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Foreclosure Timeline Followed by Title Companies

By
Title Insurance with Fidelity National Title-The Sloan Team

A lot of questions have been asked recently about the actual time line for a foreclosure. I think this is probably because properties have been languishing in "foreclosure hell" for months and months. So to set the record straight, here is the official time line that title companies issuing the TSG (trustee sale guarantee) must follow:

 

  1. THE NOTICE OF DEFAULT must be mailed to the property, published in the paper and recorded. Contrary to popular belief that the process starts after 90 days of delinquency, it may actually be started as soon as one day after payment is due. For many years we have observed institutional lenders adhere loosely to the 90 days, some starting the foreclosure process in 30 days and others waiting up to 6 months. Private lenders, such as seller carry back and private seconds are likely to start the process much sooner. However, we have seen some of these traditional trends go by the wayside. Properties today can sit with just a Notice of Default for months and months. The Notice of Default must be recorded and then a 90 day period of waiting is required before the Notice of Trustee Sale can be recorded.

 

  1. THE NOTICE OF TRUSTEE SALE must be published, recorded and posted to the property 21 days prior to the sale date. The trustee, on behalf of the beneficiary may postpone the foreclosure date up to 3 times, for more or less indefinite periods of time, without having to refile or restart the foreclosure process. The homeowner is allowed ONE postponement of 24 hours only. Again, in the past we saw occasional postponements, usually because there was an offer on a property and the lender would much prefer to be paid than to receive a property in foreclosure. However, in today's economic climate, due to the sheer number of foreclosures, we are seeing many postponements and suspended foreclosure proceedings.

 

  1. THE DAY OF THE FORECLOSURE SALE will require all serious bidders to have a cashier's check in the amount of the opening bid, just to register. It is suggested that the potential buyer also have several more cashier's checks, in smaller increments, in case the bidding goes over the initial bid. The winning bidder will receive a "Trustee's Deed" from the foreclosing trustee that may then be recorded to give constructive notice of the change in ownership. Of course, what we are seeing right now are no bidders for the vast majority of properties and the are then returned to the bank and the bank records the Trustee's Deed placing them in ownership. This becomes a "real estate owned" asset (non-performing), which is where the term "R.E.O." originates.

 

  1. BANKRUPTCY will temporarily halt a foreclosure. This used to be a means by which homeowners would try to prolong the process and perhaps buy some time to alter their situation. Due to changes in bankruptcy laws, the wait is now relatively short and is no longer seen as a viable escape.

 

  1. FORECLOSURES follow chronology meaning that everything after the recording date of the foreclosing deed of trust is wiped out at the foreclosure for that particular property. In other words, a deed of trust "junior" to the foreclosing deed of trust loses its position and ability to be paid from that sale. It has no further affect on that property. Certain deeds of trust containing personal recourse or creditors who lose on a particular property may pursue their liens with court action should they choose.

 

  1. IRS LIENS have 120 days to decide if they wish to redeem a property. Should that occur, and it is rare, they must pay the buyer of the property what they paid for the property with interest. But they will not pay for any improvements that the new owner may have incurred. So beware if you are buying a foreclosed property and check to see if there was an IRS lien.

 

HOPEFULLY, this brief overview has been helpful. Of course, this is a simplification of the foreclosure process and should be seen as informational only. There are many exceptions, and circumstances which can alter the course of a foreclosure. Always check with a real estate attorney and your CPA before taking any action or making decisions. This blog entry is in no way advisory and is meant only to shed light on the basic time frames and terminology.

 

See you next time...

Comments (1)

Fathom Realty Group Inc.
Fathom Realty Group Inc - Orange, CA
Get Paid what your WORTH!

Hi Stacey,

 

Happy New Year.  Great post.  Can you do more.  It's always great to learn new things in this business.

Regards,

 

Mike

Dec 27, 2010 05:15 PM