Foreclosures & Short Sales

What Are My Options?

I'm having trouble paying my mortgage. What Should I do?

Refinance

If you meet the requirements, one option is the Home Affordable Refinance Program (HARP), which offers a number of programs in an effort to attract more eligible borrowers. Information on HARP can be found at MakingHomeAffordable.gov. 

Forbearance

In forbearance, the lender spreads the back payments, fees, penalties, etc., over a fixed number of upcoming payments to allow the borrower to catch up. With loan modifications, lenders will often work with the borrower to help them keep the home by reducing or rolling back interest rates, forgiving back payments, or adding them to the loan amount or possibly re-casting the entire loan into a fixed rate that  wraps all  the  fees  into the new loan.

PLEASE NOTE! Forbearance may involve a balloon payment and you may have to make up the TOTAL of all the missed payments at one time. Forbearance may also adversely affect your credit and your ability to refinance or purchase in the future.

Simple rule of thumb - if you can keep paying on time do it!

Sell Your Home

Before the pandemic, many homeowners had equity in their home because prices had increased. In some areas, home prices were up over 30%. No one knows for sure what will happen after the pandemic is over, but you may still have equity in your home; enough to sell it and be able to put some cash in your pocket. 

Deed in Lieu

During the 2008 housing crisis, this became a fairly popular way to walk away from a property without foreclosing. This is a situation where the borrower offers the property to the lender in exchange for the cancellation of the note. The lender will be able to get the property much sooner, which lessens the probability of the property being in disrepair as well as lessens the lender's expenses. Like the workout, a deed in lieu of foreclosure should be thoroughly researched by borrowers so they understand the consequences on their credit report and to make sure there are no outstanding debts once the lender accepts the deed.

Attempt a Short Sale

There may be an opportunity for you to sell your home through a short sale. This MAY give you more time to plan your next move by keeping you in your home longer than if you foreclose or do a deed in lieu. If you need more information on how a short sale works, please call Pam Wasserman at 760.219.3964 or email Mark. 

Foreclosure Timeline

Foreclosure is a legal process where a lender attempts to recover the balance of a loan from a borrower by forcing the sale of the asset used as the collateral for the loan.

For defaulted borrowers who are unable to work out an arrangement with their lender to keep their house or who can't sell their house short, foreclosure may be the inevitable next step.

How long does it take to foreclose on a house?

Depending on the instrument the borrower used to secure his or her loan, as well as on state laws and lender/investor protocol, foreclosure proceedings can occur quickly.

In California, it can take several months for a lender to foreclose. If everything goes according to schedule, the process typically takes approximately 120 days or about 4 months.

Non-Judicial (Most Common in California)

If the instrument is a deed of trust, a non-judicial foreclosure typically is used to execute the foreclosure proceedings.

Non-judicial foreclosures generally take less time to complete than judicial foreclosures because the borrower pre-authorizes the sale of the home in the loan document, which orders foreclosure upon default.

Judicial

If the instrument is a mortgage, a judicial foreclosure or court- ordered action typically is used to execute the foreclosure proceedings.

In a judicial foreclosure, the lender/investor obtains the right to foreclose by filing and winning a lawsuit.

Reinstatement Period vs. Redemption Period: Which is Which?

Reinstatement Period: The reinstatement period is the time specified In the Notice of Default (NOD) in which the borrower can make all their outstanding payments along with any late fees or expenses incurred by the servicer, bring their account current, and no longer be in default. The length of the reinstatement period can vary by state.

Redemption Period: In contrast, the redemption period is typically the time after the foreclosure sale that allows the owner the ability to redeem the property. In many states, redemption requires that the owner pay the sales price, interest, and other costs.

Additional Resources

To get information on the length of foreclosure proceedings, please visit the following websites:

www.foreclosurelaws.com
www.realtytrac.com

Terms & Definitions

Short Sale 

A short sale occurs when a homeowner sells their home and the proceeds from the sale are not sufficient to pay off their mortgage and other liens on the property and the seller does not have the funds to bring to closing. A successful short sale transaction includes ALL lien holders accepting less than what is owed to them.

REO

Real Estate Owned, or REO for short, describes property that the bank comes to own because the borrower defaulted or could not financially afford to remain in the property and efforts to sell the property, either at the short sale stage or at the foreclosure safe, were unsuccessful.

Loan Servicer

The servicer is typically the company to which borrowers make their mortgage payments. The servicer may— or may not— be the company that owns the loan. The servicer is also commonly (and sometimes incorrectly) referred to as the lender—the seller’s mortgage company.

Investor

The investor is the party/entity that currently owns the note and mortgage or deed of trust. The investor has the final approval on any short sale.

Borrower

In distressed property transactions, the borrower is the property owner/seller. The borrower is not the buyer. The term borrower is used by the investor/servicer to reference the party who is their borrower.

Purchaser

The purchaser is the buyer who has entered into a purchase agreement with the existing short-sale seller.

GSEs

The acronym GSE refers to government-sponsored enterprises, which include the Federal National Mortgage Association (Fannie Mae or FNMA) and Federal Home Mortgage Corporation (Freddie Mac or FHLNC). GSEs were created to ensure there would be affordable mortgages available to homebuyers. They establish a secondary market to package mortgages and sell them as mortgage-backed securities. They’re under the jurisdiction of the Federal Housing Finance Agency (FHFA).

Mortgage

A mortgage is a loan to finance the purchase of real estate. The real estate itself is the asset used as the collateral for the mortgage. If the loan is not paid as agreed, the investor has the right to seize the asset (the real estate). It is the mortgage that puts the lien on the property.

Mortgage Note

A mortgage note is the agreement to pay the mortgage. The terms of the repayment are spelled out in the note. It is the note that makes the borrower personally responsible for the payment.

Deed of Trust/Trust Deed

In some states, rather than using a note and a mortgage, real estate is sold using a deed of trust or a trust deed. In these states, the legal title of the property is held by a trustee who holds it as security for the loan until the loan is paid. If the loan is not paid as agreed, the title to the property is already being held by a trustee and the process of the investor obtaining the asset (the property) is much simpler and quicker.

Deed in Lieu of Foreclosure

In some situations, rather than foreclosing on a borrower who is in distress, an investor/lender may allow the borrower to surrender the deed to the property voluntarily in exchange for a release of the note and mortgage.

Loan Modification

A loan modification is a permanent change in one or more of the terms of a borrower's loan, allowing the loan to be reinstated and resulting in a payment the borrower can afford. 

Notice of Default

The NOD is an official notice from the servicer to the borrower that the borrower has defaulted on the mortgage. The NOD formally starts the foreclosure process. The NOD also outlines the reinstatement period.

Notice of Sale

If, after receiving the Notice of Default (NOD), the borrower does not, or is unable to reinstate the loan, a notice of sale is recorded. The notice of sale explains when and where the foreclosure sale shall be held. 

Foreclosure Sale

A foreclosure sale entails sale of a property, commonly through an auction in order to satisfy an unpaid obligation. Depending upon state laws, this is done either under the authority of the court (judicial) or through a trustee sale (non-judicial).

Foreclosure

Foreclosure is a legal process by which a defaulted borrower is deprived of his or her interest in the mortgaged property. Technically speaking, the only "foreclosure" sale is the one that occurs at the sheriff's sale or other legal process that transfers ownership from the borrower to a new buyer or the investor. A property owner is in pre-foreclosure when they default on their mortgage.

TRID

The TTLA RESPA Integrated Disclosure Rule, also known as the “Know Before You Owe" initiative, was created by the Consumer Financial Protection Bureau (CFPB) to help consumers shop for and understand mortgages. It replaced four disclosures forms with two new ones, the Loan Estimate and the Closing Disclosure. It also gives consumers three business days to review their Closing Disclosure and ask questions before closing.