This year, the underlying cause of everyone’s financial worries is the COVID-19 pandemic, but just over a decade ago, it was the foreclosure crisis. The vast number of houses that got foreclosed in 2008 and 2009 kept the word “foreclosure” in the headlines, but in fact, lenders can foreclose on real estate properties whenever the borrowers have gone several months without making payments. Whether you are a lender or a struggling borrower, a lawyer cannot help you much in a foreclosure situation. Most foreclosures are handled by title companies or private foreclosure companies. Foreclosure can be expensive, so you may wan to shop around for the best cost.
Steps of the Foreclosure Process
Foreclosure can happen when a large loan is secured by a piece of collateral, usually a real estate property. That means that, if the borrower does not repay the loan, the lender can seize the property designated as collateral instead. The lender can start the foreclosure process only after the borrower has gone several months without making payments on the loan. After that, the lender must take the following steps to complete a foreclosure on a piece of real estate property:
- The lender drafts a notice of default, which specifies the past-due amount the borrower owes. The lender files the notice with the county recorder and sends a copy to the borrower by certified mail. If the borrower pays the past-due amount within 90 days of the filing of the notice of default, the loan is no longer in default, and the foreclosure process stops.
- If the 90-day deadline passes without payment, the lender files a notice of sale. This notice sets a “sale date” on which the property will be sold at auction. The lender must publish a notice in the local newspaper every week for three weeks, announcing the auction of the property. They must also send a notice to the borrower at least 20 days before the sale date and file the notice with the county recorder at least 15 days before the sale date. If the borrower pays the past-due amount at least five days before the sale date, the auction is canceled, and the borrower keeps the property.
- At auction, the property can be sold for any amount, as long as it is equal to or greater than the remaining balance on the loan. Usually, the lender is the highest bidder and buys the property from the borrower.
- After the auction, the new owner (usually the lender) serves the borrower with a quit notice, saying that the borrower must move out of the property. If the borrower does not move out by the end of the three days, the new owner can start the legal process of eviction.
Do Not Waste Money on Lawyers for Foreclosure Actions
As mentioned above, most foreclosure are completed by hiring a title company or a private foreclosure service who can prepare all the documents you need in a foreclosure process.