Friday, February 7, 2014

How does the foreclosure process work?

There are two types of foreclosure processes in Oregon that lenders can use when a mortgage loan is in default — judicial and nonjudicial.
In a judicial foreclosure, the lender or a representative acting on its behalf takes you to court to recover the money you owe by selling the house used to guarantee the repayment of the loan. In a real estate judicial foreclosure, there are some restrictions about the amount of money you can be sued for. If you receive a Notice of Hearing or a notice to appear in court regarding the sale of your property, immediately contact an attorney. There is contact information for the Lawyer Referral Services from the Oregon State Bar Association in this brochure’s resources section. Before you receive this Notice of Hearing, your lender may send you a notification informing you of its intention to start the foreclosure process. Remember, once you are in default on your loan agreement, the lender can start the foreclosure process at any time. 

The judicial process starts when the lender or its representative requests the circuit court authorize the sheriff to conduct the sale of the house. To allow the sale, the court must first give the homeowner the opportunity to be present at the hearing. After the request to the court, the homeowner will be served with a new notification at least 10 days before the hearing with a “NOTICE OF HEARING ON SHERIFF’S SALE OF YOUR PROPERTY.” The notice, or summons, will also be sent by first class mail to the property address. The notice will include the name of the lender asking for the property’s sale, the property address, the reason for the request, and the time and location of the hearing. The homeowner does not have to attend the hearing. The judge will decide if the lender is entitled to have the house sold. If the judge rules for the lender, the judge will issue an order called writ of execution. One important difference in a judicial foreclosure, after the sale of the property, is the right of the former homeowner to recover the house within 180 days, known as the redemption period. To redeem the house within this period, the former homeowner, following a formal notification process, must notify the new owner of that intention. The former homeowner must pay the new owner, whether a person or the financial institution, the amount paid at the sheriff’s sale to purchase the house, including applicable interest. The total amount to redeem the property may also include payments made by the purchaser for property taxes, insurance, and other expenses to maintain the house in good condition.
In the nonjudicial process, where the document securing the loan is a Deed of Trust, with a power of sale given to the trustee, the parties involved in this model are the “beneficiary,” which is the financial institution or investor you owe the money to; the “trustee,” which is the neutral third party to whom you conveyed or “transferred” temporarily the title of your house to be held in trust until your loan is paid off; and you as a borrower or “grantor.” This process applies to owner occupied, one-to-four unit, single-family dwellings.
A nonjudicial process of foreclosure by “advertisement and sale” commonly starts if you, the homeowner, are in default by not making your mortgage payments as agreed and they have been continuously late. After trying to contact you to bring your mortgage payments current, the financial institution collecting your payments will give instructions to the trustee to start the foreclosure process or, in lending jargon, “accelerate” the loan. First, the trustee will file a Notice of Default in the county records where the house is located. When the notice of default is recorded, the foreclosure process becomes public information and will take approximately 120 to 180 days until the house is sold or transferred. Immediately after the filing of the notice of default, the trustee will send to you and all parties with an interest in the property, a Notice of Trustee’s Sale or Trustee’s Notice of Sale. You will also receive a notification about your right to request a face-to-face mediation meeting with the lender or its representative. The purpose of the mediation meeting is so the parties involved - the lender, you, and a mediator - can attempt to come to agreement to avoid foreclosure. The foreclosure can be avoided by applying various options available from the financial institution, such as a forbearance, loan modification, pre-foreclosure sale or “short sale,” or voluntarily giving up the title of the house commonly known as deed-in-lieu of foreclosure.