Most current mortgage forms require a lender to send a notice of default to the borrower. The lender generally is required to provide the borrower thirty (30) days to cure the default in the mortgage.

You may also accelerate (call due the entire unpaid balance) the loan in the same notice if the borrower fails to cure the default.

III. PRIOR TO BEGINNING THE FORECLOSURE PROCESS.

Prior to beginning the court process, you should obtain an ownership and encumbrance report from a title company. These can cost between $150 and $300 and typically take about a week to complete. These are used to determine who currently owns the property and if there are any liens other than the mortgage on the property.

You cannot rely on the status of title when the mortgage was given. Changes may have been made without your permission or knowledge, and sometimes judgment liens that did not affect the priority of your mortgage were not disclosed but must be foreclosed out or removed.

In order to foreclose properly, all owners, borrowers, and lienholders must be named in the suit as defendants. If a lienholder is not included in the foreclosure action, their lien remains attached to the property even after a foreclosure sale.

V. JURISDICTION

A foreclosure can only take place in the county in which the property is located.

V. FORECLOSURE COMPLAINT

A. Who is the Plaintiff?

The holder of the note and mortgage is the plaintiff. This may be the original lender or an assignee of the note and mortgage.

B. Who are the Defendants?

The Defendants are anyone with an interest in the property, including the borrower, any other owners, secondary lienholders (second mortgages, lines of credit, judgment holders, etc.), and tenants (who may be named as “unknown tenant”). If a lienholder, owner or borrower is not included in the suit, it may cause the foreclosure to be ineffective as against that person. If there is a tenant and tenants are not served, it may be slightly more difficult to remove the tenants.

C. Necessary Allegations and Attachments.

In order to be eligible to foreclose a mortgage, you must plead that you are the holder of the note and mortgage as of the date of filing of the complaint. You must also allege that the borrower defaulted on the mortgage.

You must attach a copy of the note and mortgage to the complaint. If you do not have the original note, you may add an action to reestablish the note. If you are required to provide a notice of default, you must attach a copy of the notice to the complaint.

If the value of the property is less than the amount of the mortgage, you may add an action for damages. This would allow you to obtain a deficiency judgment for the difference between the value of the property and your mortgage against the borrower.

D. Lis Pendens

Along with the complaint, you should file a Notice of Lis Pendens. The Lis Pendens provides notice to any person looking into the property that there is a lawsuit connected with the property.

E. Filing Fees.

Currently, the fees for filing a foreclosure are as follows:

Filing Fee:                                                                     $300.00

If >5 defendants (additional fee per defendant)       $ 2.50

For issuance of Summons, per defendant             $ 10.00

Filing of Lis Pendens                                                  $ 10.00

VI. SERVICE OF THE COMPLAINT ON DEFFENDANTS

A. Summonses.

Summonses must be prepared for every defendant to accompany the complaint. Each defendant requires a separate summons. The summons requires the recipient to answer the lawsuit within twenty (20) days of receipt.

B. Service.

Each defendant must be served a copy of the summons, complaint and Lis Pendens by process server or law enforcement agent. This can cost between $20 and $200, depending upon the location of the defendant. If personal service is not obtained on the borrower, you will not be able to obtain a deficiency judgment against him or her. Service may take very little time or take a great deal of time if the party is difficult to find.

VII. ADDITIONAL REQUIREMENTS

Depending upon the jurisdiction in which you are filing your complaint, there may be additional requirements imposed by the local court.

VIII. RESPONSES OR DEFAULTS

A. Responses.

Once a defendant is served with the foreclosure papers, he or she is obligated to file a response by no later than twenty (20) days from the date of service. A response may be a in the form of an answer or a motion, and may be simple denial, may offer excuses or defenses, or often times attempts to attack the sufficiency of the documents or pleadings.

If a motion is filed, there must be a hearing on the motion. This hearing can be held as soon as one week after filing, but typically will be heard between two weeks and one and a half months later.

B. Defaults.

If a defendant does not respond within the twenty-day time frame, a clerk’s default will generally be entered. A default means that the defendant no longer has a right to object to the allegations in the complaint.

IX. SUMMARY JUDGMENT

If no factual disputes are raised by the defendants a motion for summary judgment may be filed. At this time, you must file your original note with the court.

A. Affidavits

In order to establish the facts of your case, you must submit affidavits refuting any factual allegations made in any affirmative defenses and establishing that you were and are the owner and holder of the note and mortgage, the amounts due, that you have hired an attorney or not, and the court costs associated with the action. The attorney will also prepare an affidavit as to his or her fees and costs to be included in the summary judgment.

B. Hearing.

To obtain a judgment, there must be a hearing on the motion for summary judgment. This motion cannot be less than twenty (20) days from the date of filing of the motion and affidavits. The timing of the motion depends upon the court’s availability, so the date of the hearing could be as close as twenty-one (21) days from the date of filing to months from the date of filing.

Any defendant filing an answer can submit an opposing affidavit stating facts that would indicate that you are not entitled to summary judgment. These affidavits must be submitted at least five (5) days prior to the hearing.

At the hearing, if the court is convinced that you have established all of the facts necessary to obtain a judgment, the court will enter a judgment in your favor. If the court is not convinced that all of the facts have been established, the case may go to trial. It is very rare that a mortgage foreclosure case would go to trial.

X. REINSTATEMENT AND RIGHT OF REDEMPTION

Until a certificate of sale is filed, the borrower has a right to redeem the property. This means that they have the right to pay the judgment.

XI. FORECLOSURE SALE

A Notice of the Sale must be published twice in the weeks before the sale. This typically costs approximately $150.00, depending upon the length of the publication and the newspaper where it is published.

The court establishes the date and time of the sale of the property. You or a representative are required to be at the sale if you wish to bid on the property. The clerk of court charges a fee of $70.00 to conduct a foreclosure sale, which must be paid prior to the sale.

At the sale, the clerk will open the property up for bids. It is in your best interest to establish the first bid at $100.00 or less because you will be required to pay documentary stamp taxes on the transfer, and documentary stamp taxes are $.70 per $100.00.

If there is a bidder bidding against you, you can continue to increase your bid up to the amount of your judgment without having to pay anything further for the property.

If any other person bids on the property, they must pay the clerk the full amount of their bid by no later than twenty-four (24) hours after the sale. The clerk will issue you a check for the amount of your judgment.

XII. DEFICIENCY JUDGMENTS.

If you purchase the property and the property value is less than the amount of your judgment, you may be entitled to a deficiency judgment. A deficiency judgment is a personal judgment against the borrower for the difference between the amount of your judgment and the value of the property. The clerk’s fee of $50.00 to reopen the file will be required to be paid at the time of filing any motion after the summary judgment is entered.

In order to obtain a deficiency judgment, you must submit a motion for deficiency judgment containing the amount that the property is worth and the amount of your judgment and the amount of the deficiency judgment you are seeking.

You must establish the value of the property with qualified testimony. This could involve the testimony of a realtor or an appraiser. It is recommended that an appraiser is used because they are considered experts in valuation of property, although some realtors could be considered the same.

There must be a hearing on the motion for deficiency judgment at which your appraiser or realtor must testify. If the borrower appears with an appraiser or realtor, the court will hear the testimony of both witnesses and make a determination as to the value of the property. Once a determination on the value of property is completed, the judge can enter a deficiency judgment against the borrower if the value of the property is determined to be less than the amount of the judgment.

XIII. GENERAL INFORMATION

There may be other concerns that are not specifically addressed in this newsletter. Please contact an attorney for further information.

A. Consultations.

Consultations for one half-hour block are $50.00. Please bring a copy of your note and mortgage and any information regarding any default known to you to the consultation.

B. Fee Retainers.

Typically, we require a retainer of $1500.00 to initiate a foreclosure action. This is to cover the costs and the initial fees of the action. There may be additional fees and costs throughout the litigation that may be required to be paid. At the consultation, we will be glad to give you a very clear estimate of fees.

This newsletter is designed to provide informative material of interest to our readers. Readers should not take or omit any action based solely on the basis of this newsletter as isolated circumstances may require action different from that described­ in this general orientation document. Appropriate legal advice or other expert assistance should be sought from a competent professional.