Tuesday, October 5, 2010

Foreclosure Process: How State Laws Vary

Foreclosure is not a universal, single situation. Each state has its own complex rules and timelines for how foreclosures are handled, and even within each state there may be more than one type of foreclosure. You need to know the steps of foreclosure, whether your state has judicial or non-judicial foreclosures, your state’s quirks, and any possible loopholes.

Know the steps of foreclosure

Although there are variations, your foreclosure will go through five stages, which gives you some time to adjust to the idea that you need to leave your house and take steps to ensure as smooth a transition as possible:

1. Payment default. Your agreement with your lender will stipulate how many missed payments put you in default.

2. Notice of default. Your lender sends this after a fixed amount of time, depending on your mortgage agreement. According to Wayne Greenwald, a New York-based attorney, this is when you must aggressively pursue ways to fend off the worst outcome. In New York, for example, you have the right to contest the foreclosure. Start by demanding to see the paperwork. Since so many mortgages are repeatedly sold, every so often the actual paperwork gets lost in the shuffle, and you’ll reap the benefits: your foreclosure will be delayed until it’s found.

3. Property put up for auction. Property that has been foreclosed is placed for public auction. In some states, you may have rights for redemption or reinstatement, which basically give you some final opportunities to reach an agreement with the lender.

4. Property sold at auction. If the auction fails to find a buyer, the bank will take ownership and attempt to sell property, often with a real estate agent’s assistance.

5. Eviction. You’ll receive eviction notice, advising you to vacate premises immediately.

Understand judicial vs. non-judicial foreclosures

When you bought your house, you were handed piles of pages in fine print you almost certainly didn’t read. Foreclosure is where these pages come into play! You need to understand some terms before you can understand your foreclosure:

  • A mortgage is actually not the loan you received, but a document that was issued at closing. It is an agreement between you and the bank that is lending you the money.
  • A deed of trust serves the same purpose as a mortgage, but it involves three parties: you, the bank, and a trustee that holds the title until you’ve paid off the loan. This trustee is typically a title company, but in some places it can also be an attorney.

You probably don’t remember choosing one over the other—because you didn’t. Your state’s law determined which instrument would be used. And in fact, for the average homeowner, there’s virtually no difference between the two. However, these instruments affect the kind of foreclosure you will likely face:

  • Judicial foreclosure. Typical in mortgage states, it requires the lender to go to court to proceed with foreclosure.
  • Non-judicial foreclosure. Typical in deed of trust states, the trustee can usually proceed with foreclosure without involving the courts.

Many states allow both judicial and non-judicial foreclosures, depending on specific terms in the loan documents. Non-judicial foreclosures are usually—but by no means always—quicker than judicial foreclosures.

Learn your state’s quirks

Each state has its own specific ways of handling foreclosures—you can’t even assume that all judicial or non-judicial states will be the same.

If you live in Georgia, for example, you will probably go through a non-judicial foreclosure. The lender will attempt to notify you that foreclosure is imminent, and then place a “notice of foreclosure” in the local legal newspaper for four consecutive weeks. After that, the lender’s attorney can sell your home to the highest cash bidder. Lenders on Georgia homes can often complete the repossession process in as little as six weeks.

On the other hand, if you live in Connecticut, you will definitely proceed through a judicial foreclosure. The judge presiding over the case has the option to grant either a “strict foreclosure,” where the deed is forfeited immediately, or a “foreclosure by sale.” Your lender must send you a letter at least 60 days before the foreclosure action, after which time the foreclosure can begin, typically taking up to four months.

Compare that state to New York: It’s also a judicial-only state—but the process typically takes more than a year.

Review the loopholes

Although nothing replaces professional help, researching your state’s rules is a good place to start. Even beyond the usual regulations, some states have recently created special rules to ease borrowers through the foreclosure process. Qualified local help can help you with such programs as:

  • Maine’s borrower-friendly foreclosure diversion program. It creates stays of proceedings and requires lenders to participate in good-faith foreclosure discussions. Lenders who don’t participate can find their lawsuits dismissed.
  • New York’s new rules that add loans secured by borrowers’ homes in its mandatory settlement conference law, essentially requiring lenders to meet with borrowers to discuss settlement.

The more you understand your state’s laws, the more likely you will be able to move through your foreclosure process with a minimum of bumps—or even avoid it altogether.

Read more: http://www.houselogic.com/articles/foreclosure-process-how-state-laws-vary/#ixzz10tI1FC5w

Foreclosure Laws and Procedures By State

Compare all state foreclosure timelines on this simple one-page chart and click on any state name to read about detailed foreclosure procedures for that state.

Before continuing, please note that if you're currently facing or potentially facing foreclosure, you probably have a handful of foreclosure questions. We have a Frequently Asked Questions section that can help.

State Judicial Non-
Comments Process



Alabama 49-74 21 365 Trustee
Alaska 105 65 365* Trustee
Arizona 90+ 41 30-180* Trustee
Arkansas 70 30 365* Trustee
California 117 21 365* Trustee
Colorado 145 60 None Trustee
Connecticut 62 NA Court Decides Court
Delaware 170-210 60-90 None Sheriff
District of Columbia 47 18 None Trustee
Florida 135 NA None Court
Georgia 37 32 None Trustee
Hawaii 220 60 None Trustee
Idaho 150 45 365 Trustee
Illinois 300 NA 90 Court
Indiana 261 120 None Sheriff
Iowa 160 30 20 Sheriff
Kansas 130 21 365 Sheriff
Kentucky 147 NA 365 Court
Louisiana 180 NA None Sheriff
Maine 240 30 90 Court
Maryland 46 30 Court Decides Court
Massachusetts 75 41 None Court
Michigan 60 30 30-365 Sheriff
Minnesota 90-100 7 1825 Sheriff
Mississippi 90 30 None Trustee
Missouri 60 10 365 Trustee
Montana 150 50 None Trustee
Nebraska 142 NA None Sheriff
Nevada 116 80 None Trustee
New Hampshire 59 24 None Trustee
New Jersey 270 NA 10 Sheriff
New Mexico 180 NA 30-270 Court
New York 445 NA None Court
North Carolina 110 25 None Sheriff
North Dakota 150 NA 180-365 Sheriff
Ohio 217 NA None Sheriff
Oklahoma 186 NA None Sheriff
Oregon 150 30 180 Trustee
Pennsylvania 270 NA None Sheriff
Rhode Island 62 21 None Trustee
South Carolina 150 NA None Court
South Dakota 150 23 30-365 Sheriff
Tennessee 40-45 20-25 730 Trustee
Texas 27 NA None Trustee
Utah 142 NA Court Decides Trustee
Vermont 95 NA 180-365 Court
Virginia 45 14-28 None Trustee
Washington 135 90 None Trustee
West Virginia 60-90 30-60 None Trustee
Wisconsin 290 NA 365 Sheriff
Wyoming 60 25 90-365 Sheriff

* Judicial Only Mouseover the symbol to view state-specific comments

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