Foreclosure

What you should know if you are in or near foreclosure.

Scenario: Homeowner loses job, spouse, health or combination thereof. Homeowner falls behind on payments. Then one day a letter arrives from the Public Trustee informing the homeowner that the Lender has notified the Public Trustee to commence a foreclosure (Notice of Election and Demand or N.E.D) . The homeowner is inundated with offers from unknown persons or companies offering to help, some with hidden agendas.

The Foreclosure time line is structured so as that once the Election & Demand is recorded, the home owner has 110 to 125 days to "cure" the default. If the default is not cured the Public Trustee sells the property to the highest bidder at a public sale. The foreclosing lender sets the price as they determine what the first bid is. The homeowner does not have any redemption rights; however junior lieners have the right to redeem the property.

Develop an Action Plan! Accurate information is essential to make informed decisions. The first thing to do upon getting the dreaded letter from the Public Trustee is to visit the Public Trustees office and submit a "Notice to Cure". Most, if not all, Public Trustees do this for no charge for homeowners. The Public Trustee will then provide the homeowner with an actual number to bring the loan current (by statute).

Talk with your lender. Most lenders don't want to own properties. They would be happier collecting a monthly mortgage payment. Many times they will re-instate the loan upon receiving partial payment of payments past due and will defer some past due payments extending the mortgage one to 3 months.

Talk with an attorney who specializes in real estate law. Most attorneys will do an initial consultation free of charge. The attorney should be able to describe the benefits and pitfalls of possible action plans including filing bankruptcy or offering a Deed In Lieu (of foreclosure).

Talk with at least two licensed real estate brokers and find out what your property will sell for - before the Public Trustee sells the property. Do not expect top dollar. The goal is to sell the property fast. The broker should be able to provide the homeowner a good faith estimate of what the homeowner would net if the homeowner decides to sell. Make sure that his/her estimate includes paying all liens of record, unpaid taxes, commissions, title insurance premiums, recording fees, closing fees and so on. Ask if the broker has experience in this area of real estate sales and if the broker lists properties for sale that are owned by the Lender that is foreclosing (possible conflict of interest).

AVOID THE SHARKS! There are unsavory individuals out there who will offer several schemes to help the homeowner solve the problem. Some of these are:

A loan to cure the default with no payments due until the homeowner eventually decides to sell. The deferred payments continue to accrue (at an interest rate that would make credit card companies green with envy) and at some point will consume all of the equity in the property. Usually offered to homeowners with at least $25,000 of equity. If the homeowner later defaults again, the "Shark" is now in position to capture the property during the redemption period for junior lieners. Either way, the "Shark" makes off with all of the equity.
Selling your home to an "Investor", who will then rent it back to the homeowner for a couple of years until the homeowner's credit is repaired and can buy the property back. The lease contains language that if a rent payment isn't received on time, the deal is off. The "Investor" evicts the former owner and captures all of the equity.
An "Investor" promises to pay off the foreclosing lender and gives the homeowner a small check for the equity in exchange for a Quit-claim deed. The homeowner moves out and the "Investor" rents out the property, doesn't pay off the foreclosing lender and pockets the rents. Classic case of Equity Skimming.
A loan to pay off the foreclosing lender with unusually high closing costs including 5% to7% origination fees and junk fees galore coupled with a high interest rate 3 to 5 % above par. The homeowner is in effect set up to default again and the "Lender" just made a huge amount cash at closing. Know in the industry as Predatory Lending

If you are finding yourself in foreclosure, contact our foreclosure specialist -Dave Toso for a confidential evaluation. There is no charge or obligation.

This information concerns foreclosures initiated after January 1, 2008 in the State of Colorado, with a focus on owners who are facing a pending foreclosure.

Disclaimer: Nothing on this page is to be construed as legal advice.

Boulder County Foreclosure Hotline