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 approximately four months. You can view the Foreclosure TimelineHere
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.
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.
If My Lender Forecloses, Can They Come After Me For The Loss?
This is a complex question and there is not a simple answer. 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 only applies to your first mortgage though. If you have a second mortgage and have refinanced the property, your lender may be able to come after you after the foreclosure.
In many cases with a short sale, we are able to negotiate with a lender that they will not pursue the homeowner after the short sale closes. This is one of the main benifits of completing a short sale.
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 nearly always 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.
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.
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.
FORBEARANCE AGREEMENT – 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.
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 or you will be ruined.
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.
While the Short Sale itself does not stop the foreclosure, lenders normally work with a homeowner and delay the foreclosure if necessary, if they receive a legitimate Short Sale proposal. The key here is to submit a complete, well organized, Short Sale proposal.
The lender does not want your property, and would rather resolve the situation before the foreclosure is complete.
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.
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.