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Foreclosure Timeline

June 25th, 2010 by Chris McLaughlin

Foreclosure Timeline

Novice short sale and other real estate investors are often confused by the entire process; it’s not your fault! Foreclosure has never been simple but with the current backlog and other pressures, it’s become worse than ever.

Here to help is an easy to read foreclosure process timeline. It will help novice investors understand the different methods used to purchase short sale, pre-foreclosures and foreclosed properties.

  1. First month missed payment. This counts as day one for the bank but notice, the homeowner had 30 days just like normal to come up with a payment. They will always remain 30 days ahead of the bank schedule.

  2. Second missed mortgage payment…day 30 for the bank.

  3. Third missed mortgage payment…day 60 for the bank. The loan is now seriously delinquent.

  4. Notice of Default…usually sent around day 70. If the homeowner doesn’t send payment within 30 days, the foreclosure process will begin.

  5. Notice of foreclosure…day 100. If the homeowner did not make payment the formal paperwork is now filed with the clerk of the court. An itemized list of fees, charges and payments are included.

  6. Notice of Trustee Sale is published. This typically takes place around day 160 for the bank.

  7. Loan Acceleration. Prior to the auction/sale, the homeowner may still pay back the amount owed plus fees.

  8. Second Notice of Sale. The lender is legally obligated to run another notification of the sale prior to the auction.

  9. Sale or Auction. This normally takes place roughly 180-190 days from the start of the first delinquency (ie, six months), however, due to the large number of foreclosures and the desire of banks to manage the number of defaults, many homes are now taking as long as two years to complete this entire process resulting in an extensive amount of savings for many homeowners who haven’t been required to make payments for up to two years.

    Investors are often accused of taking advantage of a bad situation but banks, buyers and homeowners often benefit from a short sale. Not only have many homeowners had a change to substantially increase their savings without having made a mortgage payment for months or even years, but banks typically realize greater gains and may save the cost associated with the extended process associated with a full foreclosure.

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    1. Comment by Amri
      July 7th, 2010 at 11:02 am

      You casually refer as buyers gaining from the short sale process yet fail to recognize that many buyers have lost their savings with the upgrades made to the home and the fees incurred by seeking professional assistance with loan modifications because the banks fail to assist distressed clients due to loss of employment.

      I highly doubt that those who are making ends meet with employment benefits hardly have the opportunity to “substantially increase their savings” as you so falsely stated.

      Please unsubscribe me to your unsolicited marketing.

    2. Comment by Fred C
      July 7th, 2010 at 3:03 pm

      Not to mention the lost equity that the short sale buyer has when hye buys directly from the bank for the balance of the outstanding loan plus fees. sometimes its even less than that!

    3. Comment by Ron Harris
      July 7th, 2010 at 5:17 pm

      Amri, you forget that many of the buyers didn’t necessary lose their jobs, they just couldn’t afford the loan in the first place, or when it adjusted.

      This is just one of many situations that can arise, as you point out with your scenario. Every situation is different and the author is just pointing out 1 scenario with the end results of a short sale. Homeowners and the banks are BOTH responsible for the pre/post results of the short sale. The only major problem is: homeowners are already in a predicament, otherwise the short sale wouldn’t be needed, but the banks REALLY fail to process short sales fast enough. Really, come on, Mr. Bank, you have a CASH buyer (me) with real PROOF of FUNDs, ready to buy your distress asset so sell NOW and avoid the 15-30K extra expenses for the foreclosure process. I have seen it too many times the bank gets LESS as time goes on, and even far less when it goes to foreclosure, and even more loses as it becomes a REO.

      If Senior/executive management was really paying attention to the bottom line of each department as the asset becomes distressed, they would realize this. The bigger they are the more bureaucracy and internal politics it seems plays a role. This is why we should NOT be bailing them out. If bailouts are needed, it should have been applied to the small business sector with more loans to support the backbone of the economy.

      Fred, what do you mean lost equity? An investor would not buy a short sale if there wasn’t enough NET equity for profit – it wouldn’t be a short sale but just a dead deal. Of course, my experience, is some short sales are profitable and sometimes it’s better to let it go to foreclosure and get a better deal. It’s not my responsibility to make sure the bank gets the best price, it IS my responsibility that I get the best price – and in many cases, what looks like loses to the bank on the HUD is not necessarily true (think interest payments from the Amortized loan) as they may actually make money from pay down from the amortized loan.

      Either way, it isn’t an easy game to play doing short sales or REO’s. Government, bureaucracy, lending is constantly making it harder for Investors to buy (even when we have CASH!). Investors should be applauded for taking a risk to help the economy buy buying distress properties; and investors SHOULD be rewarded with profits and fortunes for the elevated risk.

      My two cents!

      Ron

    4. Comment by Deb
      July 7th, 2010 at 9:24 pm

      Would thid time line still apply for a home owner whos home was part of a bankruptcy. That homewner having been making timely payments for 2 years prior to missing payments.

    5. Comment by Ben
      July 8th, 2010 at 3:48 pm

      I am fairly certain that the individuals who posted here did not read the article carefully. The first poster apparently meant ‘seller’ rather than buyer, and Fred’s post is confused, at best. In response to Deb, if the payments are late the bank generally doesn’t care about what was, only about what is. Seek help, and don’t pay anyone up front for any real estate services.

    6. Comment by Jim
      July 9th, 2010 at 7:05 am

      REO and short sale processes are two differently distict operations for the lender and/or asset manager. REO properties proceed per timelines pretty much as published in this article. Short sales are not started by the lender but rather are begun by the homeowner. The timelines differ due to the different folks administering the process. A sound, well-documented short sale package is required and underwriting of this package takes time. It has to be weighed against the representations made by the homeowner when the loan was originated. Additionally, various sources of evaluation and valuation must occur before approval of a short sale can occur. The loan is probably a small part of a bigger portfolio that may require several approvals. Some lenders are far more difficult to work with than others in the short sale process. Sales contracts for short sales can be ratified BUT contingent (upon lender approaval) and still foreclosed whereupon good legal advice seems a small price to pay in hindsight. In all due respect, investors have the mentality that throwing money around will solve all portfolio problems for lenders, and even feel their “legal” advice to short sale sellers is the entre’ to flipping schemes. Maybe snake oil (Freddiemac thinks so), maybe not (Adam Smith thinks not). Second trusts and even third trusts further complicate the problem. Seek out an experienced Realtor in your market that has an SFR or similar designation and a real estate attorney before embarking on a short sale. And if an investor is a first choice, run away fast if they offer to perform a short sale package without an attorney’s input. It was buyer beware, now owner beware, and could be seller remorse.

    7. Comment by Rental Property Investment Resources
      September 16th, 2010 at 1:47 pm

      US foreclosure rate has soared to new all-time record high…

      In August, foreclosures set a new record high for the third time in five months, indicating that 2010 repossessions will shatter all previous records. Remember: The housing bust TRIGGERED this great recession in the FIRST place! And now, despite $3.6 T…

    8. Comment by Dawn
      November 8th, 2010 at 3:25 pm

      I know that you have up to the Trustee Sale to redeem your property, but I’ve been trying to get NDeX West, LLC out of – guess where – Texas (why is so much of the servicing, banking, fraud and grief coming out of Texas?). They are essentially refusing to tell me how much I owe or what I need to do to reinstate my loan. I’ve been trying for months to get this information and have yet to receive anything. They are saying it’s the bank’s “discretion” whether I can resinstate! What can I do about this illegal attempt to steal my home thru foreclosure? Thanks for your response.


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