What is the Definition and course of action of a Pre-Foreclosure?

When a homeowner becomes delinquent on their mortgage 3 months in arrears they are issued a Notice of Trustee Sale or Notice of Default from their Mortgage Company. It is at this time the character is considered to be in a “pre-foreclosure” position.

Once the character or home is classified as a “pre-foreclosure”, the character retains this classification until such time one of several things occurs. The homeowner can bring their loan payments current, successfully complete a short sale (selling their home for less than what they owe on their home), get approval from the Lender for a Loan alteration or the home is sold at a Trustee Sale Auction.

A pre-foreclosure basically does not covert to an actual foreclosure until the character is sold at auction by a Trustee Sale. This kind of sale only occurs in 13 States including Arizona. This Trustee Sale is also known as a non-judicial procedure. The other kind of foreclosure is called a judicial foreclosure. In this article we will only be concerned with a non-judicial foreclosure.

As mentioned, the pre-foreclosure is substantiated by a Notice of Trustee Sale. This notice is a recorded document and consequently public notice suggesting the Lender or Mortgage Company’s intent to repossess the character themselves or sell the character by an Auction. All parties that have an interest in the character, i.e. additional mortgage holders, Homeowners Associations, Contractors or County Assessors have the legal right to foreclose on the character in addition.

Once the homeowner is issued the Notice of Trustee Sale they are now in a “pre-foreclosure” position. By law, the actual sale of the character or auction cannot occur until at the minimum 90 days after the Notice of Default. During this pre-foreclosure time frame the homeowner can stop all action against the character by becoming current on their payments, selling the character via a “short sale” or negotiating a loan alteration with their lender.

Any homeowner facing a pre-foreclosure or foreclosure scenario should consult with an attorney to clarify all legal ramifications and consequences. A bankruptcy filing can sometimes postpone a Trustee Sale but again legal advice is highly recommended.

Leave a Reply