Understanding the foreclosure process in Pennsylvania is an important part of navigating your own home foreclosure.
Before we continue, let's lay a little bit of foundation...
What is Foreclosure?
Foreclosure is a legal process that lenders use to take possession of a mortgaged property when the borrower fails to make mortgage payments.
I'm not going to sugar coat this at all. Foreclosure can be a complicated and scary process for many people. When you understand how foreclosure works in Pennsylvania, it equips you with the proper knowledge to navigate the process well.
Why Do Homeowners Go Into Foreclosure?
There are a number of different reasons why homeowners stop making mortgage payments. The number of people that go into foreclosure voluntarily is very minimal. Foreclosure can result from any one of the following instances:
- Job loss (laid off, fired, or quit)
- Excessive debt
- Job transfer to another state
- Not able to work due to medical conditions
- Issues with co-owner, spouse, or partner (divorce)
- Expensive repair and maintenance costs
- Owe significantly more on the home you think it is worth
The Basic Stages of Foreclosure
The Pennsylvania foreclosure process has a couple of stages that you should be aware of.
1. Missed Mortgage Payments
As a borrower, you main responsibility is to make your mortgage payments when they are due. Failure to do so will put you in a difficult situation with your lender.
Some lenders might contact you (phone, email, letter) once a payment is missed. If you miss one payment, it will not lead to foreclosure. However, missing multiple payments will definitely put you in a difficult situation.
2. Notice of Foreclosure
In Pennsylvania, when a borrower is at least 60 days late on their mortgage payments, the foreclosure process begins. Lenders will generally send out two letters to notify a borrower of their intent to begin foreclosure. Once you get that first letter, it is important that you begin to contact your lender and develop and begin to plan how you will handle this.
If you miss multiple payments and fail to contact your lender, then a public notice of foreclosure will be recorded in your county's records.
During this phase, you have a few month months to come up with a solution that will stop the foreclosure process. There are a number of measures that you can take if you talk to your lender. You could pursue a loan modification or even some type of payment plan. We discuss these and more in a podcast that discusses the "12 Options for Facing Foreclosure". (Part 1, Part 2)
A loan will remain in a pre-foreclosure period until the mortgage default is at least 120 days delinquent. If you have not satisfied the default by the end of this period, then the lender must file a complaint with the court indicating that you are in default.
You have 20 days in which to respond to this action. If you don't respond within the 20 days, your lender will send you a notice to inform you that you have 10 more days to respond before the lender will seek a default judgement. You will have 30 days to respond to a foreclosure complaint. If you don't, a court process will begin and the judge will rule in favor of the lender. The lender will then be permitted to sell your property.
4. Notice of Sale
Your lender will receive a Notice of Sale which will be posted on the property at least 30 days prior to sale. It will also be served to you 30 days prior to sale.
Your house will then be sold at a public auction that is supervised by the county sheriff. At the auction, your home will be sold to the highest bidder. If there is not a winning bid, it will revert back to the lender and become real-estate owned.
What Happens After a Foreclosure Auction?
After a foreclosure is complete, the loan amount is paid off with the proceeds of the sale. If the sale of the property at auction isn't enough to pay off the loan, a deficiency judgement can be issued against the borrower.
A deficiency judgement is where the bank gets a judgement against you, the borrower, for the remaining funds owed to the bank on the loan amount after the foreclosure sale. In Pennsylvania, the lender may obtain a deficiency judgement in a separate action after the foreclosure sale.
Deficiency judgements come with limitations. These limitations vary from state to state. Pennsylvania's regulations state that if the lender is the purchaser at the foreclosure sale, the deficiency is limited by the fair market value of the property.
Once the auction of your home has been completed, the bank will request that the court order you to be evicted from the property. The bank can obtain an eviction order once they receive proof that the title was transferred. This will grant the new owner the right to take control of the property. The eviction process typically begins in a few days.
Foreclosure is something that is definitely avoidable. You can prevent yourself from having awful credit. You can avoid putting your family through a horrible eviction. We can help. Call us at (267) 223-7891 to avoid the awful foreclosure process.
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