At any time any foreclosure case is registered, a structured process follows. In a judicial state, foreclosure begins as it is filed; in a non-judicial system, foreclosure begins once the Notice of Trustee Sales or the Notice of Default is filed. The beginning marks the pre-foreclosure stage, or the preparation before the actual handling of the case -the time when you can make the most money out of the case.
Ordering the TSG or Trustee Sale Guarantee -also known as the Trustee Report.
There must be a notice sent to every single person with interest in the property being foreclosed -As in anyone and everyone with a lien on the property, even a mechanic’s lien, or anyone with a second mortgage. This is to inform all parties concerned with the real property.
Substitution of trustee: In a non-judicial state, there is always a Substitution of Trustee. This stems from the three tiered approach, which consists of:
The Trustor, or the person who borrowed the money, The Trustee, the beneficiary, The Trustee, who handles all the transaction pertinent to foreclosure
You may see a Substitution of Trustee posted at the County Recorder’s Office. This trustee only handles foreclosures and will follow the process to the end.
The Posting of Legal Notices -As required by law, as the affair concerns land and property, it should be made public through a legal notice. This notice contains only the information valid for public consumption; in other words, nothing that might be detrimental to the case or the parties involved. The notice appears on newspapers, publications, even special county-owned legal publications, and on the site of the property itself.
Maintaining constant contact -Constant contact should be maintained with the title company to ensure that no liens remain attached to the property being foreclosed. Bankruptcy can put a halt to the foreclosure, as bankruptcy is handled by federal law, superseding state law.
Prepare a credit bid: The beneficiary or mortgagee prepares a credit bid, which is the starting bid/amount at the auction, depending on the state and the state statutes.
As dictated by state law, the credit bid is determined by the principal balance plus arrears:
Bank Interest, Penalties, All legal fees. Arrears can include homeowner fees, and second mortgages. In a judicial system, it’s the attorney who will handle the preparation of the credit bid; in a non-judicial system, it’s the trustee.
Make payment and reinstate the loan: The owner can perform this task. Suspend or cancel the sale at any time: The beneficiary or mortgagee can do this, if suitable arrangements have been worked out with the owner beforehand
Notice of Trustee Sale. This notice contains when and where the auction will be held. It also contains the legal property description -available in the County Tax Assessor’s Office. As a legal document, care should be taken to match the actual address with the document -note that addresses change over a period of time.
The Due on sale clause. This is a part of the mortgage that demand full payment of the loan, should the house be sold or transferred. The lender has no power to halt the sale, but can legally demand for full payment -which, in the lender’s case, has the same financial effect.
In the absence of a Due on Sale clause, the loan is assumable without the lender’s consent. Older FHA and VA loans are assumable without the consent of the lender. How does this impact the sale of a foreclosed property? If you get a warranty deed from the owner at the time of the foreclosure sale or in the pre-foreclosure timeframe, as long as you keep making the payments, the bank will most likely be not be aware of the transfer. If you buy the property and then sell it immediately or even later on, you will be fulfilling that requirement of paying off the loan at that time.