How Soon Before the Bank Takes My House?
I'm often asked this question by homeowners who are facing difficulty making mortgage payments. Of course, there is no 'one' answer that fits all situations however these are the major milestones if you are having trouble making your payments on your Inland Empire home. My area of expertise is as a real estate professional, not a legal or tax expert, and my comments should not be construed as legal or tax advise. I encourage all homeowners facing a mortgage payment problem to seek legal and tax advise from qualified individuals.
1. Payment Default Date - The first day after a mortgage payment is due but not paid, you are technically in payment default. Usually your payment is due on the first of each month and the payment includes the interest accrued on the mortgage during the past month as well as a principal payment and possibly an escrow amount to pay for property taxes and insurance. Many mortgages provide for a 15-day grace period so that you may still make payment during this time window and not be reported as late. It is not uncommon for the bank to start calling you during this time frame to start asking about the overdue payment.
2. Payment Default Period - Once you are officially 'late'. the bank is likely to start a series of letters, phone calls and sometimes even property visits in an attempt to establish communication with you to determine what steps you are taking to 'cure' or fix the payment problem. It is likely that the bank will be open to a loan modification or a loan forebearance to get you back on track with the payments. The requests are likely to be more and more 'forceful' as the delinquency gets further and further behind. But know your rights and what they are allowed and not allowed to do when contacting you in an attempt to collect the debt.
3. Notice of Default - At some point, the bank will decide that they need to protect their legal rights and will file a Notice of Default (NOD) at the County Recorder's Office. Technically the bank could file this notice as soon as one day after delinquency however most banks don't file an NOD until the payments are 90 (and often, many more) days past due. A Notice of Default is a matter of public record and at this point you will really need to make some decisions about what to do if you haven't already. There are generally five things to consider when facing a mortgage payment problem and you haven't consulted with legal and tax professionals, the NOD should be your wake-up call and reason to consult with these professionals. If you receive an NOD while already working on a loan modification or a short-sale, you should not necessarily be alarmed by the filing as the bank is preserving their rights. They are probably seriously considering the loan modification or short-sale. But the clock doesn't 'stop' just because these avenues are being evaluated.
4. Notice of Trustee Sale - If you haven't been able to 'cure' the default by either making full payments on the overdue amounts or through other means such as a loan modification or short-sale, the next step the bank will take is to file a Notice of Trustee Sale (NTS). In California this cannot be filed until more than three months have passed since the date the NOD was filed. Like the NOD, the Notice of Trustee Sale is a public notice but before the bank can foreclose they need to publish the notice in a newspaper as well. If you are working on a short-sale, you should immediately let your real estate broker know about the NTS filing so that communications can be opened in an attempt to postpone the sale to allow the short-sale to be completed.
5. Trustee Sale Date - The Notice of Trustee Sale will state the date that the bank will 'sell' the property at public auction if you haven't cured the default. If you are working on a loan modification or a short-sale it is not uncommon for the trustee sale to be postponed to a future date. The majority are postponed for 30 days but sometimes the bank will only postpone for 1 day, 3 days, 7 days, 10 day or 14 days. Many though will end up postponing for 45 days or even 60 days. Once the new date is scheduled, the bank has the option of postponing again and again. It is not unheard of for the bank to postpone a trustee sale for as long as a year.
6. Trustee Sale Held - If the default isn't cured, the bank may end up holding the auction. The published bid is the amount that the bank states is owed on the mortgage including outstanding interest and legal fees. Some banks will discount the opening bid on the amount owed to entice a 3rd party to pay cash on-the-spot at the public auction. In these cases, the 3rd party becomes the new owner of the property. If there are no 3rd parties interested in the property, the foreclosing bank becomes the new owner.
How Soon Before the Bank Takes My House? In Riverside County and the Inland Empire area of Southern California, it is a minimum of about 4 months from the time the first mortgage payment is missed (if the lender immediately files the NOD). It is common for at least seven months from the first missed payment (if the lender files the NOD 90+ days from the first missed payment). Many homeowners will remain in their homes for more than a year before the bank takes the house (with delays of NOD filings and postponements of the trustee sale).
As a real estate professional, I can help homeowners who are in financial difficulty and want to pursue a short-sale option. As a Certified Distressed Property Expert (CDPE), I am in touch with other professionals throughout the country to stay on top of the most current practices and policies of the major banks.
If you own a home in Riverside County or nearby Inland Empire areas of southern California and are in a financially distressed situation, please contact me at 951-898-8912 to discuss your situation. No obligation, no cost, just an honest assessment of how I might be able to help!