The Foreclosure Process

Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when the borrower, or owner, defaults on the loan payments and the lender files a public Notice of Default. The foreclosure process can end in one of four ways:

1. The borrower/owner reinstates the loan by paying off the delinquent amount during a grace period determined by state law. This grace period also is known as pre-foreclosure.
2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These are known as bank-owned or REO properties (real estate owned by the lender).

The Foreclosure Timeline

A.     Notice of Default is recorded

• Contact is still the owner of the property.

• Still time to list the property and close escrow in many cases.

B.      90 Days After Notice Of Default — Sale date may be posted

• Sale date is set; time is running out.

• If escrow cannot close before the sale date then the lender or lender's trustee should be contacted and a  postponement of the sale should be requested.

• Usually a postponement will be granted although a copy of the contract in escrow needs to be provided to the trustee.

• The loan may be reinstated up to five days before the sale date.

C.     21 Days after sale posting the sale may be held

• If the property is not sold at the auction, then the bank or beneficiary foreclosing now owns the property.