FORECLOSURE –is a legal process when the bank or mortgage lender takes possession of the property because the borrower fails to make payments on the principal or interest of the loan for a certain period of time. Once the bank takes over on the property, it sells the property at a discounted price to recover money lost on the mortgage loan.
Foreclosure remains on a borrower’s credit report for seven years and it is one of the worst types of credit report entered and can have negative impact on future ability to get credit.
In California, there are two types of foreclosures: judicial and non-judicial. In judicial foreclosure, the lender will have to file a case in court to get an order to foreclose the property. In this type of foreclosure, lenders may seek deficiency judgment against the borrower. For example, if the amount of the loan is $500,000.00 and the property is sold for $300,000.00, the borrower could be liable for the deficiency of $200,000.00.
In non-judicial foreclosure, which is common in California, the lender can foreclose on the property without going to court, provided however, there is a “power of sale”in the mortgage or in the deed of trust. The power of sale essentially is a clause where a borrower gives the lender the power to sell the property in order to pay off the balance of the loan in the event of default on the part of the borrower. The lender designates a Trustee to handle the sale of the property.
Foreclosure starts from the time the lender records a Notice of Default and after 90 days, the Trustee may give Notice of Sale. The Notice of Sale must be given at least 20 days before the date of the sale. During the foreclosure process, the borrower is given the opportunity to cure the default and avoid the loss of the property through reinstatement; by making the delinquent payments and thereby reinstating the terms of the loan. This right continues until five business days prior to the date of the sale, including any postponement.
– Notice of Default (NOD) –the first step in the foreclosure process is the recordation of the notice of default. After the NOD, the Trustee must wait three calendar months before giving a Notice of Trustee Sale on the property.
– Notice of Trustee Sale – the lender must send the borrower by mail the notice at least 20 days before the date of the sale. The notice must also be posted at the property being foreclosed and in a public place in a county where the sale would occur.
– Effect of Bankruptcy –if bankruptcy is filed before the trustee sale, the Trustee is prohibited from proceeding with the sale on the designated date as contained in the Notice of Trustee Sale. In other words, the trustee sale is stopped and foreclosure is not completed.
UNLAWFUL DETAINER –whoever purchases the property at a trustee sale is entitled to immediate possession of the property. Lately, many lenders end up owning the property again since there are no third party buyers. Similar to the rights of third party buyers, lenders are entitled to immediate possession of the property.
An unlawful detainer (UD) action can be filed against the borrower or anyone in the property who refuses to surrender possession after the trustee sale. UD is also known as eviction from the property.
A UD action is initiated by filing a lawsuit in court. But a UD action is not like a regular civil case where it takes months or years to resolve the case. A UD is a summary in nature where the matter can be resolved within 30-45 days. In other words, a borrower who refuses to leave the property can be evicted within a short period of time from the date the lawsuit was filed.
Let us Help you navigate thru this process. Our Bankruptcy attorneys will determine which is best in your interest and recommend which course of action should be next. Call FLG now at 1-855-MABUHAY or 1-855-622-8429