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Foreclosure Sale*
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IMPORTANT:
The information on this page is intended to provide
you with an oversimplified view of the foreclosure process. There is no
shortage of information online with all kinds of advice about what to do if
you are in foreclosure. Our advice is to start by reading this page, and
consider a Short Sale
before waiting for Foreclosure.* |
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What You Have Now… When
you received your loan from the bank you signed many documents. Of all these
documents, the two documents of most interest Promissory Note and Deed
of Trust or (depending on what state you live in) a Mortgage. The Promissory Note:
When you received your loan from the bank you signed a “Promissory Note”.
This NOTE serves as evidence of your debt to the bank. For more details on
the Promissory Note, see Loan
Modification. The Deed of Trust (Mortgage):
While the Promissory Note is the evidence of your debt, the Deed of Trust is
the “Security” for the Debt. When you “Mortgage” your house you are basically
saying, “If I don’t return the money I borrowed, you can have my house.”
Without this promise… Why else would anyone loan you THAT much money? Foreclosure:
(Simple overview… NOT legal advice!) If
you signed a Deed of Trust, your
lender needs to follow a set of rules that involves among other things…
Notifying you that you are late and giving you a chance to catch up. Then
they file a “Notice of Default” document in the county records, and deliver a
copy to you… Usually they will hand you a copy or tape it to your front door.
After giving you another 90 days or so to contact them and work something
out, they will file a “Notice of Trustee Sale”. This gives you another 3 or 4
weeks (time to find a new place to live), before your house is sold by an
auction company on the courthouse steps. Aside
from any local court rulings to the contrary, your lender does not have to go
to court to Foreclose with a Deed of
Trust. If done right, Foreclosing on a Deed of Trust is usually MUCH
faster than Foreclosing on a Mortgage. If you live in a State that uses a Mortgage and not a Deed of Trust, your lender will have to
go to court and have a judge say if they can foreclose. This is considerably
more expensive and time consuming for the lender. The Problem(s)… Aside
from your problems of less income, more bills, and your house being worth
less than your loan balance… There are many other problems that involve ALL
OF US. Even if these problems allow you to continue living in your house
“rent free” while your lender goes through the foreclosure process, you
should be concerned. Let’s
start here… Your house has what’s referred to as a “Chain of Title”. You
purchased your house from someone who bought it from someone, who bought it
from someone, and so on. Your HOME LOAN has a “Chain” also. The company you
got your loan from probably sold your loan (Specifically the rights to
collect on your NOTE & foreclose on your DEED) to another lender… Then
that company may have sold it to another company… and so on. When each
transfer takes place the selling lender is supposed to “Endorse” the NOTE
& DEED to the buying lender. Just like if someone made a personal check
out to you, and you endorsed the back “Payable to Me” so I can go cash it for
you. This
all sounds neat and tidy… If the lenders actually did it this way. Although
this was their intention, they took short cuts. There were just too many
loans moving around over the last 10 years. The recording fees were expensive
and it was labor intensive to sign and record all these transfers. To cut to
the chase… Because of these short cuts, who actually owns (and has the right
to foreclose on) a small percentage of the loans given in the last 10 years
is in question. (If you want to go deeper down the rabbit hole on this topic,
Google “MERS”.) To
further compound the mess… Banks have so many borrowers not making their
payments, and so many foreclosures to request… In 2010, a small number of
banks filed the foreclosure requests illegally. This was all over the news
under the heading of “RoboSigning”. The state
courts flipped out, and halted foreclosures in many states. Most of the
banks, even the ones who did it right, froze foreclosures for months. Tens of
thousands of foreclosure filings had to be cancelled and everything started
all over. As if things weren’t bad enough… The local courts are
not set up to handle the massive volume of foreclosure requests being
submitted. The entire system is overwhelmed with tens of thousands of homes
in various stages of Foreclosure. In Mortgage States the burden on the system
is causing delays that may prolong the crisis for the next several decades. Why do I want
to avoid Foreclosure? Your lender may seek a Deficiency Judgment for the difference between what you owed on
your loan and what they sold the house for. This is legal in many states, and
it becomes “unsecured” debt you owe just like a credit card. If you have an
equity line or 2nd loan on your house your 2nd lender
is likely to pursue a Deficiency
Judgment, since they are not likely to get anything from the Foreclosure
Sale. Recently some states have passed
laws that prohibit Deficiency Judgments from 1st or 2nd
lenders IF the lender approves a Short Sale. There are not many things more traumatic than being
evicted. It might look something like this… The Sheriff, bank representative,
locksmith, and moving company show up for the eviction. The Sheriff escorts
your family outside, the locksmith changes the locks, and you all watch from
the street while the movers put all of your property on the sidewalk. When compared to your other options, Foreclosure is the biggest hit to
your credit score. In addition, the notices nailed to your door for your
neighbors to see and people coming to your door, offering “assistance” can
drain your emotions. The stress of things being out of your control, and not
knowing where you will live in the future can wear on even the strongest of
us. You can’t control your bank, but you can control what happens to you…
Take control and review your Options now. A Few Thoughts… Are you ready to start paying, but your lender will
not take your payments? If your lender takes a “partial payment” from you, it
may prolong or eliminate their ability to proceed with the Foreclosure. If you have money saved,
try working with them to do a Loan Modification
or Forebearance plan. If you have not saved any of
the payments you missed, you are going to have a hard time showing your
lender that you can start paying them again. Unless you have a special
circumstance (illness, lost job, etc) that has been fixed and you are back on
your feet, it may be time to consider a Short Sale. If you think Bankruptcy will “save your house”,
please discuss it in detail with your Bankruptcy attorney.
This is NOT LEGAL ADVICE. One way
to look at a Chapter 13 BK is a “Forced Loan Mod”. Chapter 7 Bankruptcy may
eliminate your mortgage debt (THE NOTE)… But the DEED OF TRUST or MORTGAGE
remains on the property and whoever holds the rights to it can still
foreclose on your house.* Unless you can afford to start making payments
again, Bankruptcy is not likely to “Save Your House”. As time passes, the number of people getting behind
on their mortgage payments is growing. We need to remind ourselves that money
to buy houses does not come from the Government… It comes from Private
Investors, Mortgage Banks, and Secondary Mortgage Buyers. If they keep losing
money, they stop loaning it. With no money to buy houses EVERYTHING form the
groceries you buy to feed your family, to the gas you put in your car is effected… It goes way beyond housing. Remember… The mortgage lender who is foreclosing on
your housemay NOT be the lender who gave you your loan. It is likely, they purchased your loan from another lender who
is no longer in business. It might be hard to see… But in a strange way, your
lender is in a sinking boat just like you… It’s just a larger boat. The best
thing you can do is work together to fill the hole… “Pay & Stay” or “Walk
Away” (Get out of the boat). When All Else
Fails... You’re in over your head… Your house payments are too
much for you… You tried to get a Loan
Modification… You don’t qualify for a Refinance… Tried a Short
Sale and it didn’t work out… One last option is to ask your lender about
a Deed in Lieu of Foreclosure.
Otherwise known as “Cash for Keys”. IF you ultimately end up losing your home through
foreclosure, remember that another family just like yours will live in your
house next… The bank will never live there, so however you leave it will be
your gift to the next family. It may be hard to believe, but you can and you
will start over somewhere else. If you have children, teach them something
they can learn no other way… How to fail, pick yourself up with grace and
dignity, and start all over again. I have been there and it CAN be done.
ARTICLES A List of Really Honest Questions to Ask Myself Own vs Rent Calculator
(Compliments of the NY Times)
714-401-5321 *This page is a list of
observations that may or may not apply to your specific situation. Consult a legal professional
about your specific situation. Please see our Disclaimer
Page.
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