The “F” Word… Foreclosure
Foreclosure Help in Brentwood, Livermore, & Pleasanton
Simply put, a foreclosure is legal proceeding in which a bank takes possession of a home when the homeowner can no longer pay their mortgage.
How Does Foreclosure Work?
There are five basic steps that occur before a foreclosure takes place:
Essentially, the homeowner/borrower is unable to make their mortgage payments on time. This can be for a variety of reasons such as unemployment, disability, divorce, etc. If you find yourself in this situation, it’s important to try and work with the lender to avoid escalating the situation. Ignoring them is the worst possible thing you can do.
After a few months of missed payments, the lender will next file a public notice with the County Recorder’s Office stating that the borrower has defaulted on the loan. Different states may have different additional notice requirements such as posting the default notice directly on the door of the home.
After forwarding a copy of the notice of default to the borrower, a “pre-foreclosure” period starts, which can last between 30 to 120 days depending on the local laws. During that time, the borrower can try to work out an agreement with the lender for a “short sale” or to pay the outstanding amount owed.
A “short sale” is when the borrower agrees to sell the home for less than the remaining balance of the mortgage. Any funds generated from the sale will be applied to the outstanding mortgage balance.
If the borrower is able to pay off the amount owed during this pre-foreclosure period, then they avoid foreclosure and get to keep the home.
If the default is not cured during the pre-foreclosure period, then the lender will set a date for the home to be sold at a foreclosure auction (a/k/a “trustee sale” if it is being sold by a trustee on behalf of the lender). A notice of the sale is recorded with the County Recorder’s Office and notices are sent out to the borrower and posted in newspapers and at the home itself. The actual auction can take place at various places, including at the location of the property in foreclosure.
Several states allow the borrower to pay off the outstanding amount up until the auction actually commences. This is known as the “right of redemption.”
If the auction takes place, the property is sold to the highest bidder for cash.
If no one purchases the home at the auction, the lender will then assume ownership of the property (known as an “REO” or “bank-owned property”). At that point, the lender will hire a real estate agent to list the property on the market or they will sell the property at a liquidation auction.
Please note that in many states (not including California), “judicial foreclosure” is the preferred foreclosure method as opposed to the steps described above. In a judicial foreclosure, the lender must obtain permission from a court to foreclose on a property. If the court gives permission for the foreclosure to proceed, then the local sheriff holds an auction to sell the property to the highest bidder. Or, the bank will sell the property through a real estate agent to try and recoup its losses. The judicial foreclosure process tends to take a much longer time to complete than the non-judicial foreclosure process outlined above.
Government Foreclosure Help.
Certain government organizations offer help to homeowners dealing with the prospect of foreclosure:
- The City of Livermore, CA offers mortgage default counseling / assistance to help homeowners cope with foreclosure.
- The City of Brentwood, CA offers a list of resources available to homeowners facing foreclosure.
- U.S. Department of Housing Urban Development (HUD) also offers resources and options for homeowners seeking to avoid foreclosure.
Other Foreclosure Assistance.
In addition to government assistance, there are various other organizations that offer help regarding foreclosures:
- Homeownership Preservation Foundation is an organization that offers support and counseling to people facing foreclosure.
- Money Management International is a non-profit organization that offers foreclosure counseling to any homeowner worried about the status of their mortgage.
- Housing and Economic Rights Advocates (HERA) is an organization that also offers foreclosure assistance to homeowners.