Foreclosure Process Overview
Foreclosures are a great investment opportunity. However if you don't know what you're doing you will compete against seasoned pros and probably lose. Here is a quick over view of the foreclosure process.
Borrower falls behind in payments
When a borrower falls behind in their mortgage payments, the lender (beneficiary) will attempt to contact the borrower by phone and/or by mail prior to starting the foreclosure process.
Notice of Default
If the lender is unsuccessful in collecting the past due money during these initial contact attempts, a "Notice of Default" (NOD) will be filed at the County Recorder's office. The "Notice of Default" starts the official foreclosure process.
A property is not "in foreclosure" until the "Notice of Default" has been filed with the local County Recorder.
Once the "Notice of Default" is filed, the borrower has three calendar months to bring his/her mortgage payments current. No further legal action can be taken until the three month period has passed.
Trustee's Sale
Once the three-month period has ended and the payments are not brought current, a "Trustee's Sale" is scheduled by the county.
A second notice or filing called the "Notice of Trustee's Sale" is recorded in the Public Records. Once this document is recorded The "Trustee's Sale" cannot take place until at least 21 days have passed since the "Notice of Sale" is filed.
Day of the Sale
The property will be sold to the highest all-cash bidder. The foreclosing lender, most likely will make the first bid. The bid is usually equal to the unpaid loan balance and the associated interest. If the lender submits the highest bid they will acquire the property. It is now termed REO.
Borrower falls behind in payments
When a borrower falls behind in their mortgage payments, the lender (beneficiary) will attempt to contact the borrower by phone and/or by mail prior to starting the foreclosure process.
Notice of Default
If the lender is unsuccessful in collecting the past due money during these initial contact attempts, a "Notice of Default" (NOD) will be filed at the County Recorder's office. The "Notice of Default" starts the official foreclosure process.
A property is not "in foreclosure" until the "Notice of Default" has been filed with the local County Recorder.
Once the "Notice of Default" is filed, the borrower has three calendar months to bring his/her mortgage payments current. No further legal action can be taken until the three month period has passed.
Trustee's Sale
Once the three-month period has ended and the payments are not brought current, a "Trustee's Sale" is scheduled by the county.
A second notice or filing called the "Notice of Trustee's Sale" is recorded in the Public Records. Once this document is recorded The "Trustee's Sale" cannot take place until at least 21 days have passed since the "Notice of Sale" is filed.
Day of the Sale
The property will be sold to the highest all-cash bidder. The foreclosing lender, most likely will make the first bid. The bid is usually equal to the unpaid loan balance and the associated interest. If the lender submits the highest bid they will acquire the property. It is now termed REO.
