Notes on Foreclosure
by James Robert Deal, Attorney

I no longer conduct foreclosures. However, I maintain this information on my web site as a service to the public.

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Some sellers sell their property "on contract," and in most cases this contract is a deed of trust mortgage, not the old statutory form mortgage or real estate contract. A deed of trust mortgage can be foreclosed non-judicially, that is outside of court. A non-judicial foreclosure can be completed no sooner than 190 days after the last uncured default, provided that the seller initiates foreclosure at least 120 days before the 190^th day.

Foreclosure can be initiated for failure to pay the monthly mortgage payment or for other defaults such as failure to pay the taxes or insurance or even for significantly damaging the property and reducing its value as collateral. A lender can foreclose if a borrower violates a due-on-sale clause in a deed of trust and sells the property without the lender's consent.

The first step the lawyer takes is to obtain a foreclosure title insurance policy. This is mandatory. The lawyer must send notices to all interested parties, and only by obtaining a title report can he know the identity of all the interested parties.

The next step is to serve a Notice of Default on the buyer. This notice gives the buyer a deadline for curing the default and paying foreclosure costs. The Notice of Default is filed 120 days before foreclosure.

The next step is to serve a Notice of Trustee Sale on the buyer, either personally or by having notice posted on the property. The Notice of Trustee Sale is recorded with the county auditor 90 or more days before the foreclosure date set.

It has become common for buyers to file Chapter 13 "house saver" bankruptcies, which stop the foreclosure process. After filing bankruptcy, the buyer must start paying new mortgage payments as they come due. However, the buyer does not have to bring the back payments current immediately or pay accumulated foreclosure costs immediately. The buyer can have 36 to 60 months to pay these, with 1/36^th or 1/60^th of the arrearages and costs payable each month.

If the buyer fails to pay regular mortgage payments as they come due or fails to pay monthly payment on arrearages and costs, the foreclosure can be resumed. Unfortunately, sellers often face additional, unrecoverable attorney fees whenever a buyer files a Chapter 13 "house saver" bankruptcy. And that is all the more reason for a seller who sells "on contract" to insist on a large down payment and study a buyer’s credit carefully.

Through Deal Mortgage Corporation, we are able to help buyers who have entered Chapter 13 bankruptcy to refinance their homes and leave bankruptcy. Generally borrowers can obtain a decent interest rate if they have paid 12 consecutive months of bankruptcy plan payments on time and in full.

Copyright 2008. James Robert Deal.