- I am three months behind on my mortgage payments and my lender is threatening foreclosure. What exactly does this mean?
Foreclosure is a process by which the lender terminates your ownership of your real property. The lender will do this through a public foreclosure sale which will take place at a published place and time (usually at the local courthouse). Once the foreclosure sale has taken place, you no longer own the real property and you will have to vacate the property within ten (10) days.
If your lender is threatening foreclosure, that means that you are in significant default on your mortgage payments and you are in danger of losing your house. Once the lender formally starts the foreclosure process by filing a notice of default, you will have no more than 120 days to resolve the problem or you will lose your house. The filing of a bankruptcy can stop a foreclosure sale, even if the foreclosure sale is only minutes away.
- How is a trust deed foreclosure started?
Most lenders now only use trust deeds, rather than mortgages, because foreclosure of a trust deed is much cheaper and easier than a foreclosure lawsuit. A trust deed foreclosure is initiated by the lender recording a Notice of Trustee's Sale in the Real Property Records in the County where the real property is located. The Notice will be served upon the borrower and the occupants of the real property by certified mail and US first class mail. The Notice will state the specifics of the loan default and the total amount owing. More important, the Notice will list the date, time and location of the foreclosure sale.
- Who is the "Trustee" listed on the Notice?
The Trustee is typically an attorney or other professional specializing in foreclosure sales. The Trustee is hired by the lender to act is its legal agent. When you signed your loan documents, you signed the trust deed, in which you granted the lender (the "beneficiary" under the trust deed) the right to foreclose the real property if you were delinquent on your payments. The Trustee will conduct the foreclosure sale on behalf of, and for the benefit of, the lender.
- How long does a Trust Deed foreclosure take?
The foreclosure sale must be a date that is at least 120 days from the date the lender recorded the Notice of Default.
- How is the Sale Conducted?
At the date, time and location for the sale, the Trustee will announce the property being sold. Anyone can appear and bid on the property. There is a catch, however. The winning bidder must pay cash at the time of the sale.
The Trustee is usually authorized by the lender to enter a bid equal to the amount owed by the lender. The lender buys the property for the amount of money the lender is owed on the property. This called a "credit bid," and it is the most common result at foreclosure sales.
- How do I stop a foreclosure sale?
There are only four ways to stop a foreclosure: (1) cure the default, also called "reinstating" the loan, (2) pay off the loan, (3) negotiate an extension with the lender, or (4) file for bankruptcy.
No person is eligible to file bankruptcy, unless that person shall have first attended a credit counseling session and obtained a certificate of completion within 180 days prior to the bankruptcy petition date. It may take 5 days or more to get such an appointment. If you procrastinate, you may not be able to use bankruptcy to stop your sale because you might not be able to get your counseling certificate in time. Do not delay - get your certificate at least 60 days prior to your scheduled foreclosure sale so you are eligible to file bankruptcy if you have to.
Despite advertisements you may see from some attorneys, filing a bankruptcy is not something that should be done in a few minutes or hours before the foreclosure sale. Filing for bankruptcy is a comprehensive process that must include a listing of all of your assets and liabilities. Failure to properly prepare the bankruptcy petition may result in your losing other assets that you would normally be entitled to keep.
So, even if you believe you will cure the default or sell your home before the date of the foreclosure, it may be in your best interest to consult with a lawyer well in advance of the sale so that you are fully aware of all of your options. Vanden Bos & Chapman, LLP can work with you to try to cure the default or help you sell your home. At the same time we can get everything ready for you to file a bankruptcy just prior to foreclosure, just in case you are unable to cure the default or close a sale prior to the foreclosure sale. You can and should consider bankruptcy your "last-chance, ace-in-the-hole" if all other options fail.
a. How do I cure/reinstate the default?
Under Oregon law, the Trustee has to stop the foreclosure sale if you pay the loan current at any time prior to the fifth day before the foreclosure sale. The amount you would have to pay would be all missed payments, late charges, foreclosure fees and costs, and the lender's attorney's fees. You can request the exact cure amount from the Trustee. If you do attempt to reinstate the loan, please be aware that the Trustee will only accept certified funds.
b. Can I negotiate with the Trustee/lender?
Most major lenders have special departments with the authority and ability to stop a foreclosure sale, provided you can reach an agreement with them. Each lender has its own unique programs and methods for negotiating and settling, but you should be prepared that any settlement will usually require a lump sum payment toward the default and some arrangement to cure the remaining arrears. Do not rely on an oral or verbal promise by a lender or trustee - be sure to get any agreement with the lender in writing! Agreements with a lender are not enforceable in Oregon unless they are in a writing signed by the lender.
c. Can bankruptcy save my house?
A provision of the Bankruptcy Code called the "automatic stay" will stop a foreclosure immediately upon the filing of a bankruptcy. The "automatic stay" applies in both Chapter 7 and Chapter 13 cases but may not apply if you previously filed bankruptcy. If you have prior bankruptcies, you need to see a lawyer right away to determine if a bankruptcy stay will arise in your case or not. A Chapter 7 will only provide temporary relief from a foreclosure, while a Chapter 13 will allow you to force the lender to accept a 3 to 5 year plan to cure the arrearage. You should consult with an attorney from Vanden Bos & Chapman, LLP to determine whether a Chapter 7 or a Chapter 13 is best for your situation. Bankruptcy can be that last minute reprieve that saves your house when all other options have failed.
- If I can't afford my monthly payments, why should I file bankruptcy to save my house?
A good reason to file bankruptcy to stop a foreclosure is to protect your equity in your house. Let's assume that you owe Big Bank $125,000 on your mortgage, but you can no longer afford the monthly payment, and you aren't eligible for a refinance. Let's also assume that, if you had time to adequately prepare and market your house, you could sell it for $180,000. If you let the house go to foreclosure, you will get nothing from the foreclosure sale. However, a Chapter 13 bankruptcy will grant you the necessary time to prepare and market your house for sale.
If you have more than one mortgage against your house, a foreclosure by the first lender will not relieve you of your obligations to a second mortgage and the second lender may still seek to collect payment from you. Even if you are going to let your property go to foreclosure, a bankruptcy may be necessary to discharge all debts associated with the house. Again, you should consult a Vanden Bos & Chapman, LLP attorney to discuss the specific benefits of a bankruptcy for you.
- The lender just held a foreclosure sale on my house. What do I do now?
Unfortunately, if the lender has already held the foreclosure sale, you have run out of options. Ownership and title of the real property transferred from you to the new owner at the foreclosure sale. You have until ten (10) days after the date of the foreclosure sale to move out of the property.
- Why should I meet with a Vanden Bos & Chapman, LLP attorney?
There are many myths and misconceptions about bankruptcy. If you have financial problems, bankruptcy is an option that is available to you. In order to make the decision that is best for your situation, you should know as much as possible about bankruptcy so that you can make an informed decision.
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