CA. Foreclosure question! What is the lenders “Power of Sale”?
Posted by | Posted in Buy My Home Fast - Questions & Answers | Posted on 31-07-2010-05-2008
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Question by borrowerhotline: CA. Foreclosure question! What is the lenders “Power of Sale”?
Knowledge is often the best means to verify qualifications. There are a lot of “stop foreclosure” company’s willing to help people. Good or bad intentions are unknown. If the public will ask a few key questions they can usually tell right away if the source is legitimate or a predator. So here is one I think is very important to know regarding foreclosure.. . take a shot!
Best answer:
Answer by LadyCatherine
The power of sale can often be the fairest, most inexpensive method to deal with an unpleasant financial circumstance. It allows the mortgagee/lending institution to retrieve only what it is entitled to and no more. If there is a surplus, then the owner/mortgagor will benefit. The power of sale does represent certain complexities, particularly in terms of gaining possession and the obligation of the mortgagee to obtain the best possible value
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A non-judicial foreclosure allows the lender to use the “power of sale clause” in the mortgage document to force sale of the property without a court order.
Because the non-judicial foreclosure uses powers granted to the lender in the mortgage document, which is executed by the borrower at the time the loan is made, the property sale is, in essence, already “authorized” by the borrower. When you sign a mortgage document, you are agreeing in advance to sell your property at public auction if you do not pay the debt as agreed in the note.
Your first response is correct. I help people in foreclosure in SoCal. Here are your options in a foreclosure:
1. forbearance agreement
2. Loan Modification
3. Bankruptcy
4. Short Sale
5.Legal Delay – Sue if the info is incorrect or violates TILA or RESPA.
6. refinance or hard money
7. deed in leiu
The Power of Sale clause in a mortgage gives the lender the right to sell the property pledged as collateral for the loan by way of a non-judicial foreclosure. Without a power of sale clause, the lender would have to do a judicial foreclosure which takes much more time and cost tens of thousands more than a non-judicial foreclosure.
Most loans made within the past 8 years have the power of sale clause, provided the state law where the property is located allows non-judicial foreclosures.
I saw this article that explains CA foreclosures here http://www.crystalclearmarket.com/?p=141
Hope this helps. Good luck to you.
Elliot Lau, Realtor of 22 years.
The lender’s “power of sale” refers to the clause in the original mortgage documents that allow the bank to take a house to a public auction without going through the whole lawsuit process. It is used in nonjudicial foreclosure settings, which are the predominant types of foreclosure proceedings in California.
The other type of foreclosure, judicial foreclosure, is rarely used in California and only when the loan documents do not have the power of sale clause, or if the bank wants to pursue a deficiency judgment against the owners after the sheriff sale. Since most homeowners have little other assets than the house, it is usually not worth it for the bank to go after another judgment after foreclosure.
The power of sale clause, to be accepted most easily, needs to specify the time, date, and place that the sale can be conducted. Obviously, it doesn’t have to go so far as to name specific months, days, or years. If these aren’t mentioned in the documents, then additional guidelines would have to be followed in order to use nonjudicial foreclosure.
There are still notice requirements for the lender to be able to sell the foreclosed house in this manner, and there is no redemption period after the auction. Homeowners have 90 days after the initial notice of default is sent to cure the default, but if they are unable to do so and the house is auctioned, the lender can not sue them for a deficiency judgment afterwards.
Hope that answers your question.
ForeclosureFish