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Media has beaten this dead horse repeatedly - it is well known the dire state of the housing market. Everyone knows about the countless foreclosures that have flooded the market. The amount of inventory appears to be endless. Recently, multi-family properties have finally made the foreclosure list.

On a weekly basis we are seeing NOD’s (Notice of Defaults) on several multi-family dwellings, as well as a few REO’s (Real Estate Owned) - that is the industry term for FORECLOSURE.

The multi-family foreclosures that we are seeing hit the market consist of two types of scenarios - 1. Developers that were in the process of building luxury condo complexes.  2. Investors that paid too much for properties and cannot achieve the projected rental upside they expected. Currently the foreclosure opportunities are so upside down that the investments do not pencil out.  Yet, we are just in the infant stages and as the inventory of multi-family properties builds, prices are surely bound to start making sense.

For those of you who do not know how the whole foreclosure process works - read below.

In the state of California the process begins when a homeowner has missed a payment or two, at which time the lender may choose to start the foreclosure process. This usually happens in 45 to 60 days but the decision to begin the foreclosure process is at the lender’s discretion and may vary.  Once the lender decides to begin the foreclosure process, the lender is required to file a 30-Day Notice of Intent to file a Notice of Default (NOD).

The 30-Day Notice is a rule put into place by Senate bill 1137 in July of 2008 and applies to owner-occupied residential properties sold between January 1^st, 2003 and December 31^st, 2007. After the 30 days are up, the lender can file an official NOD.  Lenders of residential properties that do not fall under the Senate bill can simply file an NOD after the first missed payment, again the actual time they file an NOD is at the lender’s discretion so may vary. The lender provides information on how to reinstate the loan and the homeowner has not less than three months from the NOD filing to do so.

If the homeowner does not act by end of three months after the NOD is filed, the lender can proceed with the foreclosure.  The lender must publish a Notice of Trustee’s Sale, which is posted for 20-31 days (the law requires lenders to post the sale for at least 20 days but most usually file 31 days before the sale because of an IRS notice requirement). In all, the homeowner has a little over three months to bring their loan into good standing from the time an NOD is filed on their property. In addition to the time frame above the homeowner can, by law, bring their loan current until five days prior to the Trustee Sale. Even after the deadline to cure a default is filed, the homeowner still has an option to pay the entire loan amount up to the time of the Trustee Sale. However, once the Trustee Sale is recorded, the property is transferred to a new owner, in most cases the lender itself, and all bets are off for the homeowner. The property is then owned by the lender and becomes a real-estate owned or REO property. Source

This entry was posted on Sunday, January 11th, 2009 at 10:21 pm and is filed under Commercial Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.