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What happens if the borrower stops making payments?

If a borrower stops making payments, the Trustee will file a Notice of Default and if the borrower does not bring the loan current, foreclosure proceeding would begin. With the protective equity in the property, the borrower has a lot to lose if the loan goes to foreclosure. Generally, the borrower will try to sell the property quickly to salvage his equity. If not, when the property goes to a Trustee’s Sale, the note holder is entitled to recover all foreclosure costs, late charges, back interest and all the remaining principal balance from the sale. If there are no bids, title to the property reverts to the note holder and then the property can be put up for sale on the open market.