In Texas, you can start a foreclosure the first day they miss a payment. If their payment is due (for instance) on August 15 and they didn’t make the payment (and their note didn’t have a “grace period”), they can notify an attorney. The attorney will send a 20 day “Notice of Intent” (only 10 days required if it’s a commercial property) which states “you owe these payments plus attorney’s fees, pay within 20 days or we intend to accelerate the note and post it for foreclosure”. If they do not pay current within that 20 days, the attorney sends an “Acceleration letter” which states “you didn’t pay what we told you to pay in our last letter, now you must pay the full balance of the note which is $X principal and $X interest plus attorney’s fees (normally 10%) enclosed is a copy of the Notice of Sale we posted at the courthouse. You have 21 days to pay the full amount due or we will auction the house on the courthouse steps”. So, if the payment was missed in August, the letter was sent today (August 22), then you could have a foreclosure sale on October 2 (always the first Tuesday of the month in Texas).

Less than 60 days from first missed payment to sale. AND, if the lender suspects that you don’t have insurance or that you haven’t paid your taxes (not all loans are escrowed) you can even be current in your payments to the lender and they can legally foreclose.

(Disclaimer, I am not an attorney and I am only speaking for Texas. States that have a “mortgage” instrument rather than a “Deed of Trust” instrument require a judicial foreclosure and that is more difficult and more time consuming.)

I think part of the problem we’ve seen is that mortgage brokers get paid per closing - with no reduction in their pay if the loan doesn’t perform. Same for inhouse loan officers - they get bonuses for closing more loans, even if those loans later default. If there were a delay where brokers and employees didn’t get all their money until the loan had performed well for an extended period of time, then I think we’d see them writing fewer bad loans.

Don’t cut and paste and re-post. Sometimes things just get stuck in moderation, what appears to be the post disappearing altogether. We’ve all had it happen to us.

Just a not for future stuff. It’ll show up eventually.

But your comment is so informative, I can see why you were eager to get it to show. I had been wondering why there was such a huge problem, as that high-level financial stuff is invisible to most people.

People accepted loans without truly understanding what they were getting into, and mortgage brokers pushed these (very profitable) loans without fully explaining the potential problems. Honestly, I’m not sure a lot of the brokers even understood the problems.

They were morons if they didn’t understand the programs, and dishonest if they didn’t explain. My husband works at a brokerage and EVERY client gets a full explanation of what lenders are offering the best deals AND what the pros and cons of each package is.

There was a recent article I read where an expert was interviewed that I agreed with– brokers need to be regulated to be either agents for the lenders or agents for the buyers. Right now the role is so nebulous that yes, many of them do push the loans that give them the big kickbacks, acting as the lender’s agent while representing themselves as the buyers agent. OTOH, my husband’s brokerage pushed straight dealing with clients and all agents were told to represent the buyer, even if it wasn’t as profitable, because word-of-mouth builds business.

It’s gotten easier for the borrowers to forclose than it ued to be. And 91 days in arrears is piddling when someone is struggling to make payments. And a lot of the lenders these days seem to think “helping the borrower get current” is to threaten them with foreclosure unless they get current NOW.

It also helps to define what “arrears” is. Some lenders start the clock at the first late payment, and keep the clock running until everything is paid current — thus a missed payment in January is still classed as “in arrears” even though regular payments (or even larger payments, but not full enough to clear the back payment) may have been made in Feb, March and April.

Another trick some lenders would be would be to hold payments in suspense if they are not the exact amount expected, and not to credit it against the loan, and only of the borrower is willing to fight can the “late charges” (because the payment was held in suspense and not creditied) be reversed.

In all deference to your Mum, but I have no sympathy for the bulk of the current crop of mortgage holders and lenders.

To Craig R:

You have to look at the big picture to understand why banks are foreclosing quickly nowadays. One of the problems is negative amortization. As more properties are foreclosed on the number of properties on the market creates a price reduction - thus the amount of the original mortgage is greater then the value of the home. Lenders, fearing a decreasing market, are trying to get out of questionable properties sooner then later. The other problem relates to general cash flow or asset valuation. Banks and mortgage lenders rely upon very short term loans for day to day operating cash. To secure those loans they have been using MSOs (essentially bundled mortgages in a security form). If the mortgage becomes questionable — either because of repayment issues or because of negative amortization the MSOs become less valuable — or of questionable value all together. This is what was referred to last week as the ‘liquidity crisis’ — which really had nothing to do with liquidity.

Now that the Fed has stepped in and said they will accept questionable MSOs to secure overnight loans it is likely we will see the time to foreclosure lengthen, but I believe the overall rate will remain steady for the next quarter or two.

It makes absolutly no sense to forclose on a property and get *no* cash flow, and knowing that the property, when sold by the bank (if it can be sold), will receive nowhere near the outstanding amount owed on the loan.

You have to look at the big picture to understand why banks are foreclosing quickly nowadays. One of the problems is negative amortization. As more
properties are foreclosed on the number of properties on the market creates a price reduction - thus the amount of the original mortgage is greater
then the value of the home. Lenders, fearing a decreasing market, are trying to get out of questionable properties sooner then later. The other problem relates to general cash flow or asset valuation. Banks and mortgage lenders rely upon very short term loans for day to day operating cash. To secure those loans they have been using MSOs (essentially bundled mortgages in a security form). If the mortgage becomes questionable — either because of repayment issues or because of negative amortization the MSOs become less valuable — or of questionable value all together. This is what was referred to last week as the ‘liquidity crisis’ — which really had nothing to do with liquidity.

Now that the Fed has stepped in and said they will accept questionable MSOs to secure overnight loans it is likely we will see the time to foreclosure lengthen, but I believe the overall rate will remain steady for the next quarter or two.

It makes absolutly no sense to forclose on a property and get *no* cash flow, and knowing that the property, when sold by the bank (if it can be sold), will receive nowhere near the outstanding amount owed on the loan.

You have to look at the big picture to understand why banks are foreclosing quickly nowadays. One of the problems is negative amortization. As more properties are foreclosed on the number of properties on the market creates a price reduction - thus the amount of the original mortgage is greater then the value of the home. Lenders, fearing a decreasing market, are trying to get out of questionable properties sooner then later. The other problem relates to general cash flow or asset valuation. Banks and mortgage lenders rely upon very short term loans for day to day operating cash. To secure those loans they have been using MSOs (essentially bundled mortgages in a security form). If the mortgage becomes questionable — either because of repayment issues or because of negative amortization the MSOs become less valuable — or of questionable value all together. This is what was referred to last week as the ‘liquidity crisis’ — which really had nothing to do with liquidity.

Now that the Fed has stepped in and said they will accept questionable MSOs to secure overnight loans it is likely we will see the time to foreclosure lengthen, but I believe the overall rate will remain steady for the next quarter or two.