and borrower a Notice of Trustee Sale (NTS)
- The NTS will also be posted at the property in a conspicuous place and published in a local newspaper (publication period)
- This Notice will contain the date, time and place where the Trustee Sale will take place
- During the publication period the borrower can still bring the loan current up to 5 days prior to the sale date
- The sale is held at the courthouse in the county where the property is located
- The lender sets an opening bid that would cover the loan balance, interest, attorney fees and any other accrued fees and costs
- The property is then sold to the person with the highest bid over the opening bid set by the lender
- If no one bids over the opening bid then the lender retains the property as a banked owned property (REO)- Real Estate Owned
During the foreclosure process there are several stages in which the homeowner has the opportunity to bring the loan current and avoid foreclosure. Foreclosures contain many nuances and affect each party involved differently. Don’t hesitate to ask your agent for information about foreclosures and your situation or for further information see the links below.
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