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Last Updated: May 14th, 2012 - 22:24:01 |
Ask the Expert – In a home loan foreclosure, how often is the owner contacted?
Ask the Expert – Questions are answered weekly by investment real estate expert Donald W. Gomez Jr. of Tropical Paradise Realty in Miami, Florida (786-202-0203) Better known as Donny. He specializes in Foreclosed investment properties. He has been writing for companies like DWGMEDIA CREATIONS for over 25 years.
DONNY,
Foreclosure procedures on home loans vary from state to state. Of the two basic types, 29 states use judicial procedures and 27 states use non-judicial procedures. 5 of those states use both types. Foreclosures by judicial procedure use mortgage loans as the security instrument for home loans and these foreclosures necessitate court action. Where as non-judicial procedures use deeds of trust as the security instrument.
Foreclosures by judicial procedures involve 5 steps of contact with the homeowner.
Mortgagors, also known as owners, who miss their home mortgage payments, are in default. The lender sends a letter asking for prompt payment of the home loan and late fee, followed by a more urgent letter after a second missed payment. Normally, then the lender’s collections department steps in. They send a third letter.
They allow fifteen to thirty days for home loan payments to be caught up. If the payments are not, the lender will initiate foreclosure. Usually, this process takes three months of default on conventional home loans, but up to six months for VA or FHA home financing.
Next, the real estate lawyer again contacts the homeowner to try to resolve the default, otherwise the court action begins. Notice is given on public records that a foreclosure case against the owner has begum. The purpose of this notice is to get the court to initiate foreclosure. This action could take up to 30 days. Thus far, 5 contacts have been made.
Once the real estate lawyer gets a positive okay from the court, a Notice of Default is filed with the county clerk. This notice is sent contacting the owner a 6th time, now by certified mail. This notice grants the owner a reinstatement period, about 30 more days to pay without further penalty. This makes 6 contacts made, thus allowing refinancing.
The real estate lawyer next prepares a Notice of Sale. This must be announced according to each state’s guidelines; that is by publicizing the auction as frequently as dictated in the mortgage or according to a specific timeline. This advertising can be considered a 7th contact point when redemption of ownership is possible by a loan refinanced and reinstated being supplied by the homeowner.
Finally, at the public auction the real estate lawyer sells the property to the highest bidder; a doable 7th contact point. home loans are paid off debt free from the sale. If they find no high bidder, the property still belongs to the mortgage brokerage.
Some localities have an 8th contact point, a ratification period when the homeowner is privileged to repurchase the property sold at auction.
The same steps and 7 or 8 contact points allowing refinance time are typically required of foreclosures done in non-judicial procedures. The only difference is that no mortgage loan is contested in court. Instead, deeds of trust, which contain the power of sale clause, enable a trustee to initiate the foreclosure. If a trustee is unavailable, the lender can assign a substitute trustee to begin foreclosure. They usually must follow these same 7 or 8 contact steps. Therefore a homeowner has had months of ample warnings.
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