This document discusses loan defaults, delinquencies, and foreclosures. It describes defaults as a breach of loan terms that can lead lenders to accelerate repayment and pursue foreclosure as a last resort. Delinquencies involve missed or late payments of principal, interest, taxes, insurance, and other amounts owed. The document outlines various options to adjust loans such as workouts, moratoriums, and voluntary deed conveyance to avoid foreclosure. It then details the processes of power-of-sale foreclosures using deeds of trust and judicial foreclosure and sale for conventional mortgages, both of which can lead to a public sale of the property.

1. Loan Defaults and Foreclosures
Chapter 13
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2. Defaults
• Breach of one or more of the conditions or terms of a loan
agreement
• Acceleration clause activated
• Lenders seek to avoid foreclosure
• Acceleration and foreclosure as last resort
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3. Delinquencies
• Principal and interest
• Grace period
• Late period charge
• Property taxes
• Other liens
• Hazard insurance
• Poor property management
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4. Adjustments
• Workouts
• The Soldiers and Sailors Civil Relief Act of 1940
• The Housing Act of 1964
• Avoiding a foreclosure
• Moratoriums (forbearance) and recasting
• Voluntary conveyance of deed
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5. Foreclosures
• Process to recover lender’s collateral—
borrower’s rights of redemption are
eliminated and all interests in the subject are
removed
– Equitable redemption period
– Strict forfeiture
– Statutory redemption period
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6. Power-of-Sale Foreclosures
• Deeds of trust
– Beneficiary notices payment delinquencies;
borrowers are unable to remedy
– Beneficiary notifies trustee to foreclose
– Trustee files Notice of Default
– Reinstatement period
– Notice of trustee’s sale and publication of date,
time, and place of sale
– Sale is held and highest cash bidder wins
– Trustee’s deed is given to successful bidder
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7. Judicial Foreclosure and Sale
• Conventional mortgages
– Lender notifies delinquent mortgagor
– If no solution, complaint is filed by mortgagee in county court
– Title search made; lis pendens filed
– Complaint brought before presiding judge
– Judgment decree
– Public sale
• Conventional guaranteed mortgages
• Equitable redemption
• Statutory redemption
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8. Loans with Special Foreclosure
Requirements
• FHA-insured loans
• DVA-guaranteed loans
• Junior loans
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