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Foreclosures The Process

I found this information on Realty Trac and found it very helpful. I hope it helps you too. They are a great website with a lot of free information.

What is Foreclosure?

Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:

  1. The borrower/owner reinstates the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.
  2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
  3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
  4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure, via a short sale foreclosure or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank-owned or REO properties (Real Estate Owned by the lender).

This foreclosure process allows for three opportunities for finding bargains on foreclosure homes.

Pre-Foreclosure (NOD, LIS):

Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.

More about pre-foreclosures

Wondering what happens after foreclosure? Then please read on. Remember that understanding foreclosures is the first step for homeowners to stop foreclosure. It is also the first step for investors to buy foreclosure properties.

Auction (NTS, NFS):

If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.

More about Foreclosure auctions


Bank-owned (REO):

If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair; however, the potential bargain for these REO homes is typically less than a pre-foreclosure or auction property. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.

More about HUD foreclosures and VA foreclosures


Before you buy

You'll need to make sure you're armed with the foreclosure data you'll need to find and buy foreclosed homes. You can start by searching free on RealtyTracís foreclosure listings database, which includes pre-foreclosure and auction properties across the country and a nationwide bank foreclosures list.

Find out more about buying resources

May 23rd, 2011 Current Real Estate Market Update
Posted May 23, 2011

I got this information from David Mikkelson of Guild Mortgage. I found it informative and wanted to pass it on to you.

Foreclosures and mortgage defaults in San Diego County continue to trend down but remain historically high, leading real estate insiders to wonder when the supposed second wave of distressed properties will enter the market.

Notices of default, the first step in the foreclosure process, fell to 1,452 in April, down 31 percent from a year ago and 21 percent from March, according to figures released by DataQuick Information Systems on Tuesday. It's the seventeenth month in a row during which notices of default have gone down on a year-over-year basis.

There were 946 foreclosures recorded in April, down 21.9 percent from a year ago and down 9.6 percent from March, figures show. It's the seventh month in a row during which foreclosures have decreased on a year-over-year basis.

"The general trend continues to be foreclosure filings are trending down," said DataQuick spokesman Andrew LePage. "Could they surge again? Sure."

Top 5 foreclosure areas, April

Area ZIP code Med price, Q1 April '10 March '10 April '11 Forec. per 1,000e
Borrego Springs 92004 $166,500 2 4 9 5.3
Campo 91906 $150,000 4 4 4 4.5
San Ysidro 92173 $163,000 11 9 12 3.8
Pine Valley 91962 $240,000 3 0 2 2.8
El Cajon 92021 $215,000 24 26 30 2.8
Source: DataQuick Information Systems

Top 5 default areas, April

Area ZIP code Median price, Q1 April '10 March '11 April '11 NODs per 1,000
Campo 91906 $150,000 10 5 4 4.5
Chula Vista SE 91915 $320,000 47 32 30 4.1
Spring Valley 91977 $234,250 35 40 55 4.1
Bonsall 92003 $150,000 5 5 6 4.0
Valley Center 92082 $415,500 12 11 17 4.0
Source: DataQuick Information Systems

Some San Diego real estate experts earlier in the year predicted a second influx of foreclosures and defaults this year, but that scenario has yet to play out, according to the numbers.

LePage said it's hard to gauge where notices and foreclosures will go because "you never know how far behind the lenders" are with releasing foreclosures onto the market.

Carson Pay, a San Diego mortgage broker, said for years troubled homeowners have found it challenging to track where banks are behind the scenes, specifically "whether they will foreclose on you or not."

Some of the factors that also could explain the drops in defaults and foreclosures include: a slowly improving economy, lenders working through complicated legal challenges and the influence of government programs that aim to help distressed homeowners, said LePage, of DataQuick.

FNC announced Wednesday that U.S. home prices in March continue to show signs of stabilization following rather mild declines in February, making March the second consecutive month with better-than-expected price momentum.

Based on the latest

Posted By: Raschel A. Kloos
May 23, 2011 01:06 PM

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