Homeowners' Legal Rights Before, During, and After Foreclosure
As the owner of a home that is subject to a mortgage, you have certain rights before, during, and after the foreclosure process. You may not be aware of some of these rights, which are often framed in technical language and may not appear on your mortgage or deed of trust. Many protections for homeowners arise from specific state and federal laws. You should understand the nuances of your rights to make sure that you exercise them when needed or hold a mortgage servicer accountable when it violates them.
Rights Before Foreclosure
Did You Know?
The foreclosure process cannot officially begin until mortgage payments are more than 120 days overdue.
If you have missed a payment on your mortgage, the mortgage servicer must attempt to contact you by phone within 36 days to discuss your loss mitigation options. It also must contact you in writing about loss mitigation within 45 days of missing a payment. Whenever you miss an additional payment, the mortgage servicer must contact you within 36 days of that event. It cannot start the foreclosure process until the homeowner is more than 120 days overdue on their payments. This 120-day period allows the homeowner to complete a loss mitigation application if they choose.
While federal law provides loss mitigation requirements, the mortgage or deed of trust will contain your right to receive notice that you are in default on your loan. The servicer must send you a breach letter informing you of the default and giving you time to fix it before it demands the remainder of the balance on the loan.
Meanwhile, state law gives homeowners a right to receive notice of a judicial or non-judicial foreclosure. (This is true across all states.) Notice might take the form of a summons and complaint in a judicial foreclosure or a notice of default in a non-judicial foreclosure. Some states might allow a mortgage servicer to provide notice by publication or by posting it on the property. In some cases, the homeowner might be entitled to receive notice of a foreclosure sale as well.
Rights During the Foreclosure Process
Once the process has started, you have a right to redeem the property before the foreclosure sale and sometimes even after the sale. Redemption involves paying off the full amount of the loan if you redeem the property before the sale, or reimbursing the buyer of the home if you redeem the property after the sale.
Some but not all states provide a right to reinstatement. This means that you can activate the provisions of the loan again by catching up with your payments and any penalty fees in a single lump sum. Then, you can resume your monthly payments. If your state’s law does not provide this right, you may receive this right through your mortgage or deed of trust. The lender or a court might even allow you to reinstate the mortgage as a matter of convenience because it is simpler than proceeding with a foreclosure sale.
You also have a right to fight a foreclosure if you have a valid defense, such as an error by the mortgage servicer. This may involve responding to the summons and complaint in a judicial foreclosure, or it may require filing a new lawsuit in a non-judicial foreclosure. Depending on the state or area where you live, you may have a right to foreclosure mediation, which can help you work out an alternative to foreclosure with the lender.
Rights After Foreclosure
If a foreclosure sale generates more than enough money to pay back what you owe on the loan, in addition to any other liens on the property, you have a right to the extra money received from the sale. This is known as a surplus. The opposite of a surplus is a deficiency judgment, which is an extra amount that the mortgage servicer can pursue from you if the foreclosure sale does not make up for the payments owed on the loan.