There will be a structured foreclosure process, the time that a foreclosure is registered, in every state. In a judicial state, the time starts when the lawsuit, is filed. In a non judicial state, the timing starts when the Notice of Default or Notice of Trustee Sales is filed. This is the pre foreclosure stage. You will make the most money in this stage, which we will talk about this later in this text.
Step 1
Ordering a Trustee Sale Guarantee (TSG):
This is another name for a Title Report.
Step 2
Sending notice to every person or entity that has a beneficial interest in the property:
This would include everyone who has a lien on the property, including mechanics liens, a second mortgage, or the IRS.
Step 3
Substitution of trustee:
In a non judicial state, there is always a Substitution of Trustee. This stems from the three tiered approach, which consists of:
1. The Trustor, the one who borrowed the money
2. The Trustee who is a beneficiary
3. The Trustee, the one oversees the process
You may see a Substitution of Trustee posted at the County Recorders Office. This trustee only handles foreclosures and will follow the process to the end.
Step 4
Post legal notices:
In nearly every state, the laws require the county to post legal notices. These notices may appear in regular newspapers or other publications. Some of these other publications include a legal newspaper, sometimes called a county recorder, in order to follow the requirements of the law. In addition, most states require that the foreclosure notice be posted at the property.
Step 5
Maintain continual contact:
Continual contact is maintained with the title company to make sure no other liens are attached to the property. One thing that can stop the whole process is bankruptcy. Bankruptcy is a federal filing lawsuit that supersedes state statute.
Step 6
Prepare a credit bid:
The beneficiary or mortgagee prepares a credit bid, which is the starting bid/amount at the auction, depending on the state and the state statutes.
In most states, the credit bid will include the principle balance plus all of the arrearages, including:
1. Bank interest
2. Penalties
3. Legal fees
Other arrearages can include second mortgages and homeowners association fees. In a judicial state, the lawyer for the mortgage company/bank will prepare the credit bid. In a non judicial, the Trustee will prepare the bid.
Step 7
Make payment and reinstate the loan:
The owner can perform this task.
Step 8
Suspend or cancel the sale at any time:
The beneficiary or mortgagee can do this, if suitable arrangements have been worked out with the owner beforehand
Notice of Trustee Sale
Take a look at the Notice of Trustee Sale on the facing page. This is a real life sample, an official document. Note the time and place of the auction. Notice the term, purported. Property descriptions can vary, so you must be sure to have the correct property and the correct legal property description. This legal description can be obtained from the County Tax Assessors office and make sure it matches the actual address, as street numbers may have changed over the years.
DueonSale Clause
A Due on Sale clause in a mortgage is a demand that the borrower pay off the loan in full, if the house is ever sold or transferred. The lender cannot prevent the sale, but can demand the payment in full of the loan balance, which often has the same practical effect.
In the absence of a Due on Sale clause, the loan is assumable without the lenders consent. Older FHA and VA loans are assumable without the consent of the lender. How does this impact the sale of a foreclosed property? If you get a warranty deed from the owner at the time of the
foreclosure sale or in the pre foreclosure timeframe, as long as you keep making the payments, the bank will most likely be not be aware of the transfer. If you buy the property and then sell it immediately or even later on, you will be fulfilling that requirement of paying off the loan at that time.
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