In Avoiding the $475,000 Mistake – Entering the Credit Bid attorney John L. Hosack, Buchalter Nemer, and mortgages expert witness Joffrey Long write:
Finally! The delays are over and your foreclosure is going to sale. The trustee asks for bidding instructions. The grand total owing on your loan (a first trust deed) is $575,000. The value of the property is $500,000. Would you open the bidding at $575,000? It could be a big mistake. Surprisingly, many otherwise sophisticated lenders and servicers, including large banks, are completely unaware of this problem.
At the opposite extreme, there’s another challenge. It occurs when a lender/servicer who is owed $575,000 opens the bidding at a minimal sum, such as $2,000, that has no relationship to the equity being auctioned.
There are serious problems with either approach. The good news – either set of problems can be avoided with some relatively simple procedures.
Joffrey Long, President of Southwestern Mortgage, chairs the education committee, is a director and is a past president of the California Mortgage Association. He provides litigation consultation for, and is often called upon to testify as an expert in mortgage related litigation matters. See his profile here.