If you default on your home loan payments in Utah, the servicer (on behalf of the loan owner, called the “lender”) will eventually begin the foreclosure process. The method will most likely be non-judicial, although judicial foreclosures are also allowed. Utah law specifies how non-judicial procedures work, and both federal and state laws give you rights and protections throughout the foreclosure.
Mortgage Loans in Utah
If you get a loan to buy a home in Utah, you’ll likely sign two documents: a promissory note and a deed of trust. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The deed of trust, which is very similar to a mortgage, is the document that gives the lender a security interest in the property and will probably include a power of sale clause. If you fail to make the payments, the power of sale clause gives the lender the right to sell the home non-judicially so it can recoup the money it loaned you.
What Happens if You Miss a Mortgage Payment
If you miss a payment, the servicer can usually charge a late fee after the grace period expires. Most mortgage loans give a grace period of ten to fifteen days, for example, before you’ll incur late charges. To find out the grace period in your situation and the amount of the late fee, review the promissory note or your monthly billing statement. If you miss a few mortgage payments, the servicer will probably send letters and call you to try to collect. In most cases, federal mortgage servicing laws require the servicer to contact you (or attempt to contact you) by phone to discuss foreclosure alternatives—called “loss mitigation” options—no later than 36 days after a missed payment and again within 36 days after each following missed payment. No more than 45 days after a missed payment, the servicer must let you know in writing about loss mitigation options that could be available, and assign personnel to help you. Some exceptions to a few of these requirements exist, like if you file for bankruptcy or tell the servicer not to contact you under the Fair Debt Collection Practices Act.
What Is a Breach Letter?
Many deeds of trust in Utah have a provision that requires the lender to send a breach letter if you fall behind in payments. This notice tells you that the loan is in default. If you don’t cure the default, the lender can accelerate the loan (call it due) and go ahead with the foreclosure.
When Does Foreclosure Start?
Federal law generally requires the servicer to wait until the loan is over 120 days delinquent before officially starting a foreclosure. However, in a few situations, like if you violate a due-on-sale clause or if the servicer is joining the foreclosure action of a superior or subordinate lien holder, the foreclosure can begin sooner.
Pre-foreclosure Notice in Utah
Before the lender or servicer can officially start the foreclosure, it has to mail you (the borrower) a notice of intent to file a notice of default. This pre-foreclosure notice must include, among other things, information about:
• who you can contact to find out about getting a loan modification or other foreclosure relief, and
• provide 30 days to pay the amount due to cure the default (catch up on payments) and avoid the filing of a notice of default.
Utah law also provides borrowers with specific rights during the loss mitigation process, like the right to a single point of contact while seeking an alternative to foreclosure. Before the expiration of the three-month period described below, you may apply directly with the single point of contact for any available foreclosure relief.
Notice of the Foreclosure in Utah
To officially start the foreclosure, the trustee records a notice of default in the county recorder’s office at least three months before giving a notice of sale. The trustee mails a copy of the notice of default within ten days after recording it to anyone who requested a copy. Most deeds of trust in Utah include a request for notice, so borrowers typically get this notification. The trustee mails a copy of the notice of sale to you at least 20 days before the sale if the deed of trust includes a request for notice. Again, most Utah deeds of trust have a request for notice provision. Check your loan documents for details. The lender or trustee also:
• publishes the notice in a newspaper, and
• posts the notice on the property at least 20 days before the sale.
Right to Reinstate Before a Foreclosure Sale in Utah
“Reinstating” is when a borrower pays the overdue amount, plus fees and costs, to bring the loan current and stop a foreclosure. Utah law gives you three months after the trustee records the notice of default to reinstate. Also, the deed of trust might give you more time to complete a reinstatement. Check the paperwork you signed when you took out the loan to find out if you get more time to bring the loan current and, if so, the deadline to reinstate. You can also call your loan servicer and ask if the lender will let you reinstate.
Deficiency Judgment Following the Sale in Utah
Sometimes, a foreclosure sale doesn’t bring in enough money to pay off the full amount owed on the loan. The difference between the sale price and the total debt is called a “deficiency balance.” Many states allow the lender to get a personal judgment, called a “deficiency judgment,” for this amount against the borrower. In Utah, the lender can get a deficiency judgment after a non-judicial foreclosure by filing a lawsuit within three months after the sale. A deficiency judgment is limited to the lesser of:
• the total debt, including interest, costs, and expenses of the sale, like trustee’s and attorneys’ fees, minus the property’s fair market value, or
• the total debt minus the foreclosure sale price.
No Redemption Period After a Foreclosure Sale in Utah
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. In Utah, though, you don’t get a redemption period after a non-judicial foreclosure.
Eviction After a Utah Non-judicial Foreclosure
If you don’t leave the home after a Utah foreclosure sale, the new owner has to give you a notice to quit (leave) before initiating an eviction action.
Reasons for a Pending Foreclosure
Apart from those who knowingly participate in mortgage fraud with the intention of never making a single payment—most homeowners face sudden extenuating circumstances that force them to stop making timely mortgage payments.
Here are a few of those reasons:
• Job loss/unexpected unemployment
• Sudden illness or medical emergency
• Death in the family
• Divorce/loss of a second income
• Excessive debt obligations
• Job demotion or promotion denials
• Inability to pay an adjustable interest rate that increases
• Unexpected major home maintenance expense
• Balloon payments due
Ways to Stop a Foreclosure
The best way to stop a foreclosure in Utah, for example, is to prevent the filing of a Notice of Default. Lenders do not want to foreclose but will file a Notice of Default to protect their interests, if necessary Don’t put it off, be embarrassed or ignore letters from your lender because those responses will make the situation worse, not better. Depending on your particular situation and hardship circumstances, there are some loan modification options your lender might propose, including the following:
• Time to make up your payments: Lenders might agree to wait before taking legal action against you and let you work out a repayment plan that is affordable for you. This is called forbearance.
• Forgiving a payment: If you can agree on a way that you will be current after missing a payment or two (without the means to pay it back), the lender might give you a break and waive your obligation. This is called debt forgiveness, and it rarely happens.
• Spread out the missed payments over a longer term: For example, if your payment is, say, $1,200 a month, the lender might let you add $100 a month to each payment for a year until you are caught up. This is called a repayment plan.
• Changing the terms of your loan: If your mortgage is an adjustable loan, the lender might freeze the interest rate before it increases or change the interest rate to a more manageable rate for you. A lender might also extend the amortization period. This is called a note modification.
• Adding the back payments to your loan balance: If you have sufficient equity and meet the lender’s lending guidelines, the lender might increase your loan balance to include the back payments and re-amortize the loan. This is called a refinance.
• Offering a separate loan: Certain government loans contain provisions that let borrowers who meet specific criteria apply for another loan, which will pay back the missed payments. This is called a partial claim.
Options After a Notice of Default
When the lender files a Notice of Default, your options are limited. That is why it is better for you to call your lender before falling behind on your payments because lenders are often reluctant to work out repayment schedules after foreclosure proceedings have commenced. You will be given a certain time period to bring the payments current, pay the costs of filing the foreclosure, and stop the foreclosure. This is called reinstatement of your loan. If you cannot make up the missed payments and the lender will not work with you, here are a few other options to stop foreclosure:
• Sell your home: Interview real estate agents to get an opinion of market value and average DOM to sell your home. You might be tempted to hire a discount broker, but many sellers feel they need the exposure and marketing that full-service brokers offer. Compare both to determine which best meets your needs and time frame.
• Consider a short sale: If your home is worth less than the amount you owe, you might be a candidate for a short sale. A short sale affects credit but it’s not as bad as a foreclosure.
• Sign a deed in lieu of foreclosure: This is called deeding the home back to the lender. The homeowner gives the lender a properly prepared and notarized deed, and the lender forgives the mortgage, effectively canceling the foreclosure action. Lenders tell me that deeds in lieu of foreclosure affect credit the same as a foreclosure.
• Short-term rental: The lender might also work an arrangement where a homeowner can remain in the home until finding a place to move into. Owners in default should negotiate the right to retain occupancy, arguing that if the lender followed through on the foreclosure, an owner would still enjoy the right of possession during that procedure.
• Consider bankruptcy: A legal action such a bankruptcy can stop all foreclosure action. Call a lawyer who specializes in filing for bankruptcy and ask for a thorough explanation of all your options, costs, and the time frame involved. It won’t permanently stop a foreclosure action, but it can postpone it.
Getting Help from a Utah Foreclosure Lawyer
Foreclosure laws are complicated. Servicers and lenders sometimes make errors or forget steps. If you think your servicer or lender failed to complete a required step, made a mistake, or violated state or federal foreclosure laws, you might have a defense that could force a restart to the foreclosure or you might have leverage to work out an alternative. Consider talking to a local foreclosure attorney or legal aid office immediately to learn about your rights. A lawyer can also tell you about different ways to avoid foreclosure. Likewise, a personal and competent counselor can provide helpful information (at no cost) about various alternatives to foreclosure.
Free Initial Consultation with Lawyer
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