Tennessee Foreclosure Laws

High medical expenses, job loss, divorce, and death are just a few of the bitter rains that life can sometimes bring. Additionally, missed mortgage payments may come as thunder on top of the rain.

You might still be able to work out a bargain to save your home after receiving notice from a lender indicating your property mortgage is delinquent and that it will soon be foreclosed. If that isn’t an option, you might try a short sale, declare bankruptcy, or let the foreclosure go through.

When you sell your house through a short sale, the bank receives the proceeds. There may be consequences, but this won’t damage your credit as severely as a bankruptcy or foreclosure. The lender might require you to make up any shortfall if the sale isn’t enough to pay off the mortgage loan.

Here’s your complete guide to Tennessee foreclosure law as a homeowner; read it and learn some ways to avoid foreclosure or sell your house.

foreclosure laws in TN

Tennessee Foreclosure Laws

Federal and state rules governing foreclosure procedures and mortgage servicers were comparatively few and tended to mostly favor foreclosing lenders prior to the foreclosure crisis, which spiked in 2010. However, foreclosure proceedings and loan servicing are now extensively regulated by federal and state legislation. Additionally, debtors are protected by the majority of laws.

In general, servicers are required to offer debtors loss mitigation options, account for each stage of the foreclosure process, and rigorously adhere to state foreclosure laws. A deed of trust and a promissory note are generally considered acceptable by borrowers in Tennessee who take out loans to purchase residential property. In addition to the legal safeguards provided by the state and federal governments, these documents grant householders some contractual rights. In the Tennessee foreclosure process, you’ll probably be granted the following rights:

  • Apply for loss mitigation
  • A pre-foreclosure breach letter
  • Receive a notice of foreclosure
  • Keep your loan current, and prevent the foreclosure sale
  • Get special protection if you are a member of the military
  • Repay the debt to prevent a sale
  • Apply for bankruptcy, as well as
  • Keep any extra money from a foreclosure sale

If you’re a homeowner in Tennessee who is behind on your mortgage payments, don’t be shocked. Learn about every stage of a Tennessee foreclosure, from your first missed payment to the foreclosure sale. Once you are aware of the procedure, you may make the most of your predicament and, ideally, find a solution to keep your house. If not, at least go through it with as little stress as you can.

Tennessee Foreclosure Process

In Tennessee, the servicer (also known as the “lender”) will eventually file a foreclosure action when you fall behind with the mortgage payments. While judicial foreclosures may certainly be possible, nonjudicial foreclosures are more likely to be used. Nonjudicial processes are outlined by Tennessee law, and you are given rights and safeguards throughout the process under both federal and state regulations.

1. Notice of Default

In Tennessee, the default stage is the first one. The homeowner technically defaults when the needed mortgage payment is not made by the due date. The majority of lenders do not classify a homeowner as being in default unless they have missed 30 days of payments. The lender and homeowner will probably communicate often during this period.

Most lenders will send out a notice of default if there are 90 days without any payment. The homeowner has violated the terms of the mortgage contract (Deed of Trust), and this is a formal notice to that effect. Most lenders would only accept late fees and full payment of all past-due payments at this point.

2. Notice of Foreclosure Sale

The Notice of Foreclosure Sale in Tennessee is the second phase. This often occurs 120 days or more after the initial missed payment. A public Notice of Sale must be posted three times at this time with 20 days’ notice from the lender. This advertisement may appear on an online news source, in a newspaper, or in five of the county’s busiest public places. Additionally, on or prior to the first publication date, the lender must mail a copy of the notice of sale to you, the borrower. The best buying opportunities in the second step continue to be with non-performing notes and short sales.

3. Foreclosure Sale

The foreclosure sale is the third step in the procedure. In Tennessee, an attorney conducts the foreclosure auction in a public setting, though not always on the courtroom steps. Any person or organization may purchase the property at this sale. Ownership will transfer back to the lender if the house doesn’t sell for the expected reserve price at the foreclosure public auction.

At this point, the foreclosure sale is your best chance to buy the house. The buyer won’t probably get a chance to see the inside of the house before the sale, and they’ll be in charge of evicting any inhabitants and their belongings. Due to these problems, only knowledgeable investors should buy a house at the foreclosure auction.

4. Real Estate Owned

REO is the foreclosure process’s fourth stage. Real Estate Owned, or REO, is a term used by banks. Bank-owned property is another term for real estate in this stage. Any property that a bank has that it acquired through default is referred to by this word. This occurs when the lender buys back the house at the foreclosure auction. After the foreclosure sale, the ownership of the REO property may shift hands between financial institutions due to the contractual obligations between services and lenders. The lender may also sell a collection of REO properties to other banks, hedge funds, or major investment companies.

The seller may choose to sell the REO in a post-foreclosure auction before placing it on the MLS. Many post-foreclosure auctions are held online, and some of them are still in progress. If the property is occupied, the buyer can also be liable for evicting the existing inhabitants.

5. Eviction

Eviction is the last phase of foreclosure. Most lenders will pay residents who remain in the house after the foreclosure sale as relocation aid. They can be tenants or previous owners. The assistance is provided to shorten the time it takes to take control of the house and to help cover the expense of hiring an attorney to carry out the eviction. 

The most common manner in which a buyer purchases an REO is from an agency that specializes in bank-owned properties once the property is free of any residents and personal property. Like any other property that is up for sale, the majority of REOs are posted for sale in the MLS. Even though they may still be referred to as foreclosures at this point, the foreclosure auction has already taken place.

Foreclosure Laws as a Homeowner

In the event of foreclosure, homeowners are safeguarded by federal laws. By requiring loan servicers to offer assistance in the event a mortgage borrower is experiencing trouble making loan payments and shielding borrowers from negligent servicer behavior, these regulations benefit consumers. Under federal law, creditors and servicers are expected to cooperate with borrowers having problems completing monthly payments, among other things:

  • Making contact with the borrower in person or over the phone to talk about preventing a foreclosure
  • Giving the borrower written notice of any potential loss mitigation options, such as repayment plans, forbearance, or loan modifications
  • Assisting a delinquent borrower with a team or a single person and avoiding dual tracking
  • Providing written notice in Tennessee following a foreclosure sale to accommodate the right of redemption period
  • Supporting a borrower who has submitted a Chapter 13 bankruptcy petition
  • Providing the borrower with information on the power of sale clause

Avoiding Foreclosure in Tennessee

The average foreclosure process takes two months to complete. You can also look into alternatives to save your residential real estate during this time.

1. Maintain sufficient records

Any type of communication (between you and the lender) must be documented. When you call, make sure to record the specifics of the conversation, the call’s time, date, and the name of the agent you talk with. Don’t forget to save a copy of the letter as well as the mail service’s delivery confirmation.

2. Get in touch with the lender

Don’t sit around and wait for the lender to get in touch with you. Instead, speak with them beforehand and let them know about your financial difficulties. When you are having trouble making your mortgage payments, the majority of lenders are prepared to offer solutions.

3. Reinstate prior to the foreclosure sale

When a borrower pays the past-due amount, along with costs and fees, to make the loan current in order to halt a foreclosure, this is referred to as “reinstating.” Nevertheless, unless this loan is a high-cost home loan (Tennessee Code Ann. § 45-20-104). Tennessee doesn’t have a statute that grants a borrower the chance to remedy the default and reinstate before the sale. However, the loan agreement may grant the borrower enough time to finish a reinstatement.

4. Research all available options

Consider looking into your alternative options.

  • The website of the TN Housing Development Agency (THDA): It is a great tool for Tennessee first-time homebuyers as well as current homeowners. You might discover useful details on foreclosure, home ownership, and outstanding programs that can support you
  • The website of the U.S. Department of Housing and Urban Development (HUD): You may learn the fundamentals of foreclosure avoidance here
house in foreclosure for sale

Can You Sell Your House in Foreclosure in Tennessee?

1. Request approval from your lender

You should consult your lender to get approval for a short sale. Clarify your payment lapses; if you aren’t in default, the lender is unlikely to approve a short sale. Prove that it’s not your fault or that you withheld financial information from them or that you are being careless.

2. Engage an attorney

Engage an attorney and a real estate agent to assist you in selling. Using professional assistance can be advantageous to you in the long run, even if cash gets tight. You can get advice from the agent on how much to ask. In addition to other sales expenses and the agent’s commission, you would like a price that is pretty close to the amount you owe on your mortgage. In a poor market, this might not be feasible. The home should then be listed for sale after discussing your realistic expectations with your real estate agent.

3. Avoid a deficiency judgment

You should discuss a deficiency judgment with your lender. If the short sale doesn’t cover the entire sum of the mortgage, the lender may file a lawsuit in some states to recover the remaining balance from you. You will be significantly better off if the lender agrees to drop the lawsuit, but even if it doesn’t, the amount you owe might be less compared to a lender’s foreclosing.

After the foreclosure sale, the lender must file a separate case in Tennessee to get a deficiency judgment. The deficiency judgment will be restricted to the entire debt less the property’s fair market value at the time of the sale if the borrower can reveal that the property was sold for a sum that was considerably less than the fair market value at the foreclosure sale.

4. Present the bid to your lender

Bring the highest bidder to your lender’s attention and request permission. Since the highest bidder would always take ownership of the property if the creditor forecloses and puts it up for auction, a compelling short sale offer can be an attractive alternative for the lender. Be prepared to demonstrate your inability to pay off the mortgage on your own if the sale falls through by providing more details about your financial situation.


It’s critical to understand Tennessee’s foreclosure laws if you own a home there. Tennessee is definitely a non-judicial foreclosure state. The foreclosure process often takes a year or longer to complete, making it difficult and expensive.

The legislation now aims to safeguard debtors more than it did in the past, and the foreclosure process is currently closely controlled. Mortgage servicers are required to adhere precisely to the regulations governing foreclosure, account for each stage of the process, and provide borrowers with chances for loss mitigation.

Hopefully, this article has given you a better understanding of the things you need to know about foreclosures. A knowledgeable foreclosure lawyer can guide you through the difficult process of the TN foreclosure timeline. If you need to sell a house fast in Tennessee to prevent foreclosure, selling to local cash home buyers in Nashville would be a fantastic alternative. We buy houses in Knoxville and throughout the Tennessee state. Give us a call today.


Kevin is a real estate investor dedicated to helping homeowners sell their properties quickly and without the stress and hassle of a traditional listing.

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