- Average foreclosure timeline is 5 to 8 months
- Loan Modification does not stop foreclosure process
- Short sale with purchase offers can postpone scheduled foreclosure auction dates
For many homeowners out there who have made a decision to do a short sale, the question I usually encounter is: “When is the best time to initiate the short sale process with my lender?” The best way to answer this question is to present the foreclosure timeline in California that homeowners in pre-foreclosure should be mindful of. Whatever stage of foreclosure/pre-foreclosure one is in, the time left to sell the property will be the most important factor to consider, given that marketing times differ, depending on the marketability, property condition, competing homes for sale in your area/city.
Note that when we speak of foreclosure in the state of California, we mean to refer to non-judicial foreclosure, which does not require court trial, and lender gives up the right to pursue a deficiency judgment. Non-judicial foreclosure is what we know as the trustee’s sale. A court trial/judicial type of foreclosure is rare in California.
For loans originated between 2003 & 2007, the following summarizes the foreclosure process in California:
Pre-Foreclosure
The very first mortgage default initiates the pre-foreclosure stage. From Day 1 of the default, the lender contacts the borrower and offers alternatives/payment plans such as forbearance, refinance or loan modification. After the missed payment, the lender waits a few weeks to months (1 to 5 months) before starting the foreclosure process.
Foreclosure
Usually on the 30th day after the missed payment, a Notice of Default (NOD) is filed by the lender at the county where the property is located. A copy is mailed to the borrower within 10 business days after recording. The NOD details the attempts of the lender to contact the borrower and arrange for foreclosure alternatives. It is at this stage when a lender expects a borrower to make contact and initiate a short sale.
Trustee’s Sale/Public Auction
Three months after the NOD filing, a lender may record a Notice of Trustee’s Sale (NOS). NOS are published in the newspapers under Public Notices, once a week, for three consecutive weeks. The actual sale date is 20 days from the first publication of the NOS. A copy is also posted at the subject property.
On the day of the auction, the property is sold to the highest bidder. If there are no bids, the property reverts back to the lender automatically, lender markets it, at this point, the property is known to be bank-owned or REO (Real Estate Owned).
This chart below summarizes the various stages a homeowner can be at any one time, and the minimum time left to sell the subject property before a trustee’s sale kicks in:
| Stage of Foreclosure/Pre-foreclosure | Minimum Time Left to Sell |
| Homeowner missed mortgage payment for the 1st time |
6 to 8 months
|
| A Notice of Default is filed & recorded |
4 months
|
| A Notice of Trustee’s Sale is filed and recorded |
5 days before trustee’s sale
|
A common misconception many homeowners have is that the foreclosure clock stops once there is a loan modification or a short sale request in place. This is not true, because the clock ticks from Day 1, whether a homeowner takes a proactive step towards foreclosure prevention or not.
LOAN MODIFICATION
There is, however, an additional 90 days ‘cooling off’ period beyond what is already given before a lender files a Notice of Trustee’s Sale. If a homeowner has a pending loan modification request, this California state law (ABX2 7 and SBX2 7) was enacted on February 20, 2009 and took effect on June 15, 2009. Not all lenders, though, are subject to such state law- lenders who have implemented a comprehensive loan modification program can file for an exemption.
Here is a list of mortgage lenders/servicers who have been granted exemption by the DRE, and therefore, could file a Notice of Sale against your property without the additional 90 day cooling period:
Foreclosure Timeline from 1st missed payment to NOS (with additional 90 day ‘cooling period’ for homeowners with pending loan modification) 8 MONTHS
Foreclosure Timeline from 1st missed payment to NOS (without additional 90 day ‘cooling period) 5 MONTHS
SHORT SALE
Since a pending loan modification request does not stop the clock from ticking, it is almost always necessary to proceed to short sale, when the loan modification is not going anywhere and will not seem likely to be approved. The months spent waiting on loan modification could have been used to market the property as a short sale, where in, more often than not, a seller could be granted postponement of the trustee’s sale, to give the seller time to generate an offer.
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