How to Postpone a Trustee's Auction
When discussing real estate, auctions are referred to as a "trustee's auction" or "trustee's sale date."
To postpone this sort or auction, the borrower must first be in default—meaning the borrower is not making mortgage payments.
Borrowers who stop making mortgage payments will sooner or later cause the bank to foreclose. How that foreclosure is handled depends on state law, but more than half of the states in the U.S. are trust deed states, and the trustee handles foreclosures. Fannie Mae short sales that are in default are handled differently; Fannie Mae and Freddie Mac do not ordinarily postpone trustee's auctions.
Before 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 a naked title."
Although there is no required period before filing a Notice of Default, most lenders prefer to try to collect during the first 60 to 45 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 90 days to reinstate the loan by making up the back payments and paying late charges, which include the trustee's fees. There are a few methods that can be used in postponing an auction.
Redeem the Mortgage
Although people refer to reinstating a mortgage and redeeming a mortgage interchangeably, they are different. To redeem a mortgage is to pay off the mortgage; reinstating requires bringing the mortgage 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. If accepted, banks will grant a temporary loan modification, and after three to six months, tell the borrower they are filing foreclosure because the borrower does not qualify for a permanent loan modification. They will then proceed to 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—including postponing an auction. However, 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 wrongdoing on the lender's part. Even if the lawyer is successful and wins the argument, the restraining order is not permanent.
Attempt to Make a Short Sale
Telling a lender that the borrower is attempting to make 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.
Fannie Mae. "General Requirements for Suspending Foreclosure Proceedings." Accessed Jan. 19, 2020.
995Hope. "So What Exactly Does It Mean to Be Facing Foreclosure?" Accessed March 20, 2020.
California Courts. "Foreclosure." Accessed Jan. 19, 2020.
United States Department of Housing and Urban Development. "Redemption." Accessed Jan. 19, 2020.
Consumer Financial Protection Bureau. "What Is a Mortgage Loan Modification?" Accessed Jan. 19, 2020.
Cornell Law School. "11 U.S. Code § 362. Automatic Stay." Accessed Jan. 19, 2020.