Stop Foreclosure Now

Let’s define Foreclosure

In the simplest terms, a foreclosure will occur when a homeowner is unable to make the principal and/or interest payments on the loan. This will ultimately result in the property being seized and sold.

The foreclosure allows the lender to recover the loan amount owed either selling or re-taking ownership of the property that was securing the loan. This is the process we have come to know and love as the repossession process. It all starts when a homeowner defaults on loan payments. The lender files a public default notice know as a Notice of Default or Lis Pendens.

In most cases the lender will take ownership of the property. The intent is usually to re-sell the property and recover the loan amount and associated cost. The lender can do a short sale foreclosure which is an agreement that is made with the homeowner in a pre-foreclosure process. The lender can also buy back the property at the public auction. When a lender repossesses a property the term used is bank-owned or REO (Real Estate Owned).

Stages of Foreclosure

Pre-Foreclosure

A pre-foreclosure is when a homeowner sells the property before a default and official foreclosure is started. The homeowner could walk away with something instead of losing everything and destroying their credit.

Notice of Default

A Notice of Default (NOD) is when a lender puts the homeowner on official notice that he/she is facing foreclosure. This will usually occur after three to six mortgage payments are missed. The Notice of Default is recorded at the County Recorder’s Office.

Notice of Sale

If the loan is not brought current within three months, an official sale date is determined. A notice called a Notice of Sale will be posted on the property. Neighbor’s love seeing official notices being posted on your house and will patiently wait for you to leave on an errand so they can read the notice. This Notice of Sale will also be recorded at the County Recorder’s Office. To add real insult to injury, this Notice of Sale will also be published in the local newspapers for a three-week period.

Foreclosure Trustee Sale

The Notice of Sale would have stipulated the time and location of the actual sale. The sale will usually be on the steps of the county courthouse. The property is auctioned to the highest bidder. The successful bidder must pay in cash. Now few people carry around hundreds of thousands of dollars in a briefcase. Usually a deposit is placed and the remainder of the money must be paid within 24 hours. Upon complete payment, the winner will receive a trustee’s deed to the property.

Foreclosure Auction

At auction, the foreclosing lender sets an opening bid on the property.

The opening bid is usually equal to the amount owed on the property; interest accrued on the loan, additional fees and any attorney fees incurred. To throw cold water on any potential real estate investors that hope to be the only bidder, the opening bid is considered as an opening only. If there are no bids higher than the opening bid, the property is normally purchased by the lender.

It makes little sense that after calculating all the cost that the lender would not accept THAT amount for the property. I have a thought about this and I believe the lender doesn’t want a bidder to get a really great deal on a property. The lender took all the risk, went to all the trouble getting the home back and selling it and some investor walks in and gets a deal by shaving $100,000.00 of the purchase price. Better to wait for the market to rebound and take the profit.

If the opening bid is not met the sale property is considered a Real Estate Owned property or REO. Consider that if the opening bid is the total amount owed or incurred and the lender sells for less the bank absorbs the losses.

The good news for investors is that with REO properties all liens are wiped out. The only amounts still owed would be any existing property taxes. A clear title is a nice reward.

Tags: Foreclosure, foreclosure definition, stop foreclosure

You and so many Americans are asking these questions:

Why is there a foreclosure problem?
Why are homes being taken over by the banks?
Why are people suddenly not able to afford their mortgage payments?

The problem really goes back a few years when banks had an abundance of money to lend and decided to lend that money at low teaser rates to people who were of questionable financial risk.

These teaser rates were the now famous ARMs (Adjustable Rate Mortgages). This ARM offered a very low interest rate for a few years and then increased to a rate usually above the prevailing rate. The bank lost a little on the front side but made it up as well as a lot more on the backside.

Many homebuyers took the risk because they had seen the home prices steadily increasing and wanted to get their piece of the pie. These homeowners had one of two plans. The first was to ride the teaser rate till it was due to expire and then refinance their loan. This would protect them from the higher rates as well as put money in their pocket from the increased equity in the house. Many homeowners refinanced and cleared $25,000 to $100,000 to use as they wish.

The second plan for many homebuyers was to simply buy the home at any interest rate, fix it up or not, and then sell it at a profit. There was a time when you could buy and immediately resell and clear $60,000 with NO fix up cost. You can see that the ARM meant nothing to these two types of homebuyers.

A gentleman in Orange County California refinanced three times in one year and cleared decent cash each time. The house of cards finally fell apart when the market tumbled and he was faced with the expiration of the teaser interest rate. His house payment increased from $3500 per month to $6000 per month. He lost his house.

Who has the highest foreclosure filing totals?

Nevada can boast the highest number of foreclosure filing for its population. The number equates to 1 foreclosure for every 75 homes. That’s 3.5 times the national average.

California has the highest number of total filings. In context, California has 10 percent of the nation’s population but has 18 percent of the nations foreclosures.

The nation’s top 10 highest foreclosure rate states are: Nevada, California, Florida, Texas, Colorado, Georgia, Michigan, Arizona, Ohio, and New Jersey.

The honor for the worst foreclosure rate within the country’s 100 largest metropolitan areas goes to Detroit. This “winner” had one foreclosure filing for every 51 households. That gives Detroit a foreclosure rate exceeding five times the national average.

What happens to those homes after foreclosure?

When these homes do go into foreclosure many are sold at action. In the most depressed housing markets as few as 1 in 100 homes up for auction are actually sold. That’s 99 out of the 100 homes up for auction at discounted prices never receive a bid equal to the starting bid set by the lender. Contrary to most myths, you can’t buy a $300,000 home for $100. All lenders reserve the right to bid and that means they will bid the opening bid if no one else does.

In many depressed markets the lenders are NOT offering sweet deals to move houses. Its not unusual for a neighborhood to have 3 of 4 homes foreclosed on and those homes sit empty for 2 or 3 years. They reject offer after offer waiting for the market to move back up.

True, some lenders move houses quickly at discounted prices but these are the few, not the many.

Another reason that many homes go up for auction and receive no bids is the fact that before potential buyers are allowed to bid, they must present a cashier’s check for the full amount they plan to bid. Few people outside of investors can pony up the full purchase price for a home. But, if you have $300,000 sitting in a CD account and feel like buying a house this week, you’ll probably get it.

Tags: Foreclosure, foreclosure facts, stop foreclosure