Foreclosure Sixth Procedure
When the landlord’s or rental property owner’s home sells at the foreclosure sale, the lender or its servicing agent may elect to accept the sale proceeds as payment in full. This is known as a “full credit” bid. Should their lender or its servicing agent elect to “underbid” (direct the trustee to open the bidding in an amount that represents a specified partial payment of their defaulted mortgage loan), the successful bidder may be able to purchase the home for less than the amount owing to their lender at the time of the foreclosure sale.
Lenders or their servicing agents may elect to “underbid” if they believe a “collateral action”is appropriate. For example,should vandals damage the home and either no insurance coverage is available or the proceeds from the insurance coverage are inadequate to pay for the causality loss, the lender or its servicing agent may pursue a collateral action against landlords and rental property owners to recover the loss incurred as a result of the damage (waste). Moving from or leaving the home vacant prior to the foreclosure sale may cause a loss in property insurance coverage. Check with the insurance agent before moving out of home.
Note: It is worth noting that when a lender forecloses based on a default on the loan used to buy the home (purchase money loan), the lender may not obtain a deficiency judgment against the landlord or rental property owner if proceeds from the foreclosure sale are insufficient to cover the amount owed on the loan. In some circumstances, a lender may obtain a deficiency judgment against you on non-purchase money loans secured by the home, such as an equity line of credit. For more information on your rights and the lenders ability to collect money from you when your property sells for less at a public foreclosure sale than what is owed, contact an attorney.
This is a blog post for Real Estate Professionals, Investors, Landlord, Property Manager, and Property Management Companies. Landlords and Rental Property Owners Guide to Sixth Procedure in Foreclosure is brought to you by SimplifyEm Pay Rent Online and Property Management Software
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