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The Three Stages of Foreclosure
STAGE 1 : THE NOTICE OF DEFAULT PROCESS
Foreclosure proceedings are initiated with a Notice of Default (NOD). The Notice of Default is recorded at the request of the lender by the trustee which, in effect, gives notice to the public that the loan is in default.
The actual recording of the notice takes place at the County Recorder's Office in the county in which the property is located. It denotes essential data pertaining to the trust deed, the amount in arrears, address of the property, and the date of recording.
In the state of California the trustier (Borrower) has three months from recordation of the notice of default to reinstate the loan (to make the loan current by paying all payments in arrears, any late charges, or other deficiencies). The law requires the lender to accept the trustee's reinstatement money during this three month period.
STAGE 2 : NOTICE OF TRUSTEE SALE
If the trustier does not reinstate the loan within three months, then the lender will instruct the trustee to publish a Notice of Trustee's Sale. This published notice states that the subject property will be sold to the highest bidder after twenty one days from publication of said notice.
During this twenty-one (21) day period, referred to as the Publication Period, the lender has the right to refuse reinstatement of the loan and can demand payment in full of the entire unpaid balance of the loan. (In the state of California the lender must accept the Trustee's reinstatement if it is tendered more than five days before the sale. Within five days of the sale the lender may refuse reinstatement and demand full payment) Often, lenders will allow reinstatement during the Publication Period.
The actual foreclosure sale will take place at a designated location chosen by the lender at least twenty-one (21) days after the three month reinstatement period. Proceeds from the sale will be disbursed to all lien holders in order of the priority of their recorded trust deeds. If the auction is unsuccessful at attaining a buyer at the minimum bid price then the property reverts to the lender.
STAGE 3 : OBTAINING POSSESSION OF THE PROPERTY
Whoever ends up with the property at the auction sale must now start another legal action in order to get physical possession of the property. This process is referred to as an unlawful detainee and can usually be completed within four to six weeks.
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