Foreclosure Process
By Charles TurnerEach case is different and requires individual professional advice but here is a good primer from our Principle Broker:
The first stage in the foreclosure process is Pre-foreclosure. This is when the bank files the foreclosure lawsuit. In some states, it is called the Notice of Default and in other states, it’s called a Lis Pendis. The bank can file the foreclosure lawsuit when the borrower becomes 3 payments behind.
During this period, the borrower has options to solve their situation:
- They can pay off the lender in full.
- They can bring the loan current for all of the past due payments and attorneys fees due.
- They can do a workout with the lender to negotiate a repayment plan, loan modification of forbearance.
- They can sell the house and move
- They can sell the house to an investor and lease it back
- They can refinance the home with an equity lender.
- If they owe more than the home will sell for, they can attempt to do a short sale with the lender.
The 2nd Stage in the foreclosure process is the Auction or Trustee Sale
- This is where the bank brings the property to public auction.
- The sale date is set by a hearing 3-4 weeks before the actual auction occurs.
- The homeowner has the right to attend the hearing and request an extension to get the home sold. Most of the homeowners we work with that attend this hearing can buy themselves an additional 3 days for a total of 60 days.
- 95% of the homes that go to auction go back to the bank as an REO.
The 3rd stage in the foreclosure process is the REO stage
- REO stands for Real Estate Owned. This usually costs the bank anywhere from 35,000 -50,000 to take a home back in foreclosure. This is the 3rd and last stage of the foreclosure process in a judicial state. The property becomes an REO if the property does not sell to a third party bidder at the auction
Oregon Foreclosure Law
Timeline: 120-180 Days
Redemption: Yes, only with Judicial Foreclosure
Deficiency Judgments: Yes, only with Judicial Foreclosure
Judicial Foreclosure: Yes
Non-Judicial Foreclosure: Yes
Security Instruments: Deed of Trust, Mortgage
Oregon foreclosure law allows the lender to pursue either a Non-Judicial or Judicial Foreclosure process. If the original loan documents contain a “power of sale” clause, then the Judicial Foreclosure procedures are used. The lender must sue the borrower in court to obtain a declaration of foreclosure. The borrower has a one-hundred and eighty (180) right of redemption after the property is sold at auction. A notice of intent to redeem must be filed by the borrower with the county sheriff between two (2) and thirty (30) days after the sale date. The redemption amount due by the borrower is the purchase price, interest, foreclosure costs, and the buyer’s costs of operating and maintaining the property during the time between the sale and redemption.
The Non-Judicial Foreclosure process requires a “power of sale” clause to be present in the original loan documents. This clause gives the lender authorization to sell the property if the borrower goes into default. If the clause specifies the time, place, and terms of the sale, then those procedures must be adhered to.
A notice of default is recorded in the recorder’s office in the county in which the property is located. The borrower is served with a copy of the notice of default no less than one-hundred and twenty (120) days before the scheduled sale date. Also, the notice of default must be published in a newspaper of general circulation for at least four (4) weeks. The final publication can not be less than twenty (20) days before the sale date.
The borrower may cure the default any time before the scheduled sale date. The sale takes place at a public auction between the hours of 9:00 AM and 4:00 PM at the place specified in the notice of default that has been recorded. The high bidder at the auction must present cash or cash equivalents to the trustee at the time of the sale.
The sale may be postponed if written notice is made to all recipients of the original notice of default. This must be done at least twenty (20) days before the scheduled sale date; and the sale may be postponed for as much as one-hundred and eighty (180) days.
With Non-Judicial Foreclosure, the borrower is not entitled to any redemption period after the sale, and the lender may not sue the borrower for a deficiency judgment.
thx for your sharing , it’s very useful and interesting.
Thank you for posting this Charles. I had a serious error happen with my mortgage company, CitiMortgage, where they thought I was behind, when I was in fact up to date and had made all my payments on time. I received a call where I was told I was being foreclosed on unless I paid four months of payments immediately plus attorney fees. I don’t know what would’ve happened if they had continued to give me misinformation – could it have really been sold behind my back even though I was in fact up to date with all my receipts for payments?
It took a while to prove I was in fact current, too, and it’s taken months of attempting to straighten it out on my credit report. Apparently, it showed a total of 150 days past due!
it’s very useful and interesting for me , i’m a newcomer in real estate field. hope that we can connect each other to have a really clear and general image about real estate market.
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This is very informative and useful. Kudos! Keep posting! Thanks.
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Kendra: “could it have really been sold behind my back even though I was in fact up to date with all my receipts for payments?”
Turner: “The borrower is served with a copy of the notice of default no less than one-hundred and twenty (120) days before the scheduled sale date.”
If loan was current, as was the case, it seems to me that this would get straigtened out long before the foreclosure took place, and that is what happened.
Kendra: “and it’s taken months of attempting to straighten it out on my credit report. Apparently, it showed a total of 150 days past due!”
It should not take “months.” If you put forth written notices, there are strict time standards–30 days is the first one, if I remember right. It sounds like they just don’t want to make the correction. If you cannot get the job done right away, I’d suggest a good attorney, who could probably turn up the heat.
Charles, what’s the effect of ORS 88.070 on the availability of deficiency judgments in judicial foreclosures?
Jim,
I have no idea. Foreclosures and judgments are not our specialty and you really need professional advice from someone that knows the ins and outs. You can read ORS 88.070 here: http://www.leg.state.or.us/ors/088.html
Charles
JP, thank you for your comments, but please realize I’m coming from a position of ignorance here and that is why I asked. I’ve heard all the horror stories, of course: once it passes a certain point, the company expects full payment and nothing less, even if it was their fault. My credit report is apparently straightened out as of the December issuance, so fortunately I don’t have to contact an attorney. If I did have to contact an attorney every time a turd of a company like CitiMortgage messed up paperwork on my account, I’d have very little money left for my mortgage, I can tell you that much.
Blame subprime lenders. But if you’re looking for aggressive efforts to tame subprime lenders, the New York Times ran a piece on Tuesday that highlighted municipal efforts to “make lenders responsible” for abusive lending practices. In particular, the Times reported on a law suit filed by Baltimore mayor Sheila Dixon (who is featured on DMI’s Mayor TV) and the City Council against Wells Fargo for discriminating against black borrowers in Baltimore. Compare this to New York City where just a few years Mayor Bloomberg, with the help of the State Supreme Court, was successful in shooting down anti-predatory lending measures passed by the NYC City Council.