In this day and age it’s only common knowledge that any one of us may find ourselves without a job tomorrow and thus in risk of not being able to make the mortgage payment….the one payment that allows us access to the American dream of home ownership…..
The best tool you can have in your home ownership belt is knowledge and the information below will help you to understand what will happen if you ever do cross that bridge of not being able to make your mortgage payment.
A mortgage note (in Nebraska the document that secures the title is called a Deed of Trust) usually carrys a grace period, typically 10 to 15 days is. Many people delay through most of the grace period before making payment, and no one, including the lender thinks very much about it. On day 16 a late fee is assessed. At this point there are no ramifications beyond that late fee and maybe a "friendly reminder" call from the lender's customer service department. The late payment probably won't even show up on the borrower's credit report. On Day 30, if the payment has still not been made, the situation changes. At that point the borrower is in default and things quickly turn serious.
Laws regarding mortgage default and foreclosure differ from state to state and mortgage lenders and servicing companies vary in the way they approach delinquent borrowers. The big mortgage gatekeepers such as Freddie Mac, FHA and the VA have changed their approach to managing delinquencies in the last ten years, having finally realized that it is more cost effective to help a borrower to stay in his home than to pursue foreclosure and then confront the need to deal with owning, managing, and selling the resulting real estate. Consequently, there are probably a hundred different scenarios that can play out as a mortgage delinquency progresses and at least that many ways a borrower can deal with his default problems. All we can do is talk about some of the possibilities and some of the options.
Starting on day 16, additional debt is incurred in the form of the mortgage late fee - usually a percentage of the principal balance; three percent is typical which, on a $300,000 mortgage is plus or minus a $100 penalty and, if the next payment and the next are also missed, the cost of bringing the mortgage current grows pretty fast. Past day 30, some lenders will allow a borrower to make a partial payment of the past due amount; others will insist that everything be brought current; lenders may even return a check if it does not cover both the current and the past due payments and maybe the late charges as well.
By day 45 the phone calls from the mortgage collectors will be coming pretty regularly. Most states have rules regarding collection activities and telephone calls including their frequency, content (no threats are permitted), and timing (early morning and late night calls are generally off limits,) but the calls, within legal boundaries, will be unremitting and the tone can vary. About 60 to 90 days after the initial missed payment the lender will send a notice of default, usually by Certified Mail, giving the borrower a finite period in which to cure the situation by paying all past due amounts, and by now collection costs are probably being added to the late fees. Once that remedial period passes, 90 to 105 days, the collection department will refer the loan to the lender's legal department which will, after another period of time, send the documents to a local attorney to begin foreclosure proceedings. By this time serious legal fees are accruing. By day 150, typically a notice of trustee sale is filed and the home is scheduled to be sold by auction. This time range varies by state due to individual laws and requirements.
A foreclosure is a legal event and there are benchmarks that must be met. Once the case is turned over to attorneys, the impending foreclosure must be advertised, usually in both the local papers and in the largest and closest metropolitan daily. The entire process can take a very long time from initial default to the actual public auction of the property. From the beginning of the process, however, the meter is running. The longer the foreclosure takes, the greater the debt that accrues and the larger the liability the homeowner has, something that will become critical down the road.
The law in most states gives the homeowner every opportunity to stop the process leading to foreclosure, right up to the minute that the auctioneer's gavel comes down and sometimes even beyond. In some states there is a period after the foreclosure during which the homeowner can redeem the property (right of redemption.).
The right of redemption is the statutory right of a property owner to redeem his or her real estate from foreclosure by paying the lender the outstanding principal and interest due, plus the lender's costs in foreclosure, or to redeem foreclosed real property from whoever purchased it at the foreclosure sale. The specifics, such as how long the owner has after the property goes to auction, exactly what has to be paid, and even what the process is called, will vary by state.
In Nebraska.....
Lenders may foreclose on a mortgage in default by using either the judicial OR the non-judicial foreclosure process.
Non-Judicial Foreclosure
The primary method of foreclosure in Nebraska involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action but requires notice. When the trust deed is initially signed it will usually contain a provision called a power of sale clause which upon default allows a trustee, who acts as a representative of the lender, to sell the property in order to satisfy the underlying defaulted loan (usually in the form of an auction). Because this is a non-judicial remedy there are very stringent notice requirements and the legal documents are required to contain the power of sale language in order to use this type of foreclosure method. In Nebraska trust deeds can also be foreclosed using the same judicial process as relates to mortgages if such option is chosen.
Power of Sale Notice Requirements:
Prior to initiating a foreclosure the lender must serve a notice of default and notice of sale must be recorded with the register of deeds. Not less than ten (10) days after the recordation of the notice of default a copy must be sent to the borrower and others such as junior lien holders or those have requested such notice.
A notice of foreclosure sale, which is usually incorporated with thenotice of default, must be sent to the borrower and all interested parties 20 days prior to the date of the sale. Sale must take place at a time, place and manner as stated in the notice of sale. Sale must take place in the same manner as an execution sale would occur in a judicial foreclosure. Theattorney for the trustee may conduct the sale.
Generally thenotice of sale must be advertised for five (5) consecutive weeks with the last publication at least ten (10) days before the sale but no more than thirty (30) days before the sale. If no address of the trustor (borrower) is set forth in the trust deed and if no request for notice is made pursuant to the loan documents the notice of default must usually be published for at least three (3) times, once a week for three consecutive weeks in a newspaper of general circulation. Publication must begin not later than ten (10) days after the filing of the notice of default.
Depending on the timing of the various required notices, it usually takes approximately 90-120 days to effectuate an uncontested non-judicial foreclosure. It may take up to six months to effectuate a judicial foreclosure and the borrower may be able to delay a sale up to 9 months. This process may also be delayed if the borrower contests the action in court, seeks delays and postponements of sales, or files for bankruptcy.
Nebraska has no post-sale statutory right of redemption with respect to foreclosures which have been confirmed. A redemption can be made prior to the final confirmation of the foreclosure sale provided all sums due, including taxes, costs and interest is paid in full.
Judicial Foreclosure
In Nebraska, the lenders can also go to court in what is known as a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. Usually if the deed of trust does not contain the power of sale language, the lender must seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in court along with what is known alis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon.
In Nebraska, the court may order the entire property to be sold, or just some part of it. The order of sale may be delayed for up to nine (9) months after the judgment if the borrower files a written request for a delay with the clerk of the court within twenty (20) days after the judgment is rendered. Otherwise, the order commanding the sale of the mortgaged property will be given twenty (20) days after the judgment.
The borrower has the right to cure the default at any time while the suit is still pending by paying the delinquent amount owed on the mortgage, as well as any interest and costs that have accrued. However, the court may still enter a decree of foreclosure and sale, which may be enforced if the buyer goes into default on the mortgage again in the future.
The sheriff must give public notice of the time and place of the sale by: 1) posting the notice on the courthouse door; 2) posting the notice in at least five other public places in the county where the property is located; and 3) by advertising the property for sale once a week for a period of four (4) weeks in a newspaper published in the county where the property is located.
The court must confirm the sale after it takes place and once this is occurs, the borrower has no right of redemption.
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