How to Postpone a Trustee's Auction
To postpone an auction, which in real estate is generally referred to as a trustee's auction or trustee's sale date, the borrower must first be in default. Going into default means the borrower is not making mortgage payments.
Borrowers who stop making mortgage payments will sooner or later cause the bank to foreclose. Now, how that foreclosure is handled depends on state law. More than half of the states in the United States are trust deed states, and foreclosures in trust deed states are handled by the trustee.
Prior to Postponing the Auction
After a borrower stops making the mortgage payments, the lender notifies the trustee to initiate foreclosure proceedings. The trustee is a third party to the trust deed, a position some call "holding naked title."
Although there is no required time period prior to filing a Notice of Default, most lenders prefer to try to collect during the first 60 to 90 days that a borrower falls into arrears, rather than jump into foreclosure proceedings. Some states such as California require the lender to give the borrower at least 30 days' notice before filing a Notice of Default.
Once the Notice of Default is filed, a borrower has about 90 days to reinstate the loan by making up the back payments and paying late charges, which include the trustee's fees.
Ways to Postpone a Trustee's Auction
- Redeem the Mortgage: There is a difference between reinstating a mortgage and redeeming a mortgage but you will often hear the words used interchangeably, which is wrong. To redeem a mortgage is to pay off the mortgage; to reinstate, a mortgage is brought current. During the final days of a non-judicial foreclosure process, a lender is not required to accept a reinstatement but must allow a redemption.
- Apply for a Loan Modification: Lenders are also not required to postpone an auction in exchange for a loan modification, but most banks will try to work out a temporary repayment schedule. This does not mean the bank will not send the home to auction. So be careful. Borrowers may want to ask the bank for a written promise not to move forward with the auction. Some banks are sneaky. These banks will grant a temporary loan modification and, after 3 to 6 months, tell the borrower they are filing foreclosure because the borrower does not qualify for a permanent loan modification. They say thanks for the partial payments and file a Notice of Default.
- File for Bankruptcy: A bankruptcy filing does not permanently stop an auction but it could postpone the auction for a while. When a debtor files for bankruptcy, the court issues an order known as an Automatic Stay that stops attempts from creditors to collect money, which includes postponing an auction. It's like telling a trained dog to sit and stay. But the lender can then file a motion to lift the Automatic Stay, especially if the Notice of Default was already filed.
- File a Temporary Restraining Order: Most people associate a temporary restraining order with domestic abuse, but petitioning the court for protection from abuse can also include a request to postpone an auction. Borrowers will need to hire a lawyer to file a temporary restraining order, and that lawyer might need to find a reason based on fraud or some type of wrongdoing on the lender's part. Even if the lawyer is successful and wins the argument, the restraining order is not permanent.
- Attempt to Do a Short Sale: Telling a lender that the borrower is attempting to do a short sale is generally not enough. The borrower must submit an offer to the bank from a qualified buyer. The real estate agent or lawyer handling the negotiation for the borrower then calls the bank's negotiator and requests a postponement of the auction. Often, banks will not consider a request for a postponement until the auction is a few days away. It's as though the bank like to make borrowers sit on pins and needles, wondering if the auction will be postponed.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.