My usual disclaimer: The following is simplified to be helpful. You shouldn’t rely on it or not seek the advice of a lawyer. It is intended to be informational so that you know what services we provide and so that you have a basic idea of what information is relevant when you come to see us.
What is foreclosure?
When you buy a house or finance the sale of a home (think seller financing), the buyer usually executes a promissory note and a deed of trust. A promissory note is just an unconditional promise to pay money to the lender. Because it is just a promise to pay, it is very simple contract. If you don’t pay, you are in default or breach.
The deed of trust secures the note. That means that if you don’t pay, if you are in default or breach on the note, the lender (the person that you are supposed to be paying under the note) can foreclose. That is, they can sell the house at a foreclosure sale.
When can the lender foreclose? Are there any rules or regulations of foreclosures?
There are a number of rules that regulate foreclosure under both Federal and State law. Too many to list or discuss here. But, for the most part, the deed of trust itself will tell you when the lender can foreclose, what the lender must do first, and how the foreclosure must be conducted. The deed of trust, usually, cannot violate laws regulating foreclosure. For instance, suppose the home in question is somebodies homestead, their principal residence and abode. By statute, a lender has to give at least 30 days notice of foreclosure. The deed cannot change that.
Breach of note, acceleration, and the right to early payoff.
Under most promissory notes, when the buyer breaches the note, the lender has the right to accelerate the full amount of the debt. What does that mean? It means that if the borrower is in default on the note, the lender can call the entire loan due. So, if the note is for $500,000.00, the lender can make all $500,000.00 due and payable.
But, first, the lender must do two things (in most cases): (1) the lender must provide notice of intent to accelerate, and (2) notice of acceleration. A notice of intent to accelerate occurs when the lender “says” something to the effect of: “Borrower, you have 30 days to get caught up [to get out of default on the loan], or I’m going to make every penny that I loaned you immediately due and payable.” This should be in writing. At that point, the borrower has to get caught up/out of default, or the full amount of the debt become due and payable.
Next, a notice of acceleration occurs when the lender says that the full amount of the debt is due. Unlike the notice of intent to accelerate, which just requires you to get caught up, this notice requires the borrower to pay the full amount of the note or you are in default of the note. If the borrower doesn’t pay the full amount of the note, then the next step is foreclosure.
Once these two things have occurred, the lender has four years to foreclose. However, the four year statute of limitations may be tolled or start over if the borrower makes a payment, enters a modification agreement, or if the lender represents that the borrower can bring the loan current by making payments less that the entire obligation, to list a few examples.
[deficiency action]
We represent lenders and borrowers.
Are you a seller interested in doing a seller financing? Make sure that you protect your interests. We can assist you in these real estate transactions. Did you do a seller financing, and now you are having trouble with the buyer? We can help you to take proper and lawful actions to protect your legal interests, including noticing the borrower of default, acceleration, and foreclosure. We can also assist you in the foreclosure process.
Are you a buyer interested in entering into a seller financing arrangement? You too need to protect your interests. We can assist you in these real estate transactions. Did you do a seller financing, and now you are having trouble with the seller/lender? We can help you to take proper and lawful actions to protect your legal interests, including noticing the borrower of default, acceleration, and foreclosure. We can also assist you in the foreclosure process.
Are you a buyer facing acceleration, default or foreclosure? You too need to protect your interests. Sometimes the lender may indicate that you owe more than you actually do, or the lender may be charging you interest above the legally allowable rate. There are a number of other issues too, including whether you got proper notice, what you rights are with respect to payoff, avoiding being sued for a deficiency, entering a deed in lieu of foreclosure, etc.