CSEU Foreclosure e-course
The Lender Foreclosure Process
Lender Foreclosures are so costly and cumbersome that many lenders are now forced to hire foreclosure experts to handle the process for them. The following list of services will give you some idea of the necessary steps a lender, or their agent, may have to take to complete a foreclosure. The fact that many lenders are located in a different state than the mortgaged property adds to the costs and complexity.
Demand Letters
The foreclosure process starts with a pay up or else letter. If the lender has already sent the demand letter, the service company will follow up; either after the letter expires or right away. They will also send the demand letter on behalf of the lender, and handle the entire collection, redemption, foreclosure and marketing of the REO property..
Deeds in lieu of Foreclosure
Many borrowers can be convinced that it is better to sign the mortgaged property over to the lender than go through the often traumatic and credit destroying foreclosure. The service company will assist the lender in negotiating, coordination of deed signing and the clearing of encumbrances.
Attorneys and Professionals
The service company will assist the lender with selection of legal and professional services in the property's location.
Bankruptcies
Bankruptcies are handled by the foreclosure attorney assigned to the case.
Chapter 7
Sign Reaffirmation Agreement, file motion to lift stay and attend hearing, if necessary.
Chapter 13
File proof of claim, obtain and review plan, file motion objecting to plan, file motion to lift stay, if applicable; monitor payments through trustee and attend hearing, if necessary
Status Reports
Status reports will be provided to the lender weekly, biweekly or monthly. The lender can check status on Foreclosures in Process, Bankruptcies, Evictions, "Documents Needed", Deed Status and Accounts Placed on Hold. In addition, any of these reports can be modified to suit the needs of each individual lender.
Taxes
To help prevent a loss due to a tax sale or forfeiture of the property due to nonpayment of real estate taxes, the company will obtain a redemption or payoff amount and pay property taxes
Title & Appraisal Services
It will be necessary to order foreclosure title work, appraisals or BPOs (Broker Price Opinion) from real estate services providers. Upon receipt of the order, it is forwarded to the lender and the network attorney. The service company will review the title work for potential problems or claims and advise. They will file title claims, assist in clearing liens and resolve other title problems.
REO (Real Estate Owned) Properties
When the lender becomes the property owner after the auction, the service company will provide a copy of the recorded deed, order an open end title commitment ( policy amount to be determined) and, if the property is not located in the lender's market area, assist in locating a local closing attorney or title company.
Evictions
Evictions are handled by the foreclosure attorney assigned to the case.
Marketing
The service company usually has established relationships with real estate brokers in the property's location. If not, they find someone they can work with there. The broker is required to turn on utilities, contract for and oversee maintenance and any necessary repairs, market the property, provide regular reports, updates and suggest price changes. The service company is usually paid a 20% referral fee by the broker.
The following are a couple of lender foreclosure service companies.
As you have seen here, foreclosures are not easy or cheap. There is real incentive to work with any investor who can buy the property as early in the process as possible.
We will remind you again that it always pays to befriend the brokers in your area who handle the REOs for the lenders and their service companies. In Port Huron, Michigan contact Cliff Schrader Realty. He's my partner and we do this stuff.