Understanding Foreclosure Proceedings In The United States

Besides being contingent on the area and economic conditions, the number of foreclosures is constantly in flux, increasing and decreasing over time. During the COVID pandemic, there was a stay in foreclosures for certain types of mortgages, but that has been lifted. In addition, there are foreclosures by junior lien holders that did nothing when there was no value supporting their lien – and now that there is some equity because of the price escalation, those junior lien holders are initiating foreclosure sales. As such, foreclosures are presently increasing.

The Causes & Impacts Of American Foreclosures

Foreclosure proceedings in the United States happen for various reasons. For example, during the COVID pandemic, many homeowners got informal forbearances on their loans but did not have to make any payments, sometimes for 18 months. Then, when payments resumed, one of several things happened – either the lender mandated a pure and full of all the arrears, or homeowners had to start making payments again with lenders putting the arrears into a separate non-interest-bearing account. This made it difficult for them unless their economic conditions at home otherwise improved.

Of course, foreclosure is a very traumatic experience in both a financial and emotional sense. These proceedings cause people to be very stressed – and understandably so. Despite making mortgage payments for years, they are often abruptly faced with the possibility of losing their home and all it brings them, including a source of equity and shelter. They are forced to move out and deal with all that entails. Then, as if this was not bad enough, they are faced with a foreclosure on their record, which can make it very difficult to purchase a home or even become a renter in the future.

Fortunately, foreclosing on a home does not totally preclude you from buying or owning one again in the future – though it does make doing so considerably more difficult. Private money lenders who charge a very high rate of interest don’t often care about your credit record or any prior foreclosures you have had. This is not the case for other lenders – they do care, and there is typically a four-year waiting period to get into a new home with them, assuming you rebuild your credit.

As such, if you find yourself in a situation where foreclosure is on the table, you should always try to stop it if you can. And more often than not, the houses in our area are worth saving in today’s market, because there is invariably equity in that property.

How Foreclosure Begins

Foreclosure can happen for one of two reasons… The first is a breach of covenant, which is extremely rare. This involves things you perform, such as keeping up the property or violating something else in the deed of trust. The second is a payment default or ballooned loan. These are much more common. When either occurs, lenders typically send out an informal letter advising you of various options.

After this letter, the formal process can begin, which includes a judicial foreclosure or a non-judicial foreclosure…

Judicial foreclosure is where a lawsuit is filed and the judgment is obtained for it to then proceed to the sheriff to hold a sheriff’s sale of the property. Again, this is an uncommon approach in California, but it happens more in commercial properties when it does happen.

The typical approach is that of a non-judicial foreclosure. Through this process, a notice of default and election to sell is recorded. That notice default election to sell gives you three months, advising you of the amount of delinquency. After the three months, a notice of sale is recorded, (which must run for at least 21 days), which lists the date and time when the foreclosure sale will be held.

A foreclosure sale at the election at the lender can be continued up to three times. In contrast, a portfolio sale can go forward on the date and time indicated unless there is some sort of stay. The only stay is a temporary restraining order from the state court or a bankruptcy filing, effectively halting the foreclosure process.

More Information

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• The Financial Consequences Of Foreclosure
• Exploring Further Remedies To Foreclosure
• The Importance Of Expert Legal Counsel

For more information on Foreclosure Proceedings In The United States, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (408) 295-5595 today.