Receiving notice that your house is about to be foreclosed upon is one of the most traumatic things you can go through. However, by virtue of the mortgage or deed of trust, which is signed at every real estate closing and subsequently recorded among the Land Records of the county in which the property is located, your lender has been given the right to foreclose on the property if the loan is not repaid in accordance with the terms of the loan. An overview of the procedure followed in the event a property is foreclosed upon and the property owner’s rights are discussed below.
WHAT WILL HAPPEN IF MY PROPERTY IS TO BE FORECLOSED?
If a default under the terms of a mortgage or deed of trust occurs, the lender may initiate a foreclosure case with the Circuit Court in the county in which the property is located. If your property is owner-occupied and residential, there are certain steps the lender must follow in order to pursue foreclosure. A property is residential if it is 4 units or less, and it is owner-occupied if it is the owner’s primary residence. The first step in the process is that your lender must send you a Notice of Intent to Foreclose. It can be sent 45 days after default, and must include several pieces of information including a summary of the default and who your servicer and investor are on your mortgage. It also must include a loss mitigation application. Do not ignore or delay in responding to any written communication from your mortgage lender.
After 90 days of default, your lender can file an Order to Docket with the court. This begins the judicial foreclosure process. Your lender must file several documents and affidavits with the Order to Docket proving they have the right to foreclose. The lender must file, under oath, a statement of debt which itemizes the entire amount the lender claims is due under the loan. This will usually include principal, interest, late charges, attorneys’ fees and all other charges that the borrower is responsible for under the mortgage. The lender must also certify that the property owner is not a member of the military service. Under a federal law, commonly known as the Soldiers’ and Sailors’ Civil Relief Act, members of the military service have specific rights with respect to lawsuits brought against them (including foreclosure proceedings) since they may not be in the U.S. due to a military assignment and unable to adequately defend their interests. If you are a member of the military service and find a property owned by you is the subject of a foreclosure action, you should ask an attorney what additional rights you may have as a result of this federal statute.
Your lender is required to file either a preliminary or final loss mitigation affidavit with the Order to Docket. This is a statement that the lender has considered you for foreclosure alternatives (ex. loan modification) and why you have been denied or explains why the lender has been unable to consider you for any mitigation options. Before a lender may proceed with scheduling a foreclosure sale, they must complete a final loss mitigation affidavit and submit it to the court. In addition, they must provide you with a copy of the affidavit and a mediation request form.
To request mediation, you must submit the mediation request form with the $50 filing fee within 25 days of when the final loss mitigation affidavit was mailed. The court will have the Office of Administrative Hearings schedule a mediation for approximately 30-60 days from when you request mediation. Mediation is intended to provide you with an opportunity to meet with your lender and an administrative law judge, acting as a mediator, to discuss both retention (ex. seeking a modification) and non-retention (ex. short sale, cash for keys) options.
If you do not request mediation, the lender may schedule a sale of the property for 30 days or later after the final loss mitigation affidavit has been filed. If you do request mediation, the lender may not schedule a sale until after the mediation has been completed. If no agreement is reached in mediation, the lender can schedule the sale for 15 days after the mediation was held. If your lender proceeds with scheduling a sale, they must place an advertisement including the date, time and location of the sale and a description of the property to be sold in the legal notices section of a local newspaper for three consecutive weeks in the area where the property is located. The first advertisement should be published not less than 15 days prior to the date of sale and the last advertisement should be published not more than 7 days prior to the date of sale.
You also must be given notice by certified and first class mail of the time, place, and terms of the pending foreclosure sale. This notice must be sent no later than 10 days prior to the scheduled sale date.
IS IT TOO LATE TO PREVENT THE SALE OF MY PROPERTY?
The earlier you are able to work with your lender in the foreclosure process, the better. If you have not spoken with your lender, contact them immediately. You must communicate with your lender to pursue a modification, short sale, or any other non-foreclosure options. You also should work with a housing counselor, who can assist you with determining what your options might be and with providing necessary documentation to your lender. The State of Maryland operates the Maryland HOPE Hotline which can connect you with free qualified housing counselors in your community You can call the HOPE Hotline at 877-462-7555.
Mediation is a good opportunity to resolve any outstanding issues regarding a modification, short sale or other options. When you attend mediation, you can bring your housing counselor and/or legal representation. You may be eligible for free legal services to represent you. HOPE Hotline (877-462-7555) representatives can identify legal service providers that may be able to assist you for free or low cost in your foreclosure matter. In addition to representing you at mediation, an attorney may also be able to assist you if your lender has not met the foreclosure requirements in both state and federal laws. If you believe that your lender has not met these guidelines, you should reach out to an attorney as early in the process as possible.
A bankruptcy filing prior to the sale may “stay” or temporarily stop a foreclosure. However bankruptcy is not always the best option for a homeowner, and there are a variety of bankruptcy filings with different consequences. It is recommended that you speak to an attorney familiar with foreclosure and bankruptcy matters so they can determine if bankruptcy may be right for your circumstance.
Finally, objections may be filed after the sale has taken place, but before the court has ratified the sale, if the sale was improperly conducted, but this is an option that would not apply to most homeowners. Exceptions are based solely on whether the sale process was not followed. It does not enable homeowners to challenges whether the overall foreclosure process was handled correctly or if they were improperly denied a loan modification. Those challenges need to be heard by the court prior to the sale.
SALE OF THE PROPERTY
If a sale does take place, the property will be sold through a public auction open to anyone who desires to make a bid. Foreclosure auctions are usually held at the courthouse in the county where the property is located.
After a sale has taken place, it usually takes approximately 30-45 days for the sale to be ratified, however the ratification time can vary significantly from county to county. You may remain in the property during this time. After ratification, an audit of the sale is conducted, all expenses are claimed and a determination of how proceeds will be distributed is made. You may be entitled to any excess proceeds following payment of the principal, interest, costs, fees and any other liens on the property. In order to claim your right to the excess, you must file a request with the court. Alternatively, if the sale proceeds are insufficient to pay off the expenses, you may be subject to a deficiency judgment, which holds you personally responsible for the amount remaining due. In both circumstances, it is a good idea to consult with an attorney.
The last step in the foreclosure process is once the sale has been ratified, the new owner of the property must obtain an order of possession by the court before they can proceed with any eviction process. You must be provided notice of the motion to obtain an order of possession. Once the order has been obtained and the notice provided, the new owner can proceed with evicting you from the property. It is best to have made alternate living arrangements and to move prior to or no later than when you receive the motion to obtain possession so you and your possessions are not evicted from the property.
If you are a tenant living in a property going through foreclosure, you have some specific rights. Under both federal and state law, most tenants have a right to have their lease survive foreclosure. Most of the time the foreclosure sale purchaser becomes the new landlord and is bound by the terms of the lease. In addition, if the new owner wants the tenant to leave, the owner must send the tenant a notice to vacate the property at least 90 days in advance. You do not have to have a written lease for these protections to apply. Verbal and month-to-month agreements are usually protected too. You can get free legal advice and possibly representation for tenant-related foreclosure issues from the Public Justice Center by calling 410-625-9409 (Baltimore) or 1-877-625-9409 (statewide).
There are many procedural steps and hurdles during the foreclosure proceedings where legal assistance may be of immense importance. You can seek free or low cost legal representation by contacting the HOPE Hotline at 877-462-7555.
TIPS TO AVOID A FORECLOSURE
As a practical matter, if you are having difficulty meeting your financial obligations, you should consider the following suggestions:
- Contact your mortgage lender and discuss the problem. They may be able to work out an arrangement to assist you over a difficult period.
- By all means pay your mortgage payment first. It is one thing to have your credit cards curtailed for non-payment; it is much worse to lose your home.
- Communicate with all your creditors in an effort to work out manageable payment terms.
- Contact the Consumer Credit Counseling Service of Maryland at 800-642-2227, a non-profit organization which can assist you in restructuring your indebtedness.
- Consult a qualified lawyer who specializes in bankruptcy matters. The local lawyer referral services can assist you.
- In no event should you ever ignore or delay responding to a written communication from your mortgage lender.
Call the Maryland HOPE Hotline at 877-462-7555 to see about finding a housing counselor and/or an attorney that can help you in navigating the foreclosure process.
The Section of Real Property, Planning & Zoning and the Public Awareness Committee of the Maryland State Bar Association have prepared this information. It is intended to inform the public and not serve as legal advice.