From The Desk of Linda Strasberg

Distressed Property Timeline

Distressed Property timeline will go over the general process of what a distressed or foreclosure property goes through before being recycled back onto the market or sold to a new owner. It’s important for distressed homeowners or home buyers to understand the big picture of distressed property timelines and foreclosure properties and how these properties are handled.

1) Property Goes Into Default because payments have been missed.

2) Notice of Default letter is then Issued by the Lender.

3) Borrower has stated amount of days or “reinstatement period” to bring the loan current by paying past due payments and fees.

4) “Notice of Sale” is issued by the lender, if borrower can’t re-instate the loan by paying all past due payments and fees.

5) At this point the homeowner/borrower can apply for HAMP Program with borrower’s hardship letter, financial history and expenses, tax returns, proof of employment, etc. if they want to try and keep the property. If the borrower qualifies, this will reduce the borrower’s payments to 31% of his gross monthly income. If the borrower does not want to keep the property, they can request a short sale, through HAFA.

6) If the lender has not discussed a short sale option or “deed in lieu” option with the borrower, the lender must then notify the borrower in writing of these options and give the borrower 14 days to respond, either in writing or orally. If the borrower does not respond to this notification, this ends the lender’s responsibility to give a HAFA Offer to the borrower. This is a crucial point in the distressed property timeline, as many homeowners ignore correspondence thinking that it will go away.

7) The servicer or lender must consider the HAMP eligible borrower for HAFA within 30 days of either:

* Borrower doesn’t qualify for HAMP trial period

* Borrower doesn’t successfully complete the HAMP trial period

* Borrower is delinquent on a HAMP trial period or misses 2 payments

* Borrower requests a short sale or “deed in lieu”

8) Deed In Lieu or HAFA Program to facilitate the Short Sale. If Deed in Lieu agreement is signed with the lender, the vacancy date must be at least 30 days after signing the agreement. When the borrower signs a short sale agreement with their Realtor, Certified Short Sale Specialist; makes short sale request in writing to avoid foreclosure with their lender and/or is eligible for the HAFA program, he can have anywhere from 120 days to 1 year to sell the property, depending on lender guidelines. (Subject To Conditions)

9) If the property doesn’t sell through the HAFA process or the lender doesn't get the title back through "deed in lieu", it goes to the Foreclosure Sale at the Courthouse, sometimes known as the Sheriff’s Sale or Trustee’s Sale, to be auctioned off to the highest bidder.

10) The borrower still has a redemption period after the Foreclosure Sale to pay the full balance of the note and all costs of sale and retain the property. Most borrowers are not in a position to do this.

11) If it doesn’t bring high enough bids at the courthouse, the lender will bid high enough to keep it at which point it becomes an REO or bank owned property.

12) Which 9 times out of 10 will then get listed with a local real estate agent for sale back into the marketplace, where it’s usually priced competitively with all similar properties on the market. This process limits the lenders losses.

This distressed property timeline seems pretty complicated, but it’s getting easier and more streamlined everyday. The HAFA Program is trying to standardize the forms and processes to make liquidating these properties easier for both the lender and the displaced homeowner. It seems evident that we haven’t seen the biggest number of foreclosures yet, and they are becoming a huge piece of the real estate market. Cycling through these and getting housing inventory back to normal levels will definitely take some time.

FORECLOSURE is NEVER The Answer

Linda Strasberg, All Rights Reserved