Your Legal Rights In A Foreclosure
If you can't pay your mortgage payments on time, the possibility of foreclosure -- and with it your home being foreclosed upon--can seem daunting. The process of foreclosure is complex and legal. However, you are protected by the law in your state as well as the mortgage documents that you signed.
Loss Mitigation Rights
Your loan servicing company is who handles your mortgage account. It may or not be the same company that issued the loan. The loan servicer must contact you by phone (or attempt to do so) within 36 days after your first missed payment. This is also true for any subsequent missed payments. Your lender and you will work together to avoid foreclosure through loss mitigation.
Your servicer must inform you in writing within 45 days of missing a payment. They also need to refer you to someone who can help with foreclosure prevention. Your servicer can't foreclose unless you are at least 120 calendar days behind in your payments.
Right To A Breach Letter
A clause in mortgage contracts usually requires lenders to send a breach letter to inform you when you are in default. You must include the following:
Information about the default and its causes
How to fix the default and reinstate your loan
The deadline by which you must remedy the default is usually at least 30 calendar days after the date that you received the notice.
Failure to remedy the default within the stipulated timeframe will result in the sale of the property
You must cure default to avoid foreclosure. If you don't pay the full amount due by the date shown in the breach letter, and you haven't found any other options, foreclosure proceedings are likely to begin.
You must have been paying your bills for at least 120 days before foreclosure proceedings can begin. Your lender will likely send you a breach letter around the 90th day.
Loss Mitigation Rights
Your loan servicing company is who handles your mortgage account. It may or not be the same company that issued the loan. The loan servicer must contact you by phone (or attempt to do so) within 36 days after your first missed payment. This is also true for any subsequent missed payments. Your lender and you will work together to avoid foreclosure through loss mitigation.
Your servicer must inform you in writing within 45 days of missing a payment. They also need to refer you to someone who can help with foreclosure prevention. Your servicer can't foreclose unless you are at least 120 calendar days behind in your payments.
Right To A Breach Letter
A clause in mortgage contracts usually requires lenders to send a breach letter to inform you when you are in default. You must include the following:
Information about the default and its causes
How to fix the default and reinstate your loan
The deadline by which you must remedy the default is usually at least 30 calendar days after the date that you received the notice.
Failure to remedy the default within the stipulated timeframe will result in the sale of the property
You must cure default to avoid foreclosure. If you don't pay the full amount due by the date shown in the breach letter, and you haven't found any other options, foreclosure proceedings are likely to begin.
You must have been paying your bills for at least 120 days before foreclosure proceedings can begin. Your lender will likely send you a breach letter around the 90th day.
Notice Of Foreclosure
You have the right of notice about a pending foreclosure regardless of where you are located. If it is a court foreclosure you will be notified by a summons and complaint that a foreclosure has started. Two notices may be sent if the foreclosure is non-judicial.
A defense to foreclosure may be available if you fail to receive the appropriate notice according to state laws. It does not necessarily mean that you will avoid foreclosure. However it could force the servicer into issuing a new notice, and the foreclosure process can be reopened. You may have enough time to catch up on your payments or find another option.
Notice To Default:
According to state law, a nonjudicial foreclosure begins when a notification of default has been recorded at the county offices. The NOD is a public notice that your default has been declared. It includes information about the borrower(s), lender, trustee, property, default, actions required to cure it, and a statement that the lender will make the property available for sale if the default is not corrected by the specified deadline.
Notices Of Sale:
This notice might be mailed, published in local newspapers, posted on the property, and recorded into the county land records. It contains details about the property as well as a statement that it will be sold at a public auction.
Right To Reinstate
According to state law, you may have the ability to stop a foreclosure by making a lump sum payment to bring your loan up to date, including all fees and expenses. Then, you can resume regular payments. In general, you have to reinstate the loan within a certain deadline, such that by 5:00 PM on the last day before the property sale.
The right to reinstate may be granted by your mortgage contract. You may also be able to reinstate your loan by checking your mortgage contract or deed to trust.
The lender may grant you reinstatement if the state or mortgage contract does not allow for you too. If the lender refuses to reinstate you, you can petition a court for permission. A judge will generally allow foreclosure if the lender is unwilling to reinstate your loan.
Redemption right
All states permit borrowers to pay off any debt, including fees and expenses. Some states also allow borrowers and borrowers to purchase the property back after the foreclosure sale.
Right To Foreclosure Mediation
Property owners in foreclosure can participate in mediation in some states, counties, or cities. You meet with your lender or servicer and an impartial mediator to discuss possible options such as a loan modification or short-sale, repayment plan, and deed instead of foreclosure.
Right To Challenge The Foreclosure
You have the right to challenge the foreclosure in court, regardless of where you live. You can only participate in an existing foreclosure lawsuit if it is a judicial foreclosure. You must file your own lawsuit if it's nonjudicial. If it's a nonjudicial foreclosure, however, you must file your own lawsuit.
Right To A Surplus
You are entitled to any excess proceeds if the property is sold at a foreclosure auction for more than what you owe, including all fees and lien on it. You may also be liable for the excess proceeds, which is called a surplus, depending on your state law.
Fair Debt Collection Practices Act Validation Letter
The Fair Debt Collection Practices Act (FDCPA) federal law covers when, how, and how often third-party debt collectors may contact debtors. FDCPA could apply to foreclosures depending on whether the law is judicial or not.
Judicial Foreclosures:
Creditors can obtain deficiency judgments.
Nonjudicial Foreclosures:
A unanimous U.S. Supreme Court decision in Obduskey v. McCarthy & Holthus LLP in February 2019 states that the FDCPA is not applicable to nonjudicial foreclosures.
FDCPA is applicable to mortgage services. Your mortgage servicer must send an FDCPA validation note that includes:
What you owe including interest, late charges, and attorney fees.
Name of the creditor
A statement explaining that the debt is valid if it is not challenged within 30 days after receiving the letter
A statement that, if the debt collector is notified in writing within the 30 day period to dispute the debt, he/she will receive written verification of the debt from you and send you a copy
A statement from the debt collector that you will receive the name and address the original creditor if they are different than the current creditor if requested within the 30-day period