Frequently Asked Questions - Foreclosures
How Fast Can A Foreclosure Happen?
In California, a foreclosure can be completed in less than six months from the time the loan becomes delinquent. The mortgage company can record a Notice of Default, the first step in the foreclosure process as soon as the loan is two months delinquent. Typically, the first indication a homeowner gets that a foreclosure has commenced is notification of the Notice of Default.
Once the Notice of Default has been recorded, the foreclosure can be completed in less than four months.
Do I have enough time to stop my foreclosure?
Until the auction occurs, there is enough time for a homeowner to stop their foreclosure. TIME IS OF THE ESSENCE and action should be taken as soon as possible.
Your mailbox is likely to be filled each day with promises of solutions. People may even offer you money. These false promises are only for companies to ultimately take ownership of your home by delaying the foreclosure process. In the end, the homeowner will basically have no other alternative but to sell their home at a steep discount. Be vary wary of promises that sound too good to be true because most likely they are. (once NOD filed, it’s public record and all the sharks come hunting…meaning everyone starts contacting you)
How Can I Stop The Foreclosure?
The best way to stop the foreclosure is to bring the loan current. To do that you would need to pay all delinquent amounts as well as the costs and fees incurred by the mortgage company to file and process the foreclosure.
Many borrowers are not able to bring the loan current and are forced to look at other alternatives to avoid foreclosure. Even if you are well into the foreclosure process, most lenders are willing to grant you additional time to remedy the situation if they believe it is reasonably likely they can avoid acquiring your property through foreclosure. Among the alternatives the lender might be receptive to:
Get the property sold so you can save your equity.
If you don’t have equity, cooperate in a Short Sale and accept a discounted payoff as "full payment" on the loan.
A forbearance agreement in which you agree to both stay current on the loan going forward and to a schedule of repayment on delinquent amounts.
What Options Do I Have To Avoid Foreclosure?
There are several things you can do to avoid foreclosure. It is usually best to let your lender know, right away, that you intend to solve the problem so they won’t have to get the property in foreclosure.
Here are some of your options:
· Sell Your Property
· Refinance
· Negotiate a Forbearance Agreement
· Do Nothing
If My Lender Forecloses, Can They Come After Me For The Loss?
In order for your lender to recover losses incurred on your mortgage as a result of foreclosure, the lender would need to do a Judicial foreclosure. While, theoretically a lender could pursue a deficiency judgment through a Judicial Foreclosure on some mortgages, it almost never happens in California.
The lender is normally left with the proceeds generated at the Trustee’s Sale or from a sale after acquiring the property at the Trustee’s Sale. This is another reason why lenders would prefer to work with the homeowner to solve the problem and avoid getting the property through foreclosure.
Can I Just Deed My Property To Someone And Avoid Foreclosure?
Deeding your property to a third party does not eliminate your obligations related to the loan. Unless the mortgage is paid off when you deed the property, you will almost certainly remain as the party primarily responsible for the repayment of the loan. If the lender eventually forecloses, it will be on your credit record.
If you deed your property to a third party you also give up control of the property. It is, in most cares, a bad idea to simply deed your property to a third party. Do not deed your property to someone without paying off the loan unless you have consulted with an attorney.
What will a Foreclosure do to my credit?
By almost any measure a completed foreclosure is the most damaging event your credit status can encounter – worse than bankruptcy. A foreclosure on your credit record will negatively impact your ability to borrow money for years. For most people, it is well worth the time and effort to solve the problem before the foreclosure is done.
What does a Notice of Default mean?
If a Notice of Default has been recorded against your property it means your lender has started the formal foreclosure process. In California, a borrower must be two months delinquent before a lender can commence a foreclosure action by recording a Notice of Default.
A borrower has over three months from the recording of the Notice of Default to work something out with their lender and avoid the completion of the foreclosure. Once the Notice of Default has been recorded, it is important to act to avoid losing the property and having a foreclosure on your record.
Can I try a Forbearance Agreement to avoid Foreclosure?
Yes, you can and you should look at a Forbearance Agreement as an option to avoid foreclosure. A forbearance agreement is 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.
Can’t I just file Bankruptcy to stop the Foreclosure?
Yes, filing bankruptcy will stop the foreclosure process – but only temporarily. Many lawyers will preach the gospel of bankruptcy to homeowners facing foreclosure. Filing bankruptcy, they claim, will stop foreclosure and "save your home". This is not necessarily true. The reality is bankruptcy will only provide temporary relief.
When a bankruptcy is filed, an automatic stay goes into effect, which temporarily stops the foreclosure. This may sound like an easy solution but, there is a dark side. Unfortunately for most people, it only stops the sale for one or two months. Immediately after filing a Chapter 13 Bankruptcy, you will have to file a repayment plan with the courts. This plan has to show you have enough income to pay basic living expenses and other monthly payments In addition, you must be able to resume making your monthly mortgage payments plus all past due amounts are spread out between 24 and 60 months. Filing bankruptcy is a viable alternative if your financial situation has improved.
IMPORTANT! Many homeowners do not understand how bankruptcy works and think they can keep their home and avoid paying the rest of the mortgage. This is not true. You either lose your property or you keep the property by making the payments. Please consult an attorney for all specifics of filing a bankruptcy
I Have Heard Of Foreclosure Scams, What Should I Look For?
Unfortunately there are quite a few people that might try and take advantage of your temporary misfortune. These people will try and convince you that they can provide a quick and easy solution to your mortgage problem. As a general rule, if it seems too good to be true, it usually is.
Here are a few examples of the scams you could encounter:
You need to sell your property fast. If you have equity, these guys want it by providing fast cash. They solve your problem and they get your equity. On occasion they offer a small amount of money to you – which is normally a signal they are getting lots of your equity.
Sign the deed to the property to us and we will take care of everything. Sometimes called the "Bailout" scam, the investor tells the homeowner that he will be allowed to stay in the home and pay "rent" to the investor until a long term solution can be worked out. Once the owner signs the deed to the property over to the investor, big trouble usually follows. If the investor has the deed, the investor has control. Here is the big kicker – the homeowner who signed over the deed is still responsible for the loan. The investor nearly never makes the mortgage payments and the homeowner gets hit with the foreclosure.
For a consulting fee I will work with your lender to find a solution. It is almost always illegal in the state of California for anyone, besides an attorney, to collect a fee as payment for making arrangements with your lender. See California Civil Code Sections 2945-2945.11for details.
Your lender will work with you directly if you want to make arrangements to make up past payments and keep your property. This would normally involve a Forbearance Agreement.
If My Lender Has Started A Foreclosure, Can I Still Sell My Property?
Absolutely, In fact, your lender would rather you sell the property than allow the foreclosure to continue.
Your lender does not want to take your property through foreclosure. Even if you have no equity in the property, the lender wants to find a solution.
This is precisely why lenders agree to a Short Sale and accept a discounted payoff to fully satisfy the loan. In a Short Sale, the lender in nearly all cases pays all the closing costs – including title fees, escrow fees and the real estate commission.
Should I speak with my lender when they call?
It is best that you not avoid calls or letters from your mortgage company, particularly if a foreclosure is pending. Your mortgage company does not want to take your property through foreclosure. The mortgage company would rather look for options to avoid foreclosure.
When speaking with your mortgage company, be honest about your circumstances and listen for them to possibly suggest options. The mortgage company knows the best way for them to limit losses on a delinquent mortgage is to work with the homeowner.
Be sure to keep notes of all conversations you have with the mortgage company including dates and times of calls, the name of the representative with whom you spoke and the details of the conversation.