Consider the following:

• Banks currently own over 800,000 REO’s (foreclosures) that they have not yet put on the market, and are simply sitting on.  They cannot yet afford to take the losses on these homes, so they are letting them sit vacant, accumulating fines, property taxes, back HOA dues etc.
• There are 6,500,000 mortgages currently in default in the United States.
• What is the cure rate of these mortgages (the likelihood that they will be brought current as opposed to going to foreclosure or short sale)?
• 30 days late: 29% Cure Rate (in other words, 71% will go to foreclosure or short sale)
• 60 days late: 5% Cure Rate
• 90 days late: 0% Cure Rate

While these are national numbers, these default properties are heavily concentrated in the hardest hit states of Florida, Nevada, Arizona and California.

Keep in mind that lenders often take longer than the timeframes below to foreclose, primarily because they typically prefer to workout a short sale with the borrower rather than foreclose. With that said, I highly recommend all borrowers be proactive and not allow their home to get to the 11th hour in the foreclosure process.

Once a NOTS (Notice of Trustee Sale) or foreclosure sale date, has been filed, while we can often successfully get the sale date postponed, there are no guarantees, and lenders sometimes either elect to foreclose or foreclose by mistake, simply because the left hand very often does not know what the right hand is doing at most of the nation’s major lending institutions.

Generally, lenders will file a NOD 90-120 days after a borrower stops making payments, and file a NOTS 90-120 days after the NOD, making the whole process take about 6-7 months start to finish. Many lenders extend this period dramatically when a seller is doing a short sale.

Finally, many people are under the mistaken impression that they can stay in their homes for months and even years without making payments and not get foreclosed on. While this was true in many instances in 2009, this was due to the 4 concurrent foreclosure moratoriums that were in effect in California. As of September 2009, those moratoriums have ended and lenders are now foreclosing at a brisk pace on borrowers who are simply not making payments and not pursuing any other avenues to avoid foreclosure.

Again, a short sale is almost always a better alternative to foreclosure.

As of September 8, 2008, California has a special foreclosure timeline for loans originated between 2003 and 2007, inclusive, which are secured by owner-occupied residences. The special foreclosure timeline will remain in effect until January 1, 2013. (Cal. Civ. Code § 2923.5.)

In past real estate downturns, banks were willing to take properties back in a deed in lieu of foreclosure. Today, however, most banks are not interested in doing deeds in lieu of foreclosure because they are already overwhelmed with foreclosed properties and do not want to take any more properties back.

For this reason, typically, when a seller calls their lender to request a deed in lieu, they are told that the bank does not want it, and to short sale the property.

The other major obstacle in most cases to a deed in lieu is that there can only be one loan on the property. If a homeowner has a first and a second lien on the property, they cannot do a deed in lieu of foreclosure.

Finally, a deed in lieu shows up as a foreclosure on a borrowers credit report.