Pre-foreclosure is actually not really a legal term. It’s something that lenders, debt collectors and trustee companies made up to make it sound like foreclosure is imminent but it’s not actually a term that you will find anywhere in the civil code or the foreclosure regulations. There is no such thing as legal pre foreclosure. It’s more of a term that is used for semantics or colloquially to refer to a borrower’s loan situation where they haven’t made payments in a while and at some point the foreclosure process will begin but it hasn’t begun yet. Basically, you are behind on payments whether it’s a few months behind, 2, 3, 4 months behind but the lender actually hasn’t filed that notice of default yet and taken the formal step to begin the actual foreclosure process.
At least that’s how it works in California which is the only state that I’m licensed to practice in and the only state I would give you advice in. In California there is no such thing as pre-foreclosure other than something that the lenders make up to try and scare and intimidate borrowers into sending them some money or doing something that they want them to do. It is something to take seriously though even though it’s a made up term because it usually indicates that there’s been some lapse in payments, there is some serious misunderstanding or disconnect between the borrower and the lender and it’s going to be pretty likely that a foreclosure is coming down the road. It just hasn’t quite happened yet. It’s pre-foreclosure instead of actual foreclosure.
Although it’s not a legal term it’s still something to not ignore or talk to a real estate attorney or a bankruptcy attorney and see what kinds of options you have if you want to keep the property. If you’ve had enough, you don’t want to keep the property, the property has become too much of a burden for you, that’s certainly a perfectly sound financial decision as well. I would recommend discussing the situation with a short sale attorney. We do short sales all the time and there are some great short sale options that can even put money in your pocket as far as relocation money, the lender is oftentimes willing to cover the cost of moving and willing to provide some assistance in the foreclosure and short sale process because they feel like the borrower is working with them and not milking this thing until the very end or destroying the property.
So pre-foreclosure is not a real thing, however it’s still something to take seriously if that term is getting thrown around by a lender or a debt collector and of course, if you have any follow up questions to that or any other legal topic, please feel free to reach out to our office, call or email us. We are happy to discuss it with you.
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