Mortgage Foreclosure Process - Explanation Of A Trustee’s Sale
In our last article, we explained some plausible steps that the lender can take once a mortgage foreclosure process has started. Today, we’ll explain a trustee’s sale or nonjudicial foreclosure in states that use deeds of trust.
We’ll use an example where the borrower has missed payments on their loan and after the grace period (typically 15 days), they fall delinquent on the mortgage loan. Because of the fact that foreclosures are very costly to lenders and banks, they prefer to collect the payments instead of taking back the properties. Most lenders are willing to work with the homeowner for a certain period of time to get them back on track. This time period is typically 60 to 90 days. If a resolution has not been made after that timeframe, the lender will then proceed to the next step of the mortgage foreclosure process: filing the notice of default.
At a certain point, the lender will decide not to work with the homeowner and will commence the official legal process of foreclosing on the property and your chances to stop mortgage foreclosure is reduced. The lender files the NOD at the county recorder’s office and mails a copy of the notice to the homeowner. Some states may call this document something else but the function is always the same. The homeowner has an option to reinstate the loan if they can make up the outstanding balance on the loan (back payments an late fees). Taking care of these fees will stop the mortgage foreclosure process and bring everything back to good standing from the borrower’s standpoint. Otherwise, the lender moves to the next step: preparation to force sale of property or trustee’s sale.
During this stage, the lender does several things to move the process forward. This includes recording a notice of sale and advertises the pending foreclosure in a newspaper for 3 to 6 weeks. Some states have stipulations where if the notice of sale is recorded, the homeowner is unable to reinstate the loan but has to pay off the outstanding balance. I would recommend looking into your state’s policies as to what rights you have as the borrower during a notice of trustee’s sale.
If the mortgage or loan is not reinstated by this point, the lender will proceed with the public auction to sell off the property with the intent of recuperating some of the loss and the possibility to stop home foreclosure is practically gone . At the auction, the lender will open bidding with the amount of money owed and if the property is not sold, the bank keeps the property in its portfolio. If, however, does bid higher, that individual has a timeframe to come up with sufficient funds to assume responsibilities of the property. At that point, the trustee will execute a trustee’s deed to the new property owner.
A trustee’s sale can be complex and quite overwhelming for the homeowner going through the process. Some states, however, have a redemption period, where the original borrower can get the property back by paying the outstanding balance in full to avoid mortgage foreclosures. I’ll be sure to cover this topic more in depth in future articles.