Understanding the Foreclosure Process:
A Step-by-Step Guide

We understand managing foreclosures can be complex & time-sensitive. So, we feel it’s important you have a clear understanding of the entire process from start to finish. Below is a detailed breakdown of the foreclosure timeline and what to expect during each stage.


Key Words:

Foreclosure: The action of taking possession of a mortgaged property when the mortgagor (borrower) fails to keep up their mortgage payments or other contractual obligations.

Notice of Default (NOD): A formal document that informs a borrower that they are in arrears on their mortgage payments, or failing to comply with their contractual obligations and that the lender intends to foreclose on the property.

Trustee: A neutral third party who holds the title to a property until the loan is paid off between the borrower and the lender.


Part 1: Starting the Foreclosure Process

  1. Deciding to Foreclose:
    • The decision to proceed with a foreclosure would come after you have evaluated the Borrower’s payment history or lack of it, the loan to value, if the Borrower is communicating with us or not, if it is a consumer purpose loan or business purpose loan, the Borrower’s exit strategy, etc. We will work with you to provide all possible information to make this decision and are happy to provide our recommendation as well.
    • Where there are multiple Lender(s), the decision to proceed with foreclosure would be directed by the majority rule; if the Lender(s) that have a majority of the loan wish to proceed, we will begin foreclosure for ALL Lender(s)s.
    • Owner Occupied Consumer loans require 120 days of delinquency before filing an NOD. Business Purpose loans require only 31 days of delinquency.
  2. Beginning Foreclosure:
    • For Consumer Purpose loans, we send the Borrower a 30-day Notice of Intent to begin foreclosure. The Borrower has 30 days to bring the loan current to prevent the filing of an NOD.
    • White Hat Servicing will email the Trustee, instructing them to begin Foreclosure. We will also send the Trustee:
      • Copy of the Servicing agreement
      • Copy of the Borrower’s Business purpose letter, or the above mentioned 30-day notice of intent.
    • We will obtain the following for verification and signature from each Lender(s):
      • Request to Start California Foreclosure
      • Declaration of Beneficiary/Lender(s)
      • Current Demand Loan Payoff, or Reinstatement Calculation
    • (Note: If there is an active payoff demand ordered prior to the NOD, the process is paused until the payoff demand expires.)
    • All forms are sent to the Trustee who reviews each for completeness & accuracy.
    • The Trustee then sends an invoice for payment (fees for this can vary loan to loan, based on loan size, number of lenders participating in the loan, etc.; a quote will be obtained from the Trustee once we request the Notice of Default be started), and the following forms:
      • Payoff Status Report, or Reinstatement Report
      • Declaration of Default and Demand for Sale
      • As the Lender(s) you would review, sign, and return the forms to the Trustee as well as pay the Trustee’s invoice for this first stage (by check or wire). These costs are added to the payoff demand and/or sale amount to fully payoff the loan.
    • (Note: The fee for the Trustee is paid directly to the Trustee, instructions are provided for this. All documents can be signed by White Hat Servicing as your agent, we would get your approval before signing anything though.)
    • The Trustee files and records the Notice of Default. Once the Trustee has the funds they release for recording and once the County records the Notice of Default, it is then returned to us.
  3. 90-Day Countdown:
    • After the NOD is recorded a “90-day foreclosure clock” begins; the Borrower has 90 days to reinstate the loan or pay off the loan in full.
    • During this time, the Trustee will send the “Status Report/Loan in Foreclosure” along with the “Trustee Sale Guarantee”. The Status Report will have items listed that we want to pay attention to on the Trustee Sale Guarantee, for any that require further action, such as anything in a senior position to your lien.

Part 2: Completing the Foreclosure

  1. Preparing for the Trustee Sale:
    • About 60 days after recording the NOD, the Trustee will send an invoice for the remainder of the Foreclosure Fees, as well as updated documents for review and signing, including:
      • Updated Status Report/Loan in Foreclosure
      • Authorization to Publish
      • Updated Payoff Status Report
      • Affidavit of Non-Military Service
      • Updated invoice for Lender(s) deposits.
    • White Hat Servicing reviews all forms and information sent for accuracy and then sends it to you for your review, signatures, and payment.
    • At this point you would review, sign, and return the forms, and send the second stage deposit to the Trustee to cover the remaining foreclosure costs (by check or wire).
    • The Trustee will then record and provide us the “Recorded Notice of Trustee Sale”, which includes the scheduled auction date.
    • A final bid amount/payoff demand is issued by the Trustee just prior to the Trustee Sale. This is reviewed for accuracy to ensure that all interest, fees, penalties, etc. are included in the sale amount that will set the starting bid for the Trustee. This is reviewed by White Hat Servicing for accuracy and sent to the Lender(s) for their review and approval.
  2. Trustee Sale:
    • If the Borrower does not file Bankruptcy (which might be done, in which case we work with the Trustee to get the property removed from Bankruptcy protection to proceed with the Foreclosure), then on the scheduled date the property will be auctioned at the respective county courthouse where interested buyers can bid on the property to purchase it, also known as “bidding at the steps”.
    • If no one bids on the property it becomes property of the Lender(s). The Lender(s) has the option at this point to then sell the property, keep the property, flip the property, etc.
    • If the mortgage is a 2nd mortgage and you acquire the property back, then you are taking the loan subject to the senior mortgage and are required to make the payments on it, or refinance/pay it off, depending on the mortgage/lender.
    • If the property is taken back through Foreclosure, White Hat Servicing can assist in the liquidation of the property, if the Lender chooses this.
  3. Two-Week Waiting Period:
    • There is a mandatory two-week waiting period after the sale, allowing the Borrower time to bring in the funds to repurchase the property. The Borrower would have to come in with all funds needed to purchase the property in full. At this point, the property would revert to the Borrower as the Lender(s) got paid off in full.
    • If the Borrower doesn’t redeem the property, and a new buyer has bid on the property, a Disbursement Payoff will be issued. White Hat Servicing verifies the disbursement payoff, ensuring accuracy that all your interest and fees are being paid to you.
    • Once verified, funds are released and your investment is paid off in full.
  4. Reconveyance:
    • The final step is the “Reconveyance of Deed”. The Trustee will send a Request for Reconveyance form which White Hat Servicing can sign on your behalf. Before singing, we would provide a copy of the document confirming you wish for us to sign it. Once recorded by the Trustee, the deed will be fully transferred, and the loan file will be closed; you will be notified once this is completed.

Summary Timeline:

Business Purpose loans can have an NOD start after 30 days late; Owner-Occupied Consumer Purpose loans can have NOD start after 120 days late:

  • Day 1-30: Notice of Default is initiated; 30-day Notice of Intent is sent (if applicable).
  • Day 30-60: Lender(s) submits required documents to Servicer and Trustee; pay initial deposit.
  • Day 60-90: Lender(s) reviews second set of documents; pay second deposit.
  • Day 90-120: Trustee Sale scheduled and property auctioned; two-week waiting period.
  • Day 120+: Disbursement payoff issued; reconveyance completed.

Important Notes:

  • Borrower Payment Options: Once a loan is in Foreclosure, the Borrower is not able to make partial payments. To make a payment, the Borrower is required to bring the loan current, otherwise the Foreclosure would proceed.
  • Senior Lien Concerns: It is important to review the “Trustee Sale Guarantee” (provided by the Trustee) to ensure there are no conflicting actions or liens in a senior position. White Hat Servicing also reviews this, noting anything that may be shown in senior position but should not be, and gets this addressed (sometimes a lien that is paid off when the loan was originated are not removed, in this case the appropriate documentation from the loan file or Escrow/Title is obtained to get this resolved).
  • Communication: It is important to maintain good communication with White Hat Servicing and get any questions answered or things clarified, when such a need arises.
  • Taking Title After Foreclosure: If the property is taken back through Foreclosure, Title is held the same way that you were shown as the Lender for the loan. If multiple Lenders, Title would show the Lender having their respective percentage of ownership.

If you have any questions or need assistance at any stage of the foreclosure process, please feel free to reach out to us.

We’re here to help!

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