The foreclosure process is complicated by necessity; the many steps and requirements serve to protect both the borrower and the lender ensuring that the process is thorough and fair. But even the most basic aspects of foreclosure tend to confuse those who don’t have the depth of experience that we here at Total Lender Solutions possess. Here are three common misconceptions about foreclosures.
Lenders Don’t Have to Bring Up Loan Modifications
Lenders shouldn’t be so quick to start the foreclosure process. California and some other states require that in the event that a borrower becomes delinquent, a good faith effort to communicate with the borrower prior to initiating foreclosure must occur. Part of the foreclosure process is providing notices to the borrower, via certified mail, of relevant actions that are being taken, from a notice of default to a notice of trustee’s sale. Many states also require lenders to contact (or attempt to contact) borrowers to discuss alternatives to foreclosure. It’s important to note that lenders are not required to offer loan modifications to borrowers. If the borrower can’t be contacted, or if the borrower can’t or won’t accept fair terms to modify their loan, the lender is not obligated to modify the loan.
Non-Judicial Foreclosures are Quick and Easy
In order to really understand how long a foreclosure can take, it’s important to start at the very beginning - when a borrower misses their first payment. From that point, it may take several months for the foreclosure process to even begin, as noted above. While it’s true that a non-judicial foreclosure does not require court action, that doesn’t mean that the process is quick and easy. Even though the actual foreclosure is conducted out of court, lenders are sometimes sued by the borrowers (or even a junior lienholder) with a court order temporarily stopping the foreclosure. Borrowers may also utilize the bankruptcy court to delay or even stop the foreclosure. As we’ve pointed out, non-judicial foreclosures require lenders to follow their state’s requirements; fully executing a foreclosure can take many months, and failure to comply with regulations can set the process back.
Foreclosures Are The Best Way to Offset Potential Losses
There will be times when a foreclosure is the only way to recover a defaulted loan. There will be borrowers who will simply not be able to make loan payments, even if both sides have made an effort to modify the loan. Lenders may believe foreclosing on a property and then selling it is the best (and possibly the only) way to offset potential losses. But as we’ve noted before, foreclosures do not guarantee that the lenders’ losses will be recouped.
If you’re not sure whether or not foreclosure is your best option, we can help you understand the pros and cons of foreclosing on a delinquent borrower. At Total Lender Solutions, we advocate for lenders looking to maximize recoveries on defaulted loans. For over 15 years, our team of highly experienced real estate professionals and legal experts has transformed complicated processes into clear resolutions for institutional and private lenders. We work as a vigorous extension of your team to provide comprehensive solutions and seamless communication, from pre-foreclosure and notice of default to the final sale phase. Our dedication and persistence when it comes to the foreclosure process ensures that our clients feel confident in reaching a successful outcome. Contact us today.
