The 5 steps to a foreclosure
Step1:
A default of payment occurs when a borrower has failed to make at least one of their scheduled mortgage payments. This can be a challenging and stressful situation for a borrower, but it is important to understand that the lender still wants to work with them in order to avoid foreclosure. The lender will try to get the borrower back on track by making repeated calls and offering options such as loan modifications to reduce the payment amount or the acceptance of a lump sum payment to bring the loan current. If these options are unsuccessful, the lender may then begin the foreclosure process. It is important for borrowers to understand their rights and to reach out to their lender in order to avoid foreclosure proceedings.
Step 2:
This is intended to provide a brief overview of the beginning stages of the legal process of foreclosure in the state of Colorado. It is important to understand that each situation is unique and that the legal process is different from state to state. The article outlines that after 90-120 days of a loan being in default, the lender will reclassify the loan and have their attorney file a Notice of Election and Demand with the Public Trustee in the county in which the property is located. This marks the beginning of the legal process to recover the property. Colorado statute provides the borrower with a 120-day window to work out a plan with the lender to avoid the foreclosure sale. Possible plans include selling the home, loan modification, deed in lieu of foreclosure, or a short sale. It is important to note that each situation is unique and the legal process can vary from state to state.
Step 3:
If no agreement is reached between the borrower and their lender before the auction date, the Public Trustee will offer the property for sale to the highest bidder. The lender will begin the bidding and any other individual, company, or creditor may offer an increased bid. Once the highest bid has been determined, and any applicable redemption periods have been fulfilled, the Public Trustee will issue a Public Trustee's Deed to the purchaser. This deed signals that the purchaser now holds title to the property, and the original homeowner must vacate the property or face eviction.
Step 4:
When a lender is the highest bidder on a property during a Public Trustee sale, the property is transferred to the bank. This is known as an REO or Real Estate Owned by the Bank. The lender will then list and market the property for sale with its own team of local real estate agents. If the asking price does not result in a sale, the lender will gradually reduce the price until the property is sold in the local market. If the property does not sell in the specified time or at the specified price, it is usually sent to a HUD auction.
Step 5:
When a property is put up for sale, the lender is likely to initiate the eviction process if the borrower is still occupying the residence. In certain cases, the borrower may be able to negotiate a lease agreement with the REO management to remain in the property in order to preserve its condition and security. This is usually only offered on higher-end properties and properties which have been properly maintained, allowing the property to be presented in its most appealing condition for sale.
