In case you missed it, this was a big deal on TBWS Daily the other day. Here is the skinny – I’ll start at the end – the foreclosure is not complete until the redemption is over. In other words, the bank does not take possession or “own” the property until after the redemption period—because technically, if the “owner” can scrape together the money, they could still buy the home back from the bank.
Here’s how this generally works…First, Homeowner stops making payments
- Bank sends “breech letter” – 60 days
- Bank begins foreclosure process — Posts legal notices or begins Judicial process (depending on state laws) – 90 days
- After appropriate time has passed or orders are issued, a Sheriff’s Sale occurs at the county courthouse
- Bank typically does not get a high enough bid and buys the Sheriff’s Deed for the amount of the mortgage back to themselves – but if they did get a high enough bid, the buyer must pay cash — no mortgages at this point — but someone must have tried or Fannie wouldn’t have said something, right? The bank/buyer does not technically OWN the property – they own the rights to the property after the redemption is over
- 6-18 months is a typical redemption period – the owner still owns property but for only under certain conditions (payoff and time limit). The owner may also still occupy the property and do as they like with it
- Only after expiration of the redemption period is the transfer of title in the property completed. At this point, the Sheriff will remove the former owner and their belongings from the home. The Bank now has the right to transfer the property to another individual
- This redemption period can be accelerated in cases of abandonment by the owner – in most cases that reduces the waiting period to 30 days
Fannie calls this a Title Defect for a reason – you would not get a title policy without exceptions, you do not fully OWN the property – yet. You also do not have the right to sell or transfer the property since you do not own it. If you did make the mistake of mortgaging a property without clear title and the seller did not have the full right to transfer, do not fret…Fannie says it will buy the mortgage after the expiration of the redemption period.
Let your agents know. www.MortgageCurrentcy.com has a Mortgage Talking Points for your agents. Set up sales meeting and ask a foreclosure attorney & title rep to discuss your state’s rules! Or use www.ConstantConnecting.com to email the talking points to your Realtors(r)