As Miket points out, a bankruptcy (BK) filing can forestall the foreclosure process and some homeowners and their legal advisors are adept at keeping a property in BK … albeit an aggressive lender (beneficiary) can take counter legal actions, if they grow weary of the “BK delay” gamesmanship.
As Miketh also notes, a notice of trustee sale (NTS) must be ?re-filed? after one year if no trustee sale occurred within the 12 month timeline.
Not every property in default (NOD + NTS) goes to auction. Some homeowners will do a “deed in lieu” thereby turning over ownership to the foreclosing beneficiary. But, that is less the case today, as so many homeowners are opting to stay put until/unless the lender (bene) takes the property to trustee sale. It can be stressful to always wonder if this sale date will be ?the one,? and some prefer to ?move on? rather than string things out.
In the wake of the robo-signing scandal and subsequent nationwide (states? atty gen) settlement, and other foreclosure reform legislation, many lenders are now being more liberal about considering/approving loan modifications. But lenders have found that many (NOT ALL) homeowners with negative equity, are simply not interested in ANY realistic “loan mod” options. These homeowners know how common it is for lenders to postpone trustee sales (go slow ? dot ?I?s, cross ?t?s), and many defaulted owners prefer to stay in their homes until that fateful day when the property finally goes to auction. Hence, you hear stories about 2, 3 or more years in a property without making ANY payments.
It’s also ironic that many property owners with “high risk” (low credit score or ?sub-prime?) mortgage loans, now are being offered favorable loan mod options, whereas a similar property, in the same neighborhood, purchased/financed at appx the same time, by a borrower with a high credit score, and substantial down payment, may not have such generous loan mod options. One reason for this discrepancy is the common practice of lenders assigning (selling) loans to a new beneficiary. And the higher the risk in the loan (?in default? or ?at risk?) the more likely the loan will be sold at a deep discount to a new beneficiary. It is often in the best interest of the new beneficiary to make the defaulted loan a performing asset, by offering generous loan mod terms or even a principal reduction. Yet many homeowners still see ?negative equity? and have grown accustom to not making payments, and they say ?thanks but no thanks? to any loan mod option.
I looked at one deed of trust (DOT) today where the loan was assigned three (3) times in the last 6 months. The loan is going to trustee sale very soon, and I suspect the latest beneficiary will not be taking much or any loss should they opt to foreclose, even at a deep discount bid. Why? Because the new bene almost certainly purchased the loan at a deep discount (well below the property’s current market value). With the market strengthening, the new bene may in no rush to foreclose.
Another dirty little secret is that many banks are profiting handsomely by delays in the foreclosure process. While many of the large banks were once big mortgage lenders, a large number are now making hay by servicing loan portfolios. Mortgage servicing fees add up, and get added in to any bid on a DOT that might eventually go to trustee sale. Servicing fees add up, and the longer the delay, the more in fees payable to the institution doing the servicing. More delays = big servicers acting like Charlie Sheen ? ?Winning!? Duh!