Foreclosures can vary from state to state. The following information will help you to understand the California foreclosure process.

California is known as the Title Theory state where the mortgage company (i.e. bank) holds the title to the property while you live on the land and continue to make mortgage payments. The document that secures the title is usually called a “deed of trust” but may also be referred to as a mortgage. California has a complicated set of rules concerning foreclosures. The entire foreclosure process is described below.

How are mortgages in California foreclosed?

In general, foreclosure means that when you miss a payment or two , the bank sends an official notice that you are in the foreclosure process. Then you have a period of time to cure the deficiency. If you cannot do that, the mortgage company pursues foreclosure through either judicial or non-judicial means. An auction is then held and the property is sold to the highest bidder.

The primary method of foreclosure in California involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action. When the deed of the trust/mortgage is initially signed, it will usually contain a provision called a power of sale clause. This allows the trustee (usually a title company) to sell the property to satisfy the defaulted loan. The trustee acts as a representative of the mortgage company to sell the property, which typically occurs in the form of an auction.

California has a requirement known as the one action rule. If a foreclosure is completed by non-judicial means (outside of court), then the mortgage company cannot pursue a second action against you if the auction proceeds do not meet the amount due on the property.

If a foreclosure is judicial, the house may be sold and a separate judgment may be obtained against you for the remaining balance due on the loan (up to the full amount of the loan plus foreclosure costs) if the auction proceeds do not meet the balance due on the property.

Most loans are foreclosed upon using non-judicial foreclosure, but a mortgage company has the option of using judicial foreclosure. Since this process takes longer than non-judicial foreclosure, it is rarely used. In California non-judicial remedies have stringent notice requirements and the mortgage document are required to contain the power of sale language in order to use this type of foreclosure method.

Information compiled by The University of San Francisco School of Law

Finding a new home. Bad credit. Surprise tax bills. If you’re facing foreclosure, brace yourself for some difficult situations. Here’s some smart advice to help you deal with each one.

These days, record-breaking foreclosure statistics are coming out with numbing frequency. But what happens to the thousands of families after their personal financial disaster is added to the mounting national count?

Unfortunately, once a foreclosure is final, the financial and emotional upheaval is far from over.

While there’s considerable pain, most foreclosure victims will eventually become homeowners again, says Jay Zagorsky, a research scientist at Ohio State University.

Still, that won’t happen any time soon, especially since mortgage rule maker Fannie Mae has recently lengthened the time that must lapse between a foreclosure and approval for a new mortgage.

Here’s a look at the issues foreclosed families grapple with and some smart solutions.

1. Finding a new home
The immediate problem is obvious: where and how to find a new place to live.

Lack of cash for a rental deposit is probably the biggest barrier to foreclosed owners getting re-established on their own. Landlords will sometimes accept tenants who have a credit score of just 580, says Maurice Ortiz, marketing director at The Apartment People in Chicago.

But if landlords look beyond a numerical score to credit records, a foreclosure may spook them, since it indicates the potential tenant hasn’t paid his housing bills, Ortiz adds. If the foreclosure can be explained, however, and if the rental candidate has a solid job history, he may be accepted.

Moreover, “if you’re on the edge, you may have to double your deposit,” says Mark Fogelman, president of Memphis-based Fogelman Management Group.

Scraping together a rental deposit isn’t easy for cash-strapped foreclosed owners.

“That’s why I recommend that people try to make plans as soon as they think foreclosure (is inevitable),” says Patricia Lynch, a corporate trainer with ClearPoint Financial Solutions in Richmond, Va. Anyone who has an FHA-insured loan who’s being foreclosed on should investigate the “cash for keys” program, whereby they get a check for up to $1,000 if they voluntarily vacate their home and leave it “broom clean,” Lynch says.

2. Suffering through the credit fallout
Once owners default on their mortgages, other creditors consider it much more likely they won’t collect what they’re owed either.

“Credit cards have a ‘default’ rate, and (foreclosed owners) could see their interest rate jump to very high levels — as much as 30 percent,” says John Ulzheimer, president of consumer education for Credit.com. “You’ll also have a hard time getting a decent car loan,” he adds.

If a foreclosure is an isolated event on an otherwise good credit record, consumers may be able to rehabilitate their records and garner better loans and card rates in 24 months, Ulzheimer says.

But since a foreclosure is rarely the former owner’s only credit slip-up and foreclosures are often combined with the fallout of punishing rates, some former homeowners will never climb back up to a good credit score, Ulzheimer says.

3. Buying another home of one’s own
Fannie Mae has just increased the length of time it takes from the completion of a foreclosure sale until the borrower can get a new mortgage from four years to five years.

The extra year is designed to deter what Fannie Mae believes are borrowers who have made reckless debt decisions. But foreclosed owners who can explain that extenuating circumstances — typically situations beyond someone’s control, such as a job loss — are the impetus for the foreclosure must wait only three years.

Perhaps the best option for obtaining a mortgage after foreclosure is with a federally insured FHA loan, says Jerry DuPaw Jr., a mortgage loan officer in McHenry, Ill.

The minimum time between the completion of foreclosure until when you can be approved for an FHA loan is three years — whether or not there are extenuating circumstances. Still, FHA borrowers will have to show that they’ve been practicing good bill-paying habits since the foreclosure.

4. Owing a potential employer an explanation
Should you lose your job as well as your home, your new job hunt shouldn’t be hindered by the subject of your foreclosure coming up in job interviews — unless you’re applying for a job in which you handle money.

“We recommend that employers do credit checks when they are concerned about how financially responsible someone is — which may be for any money-related position from a cashier to an accountant,” says Robin Throckmorton, a human-resources consultant in Loveland, Ohio.

The federal Fair Credit Reporting Act has rules employers must follow, such as notifying the applicant of the credit check, and most companies limit checks so as not to run afoul of the law.

If a foreclosed owner is applying for a financial job, he should have an explanation ready, perhaps describing how the foreclosure has changed some of his personal money-management skills today, Throckmorton says.

5. Getting hit with a tax bill
It seems like the ultimate injustice: You lose your home and then weeks or months later you open the mail and find a bill for taxes on the amount of mortgage that the lender was never able to recover from the sale of the property.

Any time debt is forgiven, it’s a potentially taxable event. You are not paying back money that you borrowed, so that money is considered income by the IRS.

However, there are some exceptions. Last year, Congress passed relief for foreclosed owners — but only those who lost their principal residence and didn’t have a mortgage that they had previously taken as a cash-out refinance to use the proceeds for expenses other than improving their home, says Julian Block, a tax attorney and syndicated tax columnist in New York City.

But foreclosure victims may still not have to pay a tax tab, even if they had a cash-out refinance. That’s because the IRS has long allowed taxpayers to escape a bill on forgiven debt if they are insolvent. If, for instance, you receive a Form 1099c from a lender saying it couldn’t recover $5,000 of what it was owed, but your debts exceed your assets to the tune of $15,000, you must file Form 982 with your tax return to clear your tax obligation.

6. Living through loss
The emotional toll of leaving a home and neighborhood are impossible to quantify. One recent report released by First Focus, a Washington, D.C., advocacy group, finds that about 2 million children are likely to be affected by foreclosure in some way, including the disruption of being placed in a new school after a move.

One glimmer of hope is that the large numbers of foreclosures today may lessen the stigma of the event, Throckmorton says. She remembers when job applicants had to explain frequent changes in employment, because jumping from job to job was frowned upon. “Now that’s considered normal. With foreclosures so much in the news, it may prompt people not to make judgments.”

By Marilyn Kennedy Melia, Bankrate.com

It is important to know that your mortgage company would always prefer to keep you in your home rather than foreclose. They are in the business of providing mortgages, not owning or selling homes. It is in your best interest to talk to a counselor, a lawyer, or contact your mortgage company directly so you can keep your home.

• Talk to a housing counselor

Look for a HUD certified counselor. The Department of Housing and Urban Development has trained and certified loan counselors who will assist you free of charge and can negotiate with the mortgage company’s representative or “servicer” on your behalf. Servicers are often permitted by the agreements governing loans to renegotiate your loan terms, a process known as “work-out” or “loss mitigation.” This process may reduce your monthly payments, give you a few months without loan payments, delay payment of arrears or make it possible to otherwise change the payments on your home loan.

The Department of Housing and Urban Development’s Web Site www.hud.gov/foreclosure , has a nationwide directory of counseling agencies, or you can call them at (800) 569-4287. Services are free. Advice is also available at the Homeowners Hop Hot-line at (888) 995-HOPE.

• Contact a Lawyer

If you were misled or not fully informed by a broker or mortgage company about the terms of the loan, you might be able to “rescind” (cancel) the loan. You may also be entitled to damages. If you cannot afford a lawyer, call your local Bar Association of Legal Aid office and ask them to refer you to a lawyer. Contact information for local Legal Aid Societies can be found at www.dca.ca.gov/publications/guide/legal_index.shtml .

• Call your mortgage company

Ask for the “loss-mitigation” or “work-out” department and try to modify the loan terms. Be smart about modifying your loan. Many properties are worth less than the mortgages they secure; it is in your best interests to keep a property that is worth less than your mortgage? Be realistic about whether you can make the “modified” payments. Keep in mind that most modification documents contain a “waiver”. That means when you sign the modification documents you give up any legal rights you may have and you give up the right to take your mortgage company to court. Before you sign ANYTHING, take the papers to a lawyer or counselor to be sure you fully understand what you are signing. It is a legal document and you will be bound by the terms in the modification agreement.

This information was compiled by The University of San Francisco, School of Law.

Our current real estate market conditions are like no other time in history. Homeowners of distressed properties need the assistance of a Realtor now more than ever as a guide and consultant through a complicated process. The homeowner must determine if there is a way to keep their home or do they need to transfer the property with the least amount of damage to their finances and credit.

Please contact me for a confidential discussion. Let’s talk about the 7 options and find a solution for your situation.

Jana Nelson Paradise Real Estate

Providing excellent customer service, before, during & after the sale. I strive to be your Real Estate Consultant for life!

There are great opportunities to purchase foreclosures in today’s market.  If you are thinking of taking that step, here are some things you should know.

An REO (foreclosure) occurs when the bank that holds the mortgage has taken the property back because of nonpayment.  Some of the advantages to buying a bank-owned property are that the property has clear title, the property may be priced lower than comparable listings that are not bank-owned, and the bank may offer preferential financing terms.  In some cases the bank may have already made some repairs to the property as well.

There are also some disadvantages to purchasing a foreclosure.  The properties often do not last long on the market, which means you have to be prepared to make an offer almost immediately.  Otherwise, that perfect home you saw on Friday may not be available on Monday when you decide to make an offer. Homes are usually sold in “as is” condition, which means the bank is not likely to make cosmetic repairs.  Many banks charge a per day “late fee” if the closing is delayed, so it is important to have your inspections done and stay on top of the whole escrow process.

There are several common mistakes foreclosure buyers should take care to avoid.  They are:

1.  Don’t get caught up in a bidding war over an under-priced property.  The excitement can cause you to pay too much.

2.  Take advantage of the home inspection and get an accurate estimate of what the repairs will cost from an expert.

3.  Know what other comparable foreclosures are selling for so you can keep your bid at market value or slightly lower.

4.  Be wary of buying  in a neighborhood that is flooded with foreclosures.  That could mean further price drops and a loss in value if you have to sell within a few years.

5.  Make sure you have your preapproval in place.  This will not only tell you what credit you have available, but you as a buyer are more attractive to the bank than another bidder that has not secured financing.

If you are interested in purchasing a foreclosure, please explore this web site and use the search tool to find Lake Tahoe foreclosures (bank owned). You can search all active MLS listings for real estate in Lake Tahoe, California and Nevada. You can also sign up for  Get California Listings Via Email, and Get Nevada Listings Via Email, so when a new listing is posted on the MLS in your favorite neighborhood, at the price range you selected, you’re immediately notified. This is a very powerful tool that will help you stay on top and ahead of the current market.