A few days ago we looked at the number of properties that were in some stage of foreclosure in the City of Pasadena. With so much talk these days about the increasing number of foreclosure’s we thought we would attempt to explain the process for a property that goes into default. To get a good understanding of what’s involved, we need to first explain what happens when you purchase real property.

In California we use a deed of trust. Other states may use a mortgage. The deed of trust provides collateral for the debt. There are three parties involved which are the Trustor (borrower), the Trustee (neutral 3rd party) and the Beneficiary (lender). The Trustor transfers the property to the Trustee to hold in trust until the debt is repaid. When signing your documents at the closing table you provide the Trustee the right to foreclose on the property if you become in default.

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The Notice of Default

This document starts the foreclosure proceedings. When a homeowner becomes 60 - 90 days late on the house payment the notice of default is filed. The homeowner is put on notice that unless the debt is cured, the property may be sold at public auction.

Notice of Trustee Sale

This document serves as public notice as to the date, time and place of the trustee’s sale. It cannot be published until at least 90 days after the notice of default has been recorded.

Auction

The property can be sold at auction in as little as 14 days. If it is not sold then the bank becomes the owner.

Is There A Redemption Period?

In a non-judicial foreclosure the debt can be paid up until 5 days before the property is sold. However some articles now state that most lenders will allow the back payment’s to be made up until the gavel falls at auction. By now there may be some hefty late fees and legal fees that may have also accrued.

What Impact Does Foreclosure Have on Your Credit Score?

According to the article from Ray Martin your FICO score can drop from 100 to 250 points. A short sale may produce a less drastic hit to your credit score than a foreclosure. If you happen to find yourself in this unfortunate situation and feel overwhelmed, assistance can easily be found. A real estate professional can help you determine the amount of equity you may or may not have in your home. Once that’s decided, then the other options may become clearer. Unfortunately many people go into ostrich mode and stick their head in the sand hoping the problem will work itself out. It won’t.

Tags: California foreclosure, Foreclosure, Pasadena foreclosure, Pasadena real estate, short sale