Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. Now, however, federal and state laws heavily regulate loan servicing and foreclosure processes. And most of the laws give protections to borrowers. Servicers generally have to provide borrowers with loss mitigation opportunities, account for each foreclosure step, and strictly comply with foreclosure laws. Also, most people who take out a loan to buy a residential property in Utah sign a promissory note and a deed of trust, which is like a mortgage. These documents give homeowners some contractual rights in addition to federal and state legal protections.
In a Utah foreclosure, you’ll most likely get the right to:
• a pre-foreclosure notice
• apply for loss mitigation
• receive certain foreclosure notices
• get current on the loan and stop the foreclosure sale
• receive special protections if you’re in the military
• pay off the loan to prevent a sale
• file for bankruptcy, and
• get any excess money after a foreclosure sale.
So, don’t get caught off guard if you’re a Utah homeowner who’s behind in mortgage payments. Learn about each step in a Utah foreclosure, from missing your first payment to a foreclosure sale. Once you understand the process, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.
Pre-foreclosure In Utah
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the “preforeclosure” stage. (Sometimes, people refer to the period before a foreclosure sale actually happens as “preforeclosure,” too.) During this time, the servicer can charge you various fees, like late charges and inspection fees, and, in most cases, must inform you about ways to avoid foreclosure and send you a preforeclosure notice called a “breach letter.”
Fees the Servicer Can Charge During Preforeclosure
If you miss a payment, most loans include a grace period of ten or fifteen days, after which time the servicer will assess a late fee. Each month you miss a payment, the servicer will charge this fee. To find out the late charge amount and grace period for your loan, look at the promissory note you signed. You can also find this information on your monthly mortgage statement. Also, most Utah deeds of trust allow the lender (or the current loan holder, referred to as the “lender”) to take necessary steps to protect its interest in the property. Property inspections are performed to ensure that the home is occupied and appropriately maintained. Inspections, which are generally drive-by, are usually ordered automatically once the loan goes into default and typically cost around $10 or $15.
Other types of fees the servicer might charge include those for broker’s price opinions, which are like appraisals, and property preservation costs, such as for yard maintenance or winterizing an abandoned home.
Federal Mortgage Servicing Laws and Foreclosure Protections
Under federal mortgage servicing laws, the servicer must contact, or attempt to contact, you by phone to discuss loss mitigation options, like a loan modification, forbearance, or repayment plan, no later than 36 days after you miss a payment and again within 36 days after each following delinquency. No later than 45 days after missing a payment, the servicer has to inform you in writing about loss mitigation options that might be available and appoint personnel to help you try to work out a way to avoid foreclosure. A few exceptions are in place for some of these requirements, though, like if you’ve filed bankruptcy or asked the servicer not to contact you pursuant to the Fair Debt Collection Practices Act. Federal mortgage servicing laws also prohibit dual tracking (pursuing a foreclosure while a complete loss mitigation application is pending).
What Is a Breach Letter?
Many Utah deeds of trust have a provision that requires the lender to send a notice, commonly called a “breach letter,” informing you that the loan is in default before the lender can accelerate the loan. The breach letter gives you a chance to cure the default and avoid foreclosure.
When Can Foreclosure Start?
Under federal law, the servicer usually can’t officially begin a foreclosure until you’re more than 120 days past due on payments, subject to a few exceptions. This 120-day period provides most homeowners with ample opportunity to submit a loss mitigation application to the servicer.
What Is the Foreclosure Process in Utah?
If you default on your mortgage payments in Utah, the lender may foreclose using a judicial or non-judicial method.
How Judicial Foreclosures Work
A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. If you don’t respond with a written answer, the lender will automatically win the case. But if you choose to defend the foreclosure lawsuit, the court will review the evidence and determine the winner. If the lender wins, the judge will enter a judgment and order your home sold at auction.
How Nonjudicial Foreclosures Work
If the lender chooses a nonjudicial foreclosure, it must complete the out-of-court procedures described in the state statutes. After completing the required steps, the lender can sell the home at a foreclosure sale. Most lenders opt to use the nonjudicial process because it’s quicker and cheaper than litigating the matter in court.
Preforeclosure Requirements Under Utah Law
Much like the requirement under federal mortgage servicing laws, after determining that the loan is in default, the servicer or lender must appoint single point of contact that can provide information about the foreclosure and foreclosure relief. Before filing a notice of default (the lender or servicer must mail a notice to you (the borrower) giving you at least 30 days to cure the default by getting current on the loan. The letter will also include the name, telephone number, email address, and mailing address of the single point of contact.
Notice of Default
The nonjudicial foreclosure process formally begins when the trustee records a notice of default at the county recorder’s office. The notice of default gives you three months to cure the default. Within ten days of the recording, the trustee mails a copy of the notice of default to anyone who has requested a copy. Most deeds of trust in Utah include a request for notice, so you’ll probably get this notification.
Notice of Sale
If you don’t cure the default, after three months, the trustee will record a notice of sale and:
• mail a copy to you at least 20 days before the sale (if your deed of trust includes a request for notice, which it probably does)
• publish notice of the sale in a newspaper, and
• post notice about the sale on the property at least 20 days before the sale.
The Foreclosure Sale
At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less. In some states, including Utah, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower, subject to some limitations. If the lender is the highest bidder, the property becomes what’s called “Real Estate Owned” (REO). But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds that is, money over and above what’s needed to pay off all the liens on your property—you’re entitled to that surplus money.
How Long Do You Have to Move Out After Foreclosure in Utah?
If you don’t vacate the property following the foreclosure sale, the new owner will probably:
• offer you a cash-for-keys deal, or
• take steps to evict you.
The eviction process starts with a notice to quit. If you still don’t leave by the deadline given in the notice, the new owner will go through the court system to evict you. A few potential ways to stop a foreclosure include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. (Of course, if you’re able to work out a loss mitigation option, like a loan modification, that will also stop a foreclosure.)
Reinstating the Loan
Utah law gives you three months after the trustee records the notice of default to reinstate the loan. Also, the deed of trust might give you more time to reinstate. Check the paperwork you signed when you took out the loan to find out if you get more time to get caught up on past-due amounts and, if so, the deadline to reinstate. You can also call your loan servicer and ask if the lender will let you reinstate.
Redeeming the Property Before the Sale
One way to stop a foreclosure is by “redeeming” the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale. Some states also provide foreclosed borrowers with a redemption period after the foreclosure sale, during which they can buy back the home. Under Utah law, however, foreclosed homeowners don’t get a right of redemption after a nonjudicial foreclosure.
Utah Deficiency Judgment Laws
In a foreclosure, the borrower’s total mortgage debt sometimes exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a “deficiency.” For example, say the total debt owed is $600,000, but the home sells for $550,000 at the foreclosure sale. The deficiency is $50,000. In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount in our example, $50,000—from the borrower.
In Utah, the lender can get a deficiency judgment after a nonjudicial foreclosure by filing a lawsuit within three months of the sale. The deficiency amount is limited to the difference between the lesser of :
• your total debt and the property’s fair market value or
• your total debt and the foreclosure sale price.
How Long Does Foreclosure Take in Utah?
For many homeowners, foreclosure is an unfortunate reality; and one that’s entirely outside of their control. But how long does foreclosure take? It will actually vary depending on any number of circumstances. Here’s what you should know about what to expect from the foreclosure process. It’s never easy to see your dreams of owning a home shattered by foreclosure. And it’s even worse to see what it can do to your credit score. The length of foreclosure time is actually relatively flexible. And believe it or not, there may be options available that can help diminish its long-term effects.
What many people don’t realize is that the stipulations of a foreclosure are different from state to state. Also how you purchased your home, as well as any personal relationship with a lender can influence the effects of reducing or stopping foreclosure in Utah.
Mortgage and Deed of Trust
Most lenders tend to encourage the purchase of homes to be legally established where the property title serves as a deed of trust; and in Utah, this is how the vast majority of transactions are conducted. The chief reason for this is to avoid lengthy judicial proceedings, and can sometimes be as beneficial to a homeowner as it is to a lender. For one, the amount of legal fees you incur as a result can make current financial constraints even worse. But on the other hand, it also usually contains a provision known as a “power of sale clause”; which means the trustee (in this case, the lender or their attorneys) can be obligated to sell your property to satisfy the agreements of the loan.
As mentioned previously, Utah is a state that primarily operates under nonjudicial foreclosure laws, which means no court action is required (although the law does permit mortgages to serve as liens against property and can be legally executed by courts.) Instead, notice is given to both borrowers and the public, and is commonly called “sale of trust property by public auction.”
During a nonjudicial foreclosure you will receive:
• A notice of default
• A notice of intent to sell
• A combined notice of default and intent to sell
• A notice by publication in a newspaper stating your property will sell publicly on a specified date
Legally, however, you are not required to vacate your property upon receiving a notice to sell. Depending on the timing of the required notices and previous negotiations with your lender, it can take approximately 120 days to complete a nonjudicial foreclosure. The foreclosure process can be delayed if you contest the action in court, seek postponement of sale, or file for bankruptcy.
Right of Redemption
Utah law maintains a grace period known as the “right of redemption,” which can allow you the to purchase property back during instances of judicial foreclosure (where proceedings occur through the courts; as in the case of mortgages serving as property liens.) Payment is made in full of the sum of the unpaid loan, plus additional costs. Courts can extend the redemption period, in some cases up to two years; but it’s important to keep in mind this only occurs under judicial foreclosure, which is less common in Utah. If you’ve failed to find an understanding with your lender, the easiest solution during the preforeclosure period is, quite honestly, to sell your home. Not only can it diminish your chances of a black mark on your credit, it can bring you peace of mind. But for many people, the process of finding an adequate realtor (to speak nothing but a potential buyer) is never guaranteed; especially in no more that 1 – 2 months time. One way around this is to speak to a reputable home buying company. Typically, they can almost always guarantee the purchase of your home in cash, and frequently in no more than 3 – 5 days.
Home Foreclosure In Utah Free Consultation
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Family Businesses And Estate Planning