Private lenders will begin to experience new and unprecedented changes with foreclosure processes based on the new regulations of SB 109, which implements the fact that what was once the final sale of foreclosure might not be the completion now. The changes in the SB 109 law came into play after there was an increase in delinquency rates that was not observed for the better part of a decade. Essential modifications about the foreclosure process that lenders need to be aware of include:

  • Prohibition of Bulk Sale: First, it changes the cross-collateralized loan foreclosure procedure by barring trustees from selling numerous properties at once, a practice known as a bulk sale. As a result of this process, private lenders will need to be confident about their bidding tactics for cross-collateralized properties.
  • No Completion at Foreclosure Auction: SB 1079’s second and possibly most significant change is that it allows specific qualifying buyers to bid on foreclosed properties after the auction. This is a substantial change from the former foreclosure process, which involves the property being transferred as soon as the trustee’s deed was recorded after the final and highest bid at auction.
  • Reconsidered Bidding Strategies: Because “Eligible Bidders” can now purchase a property by making an offer one dime more than the amount put up for sale, lenders must be highly cautious about their auction opening bid strategy. Many lenders would now benefit from starting the auction with a “full credit bid,” in which they bid on all amounts due under the loan, including past-due interest, principal, fees, and so on.

With the recent passing of the SB 109 modifications, private lenders must exercise caution to comply with the modifications as it affects their business. To read more, click here.

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