Dealing with foreclosure may be quite difficult. Not only are you at risk of losing your house, but you’ll also need to find out how to repair your credit. However, losing your home is not a foregone conclusion if you are facing foreclosure.
You have alternatives depending on your budget, the conditions of your mortgage, and applicable state legislation. You may be able to save your house or, at least, mitigate the financial consequences of a foreclosure. Each state has its own foreclosure processes and timelines. Here’s a good breakdown of the Tennessee foreclosure timeline and some ideas on what to do if your house is in foreclosure.
The Tennessee Foreclosure Process
Tennessee is a non-judicial foreclosure state, which implies that the bank foreclosure procedure takes place outside of the courthouse and there is no redemption period. The foreclosure procedure is similar in most non-judicial jurisdictions, but the regulations and timetables differ per state. In judicial foreclosure jurisdictions, homeowners often have far longer deadlines and redemption periods.
When a power of sale clause appears in a deed of trust or mortgage, the non-judicial foreclosure process is employed. If the county does not have a newspaper, the lender must either publish notice of the foreclosure sale in a news publication at least 20 days before the auction or post notice in multiple public locations 30 days before the sale. The lender must also mail a copy of the notice of sale to you (the borrower) on or before the first publication date. (Tennessee Code Ann. 35-5-101). The lender will then organize a foreclosure sale.
The auction is open to the general public. The lender often puts in a credit offer during the auction. The lender has the option of bidding up to the whole amount owing, including fees and charges, or bidding less. In some places, including Tennessee, If the creditor wins the auction but offers less than the whole amount, the lender might sue the borrower for a deficiency judgment.
If the lender is the highest bidder, the property is referred to as “Real Estate Owned” (REO). The deficiency judgment will be restricted to the entire debt minus the property’s fair market value at the time of sale.
However, if a third party buyer is the top bidder and pays more than you owe, and the transaction results in surplus proceeds — money in excess of what is required to pay off all liens on your property — you are entitled to that extra cash.
With the exception of high-cost home loans, Tennessee foreclosure law does not allow a statutory right to reinstate the loan before the sale. The TN housing market has seen considerable growth and fewer foreclosures.
1. Notice of Default
A notice of default is the first stage in the foreclosure process for a mortgage lender or bank. In certain states, the default notice is affixed to the house, usually on the front door or window. It says that the individual who holds the loan on the residence has fallen behind on mortgage payments, and the bank is taking action. The bank will seize the dwelling if the debt is not paid on time.
Dual tracking, the practice of advancing toward seizing the property while the owner is attempting to sell the house in a short sale or working on other options, is not permitted under federal law. When a person submits an application for a loan modification or short sale, the foreclosure process is halted until the request is reviewed.
2. Notice of Foreclosure Sale
A foreclosure sale happens when a bank enforces its “lien” rights and auctions off a house. When a borrower secures a mortgage, the bank receives a lien (an ownership interest in the property). The lien protects the bank from a severe loss by allowing it to foreclose on the estate and sell it at auction if the debtor fails to make the agreed-upon payments (defaults on the loan).
However, the lien prevents the bank from selling the house in a foreclosure sale soon after a default. Instead, a mortgage lender is required to follow federal and state foreclosure regulations.
As of January 2017, federal law bars a bank from commencing the foreclosure process before an owner’s mortgage payment is 120 days late. The government’s waiting time is intended to assist the homeowner to remain in the residence. The additional time allows the owner to find a means to bring the debt current or file for a loss mitigation option.
Following the expiration of the 120-day grace period, the lender may begin foreclosure proceedings in accordance with the laws of the state in which the residence is located. Depending on the state’s procedures, the bank will employ either a judicial or nonjudicial foreclosure procedure. When the creditor files a case in court, the legal process begins. If the bank prevails, the home will be auctioned in a foreclosure auction.
If the bank utilizes a nonjudicial method, it will adhere to state foreclosure laws. In most situations, the lender must notify the borrower of the default, provide the borrower with a brief period of time to make the account current, and notify the borrower (and sometimes the general public) of the foreclosure auction date. Following completion of the stages, the bank may continue with the foreclosure sale without seeking court approval.
3. Foreclosure Sale
In Tennessee, the foreclosure auction is conducted by an attorney in a public venue, although not necessarily on the grounds of the courthouse. The property can be acquired by any person or organization at this sale. If the home does not sell at the foreclosure auction for the reserve amount, possession will return to the lender.
The foreclosure sale is the best chance to acquire the home at this time. The buyer will most likely not be able to see the interior of the home before the sale, and they’ll be liable for evicting any inhabitants and their personal goods. Due to these difficulties, buying a house at a foreclosure auction is reserved for experienced investors.
Real Estate Owned (REO)
REO is an abbreviation for “Real Estate Owned.” Property in this phase may also be referred to as bank-owned. This is a word used to describe any property owned by the bank that was gained via default. This occurs when the property reverts to the lender following the foreclosure sale.
Possession of the REO property may shift hands between financial organizations following the foreclosure sale due to contract constraints between lenders and services. A group of REO properties can potentially be sold by the lender to other hedge funds, financial institutions, or huge investment organizations.
When a borrower falls behind on their mortgage payments, the pre-foreclosure stage often includes either a real estate public auction or a short sale. When neither goes forward, the lender — for example, a bank — may take possession of the property at the end of the foreclosure process.
Banks may try to sell REO homes in their portfolios without the assistance of real estate brokers. When this occurs, banks often offer their REO homes on their websites. Loan officers at a bank may also alert consumers shopping for a house about REO properties in their portfolio.
Eviction
If the debtors are still residing in the property after the auction and a new buyer is named, they are given an order to leave. This eviction notice requires everyone residing in the residence to leave the premises immediately.
Several days may be allowed to allow tenants to vacate and remove any personal belongings. The local sheriff or law enforcement will then normally visit the property, remove them, and confiscate any remaining possessions.
Most lenders will provide residents who remain in the residence after the foreclosure sale with monetary relocation assistance. These people might be renters or previous owners. The help is supplied to shorten the time it takes to take control of the residence and to offset the cost of eviction legal fees.
1. File for Bankruptcy
If you are facing foreclosure, you might be able to utilize bankruptcy to halt the foreclosure process temporarily with an automated stay. An automated stay pauses all collecting efforts.
However, whether you can keep your house is determined by the type of bankruptcy you declare. If you are willing to lose your house to foreclosure and it has no positive equity, filing for Chapter 7 bankruptcy after the foreclosure may be your best alternative. A deficiency balance is an unprotected obligation in Chapter 7 bankruptcy, which means it can be dismissed or wiped away in bankruptcy.
If you wish to keep your house, file for Chapter 13 bankruptcy, which establishes a payment plan that allows you to restructure your obligations, including your mortgage. You’ll have three to five years under Chapter 13 to catch up on your late mortgage payments.
2. Fight the Foreclosure
You also have the option to fight and stop foreclosure last minute. The type of foreclosure you face will determine when and how you present your defense. Judicial foreclosures allow you to submit whatever defenses you choose. In the case of a nonjudicial foreclosure, you will need to file your own complaint to explain why you feel the court should intervene and halt the foreclosure. Hiring a foreclosure lawyer to represent you in a non-judicial or judicial foreclosure is strongly advised but not needed.
3. Sell the House
The Tennessee homeowner is the legal owner of their home until the foreclosure is completed. This implies they can sell the property while it is in foreclosure as long as the mortgage payment and sale are completed before the foreclosure auction.
If the property sells for more than the mortgage loan sum, the mortgage (together with any other lienholders) is paid off, and the owner keeps the difference. If, on the other hand, the house sells for less than the existing mortgage loan total, one of two things can happen: The lender has the option of forgiving the deficit balance or attempting to recover it from the borrower. State legislation will govern the lender’s possibilities.
Endnote
Many lenders may try to work with the borrower to get caught up on the debt and prevent foreclosure throughout the foreclosure process. If you have a chance to catch up on missed payments and late fees — for example, if you recently started a new job after a time of unemployment — it is worth communicating with the lender with the aim of amending the present loan.If you need to sell a house fast in Nashville, we are cash home buyers in Knoxville. Additionally, we buy houses Tennessee without commissions and in any condition. Why not give us a call today?
