Bottom line: No. As soon as the bank begins to advertise, you can no longer simply send in a missed payment or two to “catch up.” The bank is likely to refuse the payment. Why? Because if the bank were to accept the payment from you at this point, that acceptance could create the impression that your payment has cured the default, and the bank could be forced to start the process all over again if you stopped making payments again. Not surprisingly, the bank doesn’t want to have to start all over again.
You may have other options for delaying or stop- ping the foreclosure after the bank begins to advertise (see the “Aborting or delaying fore- closure” section, later in this chapter, as well as Chapter 16), but simply sending in the missed payments is usually not a good idea. Contact your lender to learn more, or consult with an attorney to learn about your legal options.
power-of-sale clause, your bank can foreclose without having to file suit against you. The same may be true if you have a deed of trust instead of a mortgage. Some deeds of trust include in them the right to foreclose non- judicially.
The note and the mortgage can be enforced separately — the note is personal, and the mortgage is backed by collateral (your home). If the bank can get the money from you personally, it doesn’t have to foreclose; it can collect the money and leave your collateral alone. People who aren’t making their mort- gage payments, however, rarely have much money lying around, so the bank usually goes after the collateral by foreclosing on the mortgage.
Read your mortgage and note carefully to determine your rights and the rights your bank has in collecting the debt. The mortgage typically contains one or more of the following:
Due on sale (due on transfer) clause: The due on sale clause just says that if you sell the house, the proceeds of the sale must pay off the mort- gage balance in full before you get any remaining proceeds.
Power of sale provision: If your mortgage contains power of sale lan- guage, all the bank needs to do to foreclose is publicly advertise the intent to foreclose and notify you (or at least try to notify you) prior to the sale (which happens at an auction). The number of days or weeks the advertisement must be posted prior to sale varies by state. Without a power of sale provision or a deed of trust, a judicial foreclosure is typi- cally required, assuming your jurisdiction allows for it. With a judicial foreclosure, the bank must work through the courts to foreclose, which may provide you with additional legal options to at least delay the fore- closure proceedings.
Review your mortgage carefully to determine whether it grants the bank power of sale. A short phrase like “This mortgage is granted a power of sale by advertisement” may be all that’s there — but that’s all the bank needs.
Acceleration clause:An acceleration clause allows the bank to call in the whole balance due in the event of missed payments. Without an acceleration clause, the bank would have to declare a separate default for each missed payment as each payment is missed. An acceleration clause allows a missed payment to be considered a default of the whole and allows the bank to call the full balance due.
In foreclosure by advertisement, the bank generally advertises by:
Sending a notice of default to you.A notice of default is required in some states, but most banks do this even if they aren’t required to do so by law.
Posting a notice on or near your property.
Publishing a notice in a local newspaper (in the county where the property is located) and/or in a legal newspaper.The advertisement will include your name, the bank’s name, the property’s legal description, the sale date, the name of the foreclosing attorney, the amount claimed due, the interest rate, the redemption period (if any), and other relevant information.
The advertisement may also be called an insertion,and depending on where the property is located, the bank may be required to publish the insertion for several consecutive weeks before it can sell the property.
If the foreclosure notice contains errors, you may be able to challenge the foreclosure for failure of process,which means failing to adhere to the statutes in your area.
In some states, homeowners can redeema property they’ve lost in foreclosure even after someone has bought the property at auction (see the “Seeking redemption: Buying back your home” section, later in this chapter). Ask your county’s register of deeds whether your area has a redemption period and, if it does, how many days or months you have to redeem.
After the advertising, notices, and postings are completed, the bank will try to sell your property at auction as soon as possible. (Auctions are commonly referred to as sheriff’s sales,because the county sheriff usually conducts the auction.) If your property is going up for auction, here are a few key points to keep in mind:
The person conducting the auction varies by state. In Oregon, for exam- ple, the lender’s representative conducts the auction in nonjudicial fore- closures, while the sheriff conducts sales in judicial foreclosures.
A sale may be adjourned(delayed) and possibly canceled if you can work out something with the bank prior to the sale, or if something goes wrong.
If you’re told that the sale will be adjourned, go to the sale and make sure it actually isadjourned.
Keep in mind that if your state has a redemption period, the clock begins ticking from the date of sale.
Just like that, the house is sold. This is why banks prefer to foreclose via advertisement — it’s quick, easy, relatively hassle-free, and inexpensive. The fact that foreclosure can happen so quickly is the very reason that we encourage you, throughout this book, to act quickly. Doing nothing always results in the loss of the home and any equity that you have in it. (Equityis the amount of cash you have in the house — the amount you can sell the house for minus what you owe on it.)
Foreclosure by judicial sale
In foreclosure by judicial sale, your bank must actually file a claim against you in court and proceed through the courts to foreclose on the property.
Banks don’t like the process because it takes longer, costs more, and gives