THE BASIC FORECLOSURE PROCESS

A foreclosure is a legal process in which, against the wishes of the owner, real property is sold to satisfy a public or private debt for which the real property has been pledged as security. The following are terms that are important to know.

1.       Default: The homeowner must miss a payment, default on payment is the only way a property can enter the foreclosure process. This can also be a missed payment to local taxing authority, a condo association or homeowners association.

2.       Legal Notice (Notice of Default, NOD): The lender or foreclosing party must notify the owner they are entering into the foreclosure process. This can be done through either personal service of a document or if the owner cannot be located through publication in a legal journal.

3.       Bank Sale or Auction Date, (Foreclosure Sale, NOTS): The homeowner is informed that he has a bank sale or auction date and the foreclosing mortgage company will gain control of the property. The actual sale of real property occurs at the conclusion of a foreclosure proceeding. The sale may be to a third party as a result of a high bid, or to the foreclosing creditor (the lender) if there are no bids higher than the amount of the defaulted debt plus foreclosure costs.

4.       Real Estate Owned (REO):  Real property that has been foreclosed by a lender and is now owned by a lender.

Most Arizona property foreclosures are by Trustee’s Sale, which is an out-of-court legal process defined by state laws. The process takes a minimum of 91 days from the first legal action, which is the recording of a Notice of Trustee’s Sale, to the date of the actual sale by opening public action. Until the property is sold at public auction, the property owner has the ability to sell or refinance the property, because they are still the owner.

The Foreclosure Process is as Followed:

The Notice of Trustee’s Sale: The foreclosure process starts by the recording of a Notice of Trustee’s Sale with the Office of the County Recorder. This Notice describes the property being sold, the date, time and place of the auction, the original borrowers, the lender and the trustee. It also states the original principal balance of the loan. The Notice of Trustee’s Sale is published in the newspaper, posted at the county courthouse and on the property, and mailed to everyone with a recorded lien or interest in the property.

Reinstatement Quotes: During the foreclosure process, property owners and junior lien holders can request a reinstatement quote of the amount needed to bring the loan payment current and cure any default. This is not public information. Upon written request, Trustees must respond within 5 business days.

Payoff Quotes: Property owners and junior lien holders can request a payoff quote. Upon written request, Trustees must respond within 14 business days. The original loan balance is stated on the Notice of Trustee’s Sale.

Other Available Information from Trustees: Upon request and payment of a small fee, the Trustees will provide the unpaid principal balance remaining, the name and address of the owner, and a list of liens or encumbrances recorded against the property.

Credit Bid Quote: Starting at 9:00 a.m. on the last business day prior to the auction date, the Trustee must make available the opening bid for the sale.

The Date of the Sale: The Trustee can continue the sale to a new date within the next 90 days and can postpone a sale an unlimited number of times. If the sale is continued, the Trustee will provide the new date and time upon request.

The Auction: The property will be sold at public auction at the time, place, and date stated in the Notice of Trustee’s Sale. The starting point will be the bid by the lender that is foreclosing, who can bid any amount up to the total amount owed, including the fees and costs for the foreclosure process.

Bidder’s Deposit: Bidder’s who wish to participate at the auction must bring a bidder’s deposit of $10,000 in a form acceptable to the Trustee. Most often the Trustee requires a cashier’s check made payable to the Trustee. Check with the Trustee’s office for their requirements before the day of the sale. The highest bidder must pay the balance of their bid by 5:00 p.m. on the following business day to the Trustee. Some lenders because of the many properties for sale that are foreclosure properties are allowing the buyer’s to complete a loan process in 30 days. This varies from lender to lender.

Trustee’s Deed Upon Sale: Once sold, the Trustee issues a Trustee’s Deed Upon Sale to the highest bidder within 7 business days. This Trustee’s Deed Upon Sale conveys title without any covenant or warranty. Bidders at a Trustee’s Sale must do their own title and property research prior to the auction date. The former property owner has no right of redemption. The foreclosure process eliminates any liens that are subordinate or junior to the deed of trust that was foreclosed.

If the IRS has recorded a federal tax lien, then they have the option of redeeming the property for the amount of the bid within 120 days from the date of the sale.

Excess Proceeds: If the property sells for more than the opening bid by the lender, the extra money from the sale is typically deposited with the County Treasure, along with a civil complaint and a judge eventually decides how to divide up the funds.

REASONS TO AVOID FORECLOSURE:

Do not just give up without a fight to avoid foreclosure. One must do all that is possible to sale a home and here are the reasons why:

1)      A person who loses a home to foreclosure will have to always answer a question on every mortgage application, “Have You Ever Had a Foreclosure on a Home Mortgage”. If you have to answer “yes” to this question it can and will have an adverse affect on your future mortgage rate. Also on many job applications the same question will be asked, especially high security clearance type jobs. Many employers of all levels will run credit checks.

2)      Credit scores will be lowered by 300+ points and a foreclosure is the most devastating credit issue you can have in relation to future credit availability.

3)      A foreclosure is the one credit report item that is almost impossible to have “repaired”.

4)      Many employers run credit checks on prospective employees and foreclosure is one of the top items that will put a potential new hire in jeopardy.

5)      Many current employers run credit checks and a foreclosure can put a current position in jeopardy, especially security level type positions.

6)      Security clearances and government positions including but not limited to military and law enforcement can be jeopardized by a foreclosure.

7)      A short sale will stay on your credit report approximately 12 to 18 months. A foreclosure will stay on your credit report 10 years or more affecting future employment and loans of any kind.  

Is it possible to avoid a foreclosure? If you are not sure and/or you are ready to do all that is possible to avoid a foreclosure then call “The Vogel Group” and let’s see if we can help you.

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